[Congressional Record Volume 148, Number 22 (Tuesday, March 5, 2002)]
[Extensions of Remarks]
[Pages E255-E256]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




ON THE INTRODUCTION OF THE ``INSIDER STOCK SALES EMPLOYEE NOTIFICATION 
                                 ACT''

                                 ______
                                 

                           HON. GEORGE MILLER

                             of california

                    in the house of representatives

                         Tuesday, March 5, 2002

  Mr. GEORGE MILLER of California. Mr. Speaker, I rise for the purpose 
of introducing the ``Insider Stock Sales Employee Notification Act,'' a 
measure that will require company executives who sell stock to 
immediately notify the company pension plan officials. The bill would 
allow all employees to be given early warning in cases where executives 
begin dumping company stock.
  Unfortunately, the Enron and Global Crossing scandals have shown us 
that employee retirement savings are vulnerable to misconduct and abuse 
by company officials. In the past few months we have learned that Enron 
and Global Crossing executives sold millions of dollars worth of 
company stock while encouraging employees to keep company stock in 
their retirement accounts, and prohibiting some employees from selling 
their company matched 401(k) shares.
  Employer-sponsor investment rules are rigged against employees. 
Companies often have one set of rules for executives--which permit 
windfall profits from sales of stock without restriction--and another 
for rank-and file employees, whose freedom to rescue their savings by 
selling company matched stock is often restricted by employers.
  Last week, the Wall Street Journal published two shocking stories 
that further document the inequities that employees endure when 
companies confront huge losses: loyal employees see their 401(k)'s 
evaporate while executives continue to pocket vast fortunes. As the 
Journal reported:
  ``. . . [T]op executives at many companies, including Enron, Lucent, 
Global Crossing, Kmart and WorldCom have seemed intent on preserving 
their lush compensation even as their companies flounder and their 
employees lost jobs, severance, medical benefits and retirement 
savings.''

[[Page E256]]

  Also, last week the Los Angeles Times reported that ``Global Crossing 
workers lost about $250 million between 1999 and 2001 when the value of 
the company stock in ``their 401(k) accounts tumbled,'' and that while 
the company ``cut off severance pay to thousands of laid-off workers 
when it filed for bankruptcy  . in the preceding months [it] forgave 
loans and made $15 million in lump-sum pension payments to certain 
executives.''
  I am inserting complete copies of these articles in the Record today.
  Pension reform must provide equity to employees. Employees have a 
right to know when their executives are dumping company stock. They 
should then be able to make an informed decision as to whether they 
want to sell any of their own company stock in their retirement 
accounts. They should be able to receive accurate financial information 
about their company. They should have a right to have equal 
representation on the pension administrative committee. They should 
have the right to sell company-matched stock after only one year. And 
they should certainly be assured that when company officials breach 
their trust, the will be held fully accountable for their actions.
  I urge the members to joint me in sponsoring this new measure, and 
the Employee Pension Freedom Act (H.R. 3657) that I introduced earlier 
this year.

                   [From the LA Times, Feb. 27, 2002]

                 Ex-Employees Questioned on 401(k) Plan

                        (By Liz Pulliam Weston)

       The Labor Department is questioning former Global Crossing 
     Ltd., workers about the bankrupt company's 401(k) retirement 
     plan, apparently to determine if any pension laws were 
     broken.
       Former Global Crossing employees said this week they have 
     been contacted by Labor Department investigators, who asked 
     for copies of documents distributed to workers describing the 
     company's 401(k) plan and its features.
       The investigators ``said that they were opening an 
     investigation into Global Crossing's 401(k) program and 
     [were] very interested in any additional information that 
     they could glean from any present or former employee,'' said 
     one former employee, who asked not to be identified.
       Global Crossing workers lost about $250 million between 
     1999 and 2001 when the value of the company stock in their 
     401(k) accounts tumbled from a peak of $64 to 30 cents before 
     the company filed the fifth-largest bankruptcy in U.S. 
     history Jan. 28.
       A Global Crossing spokeswoman said the company had been 
     contacted by Labor Department investigators and was 
     cooperating.
       ``Our [attorneys] will work to provide all necessary 
     information and answer any questions [investigators] may 
     have,'' said spokeswoman Janis Burenga.
       The Labor Department routinely examines the retirement 
     plans of companies that have filed for bankruptcy to make 
     sure employees' retirement money is safe and being properly 
     distributed as companies reorganize, said department 
     spokeswoman Gloria Della. Della would neither confirm nor 
     deny that such an investigation was taking place at Global 
     Crossing.
       The telecom giant, which is based in Bermuda and has 
     executive offices in Beverly Hills, is under investigation by 
     the Securities and Exchange Commission and the FBI for its 
     accounting methods. In addition, members of Congress have 
     demanded investigations into the company's retirement plans, 
     and employees have sued over losses in their 401(k) accounts.
       Global Crossing employees said labor investigators also 
     questioned them about the company's severance packages. 
     Global Crossing cut off severance pay to thousands of laid-
     off workers when it filed for bankruptcy, but in the 
     preceding months forgave loans and made $15 million in lump-
     sum pension payments to certain executives.
       Regulators simply may be making sure employee contributions 
     were deposited into the 401(k) plan, said Los Angeles pension 
     lawyer Alex Brucker. Troubled companies sometimes illegally 
     use 401(k) contributions to pay bills, although such behavior 
     is far more common at small, private companies than at large, 
     publicly traded firms, pension lawyers said.
       Global Crossing spokeswoman Tisha Kresier said all employee 
     contributions have been properly deposited in the plan.
       Labor investigators also may be probing whether employees 
     were advised of the risks of investing in company stock, 
     which at one point made up more than half the 401(k) plan's 
     assets, pension experts said.
       Rep. George Miller (D-Martinez) asked the Labor Department 
     last week to determine whether any of the trustees of Global 
     Crossing's savings plan were aware of the company's financial 
     problems and what steps the trustees took, if any, to protect 
     employees.
       Miller also plans to introduce a bill today that would 
     require executives who sell company stock to alert company 
     employees and pension officials within 24 hours.
       Rep. Louise McIntosh Slaughter (D-N.Y.) has requested a 
     congressional inquiry into Global Crossing's decision to 
     freeze workers' 401(k) accounts for a month before the 
     bankruptcy.
       This legal but controversial practice, known as a lockdown, 
     was used by both Global Crossing and bankrupt energy trader 
     Enron Corp. when the companies switched plan administrators.
       Several lawmakers have introduced bills that would limit 
     how long lockdowns can last.
       Global Crossing's stock already had lost 99% of its value 
     by the time its lockdown began Dec. 14. Global Crossing's 
     401(k) plan was typical for a large firm, offering a range of 
     investment options including stock and bond mutual funds as 
     well as company stock.
       Both firms matched their employees' contributions only with 
     shares of company stock, however, and placed restrictions on 
     workers' ability to sell those shares. Consumer and pension 
     rights advocates say such restrictions--also not uncommon 
     among employers--prevented many employees from diversifying 
     their accounts.
       In December, Global Crossing lifted restrictions on 
     employees' ability to sell company shares in their 401(k)--
     long after most of the shares' value had disappeared. Even 
     then, many employees did not sell their shares, saying they 
     were told by executives that the stock price would recover.

     

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