MORE...“FLYING WITH THE BANKRUPTCY BUZZARDS”
Sightings from The Catbird Seat
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June 30, 2006
WHO IS BANKRUPTING AMERICA?
Felix Rohatyn’s “al-Qaeda” Destroyed American Industry
by EIR Staff
What international investment bank has consulted in the disappearance of every formerly major American steel company?
Felix Rohatyn’s Lazard Freres.
What investment bank set up the infamous United Airlines employee ownership plan of 1994 – which lost each employee’s every dollar of stock – and had “consulted,” altogether, seven major airlines into bankruptcy and/or liquidation?
What investment bank put together the mergers that created, and then advised, the monster Enron?
What investment bank has been the strategic advisor to each of the big auto supply companies with has gone into bankruptcy; has advised both GM/Ford and the UAW on the ongoing shutdowns of auto plants and jobs; and developed the strategic bankruptcy plan for Delphi Corp., the worst industrial outsourcing in U.S. corporate history?
Rohatyn’s Lazard Freres, again.
And, in the case of the Delphi outsourcing plan, the crime was done by Felix Rohatyn personally.
But don’t get the idea that this is a project by one greedy individual. Rohatyn himself is simply the front-man for a tightly-knit network of private financier institutions – investment houses, commercial banks, and their allied law firms and consulting firms – that have systematically moved to shut down the entire industrial base of the United States over the past 30 years, and have now nearly succeeded in wiping it out altogether.
They have implemented globalization-through-fraud, taking advantage of a corrupt rewriting of America’s bankruptcy laws, which, in effect, hands life-or-death decision-making power over to this financial cartel, and a new generation of thieves they’ve created, like Delphi Chief Steve Miller, and “former” Rothschild agent Wilber Ross.
In effect, what has occured is a foreign take-down of the United States, led by an international Synarchist network which has always hated the United States, and set out to destroy the legacy of Franklin Delano Roosevelt as soon as his heart stopped beating in 1945....
AIRLINES AND AEROSPACE
Overall results: Aerospace employment in the United States fell from a peak of 900,000 during the late 1980s to 550,000 now, a 40% drop; 60 million square feet of aerospace/defense capacity was shut down from 1990-97 alone, and its machinery sold off at auctions.
The Case of Joshua Gotbaum
During the 198s, there were about 20 prime military contractors, and more than 130,000 scientists and engineers working on aerospace research and development, according to the Aerospace Industries Association. With the end of the Cold War as the pretext, there took place a drastic downsizing of both the high-technology, machine-tool-rich defense/aerospace industry and U.S. military forces, initiated by Dick Cheney, when he was Secretary of Defense from 1989 through January 1993.
Today, there are only five major prime military contractors, and only about 30,000 scientists and engineers working on aerospace R&D.
In the mid-1990s, the downsizing and dismantling of the defense/aerospace sector was led by the little-known Joshua Gotbaum, a protege of Frlix Rohatyn at Lazard Freres, and the son of New York City labor leader Victor Gotbaum, himself a close collaborator with Rohatyn in the razing of New York City public services in the 1970s under “Big MAC” – the bankers’ Municipal Assistance Corporation.
During 1975-82, Rohatyn, with the indispensable cooperation of the senior Gotbaum, brutally cut vital public services – fire, police, hospitals., and transit – by 15% to 40%, driving out much of the city’s poorer population in the process. As a reward for his father’s collaboration, Joshua Gotbaum was made a banker by Lazard Freres in 1981. By 1990 he was a general partner, and was entrusted to serve as the Managing Director of Lazard’s London office from 1989-92.
In 1994, Joshua Gotbaum was suddenly named to a newly created Pentagon position, assistant Secretary of Defense for Economic Security, with a 260-person staff and considerable powers. At a time when defense expenditures were being slashed, Gotbaum applied pressure to shut down aerospace factories. During the 1990s, more that 250,000 aerospace production workers were axed, and more than one-third of the aerospace sector was liquidated in the process of “consolidation.” With it, went much of the industry’s irreplaceable advanced machine-tool capacity....
Gotbaum also pushed to implement Cheney’s 1992-initiated policy of outsourcing and privatizing military functions....
Airlines Shot Out of the Sky
Closely related to the aerospace industry, is the commercial airline sector, whose destruction was also crafted and facilitated by Lazard Freres and Joshua Gotbaum.
Listen to the description in the Jan 7, 2004 Honolulu Star-Bulletin: “Gotbaum was an investment banker with Lazaard Freres & Co., in New York and London, providing advice to airlines on mergers, acquisitions, bankruptcies, and restructuring. He consulted with Eastern, Braniff, Pan American, British Airways and Air France.”
This is quite a record: Eastern, Braniff, and Pan American each went bankrupt and was eventually liquidated.
In addition, in 2003 Gotbaum was appointed the operating Trustee for Hawaiian Airlines, after it filed for reorganization under Chapter 11. His was an extremely rare position; normally, the existing management continues to operate a company (as “debtor-in-possession”) in a Chapter 11. Hawaiian was not bankrupt; its reason for filing bankruptcy was to force concessions from its employee unions and to renegotiate it aircraft leases with Boeing. The head of the Air Lines Pilots Association correctly called it a “sham bankruptcy.”
The outcome, for which Gotbaum demanded almost $10 million in fees, was that 2) creditors got paid in full (very unusual); 2) shareholders saw their stock actually increase in value, instead of being wiped out, as is normal; 3) employees made concessions and give-backs in wages, benefits, and work-rules; and 4) pilots had their pensions frozen and revamped.
That’s only part of the picture. Overall, there were at least nine airlines to which Lazard and Gotbaum were consultants. Seven of the nine ended up in bankruptcy, most of which included “restructuring” consulting by Lazard....
Read the complete article at: www.kycbs.net/Bankrupting-America.pdf
May 19, 2005
Pensions Hijacked: Bankruptcy scam rips off 119,000 United workers
By Roberta Wood, People's Weekly World Newspaper
CHICAGO — “You might see me coming down the aisle 20 years from now with my walker,” said flight attendant Melissa Madden. Faced with the slashing of their pensions to the tune of $6.6 billion, she and other United Airlines flight attendants here warn that if United gets away with using bankruptcy to dump its pension obligations, the nation’s entire defined-benefit pension system — and the futures of the 44 million workers it covers — could come tumbling down. Retirement for American workers could become a thing of the past.
In an interview at the Association of Flight Attendants-CWA office near O’Hare Airport, Madden didn’t dwell on the personal crisis brought into her life on May 10 when a bankruptcy judge gave the airline the go-ahead to renege on its debts to 119,000 United employees and retirees. The judge ordered the remaining assets in United’s four pension funds turned over to the federal Pension Benefit Guaranty Corp., which will assume responsibility for United’s pensions.
The daughter of a pilot, Madden left a teaching job to go to work for the airline in 1978. In the 1990s, “I was looking forward to retirement at age 50 with $2,300 a month,” she said. United cleared $662 million in net profits in 1995. In 1996, the total surpassed $1 billion. In both 1997 and 1998 it was $1.3 billion. During those high-profit years, the flight attendants and other unionized workers bargained for benefit packages that included pensions.
Madden said she fulfilled her part of the bargain. “It was a wonderful job,” she said, breaking into a smile. “My parents taught me to be loyal to the company and work hard, and I did. I had a contract that said I would be able to retire without fear of being homeless or not having enough to pay my medical bills.”
But after United stopped reporting profits, employees were hit with two rounds of contract concessions drastically cutting jobs, wages and benefits. Now, after the PBGC takeover, Madden can look forward to only $1,130 a month. “I have to rethink my future,” she said. She’s weighing selling her condo, downsizing her life or “leaving the career I love.” But, she worries, “what is the economy like for 50-year-olds?”
She also wonders if the PBGC payment will be there if other airlines and businesses with big pension liabilities like General Motors follow suit and dump more pension obligations onto the PBGC.
With billions of dollars going through United’s bank accounts every year, where is the money airline workers earned for the company over the decades?
Madden and union spokesperson Chris Clarke blame inept management and enormous executive bonuses. The bankruptcy process itself is a boondoggle, with law firms set to collect over $200 million.
But economists point to additional systemic problems. Even during the years United was reporting record-breaking profits, the value created by airline workers was being drained off.
Corporations like United are structured to depend on Wall Street finance capital to lend them money for operating cash, said Wadi’h Halabi, an economics columnist for this newspaper. Paying the interest on the debt effectively transfers their profits to the banks that lend the money.
Airlines also make exorbitant payments to lease aircraft from a General Electric subsidiary. The payments show up in GE’s profit columns. “Airlines may be entering their fifth consecutive year of losses,” wrote Business Week, “but for GE, the good times keep rolling.” Creditors like GE can call the shots. They insisted on wage cuts for United’s employees.
Perhaps the greatest rip-off is the skyrocketing price of fuel. Fuel is one of the industry’s major costs. Since neither the cost of drilling nor that of refining has increased, all of these “losses” for airlines are pure profits in the bank vaults of the oil monopolies.
Madden and Clarke see a tie-in between the push to privatize Social Security and the assault on their pensions. “Because we’ve gone to a global economy, once you’ve got that mindset, it’s all about cutting costs, “ said Madden. “It’s an awful race to the bottom.” Clarke added, “Under the Bush administration Wal-Mart philosophy, employees are liabilities, not assets.”
The flight attendants and other airline workers are far from defeated. “There is no more to give,” said Madden, her cheerful face turning stony. She left the interview to hop on a plane to Washington — as a passenger — to join a massive lobbying effort for passage of HR 2327, which would retroactively halt assignment of pension funds to the PBGC for six months. That would allow the flight attendants time to make their case that there is no just cause for their fund to be terminated.
Rep. George Miller (D-Calif.) one of the bill’s authors, warned that unless Congress acts, “All the major carriers will look to the United agreement to see if they can cut their own costs by dumping their workers’ pensions. And after the airlines, other industries will look to do the same thing.”
February 10, 2003
United's bankruptcy filing
$2.3 million boon for lawyers
The United Airlines bankruptcy is a painful economic and emotional experience for its workers and a source of great ambiguity for customers. Few can claim any obvious benefit.
Then there are the lawyers. They constitute a critical, and well-compensated, hub for the beleaguered airline.
Big-time bankruptcies can be huge feasts for a firm's outside attorneys, and the same is clearly true for Chicago's Kirkland & Ellis, bankruptcy attorneys for UAL Corp.
Its most recent filing, covering the brief period of Dec. 9 through Dec. 31, the firm seeks approval of $2.3 million in fees and expenses ranging from one senior partner's $680-an-hour contribution to $20 for an in-house messenger's cab fares.
A head-turning 80 attorneys are listed as working on the UAL case, including young associates, admitted to the bar just two years ago, whose rates are $345 an hour.
As usual, the fattest hourly fees are charged by the most senior hands, such as James H.M. Sprayregen ($680 an hour), William R. Welke ($665), George B. Javaras ($665) and Lyndon E. Norley ($625).
The total hours billed during the December period is 5,315, according to the filing, parts of which follow:
IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION
In re: UAL Corporation, et al., Debtors.
Summary of verified application of Kirkland & Ellis for allowance of administrative claim for compensation and reimbursement of expenses for the interim period December 9 through December 31, 2002
Name of Applicant: Kirkland & Ellis
Authorized to Provide Professional Services to: Debtors and Debtors-in-Possession
Date of Retention: Retention Order entered December 30, 2002, effective as of December 9, 2002
Period for which compensation and reimbursement is sought: December 9, 2002 through December 31, 2002
Amount of Compensation sought as actual, reasonable, and necessary: $2,152,847.70 (90% of $2,411,189.00)
Footnote: Kirkland & Ellis seeks allowance of fees in the amount of $2,411,189.00. However, as further detailed in paragraph 30 of the Application, Kirkland & Ellis is voluntarily discounting its requested fees by $19,136.00, thus reducing Kirkland & Ellis' allowable fees to $2,392,053.00. As a result, Kirkland & Ellis ultimately seeks reimbursement of $2,152,847.70 (i.e., 90% of $2,392,053.00) in fees by this Application.
Amount of Expense Reimbursement sought as actual, reasonable, and necessary: $127,383.67
The total time expended for the preparation of this application is approximately 85 hours, and the corresponding fees and expenses are approximately $25,000.00.
Regarding the actual work Kirkland & Ellis did on behalf of bankruptcy client UAL from Dec. 9 through Dec. 31, 2002 (that's 23 days, including Christmas; there seems to be no surcharge for weekends or holidays) the document shows:
The names of 80 attorneys in assorted departments -- partners, associates, contract attorneys and one "Of Counsel" to the bankruptcy department -- billing 5,315.8 hours at various rates for a total of $2,094,825.
Forty-one paraprofessionals -- assistants of various sorts in different departments -- named as putting in 2,218.2 billable hours worth a total of $315,682.
Research specialists in Administrative Services produced 4.4 hours of library research worth $682.
To help show where the time and money were spent, the filing also shows 24 line items listing compensation organized by "matter," such as Bankruptcy filing (160.2 hours for $38,698).
The knottiest matters by far were Case Administration (1,499.3 hours for $323,073.50); Tax Issues (787 hours for $334.344); and something called 1113 Matters (1,263.2 hours for $470,896).
The simplest and least expensive matter was Utilities (6.2 hours for $1,786).
In a separate list of expenses, the three costliest things Kirkland & Ellis wants reimbursement for are Outside Copy/Binding Services ($65,001.14); Standard Copies ($27,390.35); and Information Broker Doc/Svcs ($11,759.75).
The three least expensive: In-House Messenger Services ($8); Other Travel Expenses ($16.06); and In-House Messenger Cabfare ($20), which is differentiated from Local Transportation ($563.05).
United wants out of costly plane leases
Some companies take loss; others want jets back
By John Schmeltzer Tribune staff reporter
February 6, 2003
United Airlines said it will notify many U.S. companies Thursday that it is
canceling leases on dozens of jets, some of which are parked in the desert.
United's decision could mean the difference between profit and loss for its lessors. For years, firms, including Walt Disney Co. and Whirlpool Corp., have padded their bottom lines by leasing planes to United.
Nearly a dozen companies, including some of the nation's largest, have disclosed they have billions of dollars worth of planes leased to the Elk Grove Township-based airline. In addition, private trusts and mutual fund companies have invested many more billions of dollars in United jets. United leases about 450 of its 550 jets.
Some companies already have written off their investments, expecting that United would terminate dozens of leases Thursday during proceedings in U.S. Bankruptcy Court. In the past month, Whirlpool, Disney and the Bank of New York have taken multimillion-dollar charges.
"We don't expect to get our investment back out because of the bankruptcy, combined with the drop in value in the assets themselves," said Tom Kline, a spokesman for Whirlpool.
On Wednesday, Whirlpool reported a fourth-quarter net loss of $29 million, largely because of a $43 million after-tax write-off connected to its lease of four Boeing 757 aircraft to United.
Meanwhile, other lessors are expected to ask Bankruptcy Judge Eugene Wedoff to order United to return the jets so they can lease them to other airlines, however unlikely that may be.
A decade ago, many large companies viewed United, then the world's largest carrier, as a lucrative spot to invest cash. Airlines such as United were willing to pay sky-high rent for the ability to modernize and expand their fleets because they didn't have to shell out billions of dollars to pay for new planes.
Typically, the negotiated leases required airlines to pay 1 percent per month of the purchase or appraised price.
For example, a lease for a Boeing 757, which might have cost $50 million, would allow a lessor company to more than double its money over the life of the typical 18-year agreement. Under this type of arrangement, United would have paid $6 million per year, or a total of $108 million over the term of the agreement.
United, which filed for bankruptcy protection in December, is seeking to terminate some of those leases and cut payments on others by as much as half.
Unlike Whirlpool and Disney, CIT Group Inc., the country's largest publicly traded consumer finance company, is not writing off its investment. CIT has four planes, valued at $96 million, leased to United and holds $41 million of aircraft bonds.
"We are saying that we believe that we can structure a transaction [with United] that will allow us to recapture our investment," said CIT Aerospace President Jeff Knittel.
Another group of companies, led by Philip Morris Capital Corp., a finance unit of Altria Group Inc., is seeking the return of the jets it has leased to the bankrupt airline. Altria is the new name of Philip Morris.
Philip Morris is asking the bankruptcy court to allow it to repossess 16 of the 24 Boeing 757s the airline has been using. The company says United has not made an effort since filing for bankruptcy to comply with terms of the leases.
United has offered to return six of the jets.
Lessors such as Philip Morris and Disney are finding themselves in virtually uncharted territory.
Commercial aircraft values have plummeted since Sept. 11, 2001, as passenger demand fell and airlines responded by retiring thousands of planes. More than 1,300 planes are parked in the desert in California and Arizona. More could be headed there because of fleet reductions at United, US Airways and American Airlines.
Some experts estimate that the value of the planes has fallen more than 20 percent because so many are available.
Many lessors, however, are saying they would rather park their planes in the desert than accept the "haircuts" being proposed by United, the experts say.
"It's a high-stakes poker game, and it is not clear who is in the driver's seat right now," said one industry expert.
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MORE TO COME
Meanwhile, you can peruse more bankruptcy buzzard poop by flying to....
A Connecticut Yankee in King Kamehameha’s Court
The Bankruptcy Buzzards
The Strange Saga of BCCI
Buzzards of Paradise
Conseco: Birds in the Trailer Park
The Boyd Group
Dirty Gold in Goldman Sachs
The Story of Enron
The Great Nest Egg Robberies
Pan Am Airlines
Predators in Paradise
The Puna Connection
And, for Sidney Skolnick’s excellent series entitled
The Bankruptcy Bordello, see...
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Last Update September 29, 2007, by The Catbird