A New Generation of Vipers

The human stories recounted in last week’s two-part Times series on the looting of pension funds by unscrupulous employers have a quality that can be described only as Dickensian.

Among the cases uncovered by staff writers Douglas Frantz and Robert L. Jackson was that of an immigrant welder and Nazi labor camp survivor, who--after 22 years of toil in an Illinois boiler works--was forced to sit penniless, jobless and helpless at his dying wife’s side because his crooked boss had stolen his employees’ retirement fund. In another instance, hard-working New Mexican potash miners emerged from the pit one day to discover that the financial manipulator who recently had purchased their company was systematically despoiling their pension fund to pay his own debts and maintain his lavish way of life.

Federal authorities characterize the businessmen and lawyers who commit such outrages as “a new generation of racketeers,” and estimate that they may currently be misusing at least $4 billion of the $1.7 trillion in private pension funds intended to provide a decent old age for 76 million American workers and retirees. Only a little more than half those people belong to a fund covered by the Pension Benefit Guaranty Corp., the federal insurance program for private pension plans.

According to Raymond Maria, the acting inspector general of the U.S. Department of Labor, which has the legal responsibility to oversee private pension funds, “The nation’s pension and welfare plans are vulnerable to fraud and corruption because of a flawed enforcement strategy . . . that relies too much on civil remedies and not enough on criminal prosecution.” Today, Maria and others contend, pension-fund regulation is comparable to the sort of oversight that lead to the collapse of the savings and loan industry and saddled taxpayers with at least $150 billion in debts.

By now, that story, too, is a familiar one, echoed in industries from airlines to savings and loans to food and drugs, where years of reflexive ideological hostility to federal regulation and desperate budget cutting have deprived Americans of the effective governmental oversight on which they should be able to rely. In 1978, for example, the Labor Department’s Pension and Welfare Benefits Administration conducted 8,598 reviews and investigations of private plans. By last year, that number had fallen to 1,632, despite the tripling of pension-fund assests.

Three steps to remedy this unconscionable condition immediately commend themselves:

First, the Labor Department ought to abandon its reliance on civil and administration sanctions and pursue vigorous criminal prosecutions of thieving employers. The experience of the Securities and Exchange Commission suggests that, even among Wall Street’s avaricious insiders, such prosecutions have a deterrent value that compensates somewhat for the shortage of actual regulatory resources.

In light of that shortage, Congress also ought to pass as quickly as possible legislation directing that accountants hired to audit pension funds must report any irregularities they uncover to the Department of Labor. Accountants doubtless will resist the notion of being turned into “policemen.” Given the current limitations on the federal budget, however, there seems to be little alternative.

Finally, the House ought to press ahead with thorough hearings on the true scope of this alarming and unsavory situation. Its outlines were first brought into view last August in hearings chaired by Rep. Tom Lantos (D-San Mateo), but more information must be gathered before a comprehensive remedy can be fashioned.

Anything less will signal America’s working men and women that their government is indifferent to the theft of the decent retirement they have labored so hard to secure.