U.S. Sugar Employees Fight Against Rigged Pension Plan-Is it Time to Examine Your Retirement Account?
For many American citizens, apart from the path to owning a home with a white picket fence, the luxury of an investment portfolio to allow comfortable retirement years is an integral piece of the American dream. Most workers build up retirement accounts from scratch to grow with other short-term investments as well as their home real estate purchase; as their kids grow up and career continues its upward course, their "nest egg" gestates in the bank, waiting for them to reach 55 and a second life.
However, not every retirement account is equal, and those looking to invest in a retirement should be cautious when proceeding with their portfolio. So much depends on the safety of the investment that careful research and sound financial planning are just the baseline requirements for success. Investors should also learn from the lessons of those who have seen their retirement accounts go up in a cloud of smoke.
Workers at U.S. Sugar in Clewiston, Florida, for example, participate in a retirement plan similar to that offered by many companies across the United States. Instead of opting for a traditional pension plan, the company chose a stock sharing program that gave the workers control of company shares. Such plans are often called "employee stock ownership plans," or ESOPs for short. U.S. Sugar took its shares off the public exchange in creating its ESOP in 1983.
Giving workers a vested interest in the company success not only cut costs for a pension plan, but gave workers incentive to keep productivity high and remain loyal to the company. However, workers with ESOPs suffer from lack of access to the public market: with 95% of ESOPs operating at privately-held companies, they cash out their options with no knowledge of what shares could sell for in an open market.
Employees at U.S. Sugar who cashed out recently believe they fell victim to company double-dealing on this issue. While courting bids from an outside company that would dramatically raise stock prices, U.S. Sugar was cashing its employees out of their stock plan at a much lower rate. The discrepancy cost individual employees tens of thousands each, and the group as a whole likely millions.
Congress has put in place federal regulations to prevent this from happening, by mandating that an outside appraiser value the stock worth each year. However, a lawsuit that the employees have filed against U.S. Sugar management claims that the company's chairman and others in the family-started business withheld important information from the stock appraiser to depress the share price.
The lawsuit cites as evidence two offers to buy the company shares for as much as $293 per share, while workers were being cashed out at $194 per share. The board rejected both offers, which allowed them to retire the shares that workers were being cashed out and increase the family's own holdings by 19 percent over the six-year period 2000-2005.
Naturally, the company denies wrongdoing. The president and board are prepared for a long legal battle, a scary prospect that many employees filing the suit have tacitly acknowledged by getting part-time jobs and effectively coming out of retirement.
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