October 9, 2007
SEC Intervention Sought By UAW Members
UAW Members Request SEC “Cease-and-Desist” Order to Halt Financing of GM/UAW VEBA Pending Full Investigation
October 9, 2007. United Auto Workers union (“UAW”) member Gregg Shotwell, a 27 year employee of General Motors (“GM”), and Frank Hammer, a retired UAW International Representative, GM Department, a former President of UAW Local Union 909 (Warren, Michigan) and 32 year employee of GM (retired), requested today that the Securities and Exchange Commission (“SEC”) consider imposing a “cease-and-desist” order to stop the attempted sale of a $4.4 billion Convertible Note issued by General Motors to the UAW. The Convertible Note sale is being voted on by UAW members at GM this week as part of their vote on the proposed collective bargaining agreement between GM and the UAW. However, the UAW members may not have received the disclosure of risks that the SEC requires of companies that sell securities to the public.
“This manner in which the Note is being sold is a possible violation of the federal securities laws,” according to Stephen Diamond, an attorney and law professor at the Santa Clara University School of Law in Santa Clara, California, who wrote to the SEC on behalf of the UAW activists. “Given the failure of either the UAW or GM to explain the risks, particularly the bankruptcy risks, associated with such a complex financial instrument it is appropriate for the Commission to issue a ‘cease-and-desist’ order to stop the offering and sale of the Convertible Note in order to conduct a full investigation.”
The Convertible Note sale is part of an effort by GM to shift its health care obligations to UAW members and retirees to the UAW and a newly established Voluntary Employees’ Beneficiary Association, or VEBA, as it is commonly known. However, “the UAW has argued to its members that the VEBA will be financially secure in the case of GM bankruptcy,” Professor Diamond said. “That is not necessarily accurate and the failure to describe that risk, along with other risks associated with the Note, is highly inappropriate. GM readily discloses such risks when it sells similar securities to the wider public, and they could easily do so here,” Professor Diamond said.
“We remain concerned that today’s GM workers are being persuaded to vote for a contract that will not provide them with secure healthcare benefits in retirement. The financial risks of the new VEBA must be made clear in advance of a vote,” Hammer said today. “We are requesting that the SEC intervene.”
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CONTACT:
Stephen Diamond, Attorney - (408) 554-4813
Frank Hammer – (313) 863-3219
Gregg Shotwell – (616) 485-8176
Recipient note: If you want a copy of the full complaint filed with the SEC make the request to jtuckernd@sbcglobal.net
