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TESTIMONY BEFORE
THE U.S. CONGRESS
LABOR-MANAGEMENT SUBCOMMITTEE - 1989 |
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| Letter to the Honorable Edward M. Kennedy, U.S. Senate Labor Committee and the Department of Labor drawing attention to defects in the current interpretation and administration of ERISA: | |
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Honorable Edward M.
Kennedy
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Re: Rights and Remedies of Employee/Investors under the Employee Retirement Income Security Act of 1974 ("ERISA") Dear Ted, Certain recent developments have confirmed my concern that ERISA protection against trustee negligence and misconduct is not available to employee/investors under certain circumstances. This situation has caused and continues to cause substantial damage to working people who have been encouraged by the statute to invest; it is plainly contrary to the intention of the drafters of the statute. The situation needs administrative review within the Department of Labor (DOL) and Hearings by the appropriate legislative committees. I served as the federal official responsible for the administration of ERISA from 1984 to 1985 and have for the last twenty years been actively involved in the questions of shareholder rights. ERISA is one of the great legislative accomplishments of recent decades. Encouraged by its precise articulation of right and obligations, American employees and employers have created the largest pool of investment capital in the history of the world. This is a hugely important national asset. More Americans have a beneficial ownership of business today than in any other country or at any other time. One of the important elements of ERISA is the creation of structure and rules by which employee benefit plans are able to invest in the securities of the employer. The employer retains the power to choose the trustee of employee benefit plans. Since the decisions of the Delaware Chancery and Supreme Counts in the Polaroid case in early 1989, many employee benefit plans have become the dominant shareholder in their employer company. An utterly unintended consequence of the interpretation of ERISA by the courts and administrative practices of PWBA is the practical inability of employee/ beneficial owners to hold trustees accountable for losses in cases of conflict of interest and negligence in the investment and management of employer securities. This is a grotesque result. I have asked my long time counselor and friend, Peter Murray, Esq., a professor of law and practitioner knowledgeable in this field, to review a current situation involving massive losses to employee/beneficial owners. A copy of his opinion concluding that employees have no practical remedy is attached to this letter. Congress plainly did not intend to discriminate against employee benefit plan beneficiaries - and that is the current situation. The law should either be amended; its administration by DOL modified; or the legislative intent should be made unmistakably clear through Hearings so that essential rights can henceforth be protected by the courts. Respectfully Yours, |
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