back to article IBM accused of pumping staff retirement funds into a tanking stock... IBM's to be exact

The US Supreme Court has agreed to hear a case between IBM and employees who have accused the enterprise computing giant of mishandling their retirement fund. The top court in the nation will decide whether to uphold a lower appeals court decision (PDF) from February that ordered a trial in the class-action legal battle, …

  1. Chris Miller

    Bouncing Czechs

    Investing a company pension fund in that company's own shares is considered a very dubious practice in the UK (after Maxwell), but it used to be relatively common in the US. I'm not sure of the current position on the left side of the pond.

    1. Anonymous Coward
      Anonymous Coward

      Re: Bouncing Czechs

      The current situation on the left side of the pond is that pensions are practically unheard-of for employees of private corporations. There are still a few old giants, like IBM, that may have a pension plan, but even those are usually closed to new employees. An important exception is that members of some trade unions may have a pension plan managed by the union, rather than their employer(s). Obviously in that case the pension fund is managed independently of any employer, so this doesn't come up.

      This writeup is actually confusing, because an ESOP has nothing to do with a pension plan; it instead grants employees the right to purchase shares (always of the employer) at a fixed strike price, usually for listed companies the market price on the date of issue. So if they knew the stock was overpriced, the strike prices of the issued options would be too high and the employees who received those options would find them worthless. So whether this case is actually about an ESOP or a pension plan, participants in the plan would receive less compensation than they would have otherwise, but the mechanism is wildly different.

    2. a_yank_lurker Silver badge

      Re: Bouncing Czechs

      The company match in a 401K (sort of a retirement plan/pension) as company stock is capped after the ENRON fiasco. ESOPs are not intended to be retirement plans or pensions but an avenue for employees to buy stock in the company. The suit actually allegedly something close to a 'pump and dump' fraud with the ESOP taking a beating.

      1. Caff

        Re: Bouncing Czechs

        Yup sounds like they used their control over the pension plan investment decisions to use the pension money to inflate the price of the stock. Which cost the employees money when they used their ESOP options to purchase the stock at the inflated prices.

        Employees then making a loss on both the ESOP shares and their pension funds once it became clear they stock was overvalued.

        1. Anonymous Coward
          Anonymous Coward

          Re: Bouncing Czechs

          How many successive quarters has IBM declined now? Only an idiot would join/stay in their ESOP.

          1. Anonymous Coward
            Anonymous Coward

            Re: Bouncing Czechs

            "How many successive quarters has IBM declined now? Only an idiot would join/stay in their ESOP."

            But they buy back their shares to keep everyone happy... At least until the losses become to big and then you press the "announce loss and reset" button.

        2. a_yank_lurker Silver badge

          Re: Bouncing Czechs

          In essence a 'pump and dump' scheme with the employees as the marks.

  2. Anonymous Coward
    Anonymous Coward

    Pfft... stupid

    ... would have made more sense to let them tank, then use the retirement funds to buy them up cheap.

    1. Blockchain commentard Silver badge

      Re: Pfft... stupid

      Yep, but the workers retirement fund probably brought the shares from the directors retirement fund thereby saving the directors pension fund. Allegedly. Possibly. Maybe.

      1. Korev Silver badge
        Coat

        Re: Pfft... stupid

        You could measure the difference between the Plebs' and the Directors' fund using the Giini coefficient.

    2. rcxb Bronze badge

      Re: Pfft... stupid

      > ... would have made more sense to let them tank, then use the retirement funds to buy them up cheap.

      There was nothing to buy up. IBM had to give GlobalFoundries a huge check to TAKE the division from IBM. You'd get a better return investing in radioactive waste.

      1. MyffyW Silver badge

        Re: Pfft... stupid

        yep, buy radioactives, mis-jump to a random bit of space and jettison, jump back to a normal star system, rinse and repeat, remember to get that drive serviced AT LEAST once a year. It's all coming back to me ...

  3. Howard Hanek
    Happy

    Diversity Recruitment

    ....right after they served their sentences for pension fraud.

  4. Anonymous Coward
    Anonymous Coward

    Nothing but blue skies

    Well, Autonomy had already been sold off to HP.

    IBM stock was the next best (worse) thing.

  5. fredesmite Bronze badge
    Mushroom

    SEE Enron

    Buy NOW

    Buy often

  6. Blofeld's Cat
    Coat

    Er ...

    This may prove to be an exception to the old saying that: "Nobody ever got fired for buying IBM"

    1. Anonymous Coward
      Anonymous Coward

      Re: Er ...

      I think that slogan has been dead for quite a long time, since in fact IBM lost over 8 billion dollars down the sofa in 1993 - at the time the biggest corporate loss ever.

    2. Anonymous Coward
      Anonymous Coward

      Re: Er ...

      The saying is now "Nobody ever got fired for trying to move their business away from IBM".

      It is similar to very complex surgery - in most cases the patient may not be able to be saved and the best that can be hoped for is reducing their suffering during the time they have remaining.

      1. Anonymous Coward
        Anonymous Coward

        Re: Er ...

        It may be simpler and cheaper to start a new company using alternate technology.

        1. Anonymous Coward
          Anonymous Coward

          Re: Er ...

          At present, we don't approve of shooting the patient, regardless of the level of suffering of the patient.

  7. Kabukiwookie Silver badge

    Incentives

    CEO pay packages are often linked to the price share. Pump up the the price of your oqn stock using the employee pension fund = fat bonus.

    Jump ship and cash out your options when the stock is still worth something = carribean beachfront property.

  8. Anonymous Coward
    Anonymous Coward

    Snake and ladders

    Do snakes swallow their own tail. If so, when do they stop?

  9. JeffyPoooh Silver badge
    Pint

    Job, Pension, Investments

    It's bad enough that two are inevitably tied to one organization.

  10. Anonymous Coward
    Anonymous Coward

    Rarely the First

    IBM is rarely the first to take up financial "engineering" shenanigans, letting other companies try the waters first. In other words, if Enron were still standing, every corporate 401K would be solely invested in the target company's stock as a convenient way to pump the value without spending the "owners" money.

    One has to wonder how many other companies are silently sweating the case, not even an amicus as that would just paint a bulls eye.

POST COMMENT House rules

Not a member of The Register? Create a new account here.

  • Enter your comment

  • Add an icon

Anonymous cowards cannot choose their icon

Biting the hand that feeds IT © 1998–2020