Well, it’s like when someone “flips” a house. You know what that is — when someone buys a home that’s in disrepair, fixes it up, cuts corners to make upgrades and then sells it for a profit. This is what has happened in communities across the country as working people defaulted on their home loans due to the mortgage crisis. In the case of Hostess, they’re doing this for a huge profit and it’s a crime.
Well, not really, unless a savvy lawyer can fit it under a common law theory or statute.
This is how it all began:
Hostess convinced its workers to accept major contract concessions to keep the company afloat. To understand how severe this was, consider the report of one employee who said his annual wages decreased more than 30 percent.
In July 2011, Hostess sent its workers a letter saying that it was going to “borrow” the wages from employees to pay into the pension fund until the company was profitable again. They promised to pay it all back.
But, a year later, with unfunded pension liabilities of $2 billion, the company filed for bankruptcy. The judge in the bankruptcy case ruled that the pension money Hostess took was a debt the bakery couldn’t repay.
That’s what lawyers call “betrayal without remedy,” which loosely translated means “you’re screwed and there’s nothing you can do about it” — a tune working Americans have heard way too often.
The judge also approved a new, guaranteed base annual salary for its CEO of $1.5 million, plus cash incentives and “long-term incentive” compensation of up to $2 million. If Hostess liquidated or the CEO was fired without cause, he’d still get a “golden parachute” (severance pay) of $1.95 million.
Hostess also received approval from the judge to impose a contract on its workers. Under the imposed contract the wages of the worker mentioned above would take another 30 percent cut over five years. This time the employees had had enough and went on strike.
In response, Hostess shut down its 13 plants and began liquidating its assets, putting its employees out of work. Amazingly, Hostess continued to suck money out of the pension fund for “operations” which allowed them to give $1.75 million in bonuses to 19 executives.
Having dispatched its employees and plundered their retirement plans, Hostess management sold the company in 2013, to investors Apollo Global Management and C. Dean Metropoulos who brought it out of bankruptcy for $410 million.
So, that’s the story, folks. Think about that before you buy another hostess cupcake or twinkie.