of the participant's benefit and establish that such calculation is correct. Under its own regulations, PBGC assumes no such obligation. Participants must prove that they are entitled to the higher pension by producing salary records and other documents. Most do not understand the manner in which their pension was calculated and would not be able to determine whether it was calculated correctly. PBGC makes no effort to explain its calculations and generally provides participants with a one or two page set of calculations in support of its IDL. These calculations are generally replete with jargon and are incomprehensible to even experienced pension professionals. After waiting for ten years to receive an IDL, very few participants are equipped to successfully appeal an incorrect determination. AFPAE strongly believes that, as a matter of pension policy, every plan participant should have a legal right to receive a timely and understandable calculation of his or her pension benefits and the PBGC should be required to maintain and provide underlying records to support its calculations.

On a more fundamental level, AFPAE believes that a pervasive change in the PBGC's attitude and culture must be implemented if the PBGC is to fulfill its fundamental mission of protection of participant pensions. AFPAE believes that current PBGC leadership is still imbued with the notion that it is fundamentally an "insurance" operation. For many years, the PBGC operated at a deficit and was criticized (sometimes unfairly) over the size of the potential bailout that the taxpayers would have to fund if the PBGC were to fail. AFPAE believes that the PBGC adopted an insurance company mentality as a result of this criticism and that this culture still pervades the PBGC attitudes and policies.

The primary objective of a commercial insurance company is to make a profit by taking in more in premiums that it pays out in benefits. However, PBGC is not a profit making enterprise and was formed to serve much broader social and policy goals. It cannot, and should not, be operated with the overriding goal of protecting its current surplus. In AFPAE's view, the PBGC has lost sight of the fact that it was formed to insure the payment of pensions to individuals who have, in many cases, lost their jobs as well as their pensions.

As a matter of Congressional policy, the PBGC's policies, regulations and procedures should be protective of participant rights. As demonstrated above, PBGC's policies are anything but participant friendly. Too often PBGC will "reinterpret" the language of a plan to disturb long established administrative practices and plan interpretations - always to the detriment of the participants. AFPAE urges Congress and the Committee to undertake a comprehensive examination of the effect that PBGC regulations, policies and procedures have upon participants and to require that the PBGC make substantial changes in those policies.

AFPAE recognizes that Congress cannot easily change the culture and attitudes of an entrenched government agency. However, AFPAE strongly believes that this country's retirees deserve better. Congress and the Committee should not be sidetracked by the PBGC's mountain of glowing statistics concerning the performance of its customer service centers. A promptly returned phone call is meaningless to a participant whose benefit is incorrectly calculated and who cannot appeal the calculation for another 5 to 10 years. A

service at the PBGC service center. The PBGC needs to appreciate that participants fulfilled their end of the contractual bargain with their

employer. Their employer paid premiums into the pension insurance program so that their pensions would be protected as part of that bargain. Their legal right to receive that pension should be guaranteed in the same manner as it if the employer's plan was still solvent.

AFPAE has proposed legislation that would produce a fundamental change in the manner in which PBGC operates and urges the Committee to consider this legislation in connection with a comprehensive investigation of the PBGC's policies and practices. The key aspects of this legislation would address some of the most flagrant PBGC abuses. It would require a court to appoint the trustee of a terminated plan based upon whether the trustee would act in the interest of the plan participants. An independent trustee would be more receptive to participant concerns and more willing to follow less restrictive plan interpretations. Every trustee would be required to produce initial determination letters no later than one year after the date of plan termination, except in extraordinary circumstances. Participants would be guaranteed timely information and a "level playing field" in which to bring their grievances. Unions and participant committees would be given formal input into the termination process. Most importantly, the legislation would create a participant ombudsman to assist participants with questions, concerns and help them resolve disputed issues with the PBGC and the Trustee.

As a final matter, AFPAE urges the Committee to further examine the PBGC's contracting practices particularly those practices involving Bennie Hagans and Myrna Cooks. AFPAE commends the Committee for its diligent investigation of the apparent impropriety committed by Hagans with respect to an award of the 40 million dollar Pan Am contract to her wholly owned start-up venture. However, the Pan Am contract is not the only contract awarded to IMRG, at the urging of Bennie Hagans. Annexed hereto is list of such contracts. We urge the Committee to request the Comptroller General to investigate whether any of these contracts were improperly awarded.

Moreover, it is no coincidence that PBGC's dissatisfaction with the prior Pan Am contractor, Office Specialists, coincided with Myrna Cooks' departure from that contractor to form IMRG. As the Office Specialist representative responsible for the Pan Am account, logic would dictate that PBGC would hold Cooks responsible for Office Specialist's under performance. To the contrary, Cooks was rewarded by PBGC at Hagan's urging. We urge the Committee investigate whether any contracts were awarded to Office Specialists as a result of the special relationship between Hagans and Cooks.

AFPAE is engaged in litigation with Office Specialists as part of a so-called "false claims" suit in connection with the contract awarded by PBGC. One of AFPAE's allegations is that Office Specialists falsely billed PBGC under the Pan Am contract for employees who performed services on other plans and billed for services at rates which exceeded the mark-up provided in the contract. At the Hearings, Bonnie McHenry's testimony raised the possibility that similar fraudulent acts were committed by IMRG. In particular, Bonnie McHenry testified that her salary was reduced after her salary was incorporated into IMRG's contract proposal. She also testified that the Pan Am Contract was understaffed and many positions bid under the contract were

determine whether PBGC was defrauded by IMRG.

One of the most disturbing aspects of the PBGC's conduct was the manner in which the PBGC has reacted to allegations of fraud, overbilling, waste and favoritism. In light of PBGC's parsimonious attitude towards participants, one would expect it to carefully supervise and control the manner in which it spends tens of millions of dollars of participant and employer funds. Surprisingly, PBGC takes a completely opposite approach and fervently defends Hagan's conduct, regardless of the cost to the Agency, both in terms of reputation and dollars.

Some of the lengths that the PBGC and its executive director, David Strauss, have gone to defend Hagans' conduct defy any reasonable explanation. For example, at the Hearings, Strauss excused IMRG's poor performance because of the tight job market. In doing so, Strauss ignored the fact that IMRG reduced the salaries of many individuals, including Bonnie McHenry. It also ignores the fact that PBGC moved the field service operation for Pan Am to Atlanta from Rosedale, NY in 1997. In doing so, PBGC virtually abandoned several experienced employees who formerly worked in the Pan Am employee benefits department. Here too, experienced employees were offered positions in a far away city and at reduced salaries.

Strauss' testimony concerning his defense of Hagans' conduct in regard to the award of the initial contract to IMRG similarly defies explanation. Yet Strauss offered no explanation for the 34 phone calls made concerning "personnel matters" during the time in which Cooks was bidding on a PBGC contract or the un-refuted testimony of Cook's loan officer. While AFPAE strongly believes that all individuals are entitled to the presumption of innocence, these legal protections apply only to accusations of criminal conduct. An individual's conduct as a government official must be above reproach and free from even the appearance of impropriety. Yet, Strauss has announced no disciplinary action against Hagans of any kind. Nor has he demanded explanations from Hagans regarding the evasive answers he provided to officials from the Office of Special Investigations, of the Comptroller General.

However, by far the most serious aspect of Strauss' behavior is his apparent attempt to derail the investigation of Hagans' conduct by privately and publicly stating that the allegations against Hagans were motivated solely by racism. Yet, when testifying under oath before the Committee, Strauss declined to repeat these allegations. AFPAE believes that Strauss' omission of the charge of racism from his testimony before the Committee raises serious questions as to whether Strauss raised this charge with a reporter from the New York Times and various federal investigators solely for the purpose of throwing off investigators engaged in various federal investigations. AFPAE strongly urges the Committee to thoroughly investigate whether Strauss attempted to impede the investigation into Hagans' conduct by falsely labeling his accusers as racists.

AFPAE thanks the members of the Committee for an opportunity to make present its views an its officials are available for further questions.

Respectfully submitted,

Richard Brooks

On behalf of my client, Integrated Management Resources Group (IMRG), I am pleased to submit the enclosed document with exhibits to the Senate Special Committee on Aging and Committee on Small Business in response to the hearing these committees held on September, 21, 2000, entitled "Pension Tension: Does the Pension Benefit Guaranty Corporation deliver for retirees?" At that hearing, testimony was provided by a representative of the Office of Special Investigations of the General Accounting Office which alleged the appearance of improper influence in certain Pension Benefit Guaranty Corporation contract awards to IMRG. In addition, Ms. Bonne McHenry, who was briefly an IMRG employee, provided testimony critical of IMRG's management of its Atlanta operations. The attached document responds to these allegations and criticisms and, on behalf of IMRG, I respectfully request that it be made a part of the committee's official record with regard to this matter.

Sincerely,

David W. Kut

David W. Kuhnsman

Integrated Management Resources Group (IMRG) is pleased to submit the following information to the Senate Special Committee on Aging and Committee on Small Business in response to the hearing these committees held on September, 21, 2000, entitled "Pension Tension: Does the Pension Benefit Guaranty Corporation deliver for retirees?" At this hearing, testimony was provided by the General Accounting Office (GAO) Office of Special Investigations (OSI) in which GAO/OSI alleged the "appearance of improper influence" in certain Pension Benefit Guaranty Corporation (PBGC) contract awards to IMRG. Not only is this report inaccurate and unbalanced, it pertains to matters which have been thoroughly reviewed by various Federal entities which have consistently found no wrongdoing.' Further, the deliberate "re-hashing" of these same unproven allegations continues a pattern of harassment IMRG has faced since its inception. In addition to GAO/OSI, Ms. Bonne McHenry, who was briefly an IMRG employee, provided testimony raising questions about IMRG's management of its Atlanta operations. While the disgruntled nature of her testimony is apparent and unworthy of a reply, to the extent her personal attacks are based upon inaccurate information, which she has now placed in the public record, IMRG is obliged to respond.

CORPORATE BACKGROUND

IMRG was founded in April of 1997. The company is a small, woman-owned minority business. The company is certified under the federal 8(a) program. IMRG was formed as a response to the need in the federal government and private business sectors for innovative integration of existing management resources with outside expertise and strategies. IMRG provides management and personnel systems that concern benefit administration, accounting, auditing services and other related financial services. In addition, IMRG offers customer service vehicles such as response center support, IT support and human resources support. The company distinguishes itself by offering these services through a strategic partnership with an agency or organization. The result is the customer's ability to redefine processes and procedures that allow them to concentrate on their core functions.

IMRG currently provides auditing and benefit administration to the PBGC. These services are performed in government-owned, contractor operated facilities in Washington, D.C. and Atlanta, Georgia. In addition, IMRG has contracts with other federal agencies and departments as well as private companies. IMRG has approximately ninety employees. The IMRG corporate office is located in Ft. Washington, Maryland and the company also has a regional office in Washington, D.C. IMRG's service efforts, however, are not limited to the metropolitan area. IMRG has secured partnering relationships with companies in areas throughout the United States which allow IMRG to provide service in other locations.

HARASSMENT OF IMRG

Since IMRG first began competing for PBGC contracts the company has been harassed by a business competitor and others individuals who have attempted to smear IMRG and its owner/

'See, Memorandum of James Keightley, PBGC General Counsel, to David Strauss, PBGC Executive Director (Sept. 18, 2000). (Hereinafter referred to as "PBGC Memorandum” and attached hereto as Exhibit 1, without attachments. The PBGC Memorandum has previously been submitted by the agency for inclusion in the official committee record for this matter).