Private equity firm Cerberus Business Finance, LLC, is looting a bankrupt airline that for 66 years ferried troops and equipment to war zones in the Middle East and Southeast Asia. Cerberus' greed has tragic consequences for pilots and flight attendants now without a job, a paycheck or health insurance.
Cerberus took control of the bankrupt airline, World Airways, and retroactively cancelled the pilots' health insurance coverage without telling them. A pilot who'd been with World for 25 years went into a coma thinking he was covered. When he came out of the coma, he found Cerberus had cancelled his health insurance -- and he owed $2 million for his medical care.
As president of the International Brotherhood of Teamsters, I have seen private equity firms plunder company after company, taking rich fees for themselves and cutting costs until there's nothing left to cut. Time and again I've seen their reckless behavior drive companies to declare bankruptcy. When the dust settles, you can count on Wall Street contracts being honored. And you can be pretty sure contracts with workers will be abrogated.
That's pretty much what's happening with World Airways, a passenger and cargo carrier that sought Chapter 11 bankruptcy protection in November 2013. The airline shut down on March 27, 2014 because it had no money. All employees were fired that day.
World Airways was a profitable company until another private equity firm, MatlinPatterson, came along and loaded it with debt. They collected handsome fees and interest until Cerberus -- run by former Vice President Dan Quayle and former Treasury Secretary John Snow -- threw the airline in the trash along with its employees. Many of the flight attendants and pilots had served their country and company since the Vietnam War.
The Teamsters have represented the pilots for 45 years. Under the union contract negotiated with World Airways, the pilots' health care coverage should have continued through April 30. They thought it did.
The pilot who went into a coma contracted H1N1 on Dec. 29, 2013 while ferrying military supplies across the Pacific. He spent much of the next three weeks in a medically induced coma. When he emerged from the coma, some smaller claims were paid, but his larger claims -- $2 million -- were denied.
World Airways was self-insured and its health care plan was administered by United Health Care.UHC had access to a fund with which to pay medical claims. On March 29, the company informed employees that 'first lien holder, Cerberus, has swept the bank accounts that funds the United Health Care claims.' Also gone were funds to pay for $2 million in retirement accounts owed to the crewmembers of World Airways.
Saying that Cerberus 'swept the account' is a nice way of saying they looted accounts set up to pay World Airways health insurance claims.
We don't know how much was in that account. We do know it barely amounted to pocket change for Cerberus, which stands to profit handsomely from the wind-down of World Airways and the sale of assets from a sister airline. And we now know Cerberus has no shame and its greed has no limits.