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    Highlights for week ending January 26, 2002

Call to Action:

The following Call to Action was posted by Janet Krueger on the IBM Pension Yahoo! message board:

Note that in addition to freezing employees' 401K accounts, Enron also used several techniques to reduce their earned pensions, including a cash balance conversion!

PLEASE consider writing a letter to your representatives in Washington to let them know that they need to look at the full set issues that caused the Enron employees to lose their retirement security, including the use of illegal cash balance conversions to help inflate company's earnings per share. These problems are NOT unique to Enron. Congress must look at the accounting games being played across of all corporate America, and come up with plans to make sure that when corporations voluntarily make promises to their employees about retirement plans, and then convince those employees to rely on those promises and factor them into their long range savings, that those promises are kept!

It is time for Congress to readdress the issue of providing a pension ombudsman, as the Department of Labor is clearly not providing enough support to the workers in these situations.

It is time for Congress to ensure that the SEC and treasury are forcing corporate books to be kept honestly and openly, and that shareholders aren't hoodwinked by vapor profits being transferred from pension funds.

It is time for Congress to insist that the EEOC start working through the backlog of thousands of age discrimination complaints that have been filed due to cash balance conversions and massive lay-offs of the aging baby boomers.

The Enron investigations are entertaining. But we want ACTION. We want meaningful reforms that will protect our retirement security, not just debates.

PLEASE, write your senators and representative today. And then follow-up with a phone call to find out what actions are being taken. And if you come up with a good letter, please share with the rest of us! Also, consider writing a letter to the editor of your local paper.

Update: The corporate lobbyists are hard at work trying to imobilize congress. This is our chance to act!!!

Look at the following web site: http://www.psca.org/wash/EnronAlert1.html

Consider the calls and letters flowing into Washington telling our representatives that corporate retirement plans are in fine shape and that nothing should be done. Then think about how much of your promised pension evaporated over the last decade.

Then ACT! Write to your senators and representative TODAY! We didn't elect them so they could sit in Washington and provide a blank check to the corporations. We want action, NOW!

...Janet Krueger

News and Message Board Highlights:

  • Wall Street Journal: IBM: Unexplained Expenses Can Mean Other Opinions. Excerpt: "James Grant, editor of Grant's Interest Rate Observer and a longtime IBM skeptic, says IBM's steady earnings growth prior to last year 'was the result of ingenuity in the financial department. It isn't illegal or fattening, but it's not generated by operating results.' In past years IBM's results have been bolstered by big investment gains in its giant employee pension fund, huge stock buybacks, which reduce shares outstanding and thereby bolstered per-share earnings, and by steady reductions in its world-wide tax rates." ... "Critics complain that they can't calculate the impact of IBM's gains from its overfunded pension plan. That plan added $530 million to IBM's pretax income in 2000, 80% more than the previous year. Fueling the rise, IBM had raised its expected return rate on the fund's investments to 10% from 9.5% for 2000, a move that boosted 2000 pretax income by an extra $195 million. An IBM official says that the increase reflected IBM's experience with the long-term growth of its fund." If link is broken, view Adobe Acrobat version [PDF--64 KB].

  • Annex Bulletin: Analysis of IBM Fourth Quarter 2001 Business Results. Big Blue Stock to Take a Dive? Gerstner’s Worst Fourth Quarter; Sharp Drop in Revenue, Profit.

  • Wall Street Journal: Enron Executives' Benefits Kept on Growing As Retirement Plans of Employees Were Cut. Excerpt: "Beginning in the 1990s, Enron joined many other U.S. companies in trimming its employee-pension and savings-plan benefits to cut costs. But throughout the same period, Enron also was continuing to offer a lavish set of pension and retirement plans for its top executives. Those benefits, including a lifelong pension and company-paid insurance premiums for Chief Executive Kenneth Lay, are likely to come under more scrutiny, given the effect of Enron's collapse on the company's employees. The U.S. Department of Labor Wednesday will hold a briefing on its investigation of Enron's retirement plan." If link is broken, view Adobe Acrobat version [PDF--55 KB].


  • In a "must read" postings, Mike Cericola explains "Gerstner's raiding of the IBM pension trust funds and the dividend account in order to finance stock option buy-backs (for executives)." Excerpt: "As of a year ago, the total value of IBM's retirement trust funds stood at approximately $70 billion. The net worth of IBM stood at $19 billion. The trust funds had been growing, without IBM contribution, by approximately 10% annually. In addition, IBM, on/about 1991, had placed 15 million shares of IBM stock into the retirement medical benefits trust fund. Today's value of that stock would be approximately $7 billion. That figure, actuarially, over the past 10 years, - and into the future, - would have handled ALL retiree non-pension benefits." ... "Then, as part of Gerstner's financial engineering, the stock was removed from the trust fund and placed back into the IBM treasury. That was steal number 1, of the pre-funding of your medical benefits."

  • Raleigh News and Observer: IBM cuts 150 jobs in new division. Excerpts: "For the second time this month, IBM is cutting jobs at its Research Triangle Park facility, giving about 150 people in its Storage Systems Group 30 days to find another position within the company before terminating their jobs. IBM, which employs 15,000 people in the Triangle, characterizes the cuts as part of an ongoing rebalancing of skills. Spokesman John Lucy said the company also is hiring new employees and will continue to do so this year." ... "'IBM is working very hard to maintain that things are just roses, roses,' Zachmann said. 'What they're doing is these stealth cutbacks.'" If link is broken, view Adobe Acrobat version [PDF--81 KB].

  • Motley Fool: Beware of Tumbling Tech Titans. Excerpts: "What do Dell, Intel, IBM, Microsoft, and eBay have in common? Rising share prices and probably your money as they are among the most widely held tech stocks. That doesn't mean they're a good value, though." ... "I'm particularly bearish on eBay, due to its extreme valuation, and IBM, which recently reported fourth-quarter sales that were lower than those five years ago. With no growth whatsoever in the top line, and the bottom line only up slightly (due primarily to lower taxes and various accounting gimmicks), is IBM really worth nearly triple the price it was back then? I think not."

  • Employee Benefit Plan returns, Form 5500 series, are prepared by retirement plans. They report the business activity, investments, expenditures, earnings, etc., of the plan for the year. IBM just released its form 5500 for the year 2000. "peter_plavchan" comments on the IBM retirement plan's performance during 2000. Excerpt: "In a year the dow rose 6 %, relatively flat year, a good year as compared to 2001 performance, IBM on behalf of its employees invested funds in a variety of places and managed to loose vast sums of monnies from various benefit plans."
  • Rumors of the PBC rating distribution being skewed towards requiring more "3's" abound. Linda Guyer comments.

  • Fortune Magazine: Best Companies to Work For: America's Top (100) Employers. (Note: IBM failed to make the list).
"The test of our progress is not whether we add more to the abundance of those who have too much; it is whether we provide enough for those who have too little." — Franklin D. Roosevelt
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