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Hostess Diverted Pension Money to Run Business

Published: December 11, 2012
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Source: Newser

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For months, Hostess diverted funds intended for employee pensions and used that money to help run the sagging business, the Wall Street Journal reports. It's not clear how much workers lost, and experts say it probably wasn't illegal, but Hostess CEO Gregory Rayburn admitted it was a "terrible" thing. "I think it's like a lot of things in this case," he said. "It's not a good situation to have." The move affected bakers union employees—not Teamsters—because only the former contributed from their wages to pension funds.

But how much bakers lost is unclear, because retirees at Hostess are paid by a "multiemployer pension plan" that's funded by several companies in the business. Jeffrey Freund, a lawyer for the union, said Hostess missed $22.1 million in payments during the five months preceding the company's bankruptcy filing in January, and another $3 million to $4 million per month until Hostess and the union failed to reach an agreement. "The company's cessation of making pension contributions was a critical component of the bakers' decision" to go on strike, said Freund.

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