Lee Iacocca kept Chrysler out of bankruptcy in 1979, but his supplemental pension was wiped out by the maker's 2009 trip through Chapter 11.
More than 450 Chrysler executives, among them former chairman Lee Iacocca, filed a class action lawsuit in Wayne County Circuit Court, naming Daimler AG and Cerberus as defendants, claiming they lost millions of dollars in supplemental pensions during the automaker’s bankruptcy.
Sheldon Miller, one of the lawyers representing the executives, said the former Chrysler employees, many of them well-known figures, lost their supplemental pensions during Chrysler’s 20009 bankruptcy.
A Daimler spokesman said he could not comment on the lawsuit because he had not seen any court documents.
Miller said the supplemental pensions were not transferred to the new Chrysler during the bankruptcy and, “as a result, each of the plaintiffs lost large percentages of their earned retirement pensions.” Overall, roughly $100 million was lost by the executives.
The class action lawsuit claims that Daimler failed to protect the supplemental pensions properly. “These so-called Rabbi Trusts are not protected by ERISA regulations,” Miller said, referring to the Employee Retirement Income Security Act, which sets minimum standards, among other things, for pension programs.
Daimler could have converted pensions into annuities, a step notably taken by the company for active executives, in 2005, when Chrysler was first experiencing difficulties, Miller said
At the same time, the plaintiff have charged that Cerberus, which acquired Chrysler in 2007 and surrendered the company during the federal bailout, appears to have converted the supplemental pension account or left it unprotected from creditors during the automaker’s 2009 bankruptcy.
Miller said there are no plans for any action against the new Chrysler. “Everybody involved in this suit loves that company and, like everybody else, wants to see it succeed,” Miller said.
“The plaintiffs in our case are trying to assure that there won’t be similar hardships for Chrysler’s current employees, many of whom worked for and with the people involved in this suit. Nobody wants to hurt them or the new company’s chances for success,” he said.