The chairman of Element Six’s pension scheme voted in favour of paying a $19 million dividend from a group company to its multinational parent just months before the Shannon-based manufacturer said it was no longer willing to contribute to its defined benefit retirement plan.
More than 100 members of the Element Six pension scheme are suing its trustees for breach of duty arising from their decision to back a company proposal to wind up the fund in December 2011.
The workers claim the company effectively “siphoned off” millions in assets by making payments to its parent and other group firms in the 24 months before it warned workers that continuing to fund their pension would force the group to shut the Shannon plant.
In the High Court yesterday, the trustees’ chairman, Danny Coady, admitted that he voted at a meeting in late 2010 in favour of one of those transactions, a $19 million dividend payment from Element Six Abrasives, of which he was a director, to Shannon Diamond Holdings, where he was also a director. Mr Coady also confirmed that he did not tell his fellow trustees about this, nor did he inform their law firm, Holmes O’Malley and Sexton, or the senior counsel from whom the trustees sought advice about the possible conflicts of interest involved in their role.
He said he had no knowledge of two other transactions, a $68 million repayment of capital at the end of 2010 and a $54 million payment for intellectual property.
Forensic accountant
A report by forensic accountant, Brian McEnery of Howarth Bastow Charleton, commissioned by the trustees in 2011, flagged the payments. The court heard that Mr McEnery warned that the $19 million dividend could have been illegal as he did not believe the company had sufficient reserves to make it, partly because of its $91 million pension deficit.
Mr Coady was a member of a working group set up after the scheme’s actuary, Joe Byrne of Willis, warned in June 2011 that an existing funding proposal could prove to be inadequate, and the firm could be required to almost double its contributions to €20 million a-year.
In September, the Element Six group’s head of finance Jonathan Aiken, warned the trustees that it would shut the Shannon operation if the scheme was not wound up. The company then offered to make a final €23 million contribution on behalf of workers still paying into the fund, along with a €14 million side payment, that included €8 million towards a new defined contribution plan.
In November 2011, Mr Coady used his casting vote to ensure that the company proposal passed. The six trustees were split three for and three against. He stressed that he believed the firm’s offer was in the members’ best interest.
“I was looking at a guaranteed money-in-the-hand offer,” he said.
Mr Coady said the alternative, demanding that the company fully fund all benefits, carried too many risks.
