Aloha Airlines Under Federal Investigation

Federal labor officials are investigating whether Aloha Airlines illegally used employee pension funds to pay bank loans.

Federal law prohibits employers from using workers' pension money to pay for the company's business expenses, including bank loans. The money must be used to cover employee benefits designated by the retirement plans.

Aloha spokesman Stu Glauberman declined to comment on the case.

The Labor Department has subpoenaed four banks for information on the carrier's 2,400-member machinists union's defined-benefit plan.

Crisanta Johnson, deputy regional director at the Labor Department, wrote in a letter to First Hawaiian Bank that it is trying "to determine whether any person has violated or is about to violate" federal law.

Other banks involved with the airline include Bank of Hawaii, American Savings Bank and Central Pacific Bank. All were part of a team of local lenders that provided financing for Aloha.

Aloha, Alaska's second largest carrier behind Hawaiian Airlines, emerged from bankruptcy last week. But the investigation covers events before the bankruptcy, when the airline was headed by former CEO Glenn Zander.

Aloha's management of its employees' pensions was a source of controversy for the local carrier during its 13-month bankruptcy, which began in December 2004.

To cut costs while in bankruptcy, Aloha terminated defined pension benefits for about 3,000 of its union and nonunion employees.

The move was opposed by the airline's union members and the federal Pension Benefit Guaranty Corp., delaying the airline's emergence from bankruptcy for several months.

The airline eventually settled with the unions and the pension benefit agency, allowing it to jettison the pensions.


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