"The RICO defendants are responsible for orchestrating a widespread Ponzi scheme, in violation of the Racketeer Influenced and Corrupt Organizations Act ('RICO'), over a period of nearly five years, involving the direct solicitation of $12 million in investment money from Devon for two information technology projects," according to the complaint.
"While leading Devon down this road of deceit and as part of their scheme, the RICO defendants improperly included the funding provided by Devon on the financial reports of STG, thereby exaggerating its performance," the complaint states.
In the complaint, Devon claims IBM took the money Devon invested in the partnership and used it to boost earnings figures for Big Blue's Systems and Technology Group. The complaint alleges that IBM continued the scheme by bringing in new partners to invest in projects. Thomas Bradicich and James Gargan, two RTP-based IBM vice presidents, are among the four individual IBM defendants named in the suit. IBM has not yet filed an answer to the complaint.
Frankly, the best long term strategy (in my opinion) would be for IBM to want to keep these employees on the PPA pension. First, the pension will have been paid for and any money they are able to produce will be cash that they can continue to use for layoffs, exec packages, or showing profit. Secondly, the employees are not drawing out of the funding and I believe they are getting high quality employees at a cheap price.
A couple of posters have suggested that IBM will simply watch all of these senior employees walk out of IBM, and replace them with cheap replacements off the street. I don't think so. I look around and see that this group of employees (25+ years) are making up the directors, BUEs, and senior team lead talent in many groups that cannot afford this loss of leadership. I think 1999 was much different. We had a deeper bench and the targets back then were the "younger employees" that were viewed as mere cogs.
I hardly think that business line executives with 30 years of experience will be replaced by $50K employees off the street. Us grunts, sure. IBM has had no qualm going after the troops, but we are talking about the ones that, in some cases, report directly up to these bosses.
This also brings up another point that as far as I can determine, this rumor started on one specific message board. The board was the generic "IBM Corporation" group that discusses the financial aspects of the company. Based on those postings, I believe there was a good chance that IBM did take a look (or is looking) at the dollars behind a pension change. However, the same sources suggested that IBM booted the plan for one simple reason. Possible lawsuits.
It has been discussed that IBM can certainly terminate their pension plan at anytime, but I wonder now that the people affected the most would all be over 40 (actually over 51.) This might be something that IBM is a little worried to step into at this time. You have unemployment at a high level, an Obama administration that is worker friendly, and a company that is trying to get stimulus funds and government contracts. Another lawsuit or bad press might not be what IBM needs presently.
Plus, we're not talking the 10s of billions of dollars in savings that they were going after in 1999, but probably something, at most, in the $1 or $2 billion range. (Based on my understanding, the discount rate that IBM would need to offer would be 1/2 of the 30 year Bond rate and the 1/2 of the various corporate rates. I believe the 30 year bond is close to 4% and the corporate rates I have seen only fluctuate a quarter of a point higher.) The maximum they can net present value would be 13.5 years, but the average for the PPA class is probably closer to 7 or 8 years. This is significantly different than the original second choicers who in 1999 were initially "NPVed" with 6% over 25 years with a calculated pension that was only 48 months based on a 60 month total.
Finally, let me state that I have no clue what will or will not happen. I have not heard from anybody in IBM talking about any rumors either. The only discussion I have been part of has been on these message boards. Normally I believe that everybody should feel free to state their opinions, but you posted this information under the guise as fact:
"Alas, IBM is not going to announce this until September...or so I hear from a source who shall remain anonymous. And, the scoop is 'no more pensions'....if you are eligible under the old plan, leave or lose it. This means even people who are not yet eligible to retire. Thanks, IBM, for letting us twist in the wind all summer."
By posting this, aren't you the one that is letting IBMers who read this board "twist in the wind all summer?"
The stress of impending layoffs does, however, take its toll. I went through at least four or five before I finally got axed several years back and I had to take a job for less money, but the stress is so much less that it may add back a couple years to my life that IBM would probably have taken away due to the toll of constant stress and two or more layoff rumors a year if I had stayed.
If it does come down to leave or lose it, though, take the money and run. The job market is tough, though, so start looking now before you do bolt out.
I don't think it is simply a "no brainer" for IBM to change the plan at this stage. It did make a tremendous amount of financial sense back in 1999. Further changes made even more sense when they froze the plan. I just don't see the same upside for making a change at this point. (However, I will agree that logical decisions and IBM executives do not always go hand in hand.)
First, if IBM's goal was to simply go after the retirement "bump" that we all get when we reach either 30 years of continuous service or are over 55 years (with 10 years of service), then the horse has pretty much left the barn. By my calculations, there will probably be less than 5,000 IBMers that will not have achieved that goal by the end of 2010.
That might seem like a lot, but if they would have done a forced conversion to a cash balance in 2006, then the numbers would have been greater than 20,000 to 25,000 of individuals who were still not retirement eligible. The youngest eligible PPA participant will be turning 51 this month. (This is someone who was 40 years old back in July 1999 and had at least 10 years of service at that time.)
There is money out there that IBM will save by preventing these employees from reaching the "bump." Assuming it equals out to about $150,000 (pretty high estimate) per employee, then best case IBM would be saving is around $750 million. That might sound like a lot, but that is pretty much loose change when we are talking about pension dollars. When you add up all of the changes IBM made to the pension plan in 1999, then we are talking about $10s of billions if they could have avoided relenting to the second chancers. Three quarters of a billion is a lot, but not when you consider the consequences.
Secondly, I still would wonder why IBM would choose to force these IBMers out (now) when they could easily continue to draw down the number by laying them off. IBM does realize that this set of employees contain a great number of first and second and third line managers throughout IBM. It was one thing to cull the herd in 1999 when we had backups of our backups, but I think this would be a pretty risky move at this point. I think that the IBM execs do realize this after their 1999 experience.
Additionally, I would think it would be in IBM's best interest to keep the "retirement eligible" employees from leaving at this point. It is true that they are higher paid, but they are also very cheap employees in comparison. The reason is that as long as they are working, then that is a pension that IBM does not have to pay out. If my salary is $120,000, but my present pension value is $60,000, then I am actually a $60,000 employee. There is a better chance that the retirement eligible people will leave as compared to the one not eligible. The logic is that they are younger (non-eligible) and want to continue working.
One final point is regards to how IBM would calculate the net present value. Again, in 1999, when interest rates were at least reasonable, IBM was able to get away with their 6% value. In today's environment, that might be a bit difficult to swallow. Of course, the rules now suggest that they don't even need to justify their discount rate.
More importantly, back in 1999, the employees that IBM were truly targeting were all fairly young. The ones in their upper 20s and 30s that lost out on the pension (and a great deal left the company) and even the second choicers (most of who were in their forties.) The second chancers are now all in their 50's. And, it is one thing to "present value" back 25 years, but the impact is simply not as great if you can only go back 8 to 12 years. (This is one of the reasons that I have not included the wearaway amount in IBM's savings. It may still be significant, but I wonder if IBM would see a positive impact to the approximate 20K employees over the age of 55 still working.)
Plus, if you believe that high inflation could be in our future, then maybe having a cash balance is not as bad as what 1999 might have offered. I assume we can pretty much rule out any COLAs in our future from IBM. IBM won't be able to hold onto the cash balance for very long, since participants that end up staying would have a much shorter stretch than what happened in 1999.
Where/how did you come up with the number of employees affected (5000)? I'll admit that I did no calculation at all - I just assumed the number was larger. Either way - they will do anything for dollars as pointed out in the paragraph above. There are employees (assumption here on my part)Â that spend 40 hours a week doing nothing but looking for pennies to add to net income. Nothing is out of scope. They have already proven that anything legally in a grey area also will be tried - and they will let the courts determine the outcome. I am not even sure that is done fairly - with billions and billions of dollars at stake at large number of corporations,- the goal is simply to win. II suspect there is a lot more going on behind the scene that we never see - just look at the bailout program to see the pull Wall Street has on the government.
As to any interest rate they would use - the answer is that it will be the legally established limit or the absolute best number they think they can get away with - whichever is possible. I would not be surprised to see a number even beyond what they think they can get away with used - and then conceding to improve it some to show how flexible they are and how much they care for their employees.
I agree with your net cost of an employee being the difference in salary versus retirement - but I do not think the accounting works like that. I could be totally wrong as I have no knowledge in this what so ever. I think my retirement money is already in the retirement fund requirements either way - whether I am retired or not. So, pushing me out as an employee simply saves them money on the salary side - along with medical benefits, 401K match, social security, vacation and so on. Another bonus to them here is that the older employees cost them considerably more in medical benefits, vacation, and Â social security than what our replacements will cost them.
Another aspect of this often over looked - and this may have been already discussed at some time in the past, is the way they are making these changes. As you know, the first retirement plan change applied to all employees and triggered a major outcry and a law suite They have learned from that and over the years they have split the employees into multiple groups. Now they target the separate groups - and the outcry is too small to attract any attention or carry any weight. This was even highted by the "Â less than 5,000 IBMers " number used below. If you go back through the plan changes made in the past, I think you will find that all these changes only affected one or two groups - and this all planned. They established the group sizes by setting start date and age values for the applicable changes. These are the groups I see (and there could be more):
This rumored change would basically eliminate the top two groups listed above - paving the way for future changes with fewer employees in any retirement plan at all (contractors,off shore, or a void will replace the retiring employees). They can also provide a 'bridge' and control the percentage of employees they want to include from the third group listed above- from 0 to 100%. Just my opinion
Also, the $60K pension is "sunk cost" pay you now, pay you later the money is there.
Regardless ... of that ... IMHO, the most compelling reason to believe the rumor is that big-Sammy turns 60 and wants to wring every last nickel out of this years bottom line that is possible.
Is there any basis for the rumor? Beats me, but like you said "executive logic" operates differently than "peon-geek-interchangeable-cog" logic. TK.
Managing the Pension Plan is a headache and entails some financial risk that IBM can do without on the road to doubling earnings in 5 years.
The rise in Berkshire's stock present the Gates Foundation, founded by Mr. Gates and his wife in 1994, with an enviable challenge: They have to spend it all. One condition of Mr. Buffet's donation is that the group's annual giving must exceed his previous year's gift. Mr. Gates, co-founder of Microsoft Corp., has provided billions of dollars to the foundation, too. The group made grants totaling $3 billion last year to pay for vaccine research, farming projects, microfinance efforts, teacher training, and other charitable work, according to the foundation's website. The total value of Mr. Buffett's gift, including shares he has pledged to hand over in future years, was about $39 billion on Thursday. It is the largest charitable donation in history. Mr. Buffett's holdings are mostly in the more-expensive A shares. He has been converting portions of his holdings to the so-called Baby B shares since announcing the donation in 2006.
Republicans have made cutting spending and reforming entitlement programs a key part of their 2010 campaign message. "The choice this year could not be clearer. While Democrats are fighting to create jobs and stand up for seniors, middle class families, and small businesses, Republicans are fighting for Wall Street and to bring back the same policies that caused the worst economic crisis since the Great Depression," said Ryan Rudominer, the national press secretary for House Democrats' campaign committee.
When they make immense sums of money without sharing it among those whose time, efforts, sacrifice, and knowledge brought in the profits, it is unfair. When hard working people are dropped after dedicating years to their job since there is a cheaper alternative overseas or in a town with lower cost of living, something is amiss. I am a realist and do not think that a union will be without its drawbacks or potential for problems, but things are certainly not in your favor as they are. Those who are truly happy with things as they have been are in the minority -- I fear that the majority are just too beaten down and timid to speak up.
IBM would not have such enormous profits if it were not for those in the trenches working so many hours in fear of losing their jobs for salaries that are below the market average. We work overtime without documenting it. We don't take vacation days we are eligible for because we fear being out of the office will put us on the next list.
We've lost a viable pension plan, variable pay, and no longer even hold out hope for a pay increase each year. We watch as thousands of fellow workers are unceremoniously forced out of the company during a great recession while IBM posts record earnings. We no longer get training in what we need to do our jobs, let alone that which would enable us to advance our careers. I just don't see why the membership has not expanded dramatically since January 2009. -He Who Carries the Pickle-
When I started my 30 day blacklisted from applying for another IBM job period I was told I couldn't report to work site. Like I had a communicable disease or something.
Now I get an IBM health representative from IBM sponsored health insurance calling me how my health is and how I am feeling .and I don't even work for them anymore even though have to pay the exorbitant COBRA premiums. When I was on disability no calls were made. When I was working for them I had to make sure I couldn't take two consecutive sick days without a doctor's note. Talk about IBM caring about employee health. Like why would IBM really care about an ex-employees health now?
Maybe IBM knows something about the health issues that have befallen those they soon RA? A pattern? Quite right. -sickend-
On another note, like others have said, the one thing that IS the same for ALL ra'd workers they were without union contract. I joined the union, What have YOU done lately to ensure you're not next? -Something to THINK about-
It is up to the people to join together and there seems to be 3 classes. The older ones are stuck on their pensions and afraid to rock the boat. The middle career class are in debt up to their eye-balls and think their jobs are secure. The younger career class just doesn't believe in organizing because they think this bullshit is acceptable so they just don't give a shit.
I predict some jerk will give me grief on here, but that is part of the problem, people are not allowed to voice their opinion and the protectionists chew up anyone with their own opinion and spit them out. I am sure there will be some jerk jumping on me, I really don't care anymore, chew on this dust as my feet leave the building. -Time-For-A-New-Job-
"But dependency on government has never been bad for the rich. The pretense of the laissez-faire people is that only the poor are dependent on government, while the rich take care of themselves. This argument manages to ignore all of modern history, which shows a consistent record of laissez-faire for the poor, but enormous government intervention for the rich." From Economic Justice: The American Class System, from the book Declarations of Independence by Howard Zinn.
Neither the Long Depression of the 19th century nor the Great Depression of the 20th was an era of nonstop decline — on the contrary, both included periods when the economy grew. But these episodes of improvement were never enough to undo the damage from the initial slump, and were followed by relapses.
We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense.
And this third depression will be primarily a failure of policy. Around the world — most recently at last weekend's deeply discouraging G-20 meeting — governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.
So if lawmakers are wondering why consumer confidence and the stock market are tanking (the Standard & Poor's 500-stock index hit a new low for the year on Tuesday), they need look no further than a mirror. The situation cries out for policies to support economic growth — specifically jobless benefits and fiscal aid to states. But instead of delivering, Congressional Republicans and many Democrats have been asserting that the nation must act instead to cut the deficit. The debate has little to do with economic reality and everything to do with political posturing. A lot of lawmakers have concluded that the best way to keep their jobs is to pander to the nation's new populist mood and play off the fears of the very Americans whose economic well-being Congress is threatening.
Deficits matter, but not more than economic recovery, and not more urgently than the economic survival of millions of Americans. A sane approach would couple near-term federal spending with a credible plan for deficit reduction — a mix of tax increases and spending cuts — as the economic recovery takes hold. But today's deficit hawks — many of whom eagerly participated in digging the deficit ever deeper during the George W. Bush years — are not interested in the sane approach. In the Senate, even as they blocked the extension of unemployment benefits, they succeeded in preserving a tax loophole that benefits wealthy money managers at private equity firms and other investment partnerships. They also derailed an effort to end widespread tax avoidance by owners of small businesses organized as S-corporations. If they are really so worried about the deficit, why balk at these evidently sensible ways to close tax loopholes and end tax avoidance?
This is the nuclear bomb of politics, empowering corporations to drop megatons of money on candidates, literally letting this narrow special interest buy our government.
Democrats promised quick action to stop this armed robbery of the People's democratic authority. But – flexing milquetoast rather than muscle – the Dems proposed nothing but a disclosure bill. It meekly accepts the "right" of corporations to steal people's political power – as long as the barrage of corporate campaign ads come with name tags, revealing who's doing the stealing.
Yet, so-called leaders of the party are now even backing off on disclosure, watering down their own milquetoast. First came the NRA, shooting a hole in the bill to let them escape the disclosure requirement. Of course, other entities – from AARP to the U.S. Chamber of Commerce – want the same exemption, so it's fast becoming a non-disclosure bill... and a joke.
Backers say that these exemptions are the "only way" to win enough votes to pass the bill. What wimps! There is another way – Democrats should get out of Washington, where corporate money already rules, and go to the people, rally grassroots America to ram meaningful reform down the throats of these thieves.
For weeks now, the two biggest issues in Congress have been cleaning up Wall Street and cleaning up the Gulf Coast. To the surprise of no one in the capital's K Street corridor, Mr. Podesta — Democratic fund-raiser, avid art collector and member of a family brand in Washington — has had a big hand in both. And medical companies have also been drawn to his firm, particularly in the wake of the health care legislation.
In a remarkable season of lobbying, business is booming for the Podesta Group, already one of Washington's biggest players. It has become particularly lucrative for firms like Mr. Podesta's that are skilled at wielding influence in Congress, the center of epic debates on health care, bailouts and financial regulations.
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