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May 21, 2009 12:50 am
The former director of the US government agency that insures private sector pensions refused to answer questions before Congress on Wednesday, amid allegations that he had “inappropriate contacts” with Wall Street companies bidding for contracts to manage the agency’s assets.
Charles Millard, former director of the Pension Benefit Guaranty Corporation, was subpoenaed to testify before a Senate committee investigating the allegations, which were made last week by the PBGC’s inspector-general. He attended, but invoked his right not to incriminate himself under the Fifth Amendment. He then left, trailed by his three lawyers.
Mr Millard denies any wrongdoing over allegations that he repeatedly called and e-mailed executives at Goldman Sachs, BlackRock and JPMorgan Chase, among others, as he evaluated bids from the groups to manage assets last year.
“The Fifth Amendment protects innocent people against hostile environments,” Stanley Brand, his attorney, said in a statement. “And Congress’s recent actions and statements have created a biased and hostile environment toward Mr Millard.”
A group of senators have asked the justice department to investigate further and Vince Snowbarger, the agency’s acting director, has recommended that the PBGC’s board terminate the three contracts in question. The board is evaluating that recommendation. No company is accused of breaking the law.
The investigation into Mr Millard’s conduct comes as the PBGC faces a $33.5bn deficit, the largest in its history, following a surge of insolvencies among companies with underfunded pension schemes.
As of 31 March, the agency’s shortfall had roughly trebled from its level at the end of the fiscal year in September, Mr Snowbarger told the Senate committee on ageing on Wednesday.
“Given the state of the economy, the question of PBGC’s viability is more urgent than ever,” said Herb Kohl, the committee’s Democratic chairman. “One in seven Americans count on this agency to pay out their pension in case their employer cannot due to bankruptcy. As General Motors teeters on the edge of insolvency, hundreds of thousands of workers’ pensions could soon become the responsibility of the PBGC.”
The deficit includes only part of the roughly $42bn (€31bn, £27bn) in additional liabilities that the PBGC would have to take on if the US motor industry collapsed and could no longer manage its pension plans.
Mr Snowbarger said the PBRG had enough assets to meet its obligations for many years to come, but that its long-term deficit must still be addressed.
The committee members also expressed concerns about the management and oversight of the PBGC, whose board consists of Timothy Geithner, US Treasury secretary, Gary Locke, commerce secretary, and Hilda Solis, labour secretary. Barbara Bovbjerg of the GAO said the board had not met in 15 months and added that it was problematic that its composition changes entirely when a new administration takes power. Also, the steep drop in interest rates since last September, along with changes to actuarial assumptions, have contributed to the current deficit.
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