The Pension Benefit Guaranty Corp. has filed a lawsuit seeking $97 million from the Renco Group, which it claims deliberately dumped a portion of its ownership stake in RG Steel to avoid meeting the pension obligations of about 1,350 workers.
The majority of those pensions belong to former workers at the RG Steel plant in Warren, which was shuttered over the summer after the company filed for bankruptcy protection in May, said Darryl Parker, president of United Steelworkers Local 1375.
In December, laid-off workers learned their pensions would be reduced or cut in half when the government-run PBGC assumed the plan as it typically does for insured companies that declare bankruptcy.
The lawsuit now is seeking more than $87 million in unfunded liabilities, about $5 million in unpaid minimum-funding contributions and $5 million in termination premiums required when a company stops paying its own pension and turns to the federal agency.
“There was $70 million in underfunded pension liabilities at the Warren facility,” Parker said. “If the lawsuit is successful, it’s my understanding that Renco Group would have to assume the plan again. They would be responsible for funding it up to the current level where it’s supposed to be.”
Renco formed RG Steel in 2011 when it acquired the former Wheeling- Pittsburgh Steel Corp. assets from OAO Severstal.
In a January 2012 transaction, Renco, a holding company with investments across multiple industries, dumped 24.5 percent of its stock in RG to the investment firm Cerberus Capital Management, effectively reducing its equity stake and bringing it below 80 percent, which released it of any pension obligations.
When a U.S. Bankruptcy Court in Delaware was considering a motion to approve the pension-plan termination, the USW strongly encouraged the PBGC to pursue claims against Renco and others relating to the transaction.
In its filing, the PBGC claims Renco pursued the stock deal even after it “gave assurances that no transaction changing its ownership status was imminent.” Just months later, the company declared bankruptcy and began liquidating its assets, including the Warren plant, which since has been purchased by C.J. Betters Enterprises for $17 million.
All the while, rumors over whether C.J. Betters will scrap the plant rather than reopen it have run rampant, especially since an equipment auction was announced for March to sell the bulk of machinery and other instruments at the factory.
Since the purchase, the plant has been winterized at a cost of nearly $1 million, but it has sat idle for more than six months while its owners search for a new operator.
“Well, this is great news,” Parker said. “All of our workers are affected in some form by this pension plan — even the younger guys. We have employees that are 51 years old with 30 years at the plant; their pensions were cut in half or reduced because of this underfunded pension plan that Renco failed on.”
Older workers with supplemental plans, which the government does not recognize, have been hit harder, Parker said.
About 1,000 former RG workers still are without employment, he added.
The USW International plans to file a separate lawsuit against Renco soon.
Renco has defended itself in numerous news media reports, saying the facts of the PBGC’s claims are baseless.