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Former NFL quarterback Michael Vick faces a federal lawsuit from the Department of Labor claiming he made prohibited transfers from a defined-benefit plan sponsored by one of his companies, according to a DOL news release.

The DOL also filed a complaint in U.S. Bankruptcy Court seeking to block Vick from discharging the alleged debt to the retirement plan of MV7, a celebrity marketing firm that Vick owned, the news release said.

Vick is serving a federal prison sentence for dogfighting and filed for Chapter 11 bankruptcy protection last year.

The lawsuit, filed in U.S. District Court in Newport News, Virginia, alleges that Vick violated his ERISA duties as trustee to the MV7 plan by making a series of prohibited transfers that resulted in $1.35 million in withdrawals from the plan from March 7, 2007, through July 7, 2008, the news release said.

“The plan assets were partially used to help pay the criminal restitution imposed upon [Mr.] Vick after his conviction for unlawful dogfighting as well as his attorney in the bankruptcy cases,” the news release said.

MV7 sponsored a plan for nine current and former employees as of October 2008, the news release said. The asset size of the plan could not immediately be learned.

“This action sends a message that the Labor Department will not tolerate the misuse of plan money and will take whatever steps necessary to recover the assets owed to eligible workers,” Labor Secretary Hilda L. Solis said in the release.

Filed by Doug Halonen of Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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A banker has sued Citizens Republic Bancorp, saying he was fired for questioning a $7.5 million bonus for the company’s chief executive on the eve of a federal bailout payment.

John D. Schwab filed a lawsuit Tuesday, March 24, in Genesee County Circuit Court in Flint, Michigan.

Schwab says then-chief executive William R. Hartman fired him as executive vice president in January after Schwab opposed a four-year contract for Hartman with a $7.5 million bonus.

The suit says Hartman sought the deal in anticipation of the Michigan bank getting $300 million in federal aid.

Bank spokesman Brian J. Smith says the Flint-based bank follows all federal executive pay guidelines and has “strong policies and practices to protect” its employees.

Filed by Investment News, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Rep. Rob Andrews, D-New Jersey, said Tuesday, March 24, that any pension reform legislation considered by the House Education and Labor Committee will include new guidelines for offering investment advice to defined-contribution plan participants.

A controversial investment advice regulation by Department of Labor issued the last day of the Bush administration on January 20 has been put on hold by the DOL because of concerns that it would clear the way for investment advisors to steer participant investments to their own funds.

“My own view is that independent investment advice—qualified independent investment advice—is the way to go,” Andrews, chairman of the House Health, Employment, Labor and Pensions Subcommittee, said during a hearing Tuesday, March 24.

“I’m certain that any legislation that the full [House Education and Labor] committee takes up will touch on this area,” Andrews said.

Concurring with Andrews’ assessment of the Bush administration’s investment advice rule during the subcommittee hearing was Mercer Bullard, an associate professor at the University of Mississippi Law School and president and founder of the advocacy group Fund Democracy Inc.

“The [Bush administration rule] will have the effect of suppressing the providing of independent advice to participants while encouraging participants to rely on advisors whose incentives are to maximize their own compensation at the expense of participants,” said Bullard in the text of his testimony.

But Melanie Nussdorf, a partner with the law firm Steptoe & Johnson, who was testifying on behalf of the Securities Industry and Financial Markets Association, said the Bush administration advice rules, if allowed to go into effect, would clear the way for participants to get access to “advice providers who offer advice on a wide variety of investments—in person or on the phone—in a cost-effective manner.”

“Current advice programs do not reach enough workers in ways that are comfortable for those workers to make professional advice the norm rather than the exception,” Nussdorf said.

Filed by Doug Halonen of Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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The American Medical Association and four other medical groups filed suit Wednesday, March 26, against WellPoint, accusing the Indianapolis-based health insurer of underpaying providers for out-of-network services.

The lawsuit, filed in federal court in Los Angeles, where several of the co-plaintiffs are based, follows similar actions last month by the AMA against Aetna and Cigna.

All three AMA suits allege that the insurers conspired with Ingenix, a unit of UnitedHealth Group, to set artificially low reimbursement rates for out-of-network care.

A yearlong investigation by the New York attorney general into insurers’ use of the Ingenix database resulted in January and February settlements in which several insurers agreed to cease using the Ingenix database and to contribute to the cost of developing a replacement database operated by an independent third party.

Despite the agreements, the Chicago-based AMA filed suit to recoup payments that should have been made to doctors while the Ingenix database was still in use, AMA president Dr. Nancy Nielsen said in a statement.

“Now that the underlying scheme has been exposed, health insurers are doing the right thing by cutting their ties with the flawed Ingenix database. However, serious damages resulting from prior use of the Ingenix database still need to be addressed,” Nielsen said.

Other plaintiffs in the litigation are the California Medical Association, the Connecticut State Medical Society, the Medical Association of Georgia and the North Carolina Medical Society.

In response to the suit, WellPoint said in a statement that it “is committed to providing appropriate reimbursement for out-of-network services. We are in the process of reviewing the complaint and are unable to comment further at this time.”

The lawsuits are available at the AMA’s Web site at www.ama-assn.org/ama/pub/physician-resources/legal-topics/litigation-center.shtml.

Filed by Joanne Wojcik of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

General Motors began notifying U.S. salaried workers that they will lose their jobs as it carries out previously announced plans to reduce its global white-collar workforce by 10,000.

The automaker intends to cut 160 U.S. positions this week and 3,400 by May 1, spokesman Tom Wilkinson said. Most of those now being notified are engineers and engineering support staff at the Technical Center in the Detroit suburb of Warren, Michigan.

The moves reflect GM’s efforts to shrink further in the wake of declining sales and a global economic crisis. The automaker also is showing the federal government that it is taking steps to remain viable in hopes of winning $16.6 billion in U.S. loans in addition to the $13.4 billion borrowed already.

“We need to right-size the business to make it viable, and we need to get smaller and leaner to do that,” Wilkinson said.

In early February, GM announced plans to eliminate the 10,000 salaried positions and said about a third of those jobs were in the U.S.

“A significant number of those would come through involuntary separations; some would be through normal attrition,” Wilkinson said.

He said GM offers up to six months of base salary plus a company contribution for insurance after the termination. GM also provides outplacement services.

GM also plans to cut 18,000 hourly jobs in the U.S. by year’s end.

Globally, GM employed 243,000 salaried and hourly workers at the end of 2008, Wilkinson said. GM plans to cut about 47,000 salaried and hourly jobs worldwide this year.

Filed by Jamie LaReau of Automotive News, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

The rarest sight in corporate America might be a chief executive at a profitable company who, in recognition of tough times, takes a pay cut.

Amid extraordinary public outrage about executive bonuses at American International Group Inc., New York, and other bailed-out financial companies, a handful of CEOs accepted reduced compensation last year in spite of strong corporate performance.

In most cases, they work at firms that were until recently private partnerships or that still have the founder’s relatives on the board. Such ties deter CEOs from indulging their greedier instincts.

“When it comes to pay, there are leaders in the business world with a sense of ethics and doing the right thing,” said Vineeta Anand, chief research analyst at the AFL-CIO’s office of investment in Washington. “But it’s a pretty small group.”

Often those taking symbolic or drastically reduced pay at troubled companies still have lucrative bonus and stock packages.

Accepting a salary of $1 for 2009, Vikram Pandit of Citigroup Inc., New York, was awarded $35 million in stock last year as a “sign-on” bonus for taking the CEO role. He joined the company in 2007 after it acquired his hedge fund for $800 million.

“You’ll see people sometimes cutting their salaries in tough times, but that’s the extent of it,” said Steven Hall of compensation consultancy Steven Hall & Partners, New York. “Usually they make up the pay in other areas.”

Taking a knife to cash bonuses
The thin ranks of heroic CEOs taking pay cuts shrink further when such goodies as unvested equity grants are considered. Commonplace and often substantial, these payments are routinely excluded from total executive compensation in companies’ annual regulatory filings.

One example of CEOs taking a hit when they could have legitimately argued for better pay can be found at Greenhill & Co., New York, a boutique investment bank that was a closely held partnership until 2004.

Greenhill’s share price actually rose 8 percent last year. Earnings fell by more than half, yet the company remained solidly profitable as many Wall Street competitors turned to the federal government for a rescue, were acquired or collapsed.

Rather than demand raises for dramatically outperforming their peers, Greenhill co-CEOs Scott Bok and Simon Borrows each agreed to have their total compensation slashed to about $5.5 million from $22 million and $24 million, respectively, in 2007.

A severe drop in Greenhill’s core merger advisory business drove lower cash bonuses for the two CEOs: Bok’s fell 89 percent and Borrows’ 95 percent. To help soften the blow, Greenhill granted Bok $1.9 million worth of shares and Borrows $3.8 million worth. Greenhill didn’t return a call seeking comment.

At New York-based financial advisory firm Duff & Phelps Corp., CEO Noah Gottdiener saw his total compensation slip 4 percent last year, to $4.6 million.

In 2008, its first full year as a publicly traded company, Duff & Phelps turned profitable, with $38 million of operating income; revenue grew 9 percent, to $392 million. Its share price fell just 3 percent, vastly better than those for most financial institutions.

Gottdiener’s total compensation dropped mainly because of a 26 percent plunge in his cash bonus, to $883,000. In a regulatory filing, Duff & Phelps said it cut its executive bonus pool by $4.7 million “due to the current economic environment,” even though its financial performance exceeded targets set by the board.

But Duff & Phelps seemed eager to mitigate the current environment’s effects on Gottdiener by granting him $1.3 million worth of shares, which won’t count as pay until they vest. Duff & Phelps declined to comment.

Net income up 27 percent; pay down 7 percent
Similarly, medical device maker Becton Dickinson & Co. reduced total compensation for CEO Edward Ludwig last year by 7 percent, to $7.5 million, while net income jumped 27 percent, to $1.2 billion, and revenue increased 13 percent, to $7.2 billion.

Much of the decline in Ludwig’s compensation was related to the New Jersey-based company’s assuming a lower rate of return on his pension assets.

Like many other public companies, Becton granted its CEO a healthy amount of stock—in his case, $5 million worth last year—to offset a decline in pay. The grant isn’t officially considered part of his total compensation because it hasn’t vested.

Still, there are signs that Becton board members—including Henry Becton Jr., the son of a former CEO and grandson of a founder—are toughening their pay standards.

Citing disappointing stock performance at the start of 2009, the board said it was granting fewer shares to Ludwig and other top officers. Becton Dickinson declined to comment.

Filed by Aaron Elstein of Crain’s New York Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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The Department of Labor postponed until May 22 the implementation of the rule that allows workers to receive investment advice from employer-sponsored financial services firms under ERISA, spokeswoman Gloria Della confirmed.

The rule, adopted by the Bush administration January 20, allows greater flexibility for participants in 401(k)-type plans to receive investment advice.

That same day, the DOL extended for 60 days final implementation of this rule to comply with the incoming Obama administration’s request to review all regulations that were not yet finalized.

Della said the DOL decided on the postponement to allow time to review legal and policy issues raised by many of the 26 public comment letters received.

Filed by John D’Antona Jr. of Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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President Barack Obama has nominated New York state Labor Commissioner M. Patricia Smith to be the solicitor in the U.S. Department of Labor, tapping the woman who overhauled the New York State Labor Department the past two years for one of the top posts under new Labor Secretary Hilda Solis.

In her two years at the helm of the Labor Department, Smith zeroed in on enforcement of labor standards, working closely with union and community groups to identify wage and hour violations.

The department focused on strategic enforcement, targeting industries where violations were believed to be commonplace—including garment factories, car washes, poultry plants and restaurants—instead of investigating single complaints.

Last year, the department collected and disbursed a record $24.6 million to more than 17,000 workers. And this month, it reached an agreement with the owner of eight restaurants to fork over $2.3 million in back wages to employees who were denied overtime and minimum wage, the department’s largest ever settlement.

“She has returned the Labor Department to its core mission of enforcing the labor law by protecting all workers and ensuring that all employers in New York compete on a level playing field,” Gov. David Paterson said in a statement.

Smith’s labor roots date to her childhood, which was spent in part in a small town in coal mining country in western Pennsylvania.

“We were surrounded by working people,” she told Crain’s New York Business, a sister publication of Workforce Management. last year. “The United Mineworkers was a very active union, and you would hear about the union, about the strikes.”

After graduating from New York University School of Law, she worked for various legal services organizations. Before her appointment at the state Labor Department, she worked for 20 years in the labor bureau at the New York state Attorney General’s Office, including an eight-year stint as the bureau chief.

Her appointment in Washington requires Senate approval. A spokeswoman for the governor said there is no timeline to name a replacement but that a search would begin soon.

Filed by Daniel Massey of Crain’s New York Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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More employees are depending on company benefits to weather the recession, and employers are keeping an eye on costs even while they see benefits as a retention tool, according to a new survey by MetLife.

The study shows that 41 percent of employees polled in November “consider workplace benefits to be the foundation of their personal safety net as they awaken to current realities about their financial security,” up from 33 percent in August. That number rises to 52 percent for workers in a company that employs 2,500 people or more.

The cratering economy has caused 46 percent of employees interviewed to take a greater interest in understanding their benefits. In addition, 51 percent report that they obtain most of their financial products through their employer.

The attention to benefits is understandable in light of the fact that 50 percent indicated that they have only enough savings to miss two paychecks.

Even as layoffs increase sharply during the economic downturn, 50 percent of employers cite retention as their main objective in offering benefits. It just edges out controlling costs, which was cited by 49 percent.

“It truly is a balancing act you’ve got going on here,” said Bill Raczko, MetLife vice president and chief marketing officer for institutional business. He spoke at a conference Monday, March 23, in Washington where he released MetLife’s seventh study of employee benefits trends.

One of the biggest providers of insurance and benefits, MetLife conducted interviews of more than 1,500 company officials and more than 1,300 full-time employees in August and November.

The study shows that benefits strengthen the bond between companies and workers. Employees cited pay, health care, retirement and all other insurance benefits as the top factors influencing loyalty. Companies think that pay, health care, company culture and advancement opportunities are the most influential.

As they increasingly value their benefits during the recession, 33 percent of workers expressed concern that companies would cut benefits over the next 12 months. But only 12 percent of employers are mulling reductions.

Boosting productivity is the primary objective in offering benefits for 40 percent of companies. For instance, the number of companies adopting wellness programs has grown from 27 percent in 2005 to 33 percent in 2008.

Of course, for employees to feel good about company benefits, they have to know about them. Raczko said employers need to communicate better, especially because employees are depending on them for financial guidance.

“Taking the time to have that dialogue is something that employees respond very positively to,” he said.

That is especially true for Generation Y workers, who are experiencing their first recession and have a proclivity for seeking and absorbing information from a variety of sources.

“They are almost like sponges,” Raczko said.

The twentysomethings also are in the vanguard of a trend toward accumulating retirement income through annuities—a goal of people across age groups who will be left with what Raczko calls “financial and emotional scars” from the precipitous drop in the stock market.

“Volatility is the issue here,” he said. “Guaranteed income that lasts a participant’s lifetime is increasingly being seen as the critical missing element of defined-contribution plans.”

—Mark Schoeff Jr.

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