Forum Post: This Is Capitalism Now: How a Coal Company Bilked 20,000 Workers Out of Health Benefits

The revolution is over, and Gordon Gekko won.

Three decades on from the leveraged buyout boom, the morals, or lack thereof, of the fictional private equity titan have become the morals of management: greed is good, more is better, and employee benefits are an inconvenient obstacle to unlocking shareholder value. In other words, it's not just corporate raiders coming after your pension now; it's corporate America too.

Just look at Patriot Coal. That's the spin-off company of Peabody Energy, the country's biggest coal producer, that was larded up with 40 percent of its parent company's healthcare liabilities and just 13 percent of its assets back in 2007. A year later, Patriot saddled itself with even more obligations when it bought Magnum Coal, itself a subsidiary of Arch Coal, the nation's second-largest coal company. The end result of all this financial chicanery was Patriot getting stuck holding the bag of retiree health benefits for 22,000 people -- 90 percent of whom never worked a day for Patriot, but rather for Peabody or Arch.

Well, guess what. Patriot went bust. And now, as the Wall Street Journal reports, a bankruptcy judge has ruled that it can discharge its $1.6 billion of union healthcare obligations and replace it with ... a $300 million trust, "tens of millions" more in revenue sharing, and 35 percent of the stock of the new Patriot Coal. Not much. Now, it's not completely clear if Peabody deliberately designed Patriot to fail -- that got a "maybe" or "maybe not" from the judge -- as Temple University business professor Bruce Rader has argued. But it is clear that Peabody dumped the legacy liabilities and assets it didn't want in Patriot, which, being generous, added several degrees of difficulty to it being a going concern.

more; http://www.theatlantic.com/business/archive/2013/06/this-is-capitalism-now-how-a-coal-company-bilked-20-000-workers-out-of-health-benefits/276438/