In a victory for Orange County “vulture capitalist” Chriss Street, a federal judge in Delaware has invalidated nearly $5 million in pension benefits granted to Fruehauf Trailer Corp. workers less than a month before the truck-trailer maker filed for bankruptcy in 1996.
Street, a Newport Beach money manager and trustee of the Fruehauf estate, sued to stop the payments. (Fruehauf went out of business after asset sales in 1996 and 1997. Indiana’s Wasbash National Corp. acquired some of the company’s assets and owns the Fruehauf name.)
The Jan. 7 decision by District Court Judge Joseph Farnan stops some $4 million in benefits from going to just 40 executives and other top former workers at Fruehauf.
The disputed pension spike was pitched as a bonus to retain key workers before the company could be sold. It was approved by Fruehauf’s board of directors with minimal review and at the behest of two executives who stood to gain from the increase.
Benefits increased by 200% or more for executives while 400 other nonunion workers got small bumps.
The company’s 1,000 union workers and 7,000 other pension-plan beneficiaries got no increase.
The judge’s ruling keeps the Fruehauf pension fund solvent and averts a possible federal takeover that could have led to slashed benefits for the rank-and-file pensioners, according to Street.
“In the pension plan world this is a big deal,” Street said. “How many corporations are out there trying to handle not only the benefits they have provided long-term but also enhanced benefits that were granted in the bubble years, that are now coming due?”
Street said the ruling adds “one more fiduciary responsibility” to corporate directors.
The only appeal left to defendants would be to the U.S. Supreme Court. Street said the pension fund has to cover both sides’ legal fees in the seven-year battle, which he said total $1.7 million.
Street gained notoriety as a soothsayer of OC’s bankruptcy. He now plans to run for county treasurer in 2006.
