Halliburton Employees Get Dick-ed

Sweet Dick-ed, that is, as is Cheney'd.  Can the rest of America be far 
behind on his hit list?

 From the NYTimes


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September 10, 2002

Shriveling of Pensions After Halliburton Deal
By MARY WILLIAMS WALSH

In June, puzzling letters began appearing in the mailboxes of hundreds 
of employees of the Dresser-Rand Company, saying that they had become 
eligible for retirement benefits even though they were still working.

To request their money, they were told to call the Halliburton Company, 
which acquired Dresser-Rand in 1998.

Over the summer, many of the employees had done so and concluded that 
what the letters portrayed as an early payment of benefits was actually 
a reduction, brought on by the Halliburton merger and a spinoff less 
than two years later. Halliburton has given the workers 90 days, which 
ends later this month, to sign up for a much smaller payment than 
promised earlier, or forfeit their right to a lump sum forever.

In addition to the current employees who got those notices, some recent 
retirees received letters saying that they had been paid too much and 
should return thousands of dollars in pension money to Halliburton. 
After comparing notes, a few of the employees and retirees have 
estimated that the group is being stripped of $25 million in benefits, 
reflecting roughly $50,000 on average for about 400 people.

While Halliburton appears to be within its legal rights as the current 
sponsor of the workers' pension plan, its handling of their retirement 
benefits contrasts starkly with its treatment of Vice President Dick 
Cheney, who was chief executive of Halliburton during the acquisition 
and then the spinoff. The Dresser-Rand workers have lost their early 
retirement provision, and must now work until 65 to qualify for their 
full benefits.

When Mr. Cheney left in August 2000 to become the Republican Party's 
vice presidential candidate, Halliburton's board voted to award him 
early retirement — even though he was too young to qualify under his 
contract. That flexibility enabled him to leave with a retirement 
package, including stock and options, worth millions more than if he 
had simply resigned.

Pension experts who have looked at the Dresser-Rand case say it shows 
how the corporate impetus to acquire and divest can wreak havoc on 
workers. The Dresser-Rand employees were participants in a 
defined-benefit pension plan — the traditional kind that is virtually 
impervious to stock market downdrafts and which is insured by the 
federal government in case of corporate bankruptcy. But even with such 
bedrock protections, employees can lose pension benefits as a 
consequence of corporate mergers and spinoffs.

"It's scandalous," said Norman Stein, a pension expert and a visiting 
professor at the University of Maine law school. "It's treating the 
assets of the plan as corporate assets that can be bought or sold."

By law, defined-benefit pension assets are to be used only for the 
benefit of participating employees. The rules, though, are highly 
complex and open to interpretation. The federal agencies that enforce 
them are not eager to press too hard, lest companies decide not to 
offer pension plans.

For Dresser-Rand employees, the problem arose because Halliburton sold 
the unit 17 months after acquiring its parent, Dresser Industries. 
Halliburton booked a gain of $215 million from the sale.

Dresser-Rand makes compressors and turbines for the oil and chemical 
industries; Halliburton is an oil field equipment and services company. 
Halliburton said the unit had hurt profits in late 1999, and Mr. Cheney 
announced its sale in October of that year, saying that the deal at an 
attractive price was in the best interests of shareholders.

After the spinoff, Halliburton continued to administer the Dresser-Rand 
employees' pension plan. For pension purposes, Halliburton treated the 
workers as if they had resigned. The plan's assets and liabilities were 
merged into one of its own, smaller pension plans. Hewitt Associates, a 
big benefits consulting firm based in Lincolnshire, Ill., advised 
Halliburton on these steps.

Hewitt declined to discuss any aspect of the case, citing its policy 
not to comment on client affairs.

Halliburton responded to questions with a statement, saying that the 
Dresser-Rand employees who had turned 55 before the unit was sold would 
still receive all their pension options and benefits, as if the 
acquisition and spinoff had never happened. Officials had considered 
preserving the younger workers' benefits as well, Halliburton added, 
but decided not to, because "it would be, in effect, paying for service 
with Dresser-Rand" after the employees had begun working for the 
company that had bought the unit. The buyer was Ingersoll-Rand, an 
industrial conglomerate that has its headquarters in Woodcliff Lake, 
N.J., and is incorporated in Bermuda.

Halliburton said about 140 workers would get full benefits and about 
300 workers were affected by the change. According to Halliburton, it 
"would have been entirely up to Ingersoll-Rand" to establish a new 
pension plan for the workers under 55, matching the benefits they had 
lost as a result of the spinoff.

Paul Dickard, a spokesman for Ingersoll-Rand, disagreed. "This really 
remains a Halliburton obligation," he said. "It's very clear."

The finger-pointing between Halliburton and Ingersoll-Rand is only part 
of the employees' problems as they struggle to sort out what happened 
to the money they were repeatedly told they had coming.

Compounding the confusion, their retirement benefits actually consist 
of three different pensions, two set up years ago by Dresser-Rand's 
parent, Dresser Industries. The third was established when Dresser-Rand 
was created. Many Dresser-Rand employees have been with one entity or 
the other for more than 25 years, and have participated in all three 
plans. They have received letters and memos over the years, telling 
them that their retirement benefits would consist of money from each.

Even more vexing, Dresser Industries has ceased to exist as a result of 
the Halliburton transactions. Today there is a Dresser Inc., as well as 
Dresser-Rand, each of which has told the employees it has nothing to do 
with their pensions. The Prudential Insurance Company of America is 
also involved, having sold Dresser Industries an annuity contract to 
finacnce the obligations of the first pension plan.

Finally, the employees say that when they call a toll-free number they 
are told is for the Halliburton Benefits Center, they talk to people 
from Hewitt Associates.

Kathleen Joy-Kirkendall, a 51-year-old senior product design engineer 
who, like many of the Dresser-Rand employees, works at a unit in Olean, 
N.Y., describes just how hard it has been to get information. In 
August, she got a statement from Halliburton giving her 90 days to sign 
up for an immediate lump-sum payment of $15,021. This was less than 
half of the $31,691 that she was told in 1995 would become available 
when she turned 55.

"I started asking questions," she said. "Why am I getting this letter? 
I'm only 51. I'm not ready to retire." She wanted in particular to know 
the formula Halliburton had used to arrive at the smaller payment.

She remembered her annuity certificate and called Prudential. 
Prudential told her to call Halliburton, she says. The person at 
Halliburton told her to call Dresser Inc.

The Dresser Inc. representative took her Social Security number and 
said he would look into the matter, but never called back. So she 
called Prudential again. This time, she was instructed to call Hewitt 
and ask for someone named Jackie Schneider. She did, and was told Ms. 
Schneider no longer worked for the consulting firm.

"The conversation just stopped right there," she said. "So far, all 
dead ends."

Ms. Joy-Kirkendall and other employees produced letters dating back to 
the mid-1980's promising that their pensions, once earned, could never 
be taken away or modified. Of course, until they reached the retirement 
ages described in their letters, Dresser and Halliburton could make 
changes in their benefits.

"As with any benefit plan, Dresser retains the right to 
amend/modify/terminate the plan," a letter dated 1986 said. But "you 
will not lose your pension benefits."

Part of the employees' problem arises because these older pension 
documents — in particular, the ones that told them to expect larger 
amounts — were calculated on the assumption that they would continue 
working until they turned 55. That was the plans' official 
early-retirement age. And many of the employees have kept on working, 
often at the same desks, until they were within a few years or even 
months of turning 55.

But when Halliburton sold Dresser-Rand, it treated the employees as if 
they had resigned and gone to work for Ingersoll-Rand.

As for the retirees who were billed for an "overstated amount," 
Halliburton said in a letter to them that there was an administrative 
error uncovered in an audit. The error appears to have affected people 
who retired after the spinoff.

Haliburton and Hewitt appear to be abiding by their fiduciary duties to 
recover the money.

"The trustee is obligated to protect the existing plan participants," 
said Rebecca Miller, a managing director with RSM McGladrey, a 
business-consulting and tax-services firm owned by H&R Block. "So if 
they paid people too much, the trustee is almost obligated to say, 
`Give the plan back the money.' To the extent that the people don't 
give it back, what happens is the plan has fewer assets, and the 
employer will have to kick in the difference."

With their 90-day clock soon to run down, the Dresser-Rand employees 
are contemplating a lawsuit.

If they do sue, it will not be the first complaint filed in connection 
with Halliburton's acquisition of Dresser-Rand and Dresser Industries, 
once called the high point of Mr. Cheney's career at Halliburton.

The merger saddled Halliburton with legal claims by people who say they 
were injured by asbestos in products made by companies that became part 
of Dresser. The litigation has driven down the price of Halliburton's 
stock.

Ms. Joy-Kirkendall said that even as she and her co-workers mulled 
legal action, some have gone ahead and taken their lump sums "even if 
they were low."

"Their reasoning was that if Halliburton can do this now, Halliburton 
might think up another legal loophole to get at any money" under its 
control, she said.

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