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    Highlights—April 15, 2006

 

From the "Best Government (Corporate) Money Can Buy Department"...
  • Wall Street Journal: Treasury Probe Cites Abuses In Ties Between IBM, Agency. By Theo Francis. Excerpts: An investigation into ties between Treasury Department officials and International Business Machines Corp. shows the Treasury worked closely with IBM on pension issues and provided information that was subsequently misused in the company's lobbying. The report, released this week by the Treasury's Office of the Inspector General, also said a Treasury official disclosed nonpublic information to IBM and failed to report expenses paid by a lobbyist for a pension-industry trade group.
    The Justice Department didn't pursue criminal or civil charges in the matters because they didn't meet the agency's "prosecutorial threshold" or "lacked litigative appeal," according to the report.
    The redacted document, released under the Freedom of Information Act, says IBM representatives met regularly with a Treasury official to help draft regulations on cash-balance pension plans.
    The report says a Treasury official emailed "talking points" about cash-balance pension plans in September 2003 to an attorney at Covington & Burling, which represented IBM in a lawsuit involving its pension plan. At the time lawmakers were considering an amendment restricting the Treasury's ability to adopt regulations that would help overturn a recent federal court ruling against IBM.
    Treasury officials told OIG investigators they believed it was appropriate for agency employees to provide nonpublic information to administration "allies" who shared their public-policy objectives.
    The report says someone with ties to IBM took the emailed document, pasted the Treasury seal on the top and distributed it to congressional offices, to discourage them from voting for the amendment.
    The report found IBM's actions "seemed to make out the elements of an offense" by misusing the department's seal, an OIG spokesman said.
    The Treasury didn't pursue administrative penalties for the misuse of its seal, according to the report and Treasury officials.
    In a statement, IBM said that it cooperated with the investigation and that its employees "believed they were redistributing a public document" that hadn't been altered.
    The report said the investigation began after articles in The Wall Street Journal mentioned the altered memo and a party hosted by William Sweetnam, then Benefits Tax Counsel at Treasury, and Brian Graff, executive director and a lobbyist for the American Society of Pension Professionals and Actuaries, a pension-industry trade group. The party was attended by lobbyists and congressional staff working on pension legislation. (See related article.)
    The OIG found that a pension-industry lobbyist improperly expensed $1,455 for two parties co-hosted by a Treasury official, and more than $5,000 in travel and related expenses for a Treasury official. The document said the Treasury official didn't report the expenses required by federal ethics rules, and that these actions appear to have violated ethics and disclosure rules.
    Federal prosecutors said they didn't bring charges in part because the Treasury official left the agency.
    Mr. Sweetnam left the Treasury in February 2005 to run Groom Law Group's public-policy and legislation practice. "There were some misunderstandings on my reporting obligations, but there was nothing intentional," or any intent of quid pro quo, said Mr. Sweetnam, who added that he hadn't seen the report.
    Mr. Graff said he hadn't seen the report, but says he inadvertently expensed the costs for both parties and has since repaid his employer. "There is nothing that we pay for that we would view as being inappropriate from an ethics perspective," he said.
    A spokesman for Covington & Burling said in a statement: "We are satisfied that Covington & Burling's lawyers have, without exception, fully adhered to their ethical and legal obligations."
  • Wall Street Journal: U.S. Declines to Pursue Charges That IBM Misused Treasury Seal. By Charles Forelle. Excerpts: The Justice Department has declined to pursue criminal and civil charges against International Business Machines Corp. that it misused the Treasury Department's official seal, according to a report released by the department's inspector general. The case dates to 2003, when an IBM lobbyist distributed a document bearing the seal and the department's name to various congressional offices. The document supported IBM's positions on pending legislation regarding cash-balance pensions.
    The Treasury Department found IBM had taken the department's emailed "talking points" on the cash-balance pension issue, pasted a Treasury seal on them and redistributed them as part of an "information package" to congressional staffers. The report said that the use of the seal and name had been referred for action by the Treasury Department, but that the Justice Department had declined to become involved.
    The report, released under the Freedom of Information Act, was heavily redacted, and it wasn't clear precisely who provided the talking points initially to IBM. [...]
    When the document was distributed in 2003, IBM was opposing efforts by Rep. Bernie Sanders, a Vermont independent, to block the Treasury Department from issuing certain pension regulations. Those regulations could have given IBM a victory by helping to reverse a federal-court ruling that had gone against IBM's pension plan. The court had found IBM discriminated against older workers when it converted to a cash-balance plan. Mr. Sanders's amendment later passed.
    • Kathi Cooper (of Cooper v. IBM) comments. Full excerpt: My first inclination is to find out who paid off the Justice Department. (or at least who paid the lobbyist who paid off the Justice Department).
  • Wall Street Journal: Many Ties Link Pension Lobby To Regulators. By Ellen E. Schultz and Theo Francis. Excerpts: The retirements of millions of Americans could hang partly on the relationships between those who regulate pension plans -- and are drafting regulations -- and pension lobbyists and consultants hired by employers and financial firms.
    The relationships are social as well as professional. Consider a recent party at the Washington home of William F. Sweetnam Jr., a lawyer at the Treasury Department who is playing an important role in drafting regulations for what are known as cash-balance pension plans. The party was thrown to welcome a new congressional staffer working on pension issues. It was co-hosted by Brian Graff, a lobbyist for the American Society of Pension Actuaries, a group representing those who make a living running employer-sponsored pension plans, which has lobbied in favor of cash-balance plans.
    Not invited were any of the few lawmakers and congressional staffers who have staked out strong positions against cash-balance plans, which offer financial benefits to employers but can reduce payments to older workers.
    Instead, among the invited guests -- aside from a smattering of congressional and Treasury staffers who work on pension issues -- was a long list of lobbyists representing employers on pension and retirement matters. They included individuals from the Erisa Industry Committee and the American Benefits Council, whose members include International Business Machines Corp., AT&T Corp. and hundreds of other large employers with a financial stake in the outcome of the pension regulations Mr. Sweetnam is drafting.
    Also invited were lobbyists from the American Council of Life Insurers; Wall Street's Securities Industry Association; Davis & Harman and Groom Law Group, law firms that lobby on behalf of employers and benefits consultants; and Cigna Corp., which is defending an age-discrimination suit involving its cash-balance plan. [...]
    There is nothing new about lobbyists, congressional staffers and regulators socializing. But this is a crucial time for the pension business: The Treasury is expected any day to issue regulations on cash-balance plans, determining whether the plans violate age-discrimination laws, and it is developing proposed regulations to determine whether employers can pay departing workers smaller lump sums from cash-balance plans under certain circumstances. Employers have been increasingly eager for favorable regulations since IBM lost an age-discrimination suit in a federal district court in July, and Xerox Corp. in August lost its appeal in a cash-balance case involving the underpayment of lump sums. [...]
    Treasury Secretary John Snow, who has final say on cash-balance regulations, once headed CSX Corp., which implemented a cash-balance plan for newly hired workers this year. Mr. Snow also was on the human-resources committee of Verizon Corp.'s board when it voted to adopt a plan for Verizon employees. Mr. Sweetnam joined Sun Co., now Sunoco Inc., in 1989, as it was implementing one of the first cash-balance plans. In 1995, he joined Towers Perrin, a benefits-consulting firm that has been a prominent promoter of cash-balance plans. He became majority tax counsel to the Senate Finance Committee in 1998, serving primarily as an adviser to the then-chairman, Sen. William Roth Jr., where Mr. Sweetnam supported cash-balance plans. Mr. Sweetnam says his positions on the finance committee reflected Sen. Roth's stances.
  • The Huffington Post: Want Proof of the Hostile Takeover? Read This. Excerpts: The basic premise of my upcoming book Hostile Takeover is that there are no longer any lines or distinctions between Big Business and government. In Washington's corrupt, money-dominated politics, Corporate America and the American government are one and the same -- both looking to fleece the average citizen as much as possible. The book goes onto note that the only way we are going to take our government back is to stop letting both parties deny that a hostile takeover has occurred. To help end this denial, I find it helpful to show folks concrete examples of what I mean by a "hostile takeover." A new story in the Wall Street Journal today is one of those concrete examples. (Editor's note: The WSJ article referred to is the article at the top of this section, Treasury Probe Cites Abuses In Ties Between IBM, Agency.)
    Back in 2003, Rep. Bernie Sanders (I-VT) led a bipartisan group of lawmakers to introduce an amendment to outlaw so-called "cash balance" pension conversions whereby companies, without warning, reduce the pensions they promised workers without giving those workers a choice to stay in their old pension plan. The amendment ultimately passed the House of Representatives (though was killed in the final conference committee) over the strong objections of Corporate America, including IBM, which had been one of the biggest companies to try to shaft its workers with these kind of pension rip-off schemes.
    But the amendment didn't pass without the Bush administration quite literally turning over the Treasury Department to IBM. As the Washington Post reported at the time, IBM sent around a document to congressional offices labeled "Treasury talking points" that said the Treasury Department "strongly opposes the Sanders amendment to the Transportation/Treasury appropriations bill." Treasury soon admitted that "the department had prepared" the materials, but had never actually released them to corporations to help them lobby to defeat the bill.
    Now, years later, the Wall Street Journal reports that "an investigation into ties between Treasury Department officials and International Business Machines Corp. shows the Treasury worked closely with IBM on pension issues and provided information that was subsequently misused in the company's lobbying." A report demanded by Sanders from the Treasury Department's Inspector General "said a Treasury official disclosed nonpublic information to IBM and failed to report expenses paid by a lobbyist for a pension-industry trade group."
    Those are shocking revelations, even for a corporate-owned administration like the one we have now. However, perhaps more shocking is the fact that the Journal also notes that "the Justice Department didn't pursue criminal or civil charges in the matters because they didn't meet the agency's 'prosecutorial threshold.'" In other words, yeah, they broke the law and illegally turned the people's government over to Big Business, but that's not worth prosecuting.
    This is your government, ladies and gentlemen of America -- a government that is a wholly owned subsidiary of Big Business. A government where an agency as powerful as the U.S. Treasury Department routinely operates like an arm of the companies such as IBM that it is supposed to be regulating. A government, in short, that is the victim of a Hostile Takeover.
  • MarketWatch: US Treasury says addressing IBM pension issue, DOJ not pursuing. Excerpts: The U.S. Treasury Department is addressing concerns raised by International Business Machines Corp.'s (IBM) lobbying effort on pensions, while the Department of Justice has decided not to pursue related civil and criminal charges, according to a report by the Treasury inspector general.
    At issue is IBM's 2003 circulation to Congress of an altered version of nonpublic Treasury "talking points" on pension policy. The information was used at a time when Rep. Bernard Sanders, I-Vt., had proposed restrictions on Treasury's ability to overturn a court ruling against IBM pension conversion.
    "The misuse of the Treasury seal and name has been referred to the Treasury's assistant secretary for management and chief financial officer for potential action or remedies," according to the inspector general's report, released Monday. A Department of Justice spokesman on Monday said the agency doesn't discuss cases it declines. [...]
    The redacted version of the report released Monday blocks out the identity of the Treasury official who released the talking points. According to the report, the official said he was asked if Treasury opposed the Sanders amendment and responded that it did, providing the talking points in that context. He said he did not authorize use of the talking points in any "lobbying efforts." The Treasury's talking points became part of an "information package" IBM sent to members of Congress in an effort to defeat the Sanders amendment. When the Wall Street Journal reported use of Treasury documents for private-sector lobbying, the Treasury official apparently called the person with whom he had shared the documents to complain.
  • Yahoo! message board post by Ed Hayden. Full excerpt: When did IBM go from being one of the most respected companies in the world to an abject embarrassment? Has the last decade of sleazy behavior really been all that beneficial? IBM always said they were an ethical company and acted in such a manner. I always believed that bought the kind of customer goodwill that won contracts. I wonder how this is affecting the companies ability to win in the marketplace? Maybe the saddest observation is that given the lack of ethics in all aspects of our society no one is really shocked. Sigh.
  • Yahoo! message board post by Skip Bogard. Full excerpt: That would be when organized crime infiltrated the company. The top boss brought in his own people; the writing on the wall to Armonk insiders was when he brought in his own 37 year old chef & paid her $87,500 a year + a $30,000 sign on bonus. This was more than any IBM engineer made, even the very best.
    When the leak about the chef appeared in a rather detailed story June 14, 1995 titled "The Cook, The Chief, His Knife, And Her Cover Charge" in "Computergram International" [Technology News, London], salaries among IBM sales people nearly doubled in the two years following. The fear was the sales force would leave in mass exodus if salaries weren't raised.
    What surprised the boss the most is summarized by his comments when he entered this industry and was interviewed by a consultant reporting: "...one of the things he had found fascinating was that there a whole breed of "industry watchers" at work in the computer industry which do not exist in other industries. "You don't see that in banking, or insurance, etc." he [the boss] said.
    IBM became an embarrassment when those industry watchers simply weren't afraid to report on the behaviors in piecemeal fashion.
    When you look at the aggregate story, it's an overwhelming lesson which includes immense human cruelty and corruption. But, the sequel to the bestseller "Barbarians at the Gate" (a book in which the boss is photographed & named) hasn't been written yet.
    The publishers of the list "Top 100 Companies to Work For" no longer carries IBM on its list. It's rumored that IBM was dropped because the publishers are readying a release of the follow-on book, and dropping IBM from the Top 100 list was a significant event created to include in the publisher's forthcoming book.
  • National Public Radio: In Age of Cuts, Some CEO Pensions Total Millions. By Frank Langfitt. Excerpt: As companies continue to scale back pensions for their workers, many CEOs are doing just fine. The AFL-CIO, labor's main umbrella group, says some corporate bosses will earn millions of dollars annually in retirement. This week, the group posted a list on the Web of the CEOs with the 25 richest pensions.
    Top 25 Largest Annual CEO Pensions:
    • Pfizer Inc. - Henry A. McKinnell - $6,518,459
    • Exxon Mobil Corp. - Lee R. Raymond - $6,500,000
    • AT&T Inc. - Edward E. Whitacre - $5,494,107
    • UnitedHealth Group Inc. - William W. McGuire - $5,092,000
    • IBM Corp. - Samuel J. Palmisano - $4,000,000
  • New York Times: Pension Rule Could Lower Net Worths. By Mary Williams Walsh. Excerpts: A company like I.B.M. would seem to be doing all the right things to reassure Wall Street that its pension fund is under control. The company has pumped $6.4 billion into the pension fund over the last three years to make up for investment losses. And this year it took the big step of freezing the plan, reining in the growth of obligations to workers.
    But for all that, a new study shows that if a proposed new accounting rule for pensions takes effect at the end of this year, as expected, I.B.M.'s balance sheet could be substantially weakened. Until now, the company has not clearly shown the full extent of its obligations to its workers alongside its other debts. Making the change could weaken I.B.M.'s finances by as much as $17 billion, the study said.
  • New York Times: C.E.O. Pay Keeps Rising, and Bigger Rises Faster. By Eric Dash. Excerpts: Chief executives' pay continued to rise in 2005, although at a slightly slower pace than in 2004. The average total pay for chief executives rose 27 percent, to $11.3 million, according to a survey of 200 large companies by Pearl Meyer & Partners, the compensation practice of Clark Consulting. [...]
    The fastest-growing part of executive compensation in 2005 was in new grants of restricted stock and long-term incentive payouts. For the typical chief executive, they rose almost 15 percent, to $1.9 million. In 2004, they grew almost 111 percent, to $1.4 million, reflecting rising profits and a shift away from stock options. Of the 200 executives surveyed, about half stand to collect big pensions. At least 20 percent can expect $1 million in annual benefits.
  • New York Times: A Cozy Arrangement. Excerpts: To fix something, first you have to understand what went wrong. That's especially true for a problem as complex yet pervasive as sky-high executive compensation. Last Sunday The Times reported that in 2004, the average top executive at a big company earned 170 times the average worker's pay. These executives receive a dizzying combination of salaries, bonuses and stock grants. And their perks can go far beyond the use of a company car to even include infusions of cash to offset the taxes everyone else is expected to pay.
  • New York Times: Advice on Boss's Pay May Not Be So Independent. By Gretchen Morgenson. Excerpts: In other words, the very firm that helps Verizon's directors decide what to pay its executives has a long and lucrative relationship with the company, maintained at the behest of the executives whose pay it recommends. This is the secretive, prosperous and often conflicted world of compensation consultants, who are charged with helping corporate boards determine executive pay that is appropriate and fair, and who are often cited as the unbiased advisers whenever shareholders criticize a company's pay as excessive. [...]
    In other words, the very firm that helps Verizon's directors decide what to pay its executives has a long and lucrative relationship with the company, maintained at the behest of the executives whose pay it recommends. This is the secretive, prosperous and often conflicted world of compensation consultants, who are charged with helping corporate boards determine executive pay that is appropriate and fair, and who are often cited as the unbiased advisers whenever shareholders criticize a company's pay as excessive.
  • New York Times: For Leading Exxon to Its Riches, $144,573 a Day. By Jad Mouawad. Excerpts: For 13 years as chairman and chief executive, Lee R. Raymond propelled Exxon, the successor to John D. Rockefeller's Standard Oil Trust, to the pinnacle of the oil world. [...] For his efforts, Mr. Raymond, who retired in December, was compensated more than $686 million from 1993 to 2005, according to an analysis done for The New York Times by Brian Foley, an independent compensation consultant. That is $144,573 for each day he spent leading Exxon's "God pod," as the executive suite at the company's headquarters in Irving, Tex., is known.
    Despite the company's performance, some Exxon shareholders, academics, corporate governance experts and consumer groups were taken aback this week when they learned the details of Mr. Raymond's total compensation package, including the more than $400 million he received in his final year at the company.
  • Raleigh News & Observer, courtesy of the Arizona Daily Star: IBM employee starts off morning protesting job evaluation policies. By Anne Krishnan. Excerpts: Brian Costine spends 90 minutes each morning protesting in front of IBM's campus here. Then he goes to work at the very company he's demonstrating against. For the past month, Costine has waged a one-man protest against IBM, his employer for 25 years. He says Big Blue is trying to force longtime workers like him off the payroll and out of future benefits by giving them unfairly negative performance reviews. [...]
    Every Monday, Costine switches the messages on his signs. This week, one sign encourages workers to contact Alliance at IBM, a union that is attempting to organize IBM employees. Costine joined the New York-based group more than a year ago and became an organizer in February. Two signs target performance reviews, and another reads: "Got some time, join me here, have a voice." No one has taken Costine up on his invitation, although recently he has received more thumbs-up and horn honks from his colleagues as they report to work. "There's really a climate of fear," he said. "Everyone's afraid to come out for fear of losing their jobs, for getting pegged for that."
  • AARP: Broken Promises. With companies cutting back on retiree health benefits, more and more former employees have to go it alone. What lies ahead for today’s workers? By Reed Karaim. Excerpts: Santos R. Arrona of Visalia, Calif., worked for J.C. Penney for 25 years, mostly in delivery services, before he retired at age 69 in 1990. In addition to a modest pension, Penney provided Arrona with health benefits, including prescription drug coverage. Those benefits were something he thought he could count on from a company founded on its golden rule of fairness, honesty and value.
    But last year J.C. Penney announced that, effective Jan. 1, 2006, it would cancel virtually all health benefits for retirees age 65 and over. So Arrona, 84, joined the growing ranks of Americans who have seen their retiree health benefits end or at least deteriorate at an employer's discretion.
    Coupled with countless frozen or terminated pension plans, health benefit cutbacks make plain the growing transfer of economic risk and responsibility from employers and government to workers. To retirees like Arrona, the decisions simply feel like broken promises. "You're there all those years, you do all the work and everything they ask you to do, and then you retire and they cut you off," he says. "It doesn't seem right."
  • AARP Working Options Message board post by "Jeff (p-1526928060)". Full excerpt: I retired from Lexmark with 32 years (24 yrs. 10 mos. with IBM and 6 years 11 mos. with Lexmark) of service after being sold from IBM. Benefits and retirement were promised to be essentially equal to IBM. IBM was to fund based upon the number of years of service divided by 30. Monthly health costs have gone from $170 in 2003 to $290 in 2006 with less coverage. Dental went from $17 to $34 last year. Drug co-pay for generic went from $7 last year to $10 this year. Dental went from $14 to $34.
    Most undesirable was a letter this year canceling at the end of 2006, $300 per couple per month to aid in purchasing supplemental insurance for people over 65. Since IBM is paying almost 75%, I cannot see why Lexmark has made this change. Making changes prior to retirement at least allows one to plan. Making changes after the fact make life very difficult. I was always anti union because employees had to support both the company overhead and the union. I am now pro union. At least they have a written contract.
    PS. Lexmark never added one dollar to the retirement plan provided by IBM. The company paid off the debt of over $1 billion and made the people who did the buy out very wealthy. The employees were rewarded with wage freezes, lower benefits and now reduced retirement.
    I believe that the early leaders of industry were ethical people. Now most companies are run by short sighted managers whose primary goal is to line their pockets. AARP should lobby hard in congress and voters should cast their votes only for politicians who will make companies meet their obligations and prosecute those who steal from there own companies. Turning retirement obligations over to the tax payers, then going on about their business like United Airlines and others have done, should be illegal.
  • Yahoo! message board post by "yankefrank": Pushing PBC 3 rated employees out earlier. Full excerpt: I just found out today from my manager that this year "3" performers will be evaluated mid-year in addition to their normal end of year evaluation. If their performance has not improved this June, they will then be put on the 30 day "death march". I was told that this mid-year evaluation was a "good thing" because it gives you the opportunity to climb up from a "3" to a "2"... BUT there's an OR ELSE there... A big "OR ELSE" that will mean more "3" employees will be "separated from IBM" this year.
    BTW, I'll be 54 years old this June... and YES, I WAS RATED a "3" last year - basically because I had a serious illness. I was out for three months on disability, and before I went out, my productivity was greatly reduced due to my illness. Management explained to me that the quality of my work last year was fine, but the quantity was below what was expected of someone at my level.
    It just gets better and better every year. And here I was upset about my pension being stolen starting next year... well, I probably won't have to worry about that... just about missing out on the "early retirement subsidy"... and being able to put my son through college and avoiding the dog food diet in retirement. - Frank
  • Yahoo! message board post by "i_be_mad_as_heck". Full excerpt: Frank, A couple of short points now, and I will have more comments later.
    1. You are not alone. This same thing has happened to thousands. I know this doesn't help much, but those who have gone through this before can possibly help you work through this.
    2. Your manager is not on your side. Your manager has targets of attrits to meet or their rating will drop. Your success is counted against your manager and your 2nd level manager for not making "targets". Don't fall into the trap of thinking your management is standing up for you. They have already shown otherwise.
    3. You will be rated for the entire period from January to June. Unless you can makeup for the "shortcomings" between January and now, improvement between now in June will not be sufficient. The cards are stacked against you.
    I wish I have better news for you, but it doesn't look good.
  • Yahoo! message board post by "mail4calif". Full excerpt: Frank, Best of luck to you. I feel for you. I went through several years of hell at the end of my career. Witnessed EVERY friend except one lose their IBM jobs unwillingly. I got through it with support from family and by going out on a family medical leave of absence for my final 18 months. Told IBM I needed the time off to take care of my dying parents. It was a total lie, but it bought me the year and a half I needed to get to 30. Robert
  • San Jose Mercury-News: H-1B visa law criticized. Analysis: Program Gives Americans No Protection, Needs to be Fixed'. By K. Oanh Ha. Excerpts: When a Sunnyvale tech company laid off the manager and most of his colleagues in its reliability testing group a year and a half ago, the manager said a few employees were spared -- younger, foreign workers on H-1B visas. The laid-off manager was infuriated that as an American citizen, he wasn't given priority over the H-1B employees. The H-1B visa program allows employers to hire skilled foreign workers when there's a shortage of available American workers. ``The law does not protect American workers at all,'' said Frank, a 45-year-old Chinese-American who was out of work for five months, and who insisted his last name and the name of his former company not be published because he fears repercussions from potential employers. "It only helps American businesses and technology companies keep their costs low while sacrificing American workforce. That's not right." [...]
    A Mercury News examination of little-known government reports and analysis of H-1B applications supports critics' charges that the program gives U.S. citizens virtually no protection from being replaced by a foreign worker. California employers who filed applications seeking to hire H-1B workers were virtually guaranteed approval. Of nearly 54,000 applications to hire foreign workers filed by California employers in 2005, only 114 were denied by the Foreign Labor Certification program. Not all approved applications resulted in the hiring of a foreign worker or a visa being issued.
    Employers are not required to prove that American workers were not available for those jobs. The Labor Condition Application requires information about the H-1B position and the wage an employer intends to pay, which must be at least the prevailing market wage. The law also doesn't require the labor department to verify that employers actually pay the wages they stipulate unless there is a complaint. Of the 3,628 H-1B applications for foreign-worker visas filed last year by companies in San Jose, only two were denied. In Santa Clara, 3,677 applications brought only three denials. The Department of Labor "rubber-stamps the forms that companies send them," said Marcus Courtney, president of WashTech, which represents tech workers across the country. "Their hands are tied. They follow the law, which isn't adequate."
  • ERISA Industry Committee (ERIC) ("not our friends!"): Second District Court Contends Cash Balance Plan is Inherently Age-Discriminatory. Excerpt: A federal district court in Connecticut has held that participants in a cash balance plan may pursue their claim that the plan is inherently age-discriminatory (Richards v. FleetBoston Financial Corp.). Though only ruling that participants have plead a valid claim, the court offered an extensive analysis suggesting that the plan is age-discriminatory. On a related issue, the court preliminarily ruled that a wearaway period after the conversion to cash balance did not violate anti-backloading rules.
    On the age discrimination issue, the court reasoned that the rate of benefit accrual in a cash balance plan must be determined in terms of the change in the annuity payable at normal retirement age. Measured this way, the rate of accrual in a typical cash balance plan often decreases with age. The court is only the second follow this reasoning, with the first being the district court in Cooper v. IBM (D. Ill. 2003). Since that decision, three other courts have reached the opposite conclusion. The Seventh Circuit heard the Cooper case on appeal in February, and a decision should come within the next few months.
    The willingness of another district court judge to adopt the flawed reasoning of Cooper is disturbing and demonstrates the importance of a comprehensive clarification by Congress that hybrid plans are not age-discriminatory. It is of critical importance that any language addressing hybrid plan designs included in the final pension reform legislation not provide evidence that plans created in the past are flawed or inherently illegal.
  • New York Times: Quickly Erasing 'I' and 'B' and 'M'. By Glenn Rifkin and Jenna Smith. Excerpts: If you have one of the world's most recognized brands at your disposal, how fast do you jettison it in favor of marketing a new, unknown brand in its place? When Lenovo, the Chinese personal computer maker, bought I.B.M.'s personal computing business for $1.75 billion in December 2004, the deal included the rights to use the I.B.M. name for five years after the deal was completed. [...]
    Yet Lenovo has moved far more swiftly to remove the I.B.M. name from its brand-building venture than analysts and marketing experts had expected, leaving many wondering if Lenovo has abandoned the I.B.M. brand too quickly. Since Lenovo took over the I.B.M. personal computer business last May 1, the company's advertising and marketing efforts have excluded I.B.M. almost entirely from the message.
  • New York Times: Weapons of Math Destruction. By Paul Krugman. Excerpts: The Treasury Department has put out an exercise in spin called the "Tax Relief Kit," which tries to create the impression that most of the tax cuts went to low- and middle-income families. Conspicuously missing from the document are any actual numbers about how the tax cuts were distributed among different income classes. Yet Treasury analysts have calculated those numbers, and there's enough information in the "kit" to figure out what they discovered.
    An explanation of how to extract the administration's estimates of the distribution of tax cuts from the "Tax Relief Kit" is here. Here's the bottom line: about 32 percent of the tax cuts went to the richest 1 percent of Americans, people whose income this year will be at least $341,773. About 53 percent of the tax cuts went to the top 10 percent of the population. Remember, these are the administration's own numbers — numbers that it refuses to release to the public.
    I'm sure that this column will provoke a furious counterattack from the administration, an all-out attempt to discredit my math. Yet if I'm wrong, there's an easy way to prove it: just release the raw data used to construct the table titled "Projected Share of Individual Income Taxes and Income in 2006." Memo to reporters: if the administration doesn't release those numbers, that's in effect a confession of guilt, an implicit admission that the data contradict the administration's spin.
    And what about the people Senator Grassley compared to Hitler, those who say that the wealthiest 1 percent of Americans will receive 40 percent of the tax cuts? Although the "Tax Relief Kit" asserts that "nearly all of the tax cut provisions" are already in effect, that's not true: one crucial piece of the Bush tax cuts, elimination of the estate tax, hasn't taken effect yet. Since only estates bigger than $2 million, or $4 million for a married couple, face taxation, the great bulk of the gains from estate tax repeal will go to the wealthiest 1 percent. This will raise their share of the overall tax cuts to, you guessed it, about 40 percent.
    Again, the point isn't merely that the Bush administration has squandered the budget surplus it inherited on tax cuts for the wealthy. It's the fact that the administration has spent its entire term in office lying about the nature of those tax cuts. And all the world now knows what I suspected from the start: an administration that lies about taxes will also lie about other, graver matters.
  • Forbes: IBM Faces Impatience Despite Retooling. By Brian Bergstein. Excerpts: When Sam Palmisano addresses IBM's annual shareholder meeting this month, Big Blue's chief will unfurl plenty of good news. And yet investors in the audience could be forgiven for being impatient with the boss. After all, while Palmisano's four-year reign has dramatically reshaped the technology company, by one key measure it has been unsuccessful. Since he became CEO on March 1, 2002, IBM's shares have dropped 20 percent, shaving about $50 billion from its market value. Still, it would be hard to say Palmisano hasn't shown significant results. [...]
    With a lack of sentimentality more reminiscent of an outsider than the IBM lifer that he is, Palmisano has sold off underperforming units, reshuffled management and hacked big benefit costs such as employee pensions. [...] IBM's board also appears to be firmly in his corner, having upped Palmisano's compensation package to $19 million in 2005. [...]
    Another plan has Moffat, who squeezed billions in costs out of IBM's internal supply chain, trying to replicate the feat in the services unit. Moffat has had 70,000 IBM consultants classified according to their hourly billing rate and categories of expertise. Now those employees have been placed into an internal "marketplace," essentially a dispatching service that can be queried any time to help services contracts run more efficiently.
Urgent Call to Action from Janet Krueger
From a Yahoo! message board post. Excerpts: Congress is now on Easter break. The conference committee on the pension reform bill expects to resume its work on the pension reform act when they get back to Capitol Hill at the end of the month. If at all possible, please try to attend a town meeting or schedule a visit with your representative and senators while they are home. Raise the issue that they need to be strengthening pension protections, NOT just making it easier for corporations to cut pensions. Below are the talking points I have been using. Please note that the corporate lobbyists have been hard at work on the other side; they want cash balance conversions RETROACTIVELY legalized, which would allow IBM to keep $1.4 billion of the Cooper settlement.
ERIC, a corporate lobbying group put out a press release yesterday bragging that they now have 6 senators convinced that retroactive legalization is necessary: http://www.eric.org/forms/documents/DocumentFormPublic/viewDoc?id=6B1300000014
Senators Bond (R-MO) and Talent (R-MO) have sent a letter to conferees urging that the conference report include clarification that hybrid plans are valid defined benefit plan designs. Sen. Burr (R-NC), joined by Senators Dole (R-NC), DeMint (R-SC), and Allard (R-SC), also sent a letter to conferees addressing several issues of concern to ERIC members with hybrid plans, including design clarification for existing plans, inclusion of pension equity plans, and opposition to plan design requirements in the Senate bill. (Editor's note: Senator Allard is from Colorado, not South Carolina.)
If you are from MO, NC, or SC (or Colorado) please CALL your senators and tell them this is outrageous! If you go to the web page, you can link to and print a copy of the letters your senators wrote to the conferees... [...]
Talking points:
  1. Currently, the bills do not retroactively legalize cash balance conversions. We will be outraged if IBMers lose a large share of the Cooper settlement because Congress retroactively legalized what IBM did. If you must legalize cash balance conversions, include all of the protections for older employees from the senate bill.
  2. Fix underfunded plans by forcing companies to increase their contributions NOT by forcing them to cut benefits to current and future retirees.
  3. Fully protect vested early retirement subsidies, especially once being collected.
  4. Do not reduce the size of a lump sum distribution that can be offered in place of a promised annuity and keep the promised annuity an option.
  5. Strengthen plan termination rules so that excess funds have to be used for the sole benefit of plan participants and cannot be returned to the company or to the corporate executives.

News and Opinion Concerning Health Savings Accounts, Medical Costs and Health Care Reform
  • Physicians for a National Health Program: Massachusetts Health Reform Bill: A False Promise of Universal Coverage. Excerpts: What's Wrong With This Picture? [...] Second, the linchpin of the plan is the false assumption that uninsured people will be able to find affordable health plans. A typical group policy in Massachusetts costs about $4500 annually for an individual and more than $11,000 for family coverage. A wealthy uninsured person could afford that ・but few of the uninsured are wealthy. A 25 year old fitness instructor can find a cheaper plan. But few of the uninsured are young and healthy. According to Census Bureau figures, only 12.4% of the 748,000 uninsured in Massachusetts are both young enough to qualify for low-premium plans (under age 35) and affluent enough (incomes greater than 499% of poverty) to readily afford them. Yet even this 12.4% figure may be too high if insurers are allowed to charge higher premiums for persons with health problems; only half of uninsured persons in those age and income categories report that they are in excellent health.
  • MS-NBC: Health care is top financial concern for the rich. Wealthy Americans worry that rising costs will eat their assets, survey finds. Excerpt: Those surveyed had annual incomes of $150,000 or more with investable assets of $500,000. Such assets would include a home, bonds and stocks. The retired respondents had at least $1 million in investable assets. Nearly 200 of those surveyed had assets of over $5 million, with 116 of them having assets of $10 million or more.
  • Consumer Reports: False promises: ‘Consumer driven’ health plans. Excerpts: A promotional pamphlet for a health savings account (HSA) boasts, “If you plan correctly, you may find that you spend far less for health care than ever before.” True, if you could plan to avoid cancer, being hit by a car, or growing older. But you can’t. [...]
    The reality is that these schemes shift increased financial risk to consumers and will surely weaken our already fragile health-insurance system. HSAs provide little assurance of affordable, quality health care to those with chronic illnesses, families with children, those of moderate incomes, or older Americans with more health-care needs. HSAs do nothing to address the factors that really drive up health costs: care for those with chronic diseases; overuse of technology; hospital care; prescription drugs; and end-of-life care. [...]
    So, who, besides the wealthy, benefits from HSAs? Employers do, since they are shifting health-care costs to their employees and are more able to predict health-care expenses. And financial institutions offering HSAs are poised to reap billions in profits from the fees they can charge in setting up those accounts. [...]
    A health-insurance system can function only if costs and risks are spread among healthy and sick participants. But healthy employees who don’t expect to need much medical care are the ones most likely to abandon traditional plans in favor of low-premium, high-deductible ones. Those left in traditional plans will be sicker and more risky to insure. That means a greater likelihood of steep premium increases, pricing coverage out of the reach of more workers and adding to the ranks of the uninsured. “Consumer driven” health plans, including HSAs, abandon the premise that the community has a responsibility to care for all members. The health-care system needs fixing, but HSAs are a sham substitute for comprehensive reform.
  • Wall Street Journal: The CEO Health Plan. In Era of Givebacks, Some Executives Get Free Coverage After They Retire. By Ellen E. Schultz and Theo Francis. Excerpts: At a time when companies are scaling back health benefits for other retirees, former top executives at many corporations are receiving partial or full lifetime medical coverage on top of pensions valued at millions of dollars, a Wall Street Journal analysis of dozens of recent securities filings indicates. [...]
    Companies often provide their top executives with more generous health-care plans than other full-time employees get and then continue to provide the richer benefits through retirement. AT&T Inc. pays up to $100,000 per family per year for its top executives' out-of-pocket health-care costs through a separate insurance policy, and executives who joined the former SBC Corp. before 1999 get to keep that coverage in retirement. An AT&T spokeswoman says AT&T gives other retirees and employees "very good medical benefits" compared with other companies. [...]
    The practice angers retirees who face rising health-care premiums and co-payments and, in many cases, are losing their retirement health benefits entirely. "Executives are receiving multimillion-dollar pensions and are in a position to easily pay for their health care," says Jane Banfield, a retired AT&T manager. "Instead, they want the icing on the cake by also guaranteeing themselves free health care," she says.
  • Economic Policy Institute: Increasing health costs can't explain earnings dip for low-wage workers. Excerpts: President Bush's Council of Economic Advisors has argued that rising health insurance costs have squeezed workers wages across the income scale. As a practical matter, however, health insurance costs cannot explain the recent decline in wages for the lowest-paid workers because so few of them are covered by health insurance.
    he chart below illustrates the fact that workers in the bottom 20% of the wage scale suffered a 1.9% decline in real wages between 2004 and 2005. It also shows that only 24% of those workers were covered by employer-provided health insurance in 2004. Health costs would have had to increase by 39% to explain the decline in wages for these workers, when, in reality, they increased only 9.2% from 2004 to 2005.
  • Physicians for a National Health Program: The New Yorker Comment: Consumption. By Hendrik Hertzberg. Excerpts: Perhaps you have been wondering who or what is to blame for the high cost of medical care in this land of ours - and, more broadly, for the ungainly, unjust mess that is the American health-care system. If so, wonder no more. Your government has fingered the culprit: it’s “the vast majority of Americans.” [...]
    Hubbard’s article, headlined “The Health of a Nation,” begins with a frank-sounding acknowledgment that “in the past five years” - that is, since the present Administration took office - “private health insurance premiums have risen 73 percent,” with the result that “some businesses” have dropped coverage altogether. “What is driving this unsustainable run-up in health insurance costs,” Hubbard asks, “and how can we make things better?” Then comes what bloggers call the money quote: Health care is expensive because the vast majority of Americans consume it as if it were free. Health insurance policies with low deductibles insulate people from the cost of the medical care they use - so much so that they often do not even ask for prices.
    Can this really be the Administration’s view of the health-care crisis? That its root cause is that Americans are (a) malingerers and (b) freeloaders who perversely refuse to go comparison shopping when illness strikes? That we're overinsured? Hard as it is to believe that this is what they say, it’s even harder to believe that this is what they believe. [...]
    Medicare - a mixed system, under which the insurance function is socialized while the care itself remains in private hands - dedicates two per cent of its resources to administration. By contrast, the private health-insurance industry spends a fortune - more than ten per cent of its income - on administrative dreadnoughts devoted largely to vetoing treatments, sloughing off sick or potentially sick clients, and scheming to stick someone else with the bill. In the United States, we spend fifteen per cent of our gross domestic product on health care, close to six thousand dollars per person. The French and the Canadians spend ten per cent of G.D.P., about three thousand dollars per head. Yet their “health outcomes,” measured by indices like longevity, are better than ours. If they spent the kind of money we do, they’d live forever.

Vault Message Board Posts
Vault's IBM Business Consulting Services message board is a popular hangout for IBM BCS employees, including many employees acquired from PwC. Some sample posts follow:
  • "Thanks DM" by "phooey69". Full excerpt: I've actually been around for a while...and fortunately, not in a recently acquired account. That said, there are a lot of scary trends that still make me nervous. You just mentioned a bunch of them...layoffs, unfinished solution implementations, high PM turnover. Those have been going on for so long one becomes numb to it all.
    There are other trends that are scary also. For example, we have had "extreme cost controls" on capital and expense purchases (heavily restricted travel, holds on PC upgrades, etc.) for years. It's hard to describe adequately without sounding like whining, but a lot of crazy stuff goes on in the business simply because of the cost-control culture.
    Yet at the same time that heavy cost controls are going on, lots of "process-related" activity is being established. Lots of flowcharts, increased action paths for decision-making...things like that. Don't get me wrong -- there's a need for some level of formalized process in any organization...but we seem to take it to extremes. (For example...it's not unheard of to see conference calls with dozens of people to review what can best be reviewed by one or two people.) It's all pretty crazy, let me tell you...not sure where it all ends.
  • "Phooey69" by "Frank_Reality". Full excerpt: Welcome. You are not the only division 07 poster here. There are several others. BTW - you do understand that the "Spirit" initiative is merely a cheap attempt to buy improved morale without having to fix the many real causes? Alas, Ms. Saint-Surin is little more than a cheerleader. One who has neither been tasked nor funded to fix the root causes of poor morale. So, try to enjoy the few trinkets and events the Spirit teams provide, because that's all you're getting.
  • "Process, process, process, hardening of the arteries" by "wonderaboutibm". Full excerpt: At IBM, process has become the refuge of small minds. You are quite correct that all projects need good processes. It's also true that many IBMers are process-driven, as they should be and need to be. But along the way the small minds got caught up in the process of process, not why they implement process.
    This is an ingrained cultural flaw at IBM, and is certainly not limited to the SO organization. We have boatloads of "methodologists" going back to the granddaddy WSDDM, which I think still survives for not much good reason. These many methodologists do not appear ever to have been involved in project work, but that does not stop them from various outputs in stupendous volume that few in real project work find useful.
    But I digress from the particular SO pathology on process. Back on point: you can develop process to guide how your work should be done, or you can develop process because you are a paper-doll cutter and you like writing process documentation. Guess which mindset prevails in SO? Ever heard of missing the forest for the trees?
    Come to think of it, that might explain the notorious tendency of SO not to develop process intellectual capital that can be used from one account to another. The process folks subconsciously don't want this IC because that would preclude some fun paper doll cutting seminars.
  • "Answers" by "Dose of reality". Excerpts: That being said, IBM and BCS are definitely not employee-friendly places to work. Spend some time surfing this board if you want to garner an appreciation for the culture here. Here are some headlines:
    • Across the board salary cuts two years running
    • Raises in the 0 – 3% range with most closer to 0
    • Bonuses TARGETS at 10 – 15%, but never paid out at anywhere near that level since they are contingent on practices meeting their overall profit targets which are always inflated well beyond what is realistically achievable. But somehow, the front office always gets their bonuses, since they always sandbag their targets
    • Promotions are rare, and the thresholds are set artificially high so as to keep staff running on a treadmill in futile hopes of getting one. Then again, there is no material bump in salary with a change in title
    • Utilization targets (the % of your working capacity that you are expected to be chargeable to a client) are set so high so as to leave no time for you to be trained, take vacation, do practice development, administrative tasks etc.
    • A philosophy of putting you on any project where we may need you, regardless of career fit or geographic location
    • Restrictive travel policies that mean you may have long layovers, multiple connections and cheap hotels.
    • A bureaucracy that would put the government to shame.
    • Oversold projects that put undue stress on staff. Many project managers that can do nothing more than blame staff for failure.
  • "Item 4" by "O_Byteme". Full excerpt: Continuing the Gerstner legacy of firing yet another generation of hardworking, highly educated, creative, clever and motivated Americans who gave the company untold years of uncompensated overtime and backbreaking effort so that the executives could become wealthy, whilst moving these workers jobs to India after first forcing them to train their replacements.
  • "Bullshit from the inside" by "eyes-wide-open". Full excerpt: As an ex-PWCC partner, I was in numerous meetings, which to my amazement, were focused on screwing the staff. For example, we bell curve people's performance for bonus purposes. The trick was, if times were good, we bell curved broadly - e.g. a whole sector - try and beat that in your little functional practice. I had a long term IBMer crying in my office as she said after all these years, she worked on and helped sell an 8 figure project - only to be bell curved to a sector level and getting a 3 rating (it was a good year in the sector). In the not-so-good times, we would bell curve down to a granular level (e.g. a team of 10 or so) and one person got a bonus. The discussion on what to bell curve was open, and all about how to minimize bonuses. So, if you were in an unpopular area, you suffered through the bad times, with little to no bonus, and then when and if it got hot, we went broad and again you got little to no bonus
  • "Here we go again" by "wonderaboutibm". Full excerpt: Looks as though the minor changes in the 2006 bonus plans amount to so much shuffling of the deck chairs. At least the use of the "Growth and Innovation Metric" in bonus calculations is gone -- from an understandability standpoint, that was the ultimate laugher. But the most ludicrous aspect of the bonus calculation remains: percent attainment against "business goals" for income, revenue, etc. Since these goals remain unannounced and presumably top-secret, no one really knows what we are aiming for. All to the better if you are IBM management and you want to dictate what the attainment level will be. Laughable. Truly laughable.

New on the Alliance@IBM Site:
  • This just in: Effective April 3rd, CSO in RTP and Atlanta hit with "redeployment". Jobs being sent to Brazil. Employees NOT receiving severance pay and will have to train Brazilian replacements. Affects all brands and bands from National Missions, Maintenance and National Services Support Organization. Please send Alliance@IBM any documentation and number of employees affected to endicottalliance@stny.rr.com from your home computer (IBM is blocking e-mail sent to and from us from inside IBM).
  • **Attention!** Anyone that is part of the Qualxserv transition, we need your name. An SSR is in the process of speaking with an attorney about filing a class action suit on behalf of all 300, full time employees. The 100 supplemental employees may be included as well. If anyone has a complete list of SSR's being sold to Qualxserv please send to endicottalliance@stny.rr.com Also contact us if you are interested in a potential suit.
  • From the Job Cuts Status & Comments page:
    • Comment 4/11/06: "Central Technical Support" is the IBM Internal 2nd Level Deskside support teams. Currently there is a Northeastern team based out of East Fishkill, a Southern team based out of Jacksonville, and teams for the Central and Western Geographies based out of Markham, Ontario. There's a pilot right now to replace all of these teams with one large CTS team in Bangalore. The team lead for the Northeast USA CTS team was told that she had no choice but to train the Indians, and now that she's done that she has been told that herself and her manager are charged with being personally responsible for the success of this pilot. Failure of the pilot could result in the removal of the US team lead and manager; success will surely mean that the entirety of the US employees will be "resource actioned".
      Some details: Wrapping up training for the CTS India 3 month pilot ended 4/4. The go live date was 4/5 and for the first 5 days of the pilot the agents shadowed a CTS rep in the US for 1/2 of the day (listen in on their calls, remote into their machine to watch, etc) and then in the afternoon take 2 calls each that have been routed from the North mega-queue.
      On 4/12 they will start to receive a regular volume of tickets routed from the North mega-queue, but if we need to send a higher volume to their queue, we may tap into other regions/mega-qs for tickets. -Anonymous-
    • Comment 4/14/06: It's been 9 months since IBM dumped me, a professional hire who enjoyed working for IBM until 2001 when the terrible treatment began. Every day I dreaded my manager finding a way to cut me down despite winning profitable contracts and "starbursts". I now earn less, work less, have a life, have friends, and a manager who actually offers education, conferences and tells me to get offline when I'm on vacation. For those of you who, like me, didn't find the Alliance until it was too late; you'll find after the tearful, fearful, stressful months of job hunting hoping your family doesn't starve and losing your home, I want to tell you there is life after IBM and a better one too! -Anonymous-
    • Comment 4/14/06: I totally agree with the 4/7/06 posting about how being outsourced to IBM has been the most miserable experience of his life. My group was also outsourced and we quickly realized that IBM does not care about any of its employees. The prevailing attitude is one of uncaring. Needless to say we are all searching for new positions outside of IBM. It will take time but eventually we will find new jobs and be motivated and happy once again. I thank the posters to this board for their truthful insights about how lousy a company IBM really is for the workers. -Anonymous-
  • From the General Visitor's Comment page:
    • Comment 4/10/06: Network services in Canada is now forced to "work off" their paid vacation and holidays, and even their "Team Spirit Events". It seems IBM is not familiar with the terms "paid vacation" and "paid holiday". Older employees with more vacation have to work more OT. :) Welcome to Sam's World. -Anonymous-
    • Comment 4/10/06: There are many employees of Indian origin in IBM. They face similar problems related to job security, promotions as any other US employees. -Anonymous-
    • Comment 4/14/06: I had joined IBM a year and half ago and quit recently to join a competitor. It is SO much better at my new place! Its only after coming here that I truly realized how messed up IBM is. IBM manages by fear and intimidation. There is absolutely no work-life balance here. Working 65-75 hours for very little rewards, no appreciation and management that doesn't really care about you is not the way I want to live my life. -Anonymous-
  • Pension Comments page

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