RETIREMENT SECURITY FOR AMERICAN WORKERS: 

EXAMINING PENSION ENFORCEMENT AND 

ACCOUNTABILITY

HEARING

BEFORE THE 

SUBCOMMITTEE ON EMPLOYER-EMPLOYEE RELATIONS 

OF THE 

COMMITTEE ON EDUCATION AND 

THE WORKFORCE 

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

HEARING HELD IN WASHINGTON, DC, SEPTEMBER 10, 2002 

Serial No. 107-76 

Printed for the use of the Committee on Education 

and the Workforce

83-026 pdf 

For sale by the Superintendent of Documents, U.S. Government Printing Office 

Internet: bookstore.gpo.gov Phone: (866) 512-1800; DC area (202) 512-1800 

 FAX: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001
ii

COMMITTEE ON EDUCATION AND THE WORKFORCE 

JOHN A. BOEHNER, Ohio, Chairman 

THOMAS E. PETRI, Wisconsin GEORGE MILLER, California 

MARGE ROUKEMA, New Jersey DALE E. KILDEE, Michigan 

CASS BALLENGER, North Carolina MAJOR R. OWENS, New York 

PETER HOEKSTRA, Michigan DONALD M. PAYNE, New Jersey 

HOWARD P. “BUCK” McKEON, California PATSY MINK, Hawaii 

MICHAEL N. CASTLE, Delaware ROBERT E. ANDREWS, New Jersey 

SAM JOHNSON, Texas TIM ROEMER, Indiana 

JAMES C. GREENWOOD, Pennsylvania ROBERT C. “BOBBY” SCOTT, Virginia 

LINDSEY O. GRAHAM, South Carolina LYNN C. WOOLSEY, California 

MARK E. SOUDER, Indiana LYNN N. RIVERS, Michigan 

CHARLIE W. NORWOOD, JR., Georgia RUBEN HINOJOSA, Texas 

BOB SCHAFFER, Colorado CAROLYN McCARTHY, New York 

FRED UPTON, Michigan JOHN F. TIERNEY, Massachusetts 

VAN HILLEARY, Tennessee RON KIND, Wisconsin 

VERNON J. EHLERS, Michigan LORETTA SANCHEZ, California 

THOMAS G. TANCREDO, Colorado HAROLD E. FORD, JR., Tennessee 

JIM DeMINT, South Carolina DENNIS KUCINICH, Ohio 

JOHNNY ISAKSON, Georgia DAVID WU, Oregon 

BOB GOODLATTE, Virginia RUSH D. HOLT, New Jersey 

JUDY BIGGERT, Illinois HILDA L. SOLIS, California 

TODD RUSSELL PLATTS, Pennsylvania SUSAN DAVIS, California 

PATRICK J. TIBERI, Ohio BETTY McCOLLUM, Minnesota 

 RIC KELLER, Florida 

 TOM OSBORNE, Nebraska 

 JOHN ABNEY CULBERSON, Texas 

 JOE WILSON, South Carolina 

 Paula Nowakowski, Chief of Staff 

 John Lawrence, Minority Staff Director

 SUBCOMMITTEE ON EMPLOYER-EMPLOYEE RELATIONS 

 SAM JOHNSON, Texas, Chairman

JIM DeMINT, South Carolina ROBERT E. ANDREWS, New Jersey

JOHN BOEHNER, Ohio DONALD M. PAYNE, New Jersey 

MARGE ROUKEMA, New Jersey DALE E. KILDEE, Michigan 

CASS BALLENGER, North Carolina LYNN N. RIVERS, Michigan 

PETER HOEKSTRA, Michigan CAROLYN McCARTHY, New York 

HOWARD P. “BUCK” McKEON, California JOHN F. TIERNEY, Massachusetts 

THOMAS G. TANCREDO, Colorado HAROLD E. FORD, Jr., Tennessee 

PATRICK J. TIBERI, Ohio 

JOE WILSON, South Carolina 
iii

Table of Contents 

OPENING STATEMENT OF CHAIRMAN SAM JOHNSON, SUBCOMMITTEE ON 

EMPLOYER-EMPLOYEE RELATIONS, COMMITTEE ON EDUCATION AND THE 

WORKFORCE ............................................................................................................................... 2

OPENING STATEMENTOF RANKING MEMBER ROBERT ANDREWS, 

SUBCOMMITTEE ON EMPLOYER-EMPLOYEE RELATIONS, COMMITTEE ON 

EDUCATION AN THE WORKFORCE ....................................................................................... 4

STATEMENT OF ANN L. COMBS, ASSISTANT SECRETARY, PENSION AND WELFARE 

BENEFITS ADMINISTRATION, U.S. DEPARTMENT OF LABOR, WASHINGTON, D.C... 5

STATEMENT OF STEPHEN J. COSSU, DEPUTY INSPECTOR GENERAL, OFFICE OF 

LABOR RACKETEERING AND FRAUD INVESTIGATIONS, OFFICE OF INSPECTOR 

GENERAL, U.S. DEPARTMENT OF LABOR, WASHINGTON, D.C. ................................... 18

STATEMENT OF KAREN FERGUSON, DIRECTOR, PENSION RIGHTS CENTER, 

WASHINGTON, D.C................................................................................................................... 20

STATEMENT OF KENNETH BOEHM, CHAIRMAN, NATIONAL LEGAL AND POLICY 

CENTER, FALLS CHURCH, VA ............................................................................................... 22

APPENDIX A - WRITTEN OPENING STATEMENT OF CHAIRMAN SAM JOHNSON, 

SUBCOMMITTEE ON EMPLOYER-EMPLOYEE RELATIONS, COMMITTEE ON 

EDUCATION AND THE WORKFORCE................................................................................... 33

APPENDIX B - WRITTEN STATEMENT OF ANN L. COMBS, ASSISTANT SECRETARY, 

PENSION AND WELFARE BENEFITS ADMINISTRATION, U.S. DEPARTMENT OF 

LABOR, WASHINGTON, D.C. .................................................................................................. 37

APPENDIX C – WRITTEN STATEMENT OF STEPHEN J. COSSU, DEPUTY INSPECTOR 

GENERAL, OFFICE OF LABOR RACKETEERING AND FRAUD INVESTIGATIONS, 

OFFICE OF INSPECTOR GENERAL, U.S. DEPARTMENT OF LABOR, WASHINGTON, 

D.C................................................................................................................................................ 63

APPENDIX D – WRITTEN STATEMENT OF KAREN FERGUSON, DIRECTOR, PENSION 

RIGHTS CENTER, WASHINGTON, D.C.................................................................................. 71
iv

APPENDIX E – WRITTEN STATEMENT OF KENNETH BOEHM, CHAIRMAN, 

NATIONAL LEGAL AND POLICY CENTER, FALLS CHURCH, VA .................................. 77

APPENDIX F – SUBMITTED FOR THE RECORD, U.S. GENERAL ACCOUNTING 

OFFICE, REPORT TO CONGRESSIONAL COMMITTEES, MARCH 2002, PENSION AND 

WELFARE BENEFITS ADMINISTRATION, OPPORTUNITIES EXIST FOR IMPROVING 

MANAGEMENT OF THE ENFORCEMENT PROGRAM, GAO-02-232APPENDIX G – 

SUBMITTED FOR THE RECORD, RESPONSE OF ASSISTANT SECRETARY COMBS TO 

QUESTION POSED BY CONGRESSMAN ANDREWS RE: FINANCIAL DISCLOSURE BY 

ERISA TRUSTEES ...................................................................................................................... 89

APPENDIX G – SUBMITTED FOR THE RECORD, RESPONSE OF ASSISTANT 

SECRETARY COMBS TO QUESTION POSED BY CONGRESSMAN ANDREWS RE: 

FINANCIAL DISCLOSURE BY ERISA TRUSTEES ............................................................. 149

APPENDIX H - SUBMITTED FOR THE RECORD, LETTER TO CONGRESSMAN 

ROBERT ANDREWS, RANKING MEMBER, SUBCOMMITTEE ON EMPLOYEREMPLOYEE RELATIONS, FROM GORDON S. HEDDELL, INSPECTOR GENERAL, U.S. 

DEPARTMENT OF LABOR, WASHINGTON, D.C., SEPTEMBER 20, 2002 ...................... 153

Table of Indexes.......................................................................................................................... 159 
1

HEARING ON RETIREMENT SECURITY FOR AMERICAN WORKERS: 

EXAMINING PENSION ENFORCEMENT AND ACCOUNTABILITY 

____________________

Tuesday, September 10, 2002 

Subcommittee on Employer-Employee Relations 

Committee on Education and the Workforce 

 U.S. House of Representatives 

Washington, D.C. 

 The Subcommittee met, pursuant to notice, at 10:35 a.m., in Room 2175, Rayburn House 

Office Building, Hon. Sam Johnson, Chairman of the Subcommittee, presiding. 

 Present: Representatives Johnson, DeMint, Boehner, Ballenger, McKeon, Tiberi, Wilson, 

Andrews, Payne, Kildee, Rivers, McCarthy, and Tierney. 

 Staff present: David Connolly, Jr., Professional Staff Member; Kristin Fitzgerald, 

Professional Staff Member; Dave Thomas, Senior Legislative Assistant; Ed Gilroy, Director of 

Workforce Policy; Jo-Marie St. Martin, General Counsel; Christine Roth, Professional Staff 

Member; Loren Sweatt, Professional Staff Member; Kevin Smith, Senior Communications 

Counselor; Heather Valentine, Press Secretary; Patrick Lyden, Professional Staff Member; and, 

Deborah L. Samantar, Committee Clerk/Intern Coordinator.

Mark Zuckerman, Minority General Counsel; Michele Varnhagen, Minority Labor 

Counsel/Coordinator; Camille Donald, Minority Counsel, Employer-Employee Relations; Peter 

Rutledge, Minority Senior Legislative Associate/Labor; and, Dan Rawlins, Minority Staff 

Assistant/Labor.
2

Chairman Johnson. Good morning. In view of it being almost a year since September the 11th, 

I'd like us all to stand and pledge allegiance to our flag. 

 Let's pledge allegiance to the flag of our great nation. 

[Pledge of Allegiance recited.] 

Good morning. I'm glad you all are here. A quorum being present, the Subcommittee on 

Employer-Employee Relations will come to order. 

OPENING STATEMENT OF CHAIRMAN SAM JOHNSON, 

SUBCOMMITTEE ON EMPLOYER-EMPLOYEE RELATIONS, 

COMMITTEE ON EDUCATION AND THE WORKFORCE 

Today's hearing focuses on retirement security for American workers. You know, wave 

after wave of accounting scandals have rocked America. However, little attention has been paid to 

the big labor pension problems. That's why we're holding our fourth hearing on the safety of 

workers' pensions. Earlier hearings focused on boardroom bandits cooking the books and resulting 

pension losses.

Today, we're going to hear about the Department of Labor's efforts to protect pension funds 

as well as some other recent cases of corruption resulting in pension losses. 

 I'm pleased that Assistant Secretary Ann Combs is joining us today, and she will highlight 

the efforts of the Department of Labor's Pension and Welfare Benefits Administration, (PWBA), to 

protect the integrity of pensions, health plans, and other employee benefits for more than 150 

million people. This agency's work is vital to workers, assisting them in getting the information 

needed to protect their benefit rights. PWBA has a good story to tell on pension plan enforcement 

and outreach. 

 The Department of Labor's Office of Inspector General is charged with conducting audits, 

investigations, and evaluations to improve the effectiveness of Department programs and 

operations. Through these activities, the OIG detects and prevents labor racketeering in the 

workplace. Within the OIG, the Office of Labor Racketeering and fraud investigations administers 

programs to identify and reduce labor racketeering and corruption in employee benefit plans. Last 

March, the OIG reported there were 357 ongoing investigations, 44 percent of which involved 

pension and welfare plans. 

 This is workers' retirement and health benefits that we're talking about here. It's their 

livelihood. It's no laughing matter. That's why Stephen Cossu will tell us why multi-employer 
3

union pension funds are particularly vulnerable to corruption and pension losses. 

 Then we'll hear testimony from Ken Boehm, from the National Legal and Policy Center 

about cases where this type of corruption had led to pension losses. An example of this is Ullico. 

This is a union-owned insurance company that handles union pensions, among other things.

Dubbed big labor's Enron by the Wall Street Journal, this little-known firm is now reported to be 

the focus of a federal grand jury and the Labor Department, as well. The DOL needs to determine 

whether labor leaders who sit on the board of Ullico made Martha Stewart-type maneuvers and 

profited from insider trading while rank-and-file workers were stuck with egg on their face. This is 

not a good thing. 

 Regardless of the Ullico facts, we will hear plenty today about labor union corruption cases 

that have been closed and people who are sitting in jail. I know my subcommittee members will 

join me in condemning illegal actions that profit a privileged few at the expense of workers. As in 

the case of Enron, such actions are never acceptable. This subcommittee stands united in its 

concern for workers regardless of who the offenders are union bosses or corporate bosses.

To root out corruption in pension plans and to further protect workers' pensions, the 

President proposed an increase in the enforcement budget for both the PWBA and the OIG. I 

cannot believe the United States Senate has proposed cutting the budget for pension cops on the 

beat. That's wrong. As my colleagues will remember, the House passed the Pension Security Act in 

April of this year, and this bipartisan bill gives workers the tools they need to protect and expand 

their retirement savings. As we are holding this hearing, we in the House are still waiting for 

Senate action on pension protections. 

With that in mind, I look forward to working with my colleagues as we shed further light on 

this issue and move ahead with safeguards to protect America's pensions. 

WRITTEN OPENING STATEMENT OF CHAIRMAN SAM JOHNSON, 

SUBCOMMITTEE ON EMPLOYER-EMPLOYEE RELATIONS, COMMITTEE 

ON EDUCATION AND THE WORKFORCE – SEE APPENDIX A 

Chairman Johnson. Right now, I'd like to welcome all of our witnesses. We look forward to your 

testimony and the guidance it will offer as we address the critical issue of pension security. 

 At this time, I'd like to recognize Mr. Andrews for whatever comments he'd like to make. 
4

OPENING STATEMENTOF RANKING MEMBER ROBERT ANDREWS, 

SUBCOMMITTEE ON EMPLOYER-EMPLOYEE RELATIONS, 

COMMITTEE ON EDUCATION AN THE WORKFORCE 

Thank you, Mr. Chairman. Good morning to our colleagues, good morning to our 

witnesses, and other ladies and gentlemen. 

 Let me first begin by reporting that one of the very valued Members of our Committee, 

Mrs. Mink, has been hospitalized with a rather serious illness. She is resting comfortably. We're 

hoping that she will be recovering and returning to us very soon. I would ask that each one of us, in 

our own way, express our support and hope that she will be returning to us very soon, and if her 

staff is present that they would pass these wishes along from each one of us to Mrs. Mink. 

 In all my years in public service, I have never heard the degree of anxiety about pensions 

and the future that I heard in my district during the August district work period. People from all 

walks of life, all backgrounds, all ages are severely worried that the future they thought they had 

secured may not, in fact, be secure. 

 This anxiety stems from two sources. One, very clearly, is the difficult times we've 

experienced in the equity markets and the impact that has had on the self-directed accounts of many 

of our constituents. I believe it is $1.5 trillion worth of pension savings now in those 401K 

accounts, and the effect that equity market downturns have had on the assets of more traditional 

plans, as well. People are worried that the money they thought was going to be there is either 

already gone or will not be there when it comes time to retire. 

 The second source of anxiety is the seeming rash of irresponsible behavior by people who 

have been given the legal responsibility to care for the pension assets of their employees. This 

Committee, about six months ago, spent quite a bit of time hearing about perhaps the most 

egregious example thus far of that irresponsible behavior in the Enron Corporation. 

 I share the Chairman's assessment that no pensioner in any plan at any time should be 

subject to that kind of stress and anxiety. I think he's correct in asserting that whether the fund is 

run by management or a combination of labor and management, since all union funds include 

management participation on the boards as well, that wherever the wrongdoing has taken place, we 

should identify it and we should act legislatively to correct it where necessary. 

 I'm interested in hearing from the Assistant Secretary this morning and from the other 

witnesses about how well we're doing under existing laws in dealing with the anxieties I heard 

about in New Jersey this August. 

 I believe that its 28-year history has shown ERISA to be a success. The fact that until very 

recently we didn't hear these kind of stories about pension plans is a testament to the basic strength 

of that statute, but it's a statute that governed a world that doesn't exist anymore. When ERISA was 

enacted in 1974, we didn't have $1.5 trillion worth of pension assets in self-directed accounts. It's a 

very new area. We didn't have the confluence of firms in the financial services industry where 
5

banks and insurance companies and brokerage houses and financial advising firms are very often 

the same firm, under the same roof. 

 So we always need to be looking at whether the law should be updated to redress those 

problems, and I hope that's an effort that will continue. We also need to be focused on whether the 

tools that we presently have given the executive branch are working. I look forward to the Assistant 

Secretary's testimony about this issue this morning and I thank the Chairman for this opportunity. 

Chairman Johnson. Thank you, Mr. Andrews. 

 I'd like to go ahead and get to the witnesses. Before I do that, if any other Members have 

statements, they will be included in the record. I ask unanimous consent for the hearing record to 

remain open 14 days to allow Members' statements and other extraneous material referenced during 

the hearing to be submitted in the official hearing record. Hearing no objection, so ordered. 

 We have two panels of witnesses today, and I'll begin by introducing our only witness in the 

first panel, the Honorable Ann Combs. She's the Assistant Secretary, Pension and Welfare Benefits 

Administration at the United States Department of Labor. Ms. Combs is no stranger to this 

Subcommittee, and I would like to welcome her back and thank her for taking time out of her busy 

schedule to testify before us today. 

 The Assistant Secretary, I might add, is under a time constraint. We anticipate that all the 

Members will have an opportunity to ask questions, however I'm going to try to get her out of here 

by 11:15, if possible. So before we begin, I would like to remind Members, we will be asking 

questions after the Assistant Secretary has testified and we will impose a strict five-minute limit 

rule on all questions. 

 You understand the lights, Ms. Combs. You may begin your testimony. Thank you for 

being here. 

STATEMENT OF ANN L. COMBS, ASSISTANT SECRETARY, PENSION 

AND WELFARE BENEFITS ADMINISTRATION, U.S. DEPARTMENT OF 

LABOR, WASHINGTON, D.C. 

Thank you. Before I begin, please express my best wishes to Mrs. Mink, and I hope that 

she has a speedy recovery. 

 Good morning, Chairman Johnson, Ranking Member Andrews, Chairman Boehner and 

other Members of the Subcommittee. Thank you for inviting me today to discuss the Department's 

role in enforcing the fiduciary provisions of ERISA and to provide an overview of the Department's 

compliance and participant assistance programs. 

 Over the past 28 years, ERISA has fostered the growth of a voluntary employer-based 

benefit system that provides retirement security and health benefits to millions of Americans. I am 
6

proud to represent the Department, PWBA, and its employees who work diligently to protect the 

interests of plan participants and to support the growth of our private employment-based system. 

 With the recent corporate scandals that have rightfully prompted concerns from American 

workers and retirees, PWBA has been challenged as never before to safeguard the retirement 

security of millions of plan participants. I'm especially proud of the work that PWBA's staff has 

done in investigating pension losses and in providing assistance to thousands of workers who have 

found themselves in the untenable position of losing a portion of their retirement savings, and 

sometimes losing their jobs, as well. 

 I recognize that this Committee may have many concerns and questions about our agency's 

ongoing specific investigations. Therefore, I want to thank you in advance for respecting the 

limitations that I have in discussing those cases until we've taken public action, such as filing a 

lawsuit. We have made really only one major exception to that rule given the high level and the 

importance of the case in confirming our investigation into Enron. In general, however, we have a 

policy at the Department of neither confirming nor denying the existence of an investigation or 

discussing the specific facts. 

 Before proceeding further, I also want to reaffirm the President's support for the Pension 

Security Act of 2002 that the House passed on April 11th. As you know, the President announced 

his retirement security plan in February of this year after forming a Cabinet-level task force, in 

order to improve the current pension rules and regulations by taking into account the changes in 

plan design that Mr. Andrews alluded to. Indeed, the bill that passed out of this Committee 

included many of the President's recommendations. 

 I believe this bill would strengthen workers' abilities to manage their retirement funds more 

effectively by giving them freedom to diversify their accounts, by increasing disclosures, and by 

giving them better access to professional investment advice. The administration encourages the 

Senate to pass this legislation and to provide workers with these additional protections as soon as 

possible.

 Turning now to our current enforcement program, ERISA governs approximately 730,000 

private pension plans and 6 million private health and welfare plans. These plans cover 

approximately 150 million workers and their dependents, and they hold assets of more than $4.6 

trillion.

 PWBA's top priority is to ensure that pension, health, and welfare plans are operated in 

accordance with the law. To do this, we administer a multi-faceted program to ensure compliance. 

This includes education, outreach, compliance assistance, individual participant assistance and a 

strong enforcement program. 

 PWBA conducts both civil and criminal investigations of ERISA fiduciary violations 

through our 10 regional offices and five district offices, which are located throughout the country.

We investigate both corporate and union-sponsored employee benefit plans. Of PWBA's 850 staff, 

491 are investigators. An additional 108 are benefit advisors who assist the public with individual 

benefit questions and disputes. Nearly 80 percent of our agency's current $111 million budget is 
7

dedicated to enforcement. 

 PWBA operates under a national strategic enforcement plan, which requires our regional 

offices to focus their investigative activity on three national priorities: plan service providers, 

health-care plans, and defined contribution plans.

To carry out these priorities, PWBA has designated five national enforcement projects. 

These projects focus on employers who fail to remit employer or employee contributions to plans 

in a timely manner. Our REACT program protects participants who are exposed to the greatest risk 

of loss from companies that are facing bankruptcy, abandoned or “orphan” plans; unscrupulous 

promoters of fraudulent MEWA health insurance scams; and fiduciary violations relating to health 

benefit plans. Finally, the regional directors, subject to approval by our national office, select 

regional projects, focusing on specific types of plans or transactions that are prevalent in a 

particular geographic area. These regional projects may become the basis of nationwide projects if 

they prove to be successful. 

 PWBA is also a major player in criminal investigations involving employee benefit plans, 

and we work closely with other federal law enforcement agencies, including the Department of 

Labor's own inspector general, the FBI, the IRS, the Department of Justice, the SEC, and the postal 

inspectors. We bring a tremendous amount of expertise to these cases, based on our experience 

with employee benefit plans and with the benefits industry in general. Our criminal investigations 

cover a wide variety of pension and health plans sponsored by both corporations and joint-trustee 

plans sponsored by unions and management. 

 In fiscal 2001, PWBA opened 4,862 civil cases and we closed 4,762 of those cases. This 

was an increase of 407 cases opened and 545 closed, compared to the year before. Over 57 percent 

of our civil cases were closed with results, meaning a monetary or other fiduciary remedy was 

achieved during fiscal 2001. That is a very high percentage for an enforcement agency. 

 As for criminal cases, we opened 124 and closed 143 investigations in fiscal 2001. Fortynine of those criminal cases resulted in convictions or guilty pleas and an additional 15 were closed 

with other restitution or alternative sentencing. 

 The financial success of PWBA's investigations on plans and participants is impressive. 

Total monetary recovery for all investigations in fiscal 2001 was $652.4 million. This consisted of 

nearly $330 million in prohibited transactions that were corrected; $139 million in plan assets that 

were restored; $114 million in future losses prevented; and $69 million in benefits that were 

restored directly to individual participants. 

 PWBA's outreach, education, and assistance activities are also important to protect the 

health and retirement benefits of American workers. We assist workers and employers nationwide 

through our toll-free phone line and web site, and distribute publications to assist workers and 

employers in understanding their rights and responsibilities under ERISA. We conduct and 

participate in outreach events nationwide to provide assistance in person and to increase awareness 

of the Department as a resource for individuals and for companies. 
8

 Finally, our benefit advisors are part of the initial response team for employees facing job 

layoffs, by answering their questions and concerns about their health and retirement plans. Last 

year alone, our benefit advisors handled over 170,000 inquiries from individual participants and 

recovered over $64 million in benefits on behalf of those individual workers through informal 

resolution of complaints from individuals. 

 In addition, 1,251 enforcement investigations were opened as a result of referrals from our 

benefit advisors. This accounted for nearly 25 percent of the cases we opened last year, and an 

additional recovery of $111 million in benefits paid to those participants. This close coordination 

between our benefit advisors and the enforcement office is a critical part of our overall integrated 

strategy and it's why we are opposed to legislative proposals that would separate benefit advisors 

and create an office of participant advocacy outside of PWBA's structure. We think that would 

harm our enforcement efforts. 

Mr. Chairman, this completes my statement. I would ask that my full written statement be 

included in the record, and I would be pleased to answer any questions you and other Members of 

the Subcommittee may have. 

WRITTEN STATEMENT OF ANN L. COMBS, ASSISTANT SECRETARY, 

PENSION AND WELFARE BENEFITS ADMINISTRATION, U.S. 

DEPARTMENT OF LABOR, WASHINGTON, D.C. – SEE APPENDIX B 

Chairman Johnson. So ordered. Your written statement will be included in the record. 

Ms. Combs. Thank you. 

Chairman Johnson. Thank you. I think the workers in America are well protected by the efforts of 

your agency. 

 What specific areas of the PWBA have served to protect and enhance the security of worker 

pensions, and how have outside organizations, such as the GAO, evaluated your agency? 

Ms. Combs. In terms of the specific areas of our mission, I would say the combination of our 

traditional enforcement program, both civil and criminal, and the new emphasis on benefit advisors 

assisting individual participants have really helped to enhance the security of workers. We've given 

individuals a place to come to deal with their individual benefit situations, and many times those 

have resulted in good enforcement leads. 

 Also through our enforcement program we have identified national projects called the 

employee contribution program, which is a program designed to make sure that employee and 

employer contributions to 401(K) plans are remitted in a timely fashion. This has proven to be a 

very successful program and in fact an area where we find the most violations. 

 Our REACT program, dealing with bankruptcy, is another example where I think we move 

in quickly to help secure people's benefits in the event of a pending bankruptcy or deal with a 
9

bankruptcy trustee in order to make sure that benefits are secure. 

 The second part of your question dealt with the GAO and others who have evaluated us. 

GAO did a large study of our enforcement program just recently, and concluded that we were a 

well-managed and well-run organization. I believe that the bottom line was that we have an 

effective, comprehensive, integrated enforcement program. 

 They did point out areas where they thought we could do a better job of measuring our 

results so that we can target our resources and some areas of human capital management more 

effectively. We agree with many of the GAO's findings and have been working on those same 

problems. We're instituting some changes in response to their points, which are laid out in the GAO 

report. We have a good relationship with them and I think they respect the program. 

Chairman Johnson. Did they in any way indicate that you could reduce the level of your law 

enforcement operation? 

Ms. Combs. No, not at all. In fact several years ago, the Brookings Institution identified this 

agency as the most highly leveraged agency in the Federal Government. I've never heard anyone 

call for a reduction, with one recent exception. 

Chairman Johnson. Thank you. The Chair recognizes the gentleman from New Jersey, Mr. 

Andrews.

Mr. Andrews. Thank you, Mr. Chairman. Thank you, Madam Secretary, for your testimony. 

 I would ask unanimous consent that the GAO report that the secretary just referenced be 

entered into the record at this point. 

Chairman Johnson. Without objection, so ordered. 

Mr. Andrews. I thank you. 

 Madam Secretary, about six months ago, this Committee had a hearing in which we heard 

from a sitting fiduciary of the Enron employee benefits plan. During that hearing, evidence was 

developed that at the same time that fiduciaries themselves were selling large amounts of their own 

personally held stock in the Enron company, none of these fiduciaries shared with the beneficiaries 

of the Enron retirement plan rather damaging but truthful information about the company's 

financial status. In fact, the opposite was true. 

 The record of those hearings will show that the company management on an ongoing basis 

was promoting purchase of the stock and encouraging employees to purchase the stock. That 

hearing was as I said nearly six months ago. To date to my knowledge the Department has not filed 

suit against any of the fiduciaries that were part of the Enron plan. 

 I know the Department arranged for the appointment of an independent trustee for the fund 

in February, but I'm curious as to why litigation enforcement action has not commenced against the 
10

Enron plan and/or the Enron fiduciaries. 

Ms. Combs. Certainly. As I mentioned in my testimony, we generally don't talk about open 

investigations. However, we did make an exception in the Enron case. Given the importance of it, 

the nature of its profile, and the fact that these employees had lost their jobs, as well as their 

retirement benefits. We can't discuss the details specifically of what we may or may not be finding. 

 As you referenced, we've been very active in this case. We opened it up in November, 

immediately upon hearing about the financial difficulties of Enron. We did work to have an 

independent trustee replace the fiduciaries who had been responsible for overseeing the Enron 

benefit plans. That is State Street Corporation, and they have been there since April. The 

Bankruptcy Court approved that, and they've been running the plan since then. 

 We recently filed an amicus brief in the private litigation. The defendants had asked to have 

the plaintiffs' lawsuit dismissed, and we filed an amicus brief opposing that. 

Mr. Andrews. Let me interrupt you. I read on Page 16 of your testimony about the amicus brief 

that was filed in the private class action suit. Here's what I don't understand. 

 If the Department felt confident that it could oppose the dismissal of the plaintiffs' claim in 

that class action suit, that there was a sufficient reasonable basis to take that position, why isn't 

there a sufficient reasonable basis to file your own litigation? I assume sworn representations of 

fact accompanied the amicus brief. It seems to me that if the Department is willing to go on record 

supporting that legal position in a private suit, why hasn't there been an enforcement action by the 

Department? 

Ms. Combs. You've just put your finger on it. This was a motion to dismiss, it was not a factfinding, and so we had to assume that all the facts alleged by the plaintiff were true. We took no 

position on the facts. That's exactly what we're doing in the investigation, nailing down the facts, 

and that is time-consuming. 

 We have taken 60 depositions; we've issued over 50 subpoenas; we have millions of 

documents that we must go through, and I'm committed to making sure that if and when we bring 

litigation, we do it on the basis of a solid record so that it holds up. 

Mr. Andrews. I can appreciate that. My concern is that the Enron bankruptcy took place, if I 

recall, early in December of 2001. 

Ms. Combs. Yes. 

Mr. Andrews. The independent trustee was not appointed until April of 2002. Is that right? 

Ms. Combs. We struck the deal to have them brought in, in February. By the time they were 

approved by the bankruptcy court, it was early April. 
11

Mr. Andrews. When did they start running the show? 

Ms. Combs. Early April. 

Mr. Andrews. All right. There's a period there of about five months between the bankruptcy and 

the appointment of the independent trustee. I would wonder if all the money and all the problems 

aren’t gone? Is there anything left that an enforcement action will be effective against? 

Ms. Combs. Well, much of the loss in the price of the stock had taken place before the bankruptcy.

As you know, the price of the stock was dropping prior to the bankruptcy being filed. 

Mr. Andrews. But what about a lien against the individual assets of the fiduciaries if there is a 

judgment against them? That gives them plenty of time to purge their assets and make them 

litigation-proof, doesn't it? 

Ms. Combs. Well, I think we're working closely with all the agencies to make sure that does not 

happen. You've seen the Justice Department move against one of the defendants in Enron to 

basically put his assets in escrow. The government is doing everything we can to make sure that 

we recover assets for these workers. 

 But I'm relying on the judgment of my professional staff to tell me if and when we're ready 

to go, and then we will move as quickly as we feel that we have a solid case. 

Mr. Andrews. Thank you. 

Chairman Johnson. Thank you. 

 I'd just remind Mr. Andrews that I think it's the Justice Department that's dragging their feet 

more than Labor is, and she has to work with them. Is that not true? 

Ms. Combs. We're on parallel tracks. We're coordinating with them. 

Mr. Andrews. Isn't the enforcement of the ERISA statute under the Secretary of Labor's 

jurisdiction though? 

Ms. Combs. It is, but we're coordinating closely in terms of facts and documents, and it's a matter 

of scheduling depositions and witnesses. Everybody wants to talk to the same people, and so we do 

have to work closely with them, but we're proceeding on our own track on the ERISA case. 

Mr. Andrews. We're just hopeful it's not a matter of shutting the barn door after the horse has 

already left. 

Chairman Johnson. The Chair recognizes the gentleman from North Carolina, Mr. Ballenger. 

Mr. Ballenger. Thank you, Mr. Chairman. 
12

 I happen to sit on the board of my company's pension plan, and I always figured the 

fiduciary responsibility that I had was enough to scare me out of doing something bad. When the 

Enron thing happened, people at home asked me over and over again, “Why isn't something 

happening,” and I answer them sort of the same way the Congressman from New Jersey said. As he 

knows, I don't have a great love for lawyers, but my answer to people is, “if you have enough 

money and you can buy enough lawyers, you can almost postpone your case forever.” 

 Having read the description that you have in your statement, I was wondering why the 

penalties seem to be mighty small for people who are stealing funds from pension plans and so 

forth? I mean, 10 months to 13 months? I don't know whether that's because you “cop a plea” or 

“cut a deal” or whatever, but having read that, I just wondered why the penalties are so small. 

Doesn’t that set a precedent in the courts generally speaking? We don't go for everything? 

Sometimes you try to replace it all and sometimes you don't, but nobody is going to be terribly 

punished? Am I mistaken there? 

Ms. Combs. Well, there's a difference in civil cases where people are personally liable for losses. 

You're talking about the criminal side, where people are convicted of money laundering or 

embezzlement for example. In those instances the penalties are set in statute, and they're generally 

a maximum of five years subject to the judges' sentencing. 

 The Sarbanes-Oxley corporate governance bill increased some the criminal penalties for 

reporting and disclosure violations. They didn't address some of the other criminal penalties. But 

those are generally what the judges have imposed. Sometimes those are coupled with community 

service, or with being barred from serving as a fiduciary in the future, and restoring assets. 

 The U.S. attorneys prosecute our criminal cases for us. They can make sentencing 

recommendations. It's up to the judge. 

Mr. Ballenger. Let me ask you a question, because I'm not a lawyer. What if I were at Enron and I 

actually stole about $10 million or something, which they have done, and could afford to get the 

best legal advice and the best legal firms in the country to defend me, and the staff to work on the 

case? It just appears to me that our legal system allows people to postpone and postpone all kinds 

of things like that. 

 People at home are asking me, “Why isn't somebody from Enron in jail?” And I keep 

saying, “they have a lot of money and they can buy all the best lawyers in the United States, and 

they can fight the government forever.” 

Ms. Combs. There's no doubt about that, sir. People can drag out litigation. We can file a suit, and 

I don't doubt that we'll be in court for an extended period of time as people exercise all the rights 

that they have to defend themselves. This is the largest bankruptcy in U.S. history. I have no doubt 

that this will be a long and hard-fought legal battle, and there's not much we can do about that. 

Mr. Ballenger. But if the gentlemen that stole the money didn't have the money to defend 

themselves with, it wouldn't take so long. 
13

 Thank you, Mr. Chairman. 

Chairman Johnson. Thank you, Mr. Ballenger. 

 The Chair recognizes the gentlelady from New York, Mrs. McCarthy. 

Mrs. McCarthy. Thank you, Mr. Chairman; and thank you again for your testimony. 

 In light of what the DOL has learned from Enron, and hopefully they've learned a lot, what 

is DOL doing differently to prevent other abuses? 

 And a follow-up question: Has DOL contacted other plans as far as pensions and employer 

stock? 

Ms. Combs. We take this whole issue of employer stock extremely seriously. I can't comment on 

specific investigations, but we're well aware of a number of situations involving employer 

securities with similar fact patterns to Enron, and we are focusing all the resources at our disposal 

on them. That's a priority for the agency. 

 We also have been working closely with your Committee on legislation to prevent another 

Enron, and things that will make people better prepared to diversify their accounts, to better 

understand more the need to put not as much of their retirement income in employer stock perhaps 

in order to prevent the kind of concentration that led to these large losses. 

 We will continue to emphasize this area and to enforce the law. We think we've got enough 

tools, and we're on the case. 

Mrs. McCarthy. How long do you think it will be before we'll have any of the answers as far as 

your investigation of Enron goes? 

Ms. Combs. I can't give you a deadline. As I said the investigation is being run out of our Dallas 

regional office. It's their highest priority. They are spending an extraordinary amount of time on it, 

and we're working as quickly as possible. 

 My goal is to do it sooner rather than later, but we'll move as soon as they tell me we've got 

the case and we can succeed. I can't really put a deadline on it, but hopefully we'll do it as soon as 

possible.

Mrs. McCarthy. Certainly with the Enron case, there are also other cases involved. Are you 

investigating those? 

Ms. Combs. Well, as I said, we are aware of a number of situations. I can't confirm or deny the 

existence of other investigations specifically, but we are aware of several situations where there are 

similar fact patterns, and we're taking our responsibilities seriously. 
14

Mrs. McCarthy. Thank you. 

Chairman Johnson. Thank you, Mrs. McCarthy. 

Ms. Combs, as you know, the House runs on an uncertain time schedule, and it looks like 

we could be back here at 20 minutes of, possibly earlier than that. Would you mind? Would you be 

able to stick around until noon? 

Ms. Combs. Yes, I can make a phone call. You all are leaving for a few minutes? 

Chairman Johnson. Yes. 

Ms. Combs. Yes, I can do that. 

Chairman Johnson. Thank you very much. The Committee stands recessed until after the last 

vote.

[Recess.]

Chairman Johnson. The Committee will come to order. 

Ms. Combs, our votes took longer than we thought they would, but we'll still get you out of 

here at noon. I'd just like you, if you don't mind, to describe the connection between the 

Departments of Labor and Justice on these investigations, in particular Enron, because that was one 

of the questions that was asked. 

Ms. Combs. Well, there are different allegations involving Enron, and I may need to get my 

counsel to come up and make sure I don't misstate this. The Justice Department is leading a 

governmental task force to look into the accounting irregularities, the securities issues, and all of 

the allegations involving Enron. And we are looking at whether there were any ERISA violations in 

terms of Enron’s dealings with the retirement plans. 

 But our investigations involve some of the same targets since many of the same people are 

involved, and a lot of our cases depend on whether officials knew they were misleading the public 

or cooking the books. We would consider, when they knew how it affected their behavior, were 

they fiduciaries of the plan, and should they have done something to protect the interests of the 

plan, among the issues. 

 So there's an intersection between the two Departments, but the Justice Department is 

focused more at this point, as I understand it, on the underlying case. 

 We also work with the Justice Department on cases other than Enron as well, but routinely 

in criminal cases. When we complete a criminal investigation and recommend it for litigation, it's 

the U.S. attorneys that obviously prosecute those cases for us. But this is Tim Hauser, Associate 
15

Solicitor of Labor, who is in charge of plan benefits security, so he may have a more eloquent 

explanation of the Justice Department's role. 

Chairman Johnson. I thought she was pretty eloquent, didn't you? 

Mr. Hauser. I could not top her answer. 

 The real distinction is just that we at PWBA and at the Department of Labor are primarily 

responsible for the civil enforcement of ERISA, and that's what our focus is on in the Enron 

investigation. The Justice Department's focus, presumably, is on criminal activities and whatever 

other assistance they are providing to the SEC. 

Chairman Johnson. Yours is civil, theirs is criminal. 

Mr. Hauser. Right. 

Chairman Johnson. We've had other Members come in now. I'd like at this time to recognize the 

gentleman from South Carolina, Mr. DeMint. 

Mr. DeMint. Thank you, Mr. Chairman. 

Thank you, Ms. Combs, for waiting the extra time. I do appreciate the investigative 

oversight that you are doing, and I think you have given the American people confidence that their 

opportunity to create wealth is still very much viable. 

 A lot of what we're doing is the long-term result of moving from defined benefit to defined 

contribution pension plans. However, I'm particularly interested to know if the Department is 

already working on ideas that perhaps will apply some of the regulations and oversight processes 

for defined contribution pension plans to the health insurance market? I think, although this is a 

related but different subject, there will be a relatively short-term explosion in the desire to have 

defined contribution health plans as many employers and many insurance companies rush to 

develop them what with the recent IRS ruling that allows rollovers. 

 Is that something you've even considered at this point? 

Ms. Combs. Well, we're aware of the developments that are taking place in the marketplace in 

terms of keeping up the interest in these new defined contribution health plans, which I think is 

largely fueled by the ongoing increases in costs. 

 As I understand it, the companies that were interested in doing this were primarily unsure of 

the tax treatment, which is why they went to Treasury to get guidance as to how they would be 

taxed and to my knowledge at this point, and I've asked this question, there are no specific ERISA 

rules that would require guidance or interpretation. 

 Of course, any of these plans, like any employer-provided health plan, would be subject to 

ERISA and its fiduciary requirements, and we will enforce those laws and make sure that they 
16

comply with them and also with COBRA, HIPPA; all of the rules that are in ERISA that apply to 

health plans would apply to these defined contribution health plans. 

 As I understand it, there are still relatively few companies that have actually adopted them. 

There's a lot of interest in them, and as the market matures we'll keep our eyes on it and make sure 

that the employees who participate in those plans are safeguarded. 

Mr. DeMint. Thank you very much. 

Mr. Chairman, I yield back. 

Chairman Johnson. Thank you. The Chair recognizes the gentleman from Michigan, Mr. Kildee. 

Mr. Kildee. Thank you, Mr. Chairman. 

 What kind of scrutiny can PWBA give heavily invested employer stock plans, such as 

P&G, where about 95 percent of the employer stock is in the 401K plan? What kind of scrutiny can 

or do you give that, or is that fact alone a red flag? 

Ms. Combs. I wouldn't describe that fact alone as a red flag. I mean, the law specifically permits 

defined contribution plans to invest in employer securities and if they're designed correctly, they 

can put up to 100 percent in employer securities, so there's nothing illegal, on its face, about that. 

 We do make efforts to educate participants about the need to diversify their accounts. We 

have proposed, and you have passed legislation to give individuals rights to diversify, which they 

don't enjoy in some plans now, so that they could sell employer stock after three years. I think 

that's a very important change in the law that will help people, and we want to get them better 

investment advice so that they understand the need to diversify their accounts. 

 But there's nothing under the law that makes it illegal to have a high concentration of 

employer stock, so we don't open investigations because there is a high concentration, but we 

certainly listen to participant complaints. 

 We do bring cases on how the stock is valued, particularly in the ESOP area with privately 

held companies. We bring a lot of those cases to make sure that the plan doesn't pay too much for 

the stock. That is something that we look at. 

Mr. Kildee. P&G is an older company, but suppose you saw a company where 95 percent or a high 

amount of the stock was employer stock and it was accelerating in price very quickly. Would that 

give you some concern, and would you take any precautionary action at that time? 

Ms. Combs. If the price of the stock was going up? 

Mr. Kildee. By rapidly I mean in an accelerated fashion. I don't know how you would even judge 

that.
17

Ms. Combs. I don't know that we would consider that a danger sign. I think market manipulation is 

something the SEC is obviously looking at, and if they think that there's something going on with 

the stock price then they may want to open an investigation. 

 Then we would, of course, look to see whether the plan was affected in any way, but I don't 

think just targeting stocks whose price is doing well would be a good use of our resources. We 

look for other factors, where we think the plan may be at risk. 

Mr. Kildee. But SEC would have the primary responsibility? 

Ms. Combs. They look at the markets and at investors, and if there were something aberrant about 

a stock's behavior, I believe it would be within their jurisdiction to make an inquiry about the price 

of a stock. 

Mr. Kildee. Okay. Thank you very much. 

Chairman Johnson. Thank you for staying with us, Ms. Combs. We appreciate it, and we 

appreciate your valuable testimony. You can step down now if you wish. 

Ms. Combs. I appreciate the opportunity. Thank you very much. 

Chairman Johnson. Thank you for being with us. 

 I would ask the second panel to come forward and take their seats. I'll introduce you in a 

moment, but first, I'd like to draw your attention to the chart on your left. 

 It illustrates Ullico and Global Crossing, and points out that in 1997 Ullico invested over 

$7 million in Global Crossing, which was 7.7 percent of their stake. Ullico earned $127 million by 

selling Global stock, and insiders figured that would lift the annual valuation of the shares from 

$54 to $146. That happened in 1999. In December, each director was allowed to buy Ullico shares 

at $54. The union pension funds that owned Ullico weren't given the same offer. 

In December and January of 2001, Ullico bought back some of its shares at $146 and 

shareholders or stockholders with fewer than 10,000 shares could sell their holdings, so officers 

and directors took full advantage. The pension funds couldn't, and the true value was only $75. In 

December and January of 2001, Ullico bought back 200,000 shares and allowed officers and 

directors to cash out at $75, knowing that the stock price was only $44. 

 The Wall Street Journal reported that Ullico is under grand jury investigation and that's why 

our previous witness couldn't talk about it, but it looks like, according to their comments, that 

Ullico directors profited at the expense of their own unions. I think we'll find that out. 

 Our first witness on the second panel is Mr. Stephen Cossu, Deputy Inspector General, 

Office of Labor Racketeering and Fraud Investigations, U.S. Department of Labor, Office of 

Inspector General, Washington, D.C. 
18

 The second witness is Ms. Karen Ferguson, Director, and Pension Rights Center, 

Washington, D.C. She is accompanied by John Hotz, who is the Deputy Director. 

 Our third and final witness for today is Mr. Ken Boehm, who is the Chairman of the 

National Legal and Policy Center, Falls Church, VA. 

 We appreciate you all being here and thank you for appearing. I don't have to remind you 

about the light system we have here. You all know it, I think. 

Mr. Cossu, please begin your testimony. 

STATEMENT OF STEPHEN J. COSSU, DEPUTY INSPECTOR GENERAL, 

OFFICE OF LABOR RACKETEERING AND FRAUD INVESTIGATIONS, 

OFFICE OF INSPECTOR GENERAL, U.S. DEPARTMENT OF LABOR, 

WASHINGTON, D.C. 

Good morning, Mr. Chairman and Members of the Subcommittee. Thank you for inviting 

me to testify today on the Office of Inspector General's labor racketeering program, and in 

particular on our investigative activities in the pension arena. The OIG conducts labor racketeering 

criminal investigations in three general areas; employee benefit plans, labor-management relations, 

and internal union affairs.

In the pension arena, the OIG's focus has been on criminal investigations of multi-employer 

plans, which are substantially composed of union-sponsored, jointly administered plans. During the 

latest 5-year period, our benefit plan investigations, which include both pension and health care 

plans, have resulted in 253 indictments, 237 convictions, and have recovered over $271 million in 

monetary recoveries. 

 Currently, we are conducting investigations of pension plans with nearly $1 billion in total 

assets suspected of being at risk. Given the size of this universe and recognizing a growing 

problem, the OIG has, since 1996, been engaged in a nationwide initiative designed to combat 

abuses of pension plan assets. 

 Building on the Attorney General's Pension Abuse Initiative, which sought to increase 

criminal enforcement and enhance coordination among federal agencies to combat pension abuse, 

we felt there was a need for a proactive examination of mob-controlled and influenced union 

pension plans, and the service providers supporting them. 

 Such plans are especially vulnerable because of the potential for substantial dollar losses 

since abuses can affect more than one plan, management is often concentrated in only a few 

individuals, and plan trustees are often appointed because of their position rather than their 

financial expertise 
19

 For example, a Queens, New York, case investigated in conjunction with the FBI, revealed 

that a Teamsters Local 875 fund attorney induced the fund to divert pension assets to high-risk 

offshore investments in exchange for kickbacks from two investment brokers. As a result, $9.3 

million from the fund's total assets of $40 million, roughly one-quarter, were transferred into a 

third-party account and subsequently embezzled by the brokers. Those funds, unfortunately, were 

never recovered. 

 Also, the OIG, along with other federal agencies, including PWBA, is actively involved in 

the criminal investigation of one of the largest pension frauds of all time, involving Capital 

Consultants, Inc.

CCI defrauded their clients, including many union pension funds, of hundreds of millions of 

dollars. This investigation disclosed that a former Laborers’ union business manager retained CCI 

to make investments for the union’s pension, health, and vacation plans. In return, the manager 

received secret cash payments. 

As a result of this investigation, plea agreements were reached with CCI's president, the 

former CEO and founder of CCI, and the Laborer’s union business manager. In recent 

developments, two union pension fund trustees and a former CCI salesman were indicted. Similarly 

just last week, two other trustees pled guilty for failing to disclose gifts given to them by CCI. 

Mr. Chairman, these are just two examples of how vulnerable multi-employee plans can be. 

It is our intention to increase our presence in the pension arena on a number of fronts. As resources 

permit, we plan to be even more proactive in our effort to combat labor racketeering relative to 

pension plan corruption and organized crime, and corruption affecting industries, unions, and 

boardrooms. 

 The OIG also plans to expand its investigate probe of service providers controlled or 

influenced by organized crime, or retained by pension plans that have had a history of corruption. 

Abuses by service providers are especially egregious because, as the cases I cited demonstrate, they 

have the potential for substantial dollar losses, since they can affect more than one plan. 

 The Justice Department supports our effort, and has asked us to work even more closely in 

a partnership with them on labor racketeering and organized crime cases, given the FBI's new focus 

on anti-terrorism in the wake of September 11th and our expertise in this area. 

Based on the work we have done in the pension arena, there are several recommendations 

Congress may wish to consider that we believe would further safeguard pensions. First is 

strengthening and making more consistent the criminal penalties under Title 18 of the U.S. Code to 

better protect employee pension plans subject to ERISA, and second by requiring direct reporting 

of any ERISA violation to the Department of Labor. 

Mr. Chairman, the OIG will continue to build on our pension casework by engaging in 

proactive investigations of union-sponsored plans that are at risk, so the hard-earned benefits of 

workers are there when needed. 
20

 This concludes my prepared statement. I would be pleased to answer any questions you 

have.

WRITTEN STATEMENT OF STEPHEN J. COSSU, DEPUTY INSPECTOR 

GENERAL, OFFICE OF LABOR RACKETEERING AND FRAUD 

INVESTIGATIONS, OFFICE OF INSPECTOR GENERAL, U.S. DEPARTMENT 

OF LABOR, WASHINGTON, D.C. – SEE APPENDIX C 

Chairman Johnson. Thank you, Mr. Cossu. We appreciate your testimony. 

Ms. Ferguson, you may begin your testimony now. 

STATEMENT OF KAREN FERGUSON, DIRECTOR, PENSION RIGHTS 

CENTER, WASHINGTON, D.C 

Thank you, Mr. Chairman. I'm Karen Ferguson, Director of the Pension Rights Center, and 

with me is John Hotz, the Center's Deputy Director. The center is a 26-year-old consumer 

organization dedicated to protecting and promoting the pension rights of American workers, 

retirees, and their families. Thank you for inviting us to testify today on ERISA enforcement and 

accountability.

 The Labor Department's Pension and Welfare Benefits Administration has worked long and 

hard over the years to try to make sure that the $4 trillion in private retirement assets are wellmanaged and that individuals receive the information about their plan finances and other rights to 

benefits that they need. 

 We have been particularly pleased that, during the past five years, PWBA has gone beyond 

its original almost exclusive focus on mismanagement of plan money, and has significantly 

expanded its efforts to provide pension assistance and information to plan participants. 

 As recently as 1997, there was only a small 10-person office in Washington to respond to 

tens of thousands of queries from employees and retirees. Now, there are more than 100 benefit 

advisors in 15 field offices around the country to help individuals with their pension and health 

insurance concerns. 

 We are also pleased that the PWBA has supported efforts to develop an even more 

comprehensive pension assistance system. Most recently, they supported development of Pension 

Help America, which will be the nation's first pension assistance web site. 

 But there are also shortcomings in the ERISA enforcement and accountability scheme. 

From our perspective, the most serious shortcoming is the result of an accident of history. It is 
21

traceable to the fact that there is no government agency with a mandate to advocate for the pension 

policy concerns of workers and retirees. 

 Although early versions of the bills that became ERISA included a single agency, which 

had such a focus, these provisions were dropped in favor of a structure in which the Labor 

Department and the Department of the Treasury shared jurisdiction over most of the law's major 

provisions. Then, four years after the enactment of the law, a 1978 executive order known as 

“Reorganization 4”provided for a division of authority. 

 The Labor Department was assigned responsibility for administering the fiduciary and the 

reporting and disclosure provisions of the law; and the Treasury took over regulation of the 

minimum standards, those provisions that determine who gets a pension, how much they get, and 

when and how it is paid. 

 According to its most recent annual report to Congress, PWBA sees its mission as 

protecting the pension and other employee benefits of American workers. Although protection of 

benefits is an absolutely critical function, it is also a limited function. It does not help the many 

millions of individuals who, often because of changes in the economy or the development of new 

types of plans, have no benefits to protect because Congress and the administrative agencies have 

not yet acted to afford them the protections they need. Stated differently, there is no reference in the 

PWBA mission statement to a commitment to promote sound pension policies for participants. 

 At the same time, although the Treasury Department has jurisdiction of all the law's key 

benefit provisions, its principal concerns in the pension area are with avoiding tax abuse. Its policy 

actions are motivated by revenue concerns, not advancing employee interests. 

 In this regard, pension regulation differs from many other areas of the law. For individuals 

adversely affected by loopholes in consumer, food and drug, environmental, or securities laws, 

there are agencies that have mandates to review their situation and determine whether new policies 

should be developed to close the loopholes. 

 As we see it, the absence of a government agency with a mandate to advance participants' 

pension policy interests has been ERISA's, quote, “fatal flaw”, and it goes a long way to explaining 

why our private retirement laws are so frustrating and often appear so unfair to employees and their 

families. 

 We believe that this flaw could be easily addressed by creating a small ombuds-type office 

within the Labor Department similar to the Office of Advocacy in the Small Business 

Administration. This office of Pension Participant Advocacy would serve as a voice for employees 

and retirees within the Federal Government. The role of this Office of Pension Participant 

Advocacy would be solely advisory. Its most important function would be to identify gaps in the 

laws, develop reform recommendations, and serve as an advocate for current and prospective 

pensioners before Congress and the other government agencies. 

 There are countless examples of why such an office is needed, and I have addressed two of 

them in my written statement. So I will conclude by saying an Office of Pension Participant 
22

Advocacy would be crucial to helping employees. It could examine their situations, determine 

whether it reflects a pattern that should be of concern to policy-makers, and if so, develop an 

appropriate solution and recommend its adoption within the administration and to Congress. Such 

an office would also be helpful to this Subcommittee in developing your policies to address 

constituent concerns. 

 We would be pleased to answer any questions you may have. 

WRITTEN STATEMENT OF KAREN FERGUSON, DIRECTOR, PENSION 

RIGHTS CENTER, WASHINGTON, D.C – SEE APPENDIX D 

Chairman Johnson. Thank you, ma'am. We appreciate your testimony. 

Mr. Boehm, you may begin your testimony now. 

STATEMENT OF KENNETH BOEHM, CHAIRMAN, NATIONAL LEGAL 

AND POLICY CENTER, FALLS CHURCH, VA 

Mr. Chairman, Members of the Subcommittee, thank you for this opportunity to testify on 

this important subject. 

 Union pension funds are increasingly vulnerable to corruption. All too many American 

workers whose retirement security depends on union pension funds have already recently found out 

the hard way that these pensions do need greater enforcement from corruption problems. 

 One reason for the increased vulnerability is the dramatic increase of the number and size of 

defined contribution plans generally. In 1975, there were 12 million participants with assets 

totaling $74 million. By 1998, there were 58 million participants, with the assets in the plans 

grown to something like $2 trillion. 

 The size and complexity of the pension plans, along with the complexity of the legal 

oversight system alone, make it vulnerable to mistakes, mismanagement, and corruption. Earlier 

this year, the Department of Labor Inspector General noted he had 357 pending labor racketeering 

investigations and of those, 39 percent involved organized crime and 44 percent involved pension 

and welfare funds. He also noted in that report that more than $1 billion in plan assets were at risk 

in cases that involved violations of fiduciary duties. 
23

 But statistics alone cannot tell the whole story. The picture of how corruption and 

mismanagement affect union pension funds can best be seen in recent major cases. In one recent 

New York case, the FBI arrested 120 individuals as part of “Operation Uptick”, an investigation of 

organized crime's influence on Wall Street. One of those convicted was an alleged associate of the 

Luchese crime family. The conviction stemmed from a scheme to pay illegal kickbacks to union 

leaders with a goal of getting as much as $300 million in union pension funds under the control of 

dishonest investment advisors. 

 In a recent Oregon case that has just been cited, well in excess of $100 million, several 

hundred million, in fact, in union pension funds was lost. A money management firm, Capital 

Consultants, mismanaged huge sums of pension funds in what the government called a “Ponzi-like 

scheme”, in which fresh infusions of cash were needed to cover the earlier losses. Gifts of travel, 

gratuities, and contracts were used as inducements to get union pension fund trustees to put pension 

funds with Capital Consultants. One of the indictments involved a $200,000 payment to a union 

trustee.

 Notably, the pension trustees repeatedly watered down guidelines restricting risky 

investments. Instead of placing pension funds in marketable securities, the funds increasingly went 

to risky investments, such as collateralized notes. Some funds even went to a company linked to a 

businessman with a long association with the late mob financier, Meyer Lansky, hardly the type of 

individual you want looking after pension funds. Equally disturbing is that trustees repeatedly 

ignored warnings from their outside financial monitors that the investments by Capital Consultants 

were high risk, low return. 

 In another major case, the United Association of Plumbers and Pipefitters National Pension 

Fund bought a dilapidated beach hotel at a beach where there wasn't much of a beach, in South 

Florida, as an investment, despite no previous history with hotels. The original plan was to spend 

$100 million. That rose to $250 million, then $400 million, then $600 million, and finally to $800 

million, making it the most expensive hotel, at a cost per room of $755,000, approximately 75 

percent over what the industry standard was. The plan was plagued with shoddy construction, 

leaks, tilting walls, floors, ceilings, long delays, and one of the contracts for construction went to a 

company with ties to organized crime. The union president involved accepted an illegal trip to Italy 

from one of the contractors. That's a violation of ERISA. 

 The Department of Labor has had an ongoing investigation into numerous irregularities 

associated with this boondoggle, but in the end, the pensioners with the Pipefitters and Plumbers 

ended up with a hotel that is assessed at being worth about $587 million, even though they've paid 

$800 million for it. 

 As you pointed out Mr. Chairman, as we're having this hearing today, one of the biggest 

pension fund scandals is unfolding. A federal grand jury meeting not far from this hearing room is 

investigating an insider stock case affecting the pensions of millions of union members, as is the 

Department of Labor. The focus is on Ullico, former Union Labor Life Insurance Company, an 

insurance company owned by union pension funds. Its board includes the top union officials in the 

country, and according to Wall Street Journal and Business Week stories, these board members 

secretly bought and sold stock in a privately held company in such a way as to enrich themselves at 
24

the expense of the pensions that owned the company. In short, they took a disproportionate share of 

the profits and the pension fund holders/participants took a disproportionate share of the losses. 

 What can be done? We need to first recognize the scope of the problem. We need to make 

sure that those who enforce the restrictions, PWBA and the Department of Labor Inspector 

General's Office, have adequate resources, because there's a very good cost/benefit to be obtained 

from that. Legislatively, we need to make sure there's far more disclosure. 

 We can strengthen ERISA by making sure that, for example, union officials, especially 

those who serve as pension fund trustees, do have to disclose their outside income much the way 

that the Ethics in Government Act requires senior government officials to do it. 

 Further disclosure is helpful, including the disclosure mentioned by the representative from 

the IG's Office. People, such as accountants, who know about ERISA violations, should be legally 

required to report those violations to Department of Labor. That's currently not the case, and 

there's no good policy reason for it not to be the case. 

 In conclusion, millions of hard-working Americans are counting on the integrity of their 

union pension funds being protected. What could be more non-controversial than protecting 

pension funds from criminals? 

 Thank you. 

WRITTEN STATEMENT OF KENNETH BOEHM, CHAIRMAN, NATIONAL 

LEGAL AND POLICY CENTER, FALLS CHURCH, VA – SEE APPENDIX E 

Chairman Johnson. Thank you for your testimony. I appreciate it. I guess we do have some 

problems out there. Maybe we could go stay in that hotel that you mentioned and wake up with a 

nightmare! 

 At this time, I'd like to recognize the gentleman from South Carolina, Mr. Wilson, for 

questions.

Mr. Wilson. Thank you.

For Mr. Boehm, in your testimony attachment, you mention the case of Capital Consultants. 

What is particularly troubling in this case is that pension fund limits were continuously changed in 

order to allow trustees to make risky investments. Clearly, these trustees were not watching out for 

the best interests of the plan participants. 

 What was the resulting impact on the workers? 

Mr. Boehm. The resulting impact on the workers was that because it was concentrated in the 

Pacific Northwest, literally hundreds of millions of dollars were lost. And for people that work in 
25

the blue collar types of occupations there, it meant that people who were planning to retire won't be 

able to retire at the time they planned, much the same as with some of the recent bankruptcies. So 

it had a real impact. 

Mr. Wilson. How many millions of dollars? 

Mr. Boehm. It was a tangled web. Maybe Mr. Cossu knows. Even though the prosecution and the 

plea bargains and so forth are complete, there are still things being thrashed about, so I want to say 

about $200 million. 

Mr. Cossu. Mr. Congressman, that is still being evaluated at this stage, but the estimates are 

running anywhere between $300 and $500 million as a potential loss. CCI was controlling almost 

$900 million of plan assets. 

Mr. Wilson. Thank you very much. 

 Additionally, Mr. Boehm, you summarized some of the fiduciary duties for union leaders, 

and based on information available from the Ullico situation, how did the union leaders violate 

their fiduciary duty to the pension plan participants? 

Mr. Boehm. Fiduciary duty is a very high level duty of trust. One of the most important and the 

strictest areas of this is financial duty. When someone personally enriches themselves, which is 

what happened in this case, through insider trading at the expense of the people who own the 

pensions, then that in my view is a very, very clear violation of the fiduciary duty. 

 What they were able to do is buy and sell the stock from the company, because it's not a 

publicly listed company, and the company was owned by the pension fund. When they knew that 

the stock was going to go up, it was only changed once a year, they bought for $54 what soon 

became worth I believe $146. They disproportionately got the profit from the deal. The losses, 

when Global Crossing was tanking, went to the pension fund holders. 

 What made it particularly egregious was they set up the rules for insider stock dealing only 

for stockholders of certain amounts of stock, meaning the directors. In one case those with less than 

10,000 shares could do this, and the pension funds that had much more than that could not. So it 

was a very calculated way to enrich themselves at the expense of the pension holders. 

Mr. Wilson. Mr. Cossu, after hearing your testimony, I think I fully understand why the President 

asked for additional funds for the pension enforcement programs administered by the OIG. Your 

office seems to administer some novel and very critical enforcement programs in terms of 

protecting the pension assets of union members that might otherwise go unattended. 

 What kind of specificity would you provide us about the President's request that would 

increase the pension protection for these assets? 

Mr. Cossu. Mr. Congressman, as my statement indicated, our investigative program is extremely 

diverse. It deals not only with pensions, but also with union corruption and labor management 
26

issues, so we can't abandon one over the other. Pension investigations remain an extremely strong 

element in our program, in light of the concern that everyone has when that retirement benefit is 

needed and it's not there. 

 With the added resources and with the ongoing joint efforts with the Justice Department's 

organized crime and racketeering section, if we receive the resources, they would be put to very 

specific functions that would support the overall program. 

Mr. Wilson. Thank you, Mr. Chairman. 

Chairman Johnson. Thank you.

The Chair recognizes the gentleman from New Jersey, Mr. Andrews. 

Mr. Andrews. Thank you, Mr. Chairman. I thank the witnesses for their testimony. 

First, I want to acknowledge, of course, that your discussion of the Ullico case is based on 

news accounts at this point, is that not correct? 

Mr. Boehm. And a number of folks involved who have said that, yes, they did involve themselves, 

and in some cases had regrets about involving themselves. 

Mr. Andrews. I assume they said that to journalists? 

Mr. Boehm. That's correct. 

Mr. Andrews. Okay. And the other cases that you mentioned in your testimony are, in fact, cases 

that have been brought through the court system with prosecutions and convictions and so forth? 

Mr. Boehm. That's correct. 

Mr. Andrews. I notice that you recommend annual financial disclosure by union officials of all 

outside income, especially those who oversee pension funds. 

Mr. Boehm. Right. 

Mr. Andrews. And I understand your reasoning that one of the abuses that is identified in these 

prosecuted cases is the use of contracts of dubious value with the funds that appear to funnel 

money back to certain entities that may, in fact, benefit the trustees; is that correct? 

Mr. Boehm. That's correct, yes. 

Mr. Andrews. Would you favor the extension of that same principle to members of boards of 

ERISA plans in single-employer plans? 
27

Mr. Boehm. Yes, I would. 

Mr. Andrews. So, in other words, if we had a situation where in a single-employer plan, an ERISA 

trustee was an investment banker and the person was a principal in an investment-banking firm, 

how much disclosure should that investment banker have to give? 

 For example, should the investment banker have to list all of the clients that her firm 

receives fees from, or just the fact that she herself receives an income from that firm? What should 

she have to list? 

Mr. Boehm. The model I was citing there was the ethics in government model, which is not the 

strictest model, as you know. Congressmen, and federal judges fill it out, and there is a certain 

amount of leeway. I think if you follow that model, it would be much better than what you have 

now, and I think it would have actually stopped what you have in the Ullico case. 

Mr. Andrews. My only concern, and I applaud you for the even-handedness with which you apply 

it, is that if we know that a trustee receives her income from investment firm X but we don't know 

which entities are paying fees to investment firm X, we can't really make an evaluation of whether 

that trustee's decision, perhaps, to invest pension funds into the clients of investment firm X is 

there.

 Do you understand what I'm saying? 

Mr. Boehm. Yes, I do, and there has been some discussion among our folks in town about policy, 

and what to do about the exact example that you gave. 

 One of the possible ways to handle that might be a series of questions that go to the more 

common ways that these sophisticated contracting kickback and bribery schemes work, where the 

individual must certify, under penalty of perjury, that certain types of transactions involving 

investments done by their firm did not take place. 

 That doesn't get into the heavy volume of paperwork that would naturally occur if 

somebody is a multi-millionaire investment banker with lots and lots of clients, but it may give 

them pause if they were going to come up with something that, for lack of a better word, was cute. 

Mr. Andrews. I think the other problem with that approach, besides its self-policing aspect, which 

is troubling, is that one of the real problems across these funds is the use of a fund as a rainmaking 

device to raise business for those who serve the fund in some way. That's not really a kickback in 

the criminal sense. 

Mr. Boehm. Right. 

Mr. Andrews. It's certainly a breach of fiduciary duty. If you use your trustee control of assets to 

generate good will that then brings in clients for your law firm or customers for your bank or 

customers for your investment bank, that is a division of loyalty that the fiduciary laws really don't 
28

permit. 

Mr. Boehm. I agree with you totally, and that is, if anything, a more substantial problem, because 

it's so subtle. Yet, in the end, the fiduciary responsibility is that your first duty should be to the 

people who benefit from the fund, not yourself. 

Mr. Andrews. The question I'll close with is similar proposals have been made by people in the 

past, and the reaction has been that corporate boards across America and trusteeships across 

America couldn't get accountability to serve, because a lot of people who are in the private sector 

would not want to make those kind of disclosures. 

 Do you think people would still be willing to serve on fiduciary boards under ERISA if they 

had to file a form, like each one of us files, which discloses our source of income? 

Mr. Boehm. I think they would, I really do. Because if you don't do that, then you have the 

situation that you have now where all too often hundreds of millions of dollars are at risk because 

somebody has figured out a very roundabout, very complicated way to bribe a pension fund board 

in effect. 

Mr. Andrews. Shall we just close and ask if the Department would care to comment in writing, 

after the hearing, on its position on that change, whether it would prefer amending ERISA so that 

all ERISA trustees would be covered by that disclosure? 

Chairman Johnson. Thank you.

Excuse me. Did you have a response? 

Mr. Cossu. I just wanted to reiterate that the nature of our investigations is generally criminal 

investigations. This is more of a policy issue, which would be best addressed by PWBA. 

Mr. Andrews. Which is why I asked for a written response from the Department. I appreciate that. 

Thank you. 

Chairman Johnson. Thanks for your questions. That was a good interchange. 

 I recognize the gentleman from New Jersey, Mr. Payne. 

Mr. Payne. Thank you very much, Mr. Chairman. 

 I'm sorry that I missed all of the testimony, but I do believe that this whole issue of 

retirement security for American workers is something that's very important, especially in light of 

what we've heard recently with the Enrons and WorldComs and many of those companies, where 

the pensions of workers have certainly been compromised. 

 I just have a question for Ms. Ferguson. I was trying to catch up and go through the 

testimony, but I just have a general question. In your opinion, do you believe there is a greater risk 
29

of fraud with pension funds of union workers or employees who are unionized as opposed to 

employees who are not union workers, sort of the corporate, and the Enron-type situation? What do 

you think? 

Ms. Ferguson. I would say no. To my knowledge, there's no statistical basis for that. Of course, 

the percentage of the workforce that is unionized is, of course, very small. 

 In our own experience, the Pension Rights Center works with pension counseling projects 

around the country that are funded by the administration on Aging, and we haven't seen any 

particular difference between the union plans and the corporate plans in that respect. 

 First, I'm reminded in hearing this testimony how pleased we are that the inspector general's 

office does such an excellent job in its work in protecting participants, and also the critical role that 

disclosure plays in it. 

 For example, in the Capital Consultants case that we've been hearing about, it was actually 

individual participants who read their summary annual report, the one-page document that they get. 

Everybody says, “Oh, employees never read,” but they read this. They saw these discrepancies.

They brought them to the attention of the Labor Department, and that's how this whole thing 

started.

 There's been an effort over the years to cut back on disclosure, and to cut back on summary 

annual reports, and what these situations show is how important it is that employees continue to be 

given valuable information about their rights. 

Mr. Payne. And I guess you would strongly urge that employees sit on pension boards. There's 

always been a question about employees sitting in on pension boards, and I don't know what the 

practice is now. Do many of them have employees on the committees, to your knowledge? 

Ms. Ferguson. The typical, so-called Taft-Hartley Fund, the multi-employer plan, where a union 

negotiates with a group of employers, always has a joint trusteeship arrangement with an equal 

number of employer and employee representatives, and most state retirement funds also have joint 

trusteeship. In the single employer area, where the company runs the fund, we have not had joint 

trusteeship, although Great Britain, which has a very similar system, does. 

 With the advent of Enron and WorldCom, we're suddenly seeing a situation where you have 

acute conflicts of interest. In WorldCom and Enron, it was particularly dramatic. 

 The company, which was wearing two hats, wanted to make sure the stock would continue 

to be held by the employees and not be sold as a way of saving the company, was touting the value 

of the stock to the individuals in the 401K plan, when this was their own savings. And it seems to 

us that in that kind of situation where you have employees' money and acute conflicts of interest, 

unless you're willing to have independent fiduciaries running these plans, you have to have some 

kind of check in the form of employee representation. 
30

Mr. Payne. There's no question about it in those situations where the employees are very loyal to 

the company. They've been there all their lives, they work hard, they believe in the company. They 

work hard so that their future is ensured. However, as you've indicated, they're going to be inclined 

to want to stay and hang in there during the tough times. 

 However, the employer is being less than honest when they said that, for example, at Enron, 

they would post the value of the stock each day so employees knew it was dropping. However, the 

officers were saying, “Well, even though it's going down, you should hang in there with us,” while 

they were bailing out. So I think that that was certainly unfortunate. 

 But anyway, thank you very much. I appreciate your response. Thank you. 

Chairman Johnson. Thank you, Mr. Payne. 

 I wonder if you could, Mr. Cossu, explain to me what you mean by the return on investment 

that American taxpayers accrue from OIG's efforts. 

Mr. Cossu. Mr. Chairman, when we began the pension initiative, coming off the Attorney 

General’s Pension Abuse Initiative, we decided to take a look at the method in which we were 

going to be deploying our investigative resources, and almost run it like a business. The pension 

arena presents us with some of the higher profile cases, not only in dollars but also in the 

complexity of the crime. 

 When we examine the nature of the investigation and the resources that are devoted to 

prosecute individuals which have abused that particular pension plan, our return on investment is 

substantially high, in that the government may be able to recover tens of millions of dollars on 

behalf of the plan and the corrupt actions that were taken against them by plan officials, union 

officials, and trustees. 

 The sentencing at the conclusion of the prosecution generally is pretty heavy in plans like 

this. We have seen cases where restitution comes in almost to the same amount of dollars that the 

plan has lost, forcing the individuals to come up with that money. 

 When we match up how many hours an investigation has taken, and calculate the cost of 

that investigation and we then put it up against the dollars that are being ordered to be recovered, or 

at least charged at the time of sentencing, it's an extremely high return for that type of an 

investigation.

Chairman Johnson. Do those dollars go back into the pension plan? 

Mr. Cossu. Yes in some cases. For investigations that are conducted by both the OIG or PWBA, if 

there are plan assets, the court generally will order that the plan be restored. 

Chairman Johnson. Can you, any of you, tell me what you think the level of funding is in our 

pension plans now, on the average, across the board? Is it 80 percent? 
31

Ms. Ferguson. We can certainly get back to you on that. 

Chairman Johnson. How about the union-sponsored plans? 

Ms. Ferguson. They have been traditionally very well funded. 

Chairman Johnson. That's what I thought. Even with some of the fraud that's been alleged, is that 

true? 

Ms. Ferguson. Yes. I'm always reminded of the Doonesbury cartoon, you know, the pension fund 

was just sitting there. 

 The instances of fraud are very serious, and I'd like to add to something that the inspector 

general statement said. There isn't always restitution, because we have a very low level of bonding 

for criminal activities, and no requirement for fiduciary insurance. So often, despite the best efforts 

of the enforcement agencies, there is inadequate restitution, and this is a very, very serious 

problem. In a traditional defined benefit plans, there is usually the Pension Benefit Guarantee 

Corporation safety net, but in the 401K plan, there's nothing. 

Chairman Johnson. Mr. Boehm, would you advocate more bonding, a higher level? 

Mr. Boehm. I think it would address the problem of what happens when the money goes and 

there's no other way to recoup it. Bonding, I think, does work in a lot of other instances in society, 

and I think it would be a good thing to at least consider it here for just the reasons cited. 

Chairman Johnson. Combined with full disclosure? 

Mr. Boehm. Right, a combination of disclosure and bonding. You need sunshine and you need 

insurance.

Mr. Cossu. Mr. Chairman, to address the funding level of the union plans, the advantage that a 

multi-employer plan has is the fact that it's linked with a collective bargaining agreement, so that 

pension asset, that pension contribution is part of the collective bargaining agreement that the union 

makes with the employer. If the individual employer fails to make their contribution, he could be 

voided of any labor that would be required to run his business. So there is a level of pressure 

coming from the collective bargaining agreement to keep that funding up there. 

Chairman Johnson. In the IG area, has your investigative and enforcement mission changed any 

since last September the 11th? 

Mr. Cossu. After September 11th, as a result of the refocusing of the FBI's efforts on terrorism, 

we've been asked by Justice Department to fill the void that has occurred in the enforcement arena 

with respect to labor racketeering and organized crime. 

 There has been an all-out effort this year to work with Justice. As I indicated earlier, we 

plan to focus in on areas where the deficiencies may occur, and if given the resources and the 
32

budget, we will exercise that plan with Justice. 

Chairman Johnson. Did Justice lose some resources as a result of the 11th? 

Mr. Cossu. I'm not certain, Mr. Chairman. 

Chairman Johnson. Yeah. Well, I want to thank all of you for your valuable time and testimony. 

This has been an interesting conversation. I appreciate the Members' participation, and Mr. 

Andrews' in particular. 

Mr. Andrews. Mr. Chairman, before we adjourn, I did have a unanimous consent request of Mr. 

Cossu.

 I know the office of the OIG is conducting a review of cash balance plans and some of the 

payment issues surrounding it. We would ask if the office could give us an update on the status of 

that investigation, whatever findings you have made, and whatever you can share with us for the 

Committee's record. 

Chairman Johnson. Thank you. So ordered. 

 The Subcommittee now stands adjourned. 

Whereupon, at 12:40 p.m., the Subcommittee was adjourned 
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Table of Indexes 

Chairman Johnson, 2, 5, 8, 9, 11, 13, 14, 15, 16, 17, 20, 22, 24, 26, 28, 30, 31, 32 

Mr. Andrews, 9, 10, 11, 26, 27, 28, 32 

Mr. Ballenger, 11, 12 

Mr. Boehm, 22, 24, 25, 26, 27, 28, 31 

Mr. Cossu, 18, 25, 28, 30, 31, 32 

Mr. DeMint, 15, 16 

Mr. Hauser, 15 

Mr. Kildee, 16, 17 

Mr. Payne, 28, 29, 30 

Mr. Wilson, 24, 25, 26 

Mrs. McCarthy, 13, 14 

Ms. Combs, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17 

Ms. Ferguson, 20, 29, 31