Lucent Retirees Ask SEC for Help

NEW YORK -- Looking to the investigative and enforcement powers of the Securities and Exchange Commission, the Lucent Retirees Organization has requested the agency include Lucent Technologies in its examination of financial transactions of corporate pension plans.

"The SEC is the only authority capable of unraveling the mystery of what has happened to Lucent's pension plan and to issue corrections for needed change," said Ken Raschke, LRO president. “Lucent has rejected our repeated requests to gain an independent audit of the pension trusts. PricewaterhouseCoopers, the firm that audits both Lucent’s corporate books and the pension trusts, has declined to provide answers. And, the Employee Benefits Security Administration, the federal agency with ERISA enforcement authority, has been non-responsive to our pleas for assistance.”

Raschke said 235,000 Lucent retirees and their dependents rely on the pension assets for their future financial security.

In a letter to SEC Enforcement Division Director Stephen Cutler, Raschke stated that the LRO is concerned whether Lucent has properly exercised its fiduciary obligations in regard to the pension plan. “I want to request that you or a member of your staff meet with leaders of the LRO in the immediate future so that we can share our concerns with you,” Raschke wrote in the October 19 letter.

“Lucent could be a ‘poster child’ for the SEC’s inquiry,” Raschke said. “As you know, Lucent agreed to settle a case with the SEC by paying a $25 million penalty for its ‘lack of cooperation’,” Raschke wrote. “The LRO has experienced a similar lack of cooperation from Lucent as we have endeavored to gain information about the management of the pension trust funds.”

Raschke’s letter outlined some of the concerns that the LRO is prepared to discuss with the SEC in detail. The letter cited information from a newly published book, Optical Illusions, Lucent And The Crash Of Telecom, as the latest basis for Lucent retirees’ concerns. The book documents “two manipulations Lucent made to its pension fund.”

In the letter, Raschke raised questions about Lucent’s loss of $9.3 billion of pension fund assets in 2001 and 2002, a deficit three times larger than comparable pension funds, such as Verizon. The LRO, the letter noted, has expressed its concerns to Lucent that these losses were related to unanswered asset transfers and excessive investments in Private Equity Ventures, overseen by the Finance and Audit Committee of the Lucent Board.

“The SEC found in the Enron case that auditors had a conflict of interest because they also provided consulting services,” Raschke noted. “At Lucent, the actuaries also have provided consulting services. Therefore, a critical element of the pension stewardship is not truly arms length.”

At Lucent, the named fiduciaries of the pension funds are Lucent executives whose compensation, including bonuses, depend on corporate earnings, which in turn benefit from reduced, or no, payments to the pension trusts.

“Lucent has never contributed a penny to the pension trusts transferred from AT&T when the company was created in 1996,” Raschke said. “Yet, according to a report in The Wall Street Journal, $929 million has been added to Lucent's bottom line over its eight-year history as a result of pension and benefit plans accounting rules.”

In closing the letter, Raschke wrote he believes the SEC shares the LRO’s goal to have “Trustworthy Trusts” that serve the interest of employees, retirees, shareholders and the taxpaying public.