O.C. Register boss resents being labeled a ‘ghoul’

Shown is Aaron Kushner, CEO of Freedom Communications, the owner of the Orange County Register.

Shown is Aaron Kushner, CEO of Freedom Communications, the owner of the Orange County Register.

(Anne Cusack / Los Angeles Times)
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<i>This post has been corrected, as indicated below.</i>

Aaron Kushner, the CEO of Freedom Communications, the owner of the Orange County Register, has registered his objection to our post Tuesday describing the company’s plans to take out life insurance policies on its employees to help fund the company’s pension plan as “ghoulish.”

We observed that the scheme was introduced a few days after Freedom laid off dozens of employees at the Register and the Riverside Press-Enterprise.

In a memo to employees reprinted on Jim Romenesko’s media news blog, Kushner explained that the life insurance program demonstrates that “we care about you, your spouses and your families.”


Of course, Kushner is entitled to his say. That’s why we sought the company’s comment before writing our post. Freedom never replied, not even to say “no comment.” If it had, we would have reported its response.

But now that he has responded indirectly -- he called our post “a reminder of the kind of newspaper and journalism of which we want no part” -- let’s examine his position. In his memo to “associates” (this is what he calls people who are more typically known as “employees”) he wrote:

“Life insurance is not ghoulish, nor are the people who sell it, nor are those who buy it. Life insurance, by its very nature, was created to benefit the people we love and care about most.”

Right. We didn’t say that life insurance was ghoulish, nor are those who sell it or buy it. We suggested that the practice of insuring the lives of rank-and-file employees for corporate purposes -- in this case to fund its pension plan -- was “ghoulish.” Kushner is welcome to cavil at the term, but he must know that the practice is controversial and has often been abused. That’s why special rules for such plans were enacted by Congress in 2006. Among them is the requirement that the employees be notified and their permission sought in advance, as Freedom has done.

Kushner advised employees that “you are the sole beneficiaries of the pension plan, the insurance policies and all of the significant investments we have made to strengthen your pension plan over the last 18 months. Purchasing life insurance policies as a means of increasing pension plan assets to fund your family’s payments from the pension plan has been around for years, used by companies far larger than Freedom and is not novel, complicated or extraordinary.” He added, “the beneficiary of the insurance is not the company.”

The use of these insurance plans to fund various corporate purposes is, as Kushner says and as we already reported, not uncommon. For the rest, he’s being a bit disingenuous.


To begin with, while the company itself is not the direct beneficiary of the insurance proceeds (the pension plan is), Freedom certainly receives a benefit from the policies -- to the extent they fund the pension plan, that’s an obligation Freedom doesn’t have to meet from other corporate resources. By law, adequate funding of the pension plan is a corporate obligation. The premiums of such policies are generally tax-deductible, and the proceeds are tax-exempt.

Life insurance as most families understand it, moreover, is a policy that pays a benefit to survivors based actuarially on premiums paid over time, and is designed, it’s hoped, to meet their direct needs.

Corporate life insurance paid for by the company and aimed at the pension fund doesn’t have that direct relationship to any given family’s needs, which is one reason it’s viewed skeptically by some whose lives are to be covered. As the company’s emails to workers about the program were described to us, there’s no overt relationship between the value of the insurance on any given employee and his or her possible benefits from the Freedom pension. The benefits of an employee who refuses permission, for example, wouldn’t be reduced, compared to an employee who gives his or her OK.

These are among the issues we would have raised with Freedom had the company responded to our request for comment. As it happens, company officials will be meeting with employees today to answer their questions about the program, according to sources at the Register. Here’s betting that the session will be well attended.

[For the Record, 12:13 p.m. PST Jan. 29: An earlier version of this post said Freedom Communications had recently laid off employees at the Riverside Press-Telegram. It laid off employees at the Riverside Press-Enterprise.]