In January 1975, Westran sent PBGC a notice leading us to understand that the Westran Corporation Pension Plan ("Plan") intended to transfer all its assets to the Molders and Allied Workers Union-Industry National Pension Fund ("Fund"), a nationwide multiemployer fund, which would then cover the present and retired bargaining unit employees previously covered by Westran's own plan. Subsequently, we learned that Westran had decided to devote all plan assets to the purchase of annuities exclusively for retired participants. In violation of Section 4044, active employees with vested rights would have received nothing upon termination of the Plan.

The Act contemplates that a receiver or trustee will be appointed upon a termination if PBGC is unable to determine that the assets of a terminating plan are sufficient to pay guaranteed benefits. See Act, Sections 4004 (d), 4041 (c), 4042 (d) (1) (A) and (B). Upon the termination of Westran's plan, we estimated its assets would be about $1,000,000 less than the present value of guaranteed benefits. We, of course, would have to make up that difference and Westran would be liable to us for that amount. See Act, Sections 4022, 4062. Westran's decision to terminate its plan thus made the appointment of a statutory receiver or trustee inevitable. The question was not whether, but when.

Westran's plan to allocate all plan assets exclusively to the purchase of annuities for retired participants, leaving nothing for other participants with vested rights, would have been a violation of the Act. See Section 4044.2 Accordingly, on March 5, 1975, Mr. Ray Collins, the Case Officer assigned to this matter, advised Westran's Plan Administrator and Vice President, Mr. David Walborn, that if the Company persisted in its intent to allocate all plan assets to retirees, Mr. Collins would have to recommend that PBGC prevent that transaction by promptly appointing a receiver or trustee. (Attachment A to this letter.) Mr. Walborn agreed to reconsider the annuity purchase and not to consummate it without giving PGBC advance notice. (Ibid.; Compare p. 657 (Walborn testimony that PBGC appointed receiver without prior "inkling").) In a letter dated March 7, 1975, Mr. Walborn advised Mr. Collins that the Company intended to make the annuity purchase on April 1, 1975 (Attachment B to this letter). Under the circumstances, we knew we had to act promptly. After we decided to appoint a receiver (rather than a trustee), but several days before we actually did so, Mr. Collins told Mr. Walborn of our decision. Just before the appointing documents were signed, Mr. Collins again spoke on the telephone to Mr. Walborn (who was then in New Orleans) and told him that the documents would be mailed shortly (Attachment C to this letter). Thereafter, on March 26, 1975, PBGC appointed the receiver.

While Westran's insistence upon disregarding the Act's asset allocation provisions forced us immediately to appoint a receiver, it did not alter our basic perception which was that the termination Westran planned might have to be restructured in order to enable the Company to avoid becoming liable to us while carrying out its underlying purpose-making active employees participants in the Fund and ceasing to contribute to Westran's plan. Indeed, before we appointed the receiver (after consultation with a Michigan law professor, the Chairman of the Michigan Employee Relations Board and attorneys in the Labor Department's Field Offices), we made sure that he would be sympathetic to the need to restructure the situation, if that proved feasible. He indicated he would be. We were pleased by his assurances of flexibility. Indeed, we hoped that a local receiver would be more accessible to Westran and the Union than we could be in Washington and thus might make it easier for the parties to recast the transaction so as to avoid a termination. In addition, we felt the receiver and the court might have somewhat greater flexibility than we in bringing the matter to a prompt final resolution that would protect the rights of all the participants, and fit within the four corners of the new law.

In order to assist the parties (as we have others with similar problems) to achieve their underlying purpose, we invited representatives of the Company, of the Union, and of the Fund, as well as the receiver, who, unlike PBGC, had then and has now the sole legal power to act for the plan, to attend a meeting at our office on April 10, 1975. All those invited, including the responsible officials

2 Westran concedes that its intended course was unlawful, characterizing our position as being hung up on a technicality, and perhaps justifiably" (pp. 659, 660).

3 The receiver was recommended to us on the basis of his impeccable reputation and his experience in the local court as a trustee in bankruptcy. The receiver has since advised us, contrary to the Company's representation to this Committee (p. 658), that he has never been the receiver of a bankrupt plan.

4 See Sections 4004, 4042(d) (1) (A) and (B) of the Act.

of the Union which represents Westran's employees, came (see Attachment C to this letter).

I was extremely proud of the manner in which members of my staff conducted themselves at that meeting. With great patience and clarity, they explained the statutory consequences of the termination the Company had initiated and proposed and explored a series of imaginative alternatives to termination and to the court proceeding to confirm the receiver's appointment which the statute contemplates. I was amazed when the Company responded to this effort with & heated attack on the new law and all we had done to date to implement it, announced its intention not to cover its employees under the Molders and Allied Workers Union Pension Fund (as Westran and the Union had agreed), and stormed out of the meeting, when the discussion had barely gotten under way, for the announced purpose of enabling Company representatives to catch the earlier of two flights back to Muskegon.

.

Under the Act, a receiver's appointment lapses unless "within a reasonable time, not exceeding 20 days after the appointment of a receiver . . the corporation [i.e., PBGC] shall apply to an appropriate United States district court for a decree approving such appointment." Act, Section 4004 (b) (1). The twentyday period in this case expired on April 15, 1975. Accordingly, after the April 10 meeting, our attorneys began preparing the papers initiating the confirmation proceeding and, on Friday, April 11, contacted the Federal District Court in Grand Rapids, Michigan, to arrange to file those documents and set a date to hear our request for confirmation. Late that afternoon, we were advised that the Federal District Judge would meet with our counsel on the following Monday morning, April 14, to set the hearing date.

That morning, at virtually the same moment our attorney was calling Company counsel to advise him of the meeting to schedule the hearing, Western President Seyferth called and told me Westran had decided to withdraw its Notice of Termination. Accordingly, he asked that we not file the confirmation papers. Since calling off the meeting between the court and our attorney would automatically terminate the receivership, I decided to maintain the status quo by having the papers filed and a hearing date set, as planned. We felt that we ought not terminate the receivership until we had received written assurance that the Company had decided to reinstate the plan by resuming contributions and benefit accruals, and learned the position of the Union which represents the plan's participants. We felt that this orderly procedure was required to discharge our responsibilities to participants in this case, as in any case when a plan sponsor decides to restore a plan after filing a notice of intent to terminate. We anticipated all this would be done before the Court hearing, then scheduled for May 30. Accordingly, we notified Westran that we would treat its purported "withdrawal" of the termination as a request and take it under advisement (Attachment D to this letter). We then asked the Union for a statement of its position.

This is where matters stood when the Company leveled its charges of capricious, bureaucratic conduct. We regret those charges, since, even though utterly without basis, they tend to divert energies from the solution of the underlying problem. Thus, I note that Mr. Seyferth has been angered by our appointment of a receiver (p. 658), and that he has fought in the past to redress "the hurt inflicted by the bureaucrats and won," and intends to do so now (p. 660).

Despite these comments and others in similar vein which the Company has cavalierly strewn about-we continued to seek Westran's cooperation in an orderly closing of the case. After the hearing before this Committee, the Union informally advised us that it agreed that the plan should be reinstated pending further negotiations. Before we received written confirmation of the Union's position, we called Westran's attorney in order to arrange to terminate the receivership. After some discussion, he orally advised us that the plan would retroactively resume benefit accruals and that Westran intended to make contributions with respect to the period since its proposed termination date. With the receiver's concurrence, we began negotiating with Westran over the text of a proposed court order to terminate the pending confirmation proceeding and restore the plan. Unfortunately, these negotiations have broken down because

5 Some time after the hearing before this Committee, Westran's counsel told us the Company had no intention of reinstating benefit accruals or making contributions, despite its attempt unilaterally to withdraw its Notice of Termination. After a member of my staff explained at great length that a reinstatement of the plan necessarily implied a resumption of benefit accruals and contributions, company counsel contacted his client and advised that Westran had intended "all along" to restore accruals and contributions.

Westran refused to agree that the initial appointment of the receiver should be confirmed or, alternatively, to release PBGC from any claims arising out of this matter. Accordingly, we will have to ask the Court to confirm the receiver's appointment and to discharge him. Once an appropriate order to that effect has been issued, it will return legal power over the plan to the administrator and end the proceeding before this Corporation.

In looking back over the history of this matter, I am satisfied that my staff has acted not out of bureaucratic caprice, but out of an altogether appropriate concern for our statutory responsibilities and with due regard for the wishes and interests of the parties. There simply is no merit, as the documented facts show, in the Company's baseless assertion that we capriciously imposed a receivership without prior notice, or that we have prevented the Company and the Union from negotiating about an alternative means of accomplishing their objectives (p. 659). They are and were free to do that all along, and, indeed, we sought to do everything we could to help that process along. You may rest assured that we have done and intend to continue to do what we can to make it possible for Westran, the Union, and others affected by the Act to achieve their private objectives in conformity with public law.

Sincerely,

Enclosures.

ATTACHMENT A

STEVEN E. SCHANES,
Acting Executive Director.

PENSION BENEFIT GUARANTY CORP., CASE RECORD-CONTINUATION SHEET

Office of Program Operations, Division of Plan Terminations, Pension Benefit Guaranty Corp. Washington, D.C.

GENTLEMEN: In a phone conference with Mr. Ray Collins, it was requested that Westran give advance indication of the steps that would be taken with respect to winding up the affairs of the Westran Pension Plan.

With respect to retirees prior to February 1, 1975, from both the cast metals bargaining group and the transportation bargaining group who are now receiving benefits under the plan, and one transportation group hourly rated worker with a vested interest but not yet retired, the following steps are being taken:

1. The following amendment to the Hourly Pension Plan is being submitted to the Board of Directors of Westran for approval at a meeting called for March 18, 1975:

Upon approval by the Company of the proposed purchase price of certain annuities, the Company shall direct the trustee to apply the trust fund, after payment of unpaid expenses, to the purchase of a group annuity contract with individual annuity certificates for the benefit of retirees and their beneficiaries to the extent of their interests under the Plan. The trustee shall register such contract and certificates in the name of the trustee, and shall not deliver such certificates to the payees of benefits except upon further direction of the Company. Such contracts shall contain the express provision that in the event that the plan of distribution of benefits is not approved by the Pension Benefit Guaranty Corporation, such contract shall be liquidated and the purchase price of such individual annuities, less the amount of annuity payments made under such certificates and less the insurance company's expenses incident to such liquidation, shall be returned by the insurance company to the trustee, upon direction by the Company.

2. Northern Trust Company, Chicago, will continue to serve as the trustee for the pension plan, and in the manner set forth in the new amendment to the Pension Plan cited above.

3. The purchase of annuities dated April 1, 1975, is contemplated before that from The Travelers Insurance Company at a cost of approximately $700,000. Sincerely,

DAVID H. WALBORN, Vice President.

ATTACHMENT C

STATE OF MARYLAND,

County of Montgomery, ss:

AFFIDAVIT

Comes Now Ray T. Collins who deposes and says:

(1) That he resides at 902 Brompton Street, Fredericksburg, Virginia, and that he is an employee of the Pension Benefit Guaranty Corporation (hereinafter "PBGC") and was appointed Case Officer in charge of the Westran Corporation Pension Plan (hereinafter "Plan") termination case on or about January 14, 1975. (2) That he recommended that the Corporation appoint a trustee for the Plan on or about March 12, 1975.

(3) That after the determination to appoint a receiver was made, he spoke to Mr. David Walborn, a Westran Vice President, on several occasions in order to keep him apprised of PBGC's actions with respect to the appointment of a trustee or receiver.

(4) That affiant recalls advising Mr. Walborn, prior to the preparation of the documents appointing the receiver that PBGC had decided to appoint a trustee or receiver.

(5) That affiant recalls that, just prior to the signing of the appointing documents, he had a telephone conversation with Mr. Walborn, who was then in New Orleans, and apprised him that the appointing documents were about to be executed, that they would be mailed immediately thereafter, and that he, Mr. Collins, believed that they would be on Mr. Walborn's desk upon the latter's return to his office.

(6) That the list of persons who attended a meeting at the Corporation on April 10, 1975, attached as Exhibit 1 hereto, has been prepared by him based upon his personal recollection and the official files of the Corporation herein, where the names of those persons are recorded.

Further, affiant sayeth not.

RAY T. COLLINS.

Subscribed and sworn to before me this 20th day of June, 1975.

DIANE L. DEMPEWOLF,

Notary Public, State of Maryland, County of Montgomery.

My commission expires July 1, 1978.

EXHIBIT I

LIST OF PERSONS ATTENDING MEETING AT THE PENSION BENEFIT GUARANTY CORPORATION ON APRIL 10, 1975

Westran Corporation:

James Seyferth, president.

Dave Walborn, vice president.

Gary Counsellor, vice president.

Fred Culver, Jr., attorney representing Westran.

International Molders and Allied Workers Union and Molders and Allied Workers Union-Industry Pension Plan:

William Cates, Secretary of The International Union and Union Trustee of the Plan.

The International Molders and Allied Workers Union:

J. B. Brown, Business Agent and Bargaining Representative. The Molders and Allied Workers Union-Industry Pension Plan:

Mike Kaplan, Actuary for Martin Segal Co., (consulting actuaries).

ATTACHMENT D

[MAILGRAM]

PENSION BENEFIT GUARANTY CORPORATION,
OFFICE OF GENERAL COUNSEL,

Re. Case File 110-727.
Mr. DAVID H. WALBORN,
Secretary, Westran Corp.,
Muskegon, Mich.

Mr. FRED CULVER, Esq.,
Heckley Union Bank Building,
Muskegon, Mich.

April 17, 1975.

This will acknowledge receipt of your mailgram of April 14, 1975, received by us on April 15, 1975 wherein we were notified that you are withdrawing your notice of termination of Westran Corporation Pension Plan. Unilateral withdrawal of notice of termination may not be made. However, your mailgram is being treated as a request to withdraw your notice of termination and is under consideration by this Corporation. You will be contacted in the event further submissions are required.

Sincerely,

STEVEN E. SCHANES,
Acting Executive Director.

Mr. DENT. The next witness is David H. Walborn, with the Westran Corp.

We are going out of order because it identifies directly with the testimony we have just had. I am going to try to ask the witnesses to stay as close to 15 minutes as possible in order that we get all the witnesses in. We have another group of witnesses tomorrow and quite a number of witnesses all over the country who still want to attend and we believe that this is a matter of some urgency and we are trying to finish it up.

STATEMENT OF DAVID H. WALBORN, SECRETARY OF

WESTRAN CORP.

Mr. WALBORN. I am secretary of Westran Corp. in Muskegon, Mich., and I am the administrator of the Westran Corp. pension plan.