- (PHOTO:Facebook/Bimbo Bakery)
Hostess pensions funds were redirected and put towards other company operations as the business fell towards bankruptcy, it has been revealed. Hostess Brands Inc. executives allegedly were supposed to apply designated funds towards employee pensions, but injected the money into the company instead.
It is unclear how much money is missing from the pension plans or how many employees are affected, according to Yahoo Finance, which has reported that in August 2011 the company said it would stop making pension contributions altogether.
Hostess shut down just last month following a strike by one of the unions representing employees working at the company.
Hostess's chief executive officer, Gregory Rayburn, has said in an interview that he thought it was "terrible" that employee money meant to go towards their pensions were not used for their intended purpose.
He has said, "I think it's like a lot of things in this case. It's not a good situation to have."
Rayburn was not made Chief Executive until March of this year, and only learned about the discrepancy just before the company closed down for good. He has defended himself saying that the decision to redirect the funds away from employee pensions had nothing to do with him and was made before he came on board in his current role.
He said, "Whatever the circumstances were, whatever those decisions were, I wasn't there."
Experts have said that the move by executives at Hostess probably have not broken any federal laws as the money used did not come directly from employees.
James P. Baker, a partner at Baker & McKenzie LLP has said, "It's what lawyers call betrayal without remedy. It's sad, but that stuff does happen, unfortunately," according to Yahoo Finance.
Jeffrey Freund of Bredhoff & Kaiser PLLC, a lawyer for the union, has also claimed that in the five months before January's bankruptcy filing by Hostess, the company missed payments to the main baker pension fund totaling $22.1 million.
In the fiscal year ended May 2011, Hostess had a net loss of $341 million on its overall sales of $2.5 billion.