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Doner's Terrible Week: CEO Kalter Admits Pension Info AWOL; $55 Mil. Allegedly Owed to DeCerchio

Doner CEO Alan Kalter came thisclose to being the Bernie Madoff of advertising when he confessed that his agency was not in compliance with federal law because it failed to disclose to employees details of their pension plan, Ad Age reported. And the agency laid off about 100 employees recently after it emerged that it allegedly owed former vice chairman/chief creative officer John DeCerchio $55 million; he worked at Doner for 34 years.

Doner's annual revenue is just $182 million.

Until this week, the Doner pension plan was basically kept secret inside the agency until former chief marketing officer Bryan Yolles sued the shop (download a copy of the suit; and read his lawyer's letter to Doner here).

The situation was best described by "ExDoner," an anonymous poster on AgencySpy's comment boards:

Doner has a non-contributory Pension Equity Plan. But when you're hired, they don't mention it. There isn't any mention of it in your orientation benefits package either. There isn't any mention of it anywhere, ever, however long you stay at Doner.
Over the last year or so, however, word has slipped out about the existence of this plan. So now when people leave or are terminated, they're starting to ask about it. But you actually have to threaten legal action to get what is rightfully yours. And even if you do get your payout, they refuse to tell you how it was calculated.
For decades, people left Doner not even knowing they were entitled to it. Which means that Doner has been keeping and investing employee funds from the Pension Equity Plan for its own benefit -- all of which is absolutely illegal behavior.
There are rumors that there will finally be a class action suit by former employees and that the Department of Labor, the IRS and the Attorney General are being contacted. John DeCerchio himself had to sue Doner recently to get his partner buyout and pension money, which was in excess of 50 million dollars. This is just one more reason over 100 people were laid off two weeks ago.
Ex-CMO Yolles made more than 10 attempts since he left in 2007 to get Doner to disclose what he was owed by the company's pension plan, which has been closed to new employees since 2007.

The New York post reported that:

Doner's pension plan had about 1,200 participants at the end of 2006, of whom about 687 are currently employed, according to the latest available federal filing.
In a memo to the staff, CEO Kalter exercized the height of chutzpah:
As for the rumor and innuendo about payment, there are two important things you should know. First, every former employees'direction to us about their pension benefits has been honored. Without exception. Second, we are in compliance with the rules, regulations, and laws applying to pension plans, and continue making the necessary contributions as calculated by our actuaries.
Alan, the reason there is "rumor and innuendo" surrounding Doner's handling of its workers' retirement money is because you created it by not keeping everyone informed. (Kalter's full memo at the bottom of this post.)

Meanwhile, Doner employees might want to start perusing this helpful website on pension plan disclosure rights. It talks about how to find out how much is in the plan, whetjher it was properly invested and whether the employer took too much in expenses.

The Kalter memo:
I do want to clarify the pension issue. Yes, there is a long-standing defined benefit program, commonly referred to as a pension plan. With the introduction of 401k programs, many companies stopped bringing new employees into their program years ago. While our 401k program was introduced over 20 years ago, we waited until March of 2007 to stop bringing new employees into the Pension Plan. However, every U.S. employee prior to that is enrolled in the Plan, subject to certain eligibility requirements.

Recently, an employee who voluntarily left was asked how he wanted his pension benefit addressed, as there are multiple options one has upon leaving the company. He was surprised to learn he had a pension. Happily so, but still surprised. We realized then, that we have failed to communicate this benefit properly to you. I apologize for that sin of omission. The company not only contributes to your 401k, but we also contribute toward the Pension Plan, for those who are eligible. We tasked Aon (the plan's outside actuaries) to develop individual benefit reports for every employee in the Plan. Each report is personalized to your individual employment history. You will receive your report through February 28, 2009, (the end of our fiscal year) within the next thirty days. And from now on you will receive an annual statement of your benefits each fiscal year after the final calculations are completed.

As for the rumor and innuendo about payment, there are two important things you should know. First, every former employees’ direction to us about their pension benefits has been honored. Without exception. Second, we are in compliance with the rules, regulations, and laws applying to pension plans, and continue making the necessary contributions as calculated by our actuaries. For those of you who are in our pension plan and didn't realize it, you are about to get a pleasant surprise.

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