Welcome Home.  I've missed you IBMPENSION.

For future reference: 2001-10k financials for both Pension and
Postretirement Plans.  Current Actuals then Year-to-Year Changes
follows.

BASICS FOR FINANCIALS:
There are 3 components to pension financials.
1. The Obligation - what IBM owes us, eventually. A liability
2. The Fair Value of our Trust Fund. An asset
3. The Difference Between the Two (Surplus or Liability)

PENSION PLAN - US Only (all pension plans included):

BENEFIT OBLIGATION (a liability-think of it as your credit card with
a huge balance. Since it is a liabilty, the signs will appear
reversed to you.):
Benefit obligation at beginning of year.... 37539
Service cost................................. 613
Interest cost............................... 2624
Net of acquisitions / divestitures........... -29
Actuarial losses............................. 457
Benefits paid from trust................... -2595
Total Obligation........................... 38609

FAIR VALUE OF PLAN ASSETS (an asset-think of it as the balance in
your checking/savings account to pay your credit card bills):
Fair value of assets at beginning of year.. 44594
Actual return loss on plan assets.......... -2405
Net of acquisitions / divestitures........... -29
Benefits paid from trust................... -2595
Total Value of Plan Assets................. 39565

FAIR VALUE IN EXCESS OF OBLIGATION........... 956
(Surplus = the difference between the two)
-------------------------------------------------------------------
PENSION PLAN - US and NonUS Combined (all pension plans included):

BENEFIT OBLIGATION (a liability-think of it as your credit card with
a huge balance. Since it is a liabilty, the signs will appear
reversed to you.):
Benefit obligation at beginning of year.... 58689
Service cost................................ 1042
Interest cost............................... 3838
Plan Participants' Contributions.............. 27
Net of acquisitions / divestitures............ -7
Amendments......................................8
Actuarial losses............................ 1558
Benefits paid from trust................... -3343
Direct Benefit Payments..................... -198
Foreign Exchange Impact.................... -1184
Plan Curtailments, Settlements, Terminations. -20
Total Obligation........................... 60410

FAIR VALUE OF PLAN ASSETS (an asset-think of it as the balance in
your checking/savings account to pay your credit card bills):
Fair value of assets at beginning of year.. 69427
Actual return loss on plan assets.......... -3964
Employer Contribution........................ 417
Net of acquisitions / divestitures........... -29
Plan Participants' Contributions.............. 27
Benefits paid from trust................... -3343
Foreign Exchange Impact.................... -1376
Settlements.................................. -63
Total Value of Plan Assets................. 39565

FAIR VALUE IN EXCESS OF OBLIGATION........... 686
(Surplus = the difference between the two)
-------------------------------------------------------------------
VAPOR INCOME FORMULA - US & NonUS Combined / Employees Plan Only

Really tricky to read. If it is written as a negative number, it is
income to the Consolidated Statement of Earnings (vapor income). If
it is written as a positive number, it is a loss and reduces income
to the Consolidated Statement of Earnings. Trust me.
Service Cost.......................... 1042
Interest Cost......................... 3838
Net expected return on plan assets... -6264
- Actual Return Loss.......................... 3964
- Deferred Return Gain...................... -10228
Net amortizations...................... -42
Actuarial Gain Recognized.............. -12
Settlement Gain........................ -12
Total Net Periodic Pension Income.... -1450

aka-Vapor Income. Again, if it is written as a negative, it is income
(vapor income) to the Consolidated Statement of Earnings.
YES, it is negative, so it is income (vapor income).
----------------------------------------------------------------
POSTRETIREMENT PLAN - (Most all US)

BENEFIT OBLIGATION (a liability-think of it as your credit card, with
a huge balance. Since it is a liabilty, the signs will appear
reversed to you.):
Benefit obligation at beginning of year... 6443
Service cost................................ 65
Interest cost.............................. 437
Actuarial gains............................-183
Benefits paid-net of participant contr....... 3
- Participant contributions........................ 71
- Benefits paid from trust........................ -68
Direct benefit payments................... -617
Total Obligation.......................... 6148

FAIR VALUE OF PLAN ASSETS (an asset-think of it as the balance in
your checking/savings account to pay your credit card bills):
Fair value of assets at beginning of year... 4
Actual return gain on plan assets........... 1
Benefits paid-net of participant contri..... 3
- Participant contributions..................... 71
- Benefits paid from trust..................... -68
Total Value of Plan Assets.................. 8

OBLIGATION IN EXCESS OF FAIR VALUE:..... -6140
(Liability, not a Surplus)
------------------------------------------------------------------
------------------------------------------------------------------
Below is the YEAR-TO-YEAR FINANCIAL CHANGES for both Pension and
Postretirement Plans:

YEAR TO YEAR FINANCIAL CHANGES ONLY:
PENSION PLAN - US Only (all pension plans included):

BENEFIT OBLIGATION (a liability-think of it as your credit card, with
a huge balance. Since it is a liabilty, the signs will appear
reversed to you.):
Benefit obligation at beginning of year..... 3105
Service cost.................................. 50
Interest cost................................. 71
Net of acquisitions / divestitures........... -65
Amendments.................................. -645
Actuarial gains............................ -1272
Benefits paid from trust.................... -174
Total Obligation............................ 1070

FAIR VALUE OF PLAN ASSETS (an asset-think of it as the balance in
your checking/savings account to pay your credit card bills):
Fair value of assets at beginning of year... -990
Actual return loss on plan assets.......... -3800
Net of acquisitions / divestitures........... -65
Benefits paid from trust.................... -174
Total Value of Plan Assets................. -5029

FAIR VALUE IN EXCESS OF OBLIGATION......... -6099
(Surplus = the difference between the two above)
--------------------------------------------------------------------
YEAR TO YEAR FINANCIAL CHANGES ONLY:
PENSION PLAN - US and NonUS Combined (all pension plans included):

BENEFIT OBLIGATION (a liability-think of it as your credit card, with
a huge balance. Since it is a liabilty, the signs will appear
reversed to you.):
Benefit obligation at beginning of year..... 2485
Service cost.................................. 34
Interest cost................................. 51
Plan Participants' Contributions.............. -1
Net of acquisitions / divestitures............ 22
Amendments.................................. -700
Actuarial gains............................. -414
Benefits paid from trust.................... -194
Direct Benefit Payments....................... 20
Foreign Exchange Impact...................... 442
Plan Curtailments, Settlements, Terminations. -24
Total Obligation............................ 1721

FAIR VALUE OF PLAN ASSETS (an asset-think of it as the balance in
your checking/savings account to pay your credit card bills):
Fair value of assets at beginning of year.. -4000
Actual return on plan assets............... -5163
Employer Contribution........................ 351
Net of acquisitions / divestitures........... -15
Plan Participants Contributions............... -1
Benefits paid from trust.................... -194
Foreign Exchange Impact...................... 639
Settlements................................... 52
Total Value of Plan Assets................. -8331

FAIR VALUE IN EXCESS OF OBLIGATION........ -10052
(Surplus = the difference between the two above)
-------------------------------------------------------------------
YEAR TO YEAR FINANCIAL CHANGES ONLY:
VAPOR INCOME FORMULA - US & NonUS Combined / Employees Plan Only

Really tricky to read. If it is written as a negative number, it is
income to the Consolidated Statement of Earnings (vapor income). If
it is written as a positive number, it is a loss and reduces income
to the Consolidated Statement of Earnings. Trust me.
Service Cost............................ 34
Interest Cost........................... 51
Net expected return on plan assets.... -320
- Actual Loss............................... 5163
- Deferred Gain............................ -5483
Net amortizations loss.................. 54
- Of Transition Assets......................... 1
- Of Prior Service Cost....................... 53
Recognized Actuarial Gain.............. -16
Settlement Loss......................... 13
Total Net Periodic Pension Income..... -184

aka-Vapor Income. Again, if it is written as a negative, it is
income (vapor income) to the Consolidated Statement of Earnings.
Yes, it is negative, so it is an increase of vapor income of 184m
over last year).
--------------------------------------------------------------------
YEAR TO YEAR FINANCIAL CHANGES ONLY:
POSTRETIREMENT PLAN - (Most all US)

BENEFIT OBLIGATION (a liability-think of it as your credit card, with
a huge balance. Since it is a liabilty, the signs will appear
reversed to you.):
Benefit obligation at beginning of year... 265
Service cost................................ 15
Interest cost.............................. -12
Actuarial gains............................-546
Benefits paid-net of participant contr...... 90
- Participant contributions....................... 48
- Benefits paid from trust........................ 42
Direct benefit payments................... -107
Total Obligation.......................... -295

FAIR VALUE OF PLAN ASSETS (an asset-think of it as the balance in
your checking/savings account to pay your credit card bills):
Fair value of assets at beginning of year... -101
Actual return on plan assets.................. 15
Benefits paid-net of participant contri....... 90
- Participant contributions....................... 48
- Benefits paid from trust........................ 42
Total Value of Plan Assets..................... 4

OBLIGATION IN EXCESS OF FAIR VALUE:......... -366
(Liability, not a Surplus)
-------------------------------------------------------------------
-------------------------------------------------------------------
BASIC ASSUMPTIONS:
Expected Long-Term Rate of Return on Plan Assets - 10% (IBM stated
that next year they will use 9.5%, which will lower the amount of
income they can claim as a return from the plan assets.)
Long-term rate of compensation increase - 6%
Discount rate - 7%

DEFINITIONS:
- Service Cost-This is what IBM must put away for you for your
service to the company for this year.
- Interest Cost-This is the cost of interest that is tied to your
service cost.
- Fair Value of Plan Assets-This is IBM's best guess at the market
value, if they were going to sell it.
- Fair Value of Plan Assets in Excess of Benefit Obligation - This is
SURPLUS. The formula is Fair Value minus Obligation = Surplus
- Actuarial Gains and Losses-The effect of changes in either the
benefit obligation or plan assets resulting from experience different
from the assumed assumptions.

And it only took YAHOO 17 days to migrate it!

Does anyone know why?

--- In ibmpension@y..., justa_bean_counter wrote:
> >Do you think the auditor PWC will look at
> things a little closer this year? I am sure they do not
> want to be in the same position as Anderson.<br><br>I
> wouldn't be surprised if PWC hasn't provided IBM with a
> list of accounting concerns that needs
> 'improving'.<br><br>I wouldn't be surprised if PWC told IBM they
> wouldn't sign off the audit report, if IBM refused to
> 'improve' their accounting methods and their Annual
> Report.<br><br>Lastly, I wouldn't be surprised if PWC was working
> one-on-one with IBM in negotiating the new content of their
> Annual Report.<br><br>But then again, I've had my share
> of surprises at IBM, so, anything goes!
====

JUST A TEST - ITS BACK   BTW   TO GET TO THE MOSTY RECENT DIRECTLY

http://groups.yahoo.com/group/ibmpension/messages/?expand=1

SEEMS TO WORK

DON

Bean, you asked:

"--- In ibmpension@y..., justa_bean_counter wrote:
> >Do you think the auditor PWC will look at
> things a little closer this year? I am sure they do not
> want to be in the same position as Anderson.<br><br>I
> wouldn't be surprised if PWC hasn't provided IBM with a
> list of accounting concerns that needs
> 'improving'.<br><br>I wouldn't be surprised if PWC told IBM they
> wouldn't sign off the audit report, if IBM refused to
> 'improve' their accounting methods and their Annual
> Report.<br><br>Lastly, I wouldn't be surprised if PWC was working
> one-on-one with IBM in negotiating the new content of their
> Annual Report.<br><br>But then again, I've had my share
> of surprises at IBM, so, anything goes!"

    I think you can bet your bottom dollar that PWC and IBM executives
spent the month before submission, orchestrating the dance of the
seven veils that eventually became the annual report.  It will
intrigue millions, and reveal nothing, except to those with eagle
eyes.

   Already, wall street analysts, like the six blind men of elephant
fame, are making their proclamations.   All positive, all differing,
and all wrong.

     And, life goes on.   That is, until I get my hard copy version, or
until I get my 2 new ghtz Dell, and can cut my own copy, and do my
own analyses.

    In the meantime, trust IBM and PWH to do a veru synchronized
gavotte, as they have been in bed together for decades.

Mike.

Glad to see the mother of all forums is back.  :-)

Beans, thanks for your analysis - very helpful.

I'm especially interested in the "vapor income formula" (copied
below) and extremely curious about the "Deferred Return Gain" entry
of over 10 BILLION Dollars!

I SUSPECT this "Deferred Return Gain" is itself some kind of vapor.
(They offset $3.964 Billion in actual losses with $10.228 Billion
in "Deferred Return Gain".)

It sure seems to me like they are saying "We 'expected' to earn
$10.228 Billion, but we actually 'lost' $3.964 Billion, so our 'Net
expected return on plan assets' is ONLY $6.264 Billion."  (so we can
ADD $6.264 Billion to the vapor profits account...)

Can you explain more about it, please?

--- In ibmpension@y..., justa_bean_counter <no_reply@y...> wrote:
> snipped.....
> -------------------------------------------------------------------
> VAPOR INCOME FORMULA - US & NonUS Combined / Employees Plan Only
>
> Really tricky to read. If it is written as a negative number, it is
> income to the Consolidated Statement of Earnings (vapor income). If
> it is written as a positive number, it is a loss and reduces income
> to the Consolidated Statement of Earnings. Trust me.
> Service Cost.......................... 1042
> Interest Cost......................... 3838
> Net expected return on plan assets... -6264
> - Actual Return Loss.......................... 3964
> - Deferred Return Gain...................... -10228
> Net amortizations...................... -42
> Actuarial Gain Recognized.............. -12
> Settlement Gain........................ -12
> Total Net Periodic Pension Income.... -1450
>
> aka-Vapor Income. Again, if it is written as a negative, it is
income
> (vapor income) to the Consolidated Statement of Earnings.
> YES, it is negative, so it is income (vapor income).
> ----------------------------------------------------------------
snipped.....

First, you need to know I'm no expert.  Justa_bean_counter pretty
much explains it.  Also, I'm not too sure I want to be called 'beans'
the rest of my posting life.

The only way to understand the 10b deferred return on the plan assets
is to understand FAS87.  I have a hard time with it because I can't
understand how those people that wrote it 25 years ago could have
done such a thing!  What were they thinking?  The FASB team back then
was Donald J. Kirk, Frank Block, Victor Brown, Raymond Lauver, David
Mosso, Robert Sprouse, and Arthur Wyatt.

When they began writing FAS87, they didn't want volatility in the
numbers, so they created a smoothing technique.  Booking gains and
losses immediately can cause this volatility. They had a heck of a
time figuring out how not to recognize gains or losses immediately.
Every time someone came up with a solution to smooth out the
volatility caused by immediate recognition, it was shut down.  So,
they kept moving the shell farther and farther out till it was so far
out, no volatility was practically evident. They did this by agreeing
to use an assumption called Long-term expected rate of return on plan
assets. (For the last 10 years, IBM has pretty much used 9.5% to
10%.)  They now had a number that was so huge, it is no longer
volatile.  Next problem was how to recognize such a number.  They
decided to do it, over time, such that actual returns greater than or
less than the expected return are afforded delayed recognition, which
is one of the major tenants of pension accounting.  They knew that
made-up numbers are always less volatile than real gains or losses
and that they are easier to manage.  They knew that spreading it over
time is easier on the books than doing it immediately.  So they did
it!  They created the Vapor Formula and we now live with huge vapor
amounts of pension income to the Consolidated Statement.

In all fairness to a lot of the team members, many protested quite
loudly that this was nothing but hocus-pocus numbers.  (my words, not
theirs) Some argued that some pension plans will be able to increase
their income statements with this method (given the conditions are
right) and that the quality of earnings would be diluted.  Eventually
though, the team agreed to it and justified it by stating something
like 'well it doesn't affect the real funded status of the plan, so
it's OK'.  (BTW, I'm taking a very broad license in telling this
story, so I do encourage you to read FAS87.  It isn't as mind numbing
as you think.  Follow up with FAS132 on pension disclosure.)

To answer your specific question, "It sure seems to me like they are
saying "We 'expected' to earn $10.228 Billion, but we actually 'lost'
$3.964 Billion, so our 'Net expected return on plan assets' is ONLY
$6.264 Billion, (so we can ADD $6.264 Billion to the vapor profits
account...."  Bingo, you hit it right on the nose!! IBM is following
FAS87 (they have to).  They create a huge vapor number using the 10%
rate (which they don't have to) and book it over time, because of the
delayed recognition feature.  So, today we see the big bucks of
yesteryear's dot.coms pumping up EPS.  What conclusion can I draw
about tomorrow????  What HAS Enron, Global Crossing, and others done
to our plan assets?  I really would like to know.  After all, it is a
trust solely for the benefit of those that earn it.  We have a right
to know, don't we?

You also might think about this... Why use 10%? Why not something
lower that is more in line with the real world?  I recently saw an
article on Buffet stating he lowered his firm's rate to 6.x%.  IBM
did announce they would lower the next report to 9.5%. Should I
jump for joy?  The Annual Report discusses Vapor Income on pages 76-
77, but it's hard to recognize as such.

You need to take this a step further also.  The fact that EPS has
been pumped significantly by vapor income is published news.  Much of
the formula for executive compensation is based on EPS.  Ask yourself
this... Should the executives receive bonuses and other compensation
because of how IBM's accountants have maximized FAS87 to their full
advantage which gave them the extra boost in EPS they needed to make
their numbers?  Well, that spawns a debate on executive compensation
and another one on the quality of earnings for shareholders.

Watch for your proxy in the Annual Report, coming to your home soon.

--- In ibmpension@y..., outin91 <no_reply@y...> wrote:
> Beans, thanks for your analysis - very helpful.
>
> I'm especially interested in the "vapor income formula" (copied
> below) and extremely curious about the "Deferred Return Gain" entry
> of over 10 BILLION Dollars!
>
> I SUSPECT this "Deferred Return Gain" is itself some kind of
vapor.
> (They offset $3.964 Billion in actual losses with $10.228 Billion
> in "Deferred Return Gain".)
>
> It sure seems to me like they are saying "We 'expected' to earn
> $10.228 Billion, but we actually 'lost' $3.964 Billion, so our 'Net
> expected return on plan assets' is ONLY $6.264 Billion."  (so we
can
> ADD $6.264 Billion to the vapor profits account...)
>
> Can you explain more about it, please?
>
> --- In ibmpension@y..., justa_bean_counter <no_reply@y...> wrote:
> > snipped.....
> > ------------------------------------------------------------------
-
> > VAPOR INCOME FORMULA - US & NonUS Combined / Employees Plan Only
> >
> > Really tricky to read. If it is written as a negative number, it
is
> > income to the Consolidated Statement of Earnings (vapor income).
If
> > it is written as a positive number, it is a loss and reduces
income
> > to the Consolidated Statement of Earnings. Trust me.
> > Service Cost.......................... 1042
> > Interest Cost......................... 3838
> > Net expected return on plan assets... -6264
> > - Actual Return Loss.......................... 3964
> > - Deferred Return Gain...................... -10228
> > Net amortizations...................... -42
> > Actuarial Gain Recognized.............. -12
> > Settlement Gain........................ -12
> > Total Net Periodic Pension Income.... -1450
> >
> > aka-Vapor Income. Again, if it is written as a negative, it is
> income
> > (vapor income) to the Consolidated Statement of Earnings.
> > YES, it is negative, so it is income (vapor income).
> > ----------------------------------------------------------------
> snipped.....

Forbes article on IBM's accounting....

http://www.forbes.com/forbes/2002/0401/036_print.html

>> In 1999 IBM took a $4 billion one-time gain from the sale of a
network to AT&T. It applied a large chunk of this profit to the SG&A
line, and that raised eyebrows. The SEC called IBM on the carpet over
the 1999 annual report, and issued a rule designed to make it harder
to avoid reporting asset gains as nonrecurring revenue. IBM's
accountants, however, stood pat -- until Mar. 11. Says a former SEC
official involved in the flap: "IBM was just putting its thumb in the
eye of the SEC and saying, 'We dare you to do something.'" <<

So what happened on March 11? Apparently, March 11 was when the
annual report was originally due out.  Rumor has it the SEC (Pitt
himself) called PWC and IBM together and read them the riot act, with
threats.  That's when IBM announced the annual report would be
delayed a couple of weeks.

Nothing better than getting religion even if it was the 11th hour...

Janet

Please see http://www.ibmemployee.com for summary links to press
articles and message board postings of interest to IBM employees,
retirees, friends and investors. This week's links include:

Forbes: IBM was boldly using revenue from patent licenses and profits
from asset sales to shrink its reported overhead costs. That
accounting doesn't fly anymore. Excerpts: "In 1999 IBM took a $4
billion one-time gain from the sale of a network to AT&T. It applied
a large chunk of this profit to the SG&A line, and that raised
eyebrows. The SEC called IBM on the carpet over the 1999 annual
report, and issued a rule designed to make it harder to avoid
reporting asset gains as nonrecurring revenue. IBM's accountants,
however, stood pat—until Mar. 11. Says a former SEC official
involved
in the flap:"IBM was just putting its thumb in the eye of the SEC and
saying, `We dare you to do something.'" ... "IBM resisted fuller
disclosure even as asset sales became common in Gerstner's overhaul
of the company. In 2000 IBM brought in almost half a billion dollars
by selling two factories in Italy and one in Minnesota, plus $90
million for an office complex in Charlotte, N.C. Last year the terms
of the deals, unannounced by IBM but in some cases disclosed in the
buyers' SEC filings, included $90 million for a factory in Japan and
unspecified sums for a second plant in Japan, a 100-person consulting
business and a unit that develops global-positioning
systems." ... "Growth played a small role in generating the huge
gains Gerstner delivered for shareholders. He better than tripled the
revenue from intellectual property royalties (only $400 million the
year he arrived). He moved IBM into services, which explains how head
count has grown 40% in six years to 320,000. Typical deal in that
genre is the $500 million contract IBM landed this month to run the
data processing operations of Nestlé."

Poughkeepsie Journal: Ex-IBM chief gets hefty pay. Excerpts: "In his
ninth and final year leading IBM Corp., Chairman Louis V. Gerstner
Jr. brought home his most lavish financial reward to date: $127.7
million." ... "After he retires, Gerstner will become a consultant to
IBM for a period of 10 years. He will receive a consulting fee based
on his daily salary rate at the time of his retirement, plus expense
reimbursement. Using his $2 million salary as a base, Gerstner will
earn roughly $7,692 for each day of consulting. Gerstner will also
continue to enjoy such perks as access to company aircraft, cars,
office and apartment. He will receive financial planning, home
security services and will be reimbursed for club expenses for
company business. Gerstner also stands to earn up to $382.1 million
from 5.8 million shares of stock options that he held Dec. 31."

U.S. Congressman James T. Walsh of White Plains writes a letter to
Lou Gerstner asking a favor...

Associated Press: Supreme Court Could Set Limits for Age-
Discrimination Claims in Company Layoffs. Extracts: "The Supreme
Court confronted the job safety fears of America's graying workers on
Wednesday in a case that asks whether older employees have the same
legal clout as minorities in discrimination claims. The justices, who
have lifetime appointments, are being urged by companies to make age
bias suits tougher to prove. If the court does so, employers would
have more leeway in cutting jobs." ... "Laurie McCann, a lawyer with
the lobbying group AARP, said workers still have concerns. 'When a
company needs to cut costs, it's almost a knee-jerk reaction to focus
on older workers,' she said."

"ibmoptioneer" reports on more "stealth" layoffs at IBM.
Excerpt: "Numbers appear to be about 4300 in IGS US wide and about
600-700 in Microelectronics worldwide."

Pittsburgh Tribune-Review: IBM lab being closed. Excerpt: "Another of
Pittsburgh's original Carnegie Mellon University-originated software
start-up stars is fleeing Pittsburgh, taking 136 jobs with it. IBM
Pittsburgh Lab, the former Transarc Corp., is being dismantled and
consolidated in a Raleigh, N.C., office of its behemoth corporate
parent."

"justa_bean_counter" explains and summarizes the financial details of
IBM's retirement and pension funds derived from the latest annual
report. Excerpt: "As reported by the WSJ, there might be trouble
ahead. Now that the glory days of big surpluses are over and the fact
that IBM has disclosed they will lower their Expected Long-Term
Return on Assets from 10% to 9.5% next year, IBM must begin to
distribute their losses (if any) over the next few years. So today,
we sit and observe in wonder as they continue to report big pension
income. Next year, you should begin to see pension income come down.
(maybe)"

CNBC and the Wall Street Journal: Supreme Court tackles age bias
case. Justices hear appeal of 1967 law that doesn't allow
lawsuits.
Excerpt: "The Supreme Court is taking up a case that could settle a
major discrimination question: Can older workers sue companies over
layoffs?"

The Journal News: IBM report to shareholders highlights finances.
Excerpt: "IBM also revised its reporting of retirement-related
information, revealing a $437 million boon to profits from the
company pension fund in 2001, up from $327 million in 2000. IBM
lowered its expected long-term return on its U.S pension plan assets
from 10 percent to 9.5 percent, while noting that in years' past the
company vastly underestimated the performance of the plan. For
example, IBM expected a 9.5 percent return in 1999 and actually saw a
13.5 percent gain."

There is lots of news on the house and senate pension reform bills,
including speculation on what might happen when the conference
committee meets to try to merge them together. Janet Krueger provides
a number of links to news articles concerning the pension reform
bills.

If you only want to view/lurk without signing in or without joining
the Group and becoming a member...
bookmark this URL and use it to view/lurk the IBMPENSION Group:
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- Under 'Email Address Display', click 'Hide my email and IP address
from Group monitors'
- Click 'Save Changes'

If you want to have the postings/messages sent to your email address,
such that you never have to sign onto Yahoo at all to get all the
messages being posted:
- Enter the IBMPENSION Group at:
http://groups.yahoo.com/group/IBMPENSION/ (and logon if you haven't
already)
- Click 'Edit My Membership' at the right side
- Under 'Message Delivery', select 'Individual Emails'
- Click 'Save Changes'

Posting:
You can post or reply to any post and your email address and IP
address will NOT be exposed. (given you did all the things above)
However, if you send email directly to someone by clicking on their
ID, then it WILL be exposed. All you have to remember is to reply to
the message, not the person's name (email), and you will be covered.
This means that you must reply to posts from the IBMPENSION Group
page. Do NOT reply to messages from your personal email, like Outlook
Express, AOL, or whatever your personal email application might be.

These basics apply to all Yahoo Groups.

The following article has a good overview on what has been happening with
pension legislation in congress...

Janet Krueger
--------------------------------
http://www.boston.com/dailyglobe2/083/oped/Post_Enron_fixes_come_in_two_sizes+.s\
html


  Post-Enron fixes come in two sizes


  By Thomas Oliphant, 3/24/2002


  WASHINGTON


  WHEN ENRON Corp. was collapsing like a house of marked cards four
  months ago, the popular sport was to speculate about whether it was a
  business scandal or a political mess.


  It's still early, but off the facts to date it is beginning to resemble
  a hybrid - a spectacular, scary business scandal with a potentially
  large political issue attached.


  The issue is not, as so many Democrats would wish, what President Bush
  or his higher-ups did or didn't do - or knew or didn't know. Instead,
  it's more basic: what is going to be done about it. From the White
  House and its allies in the House, the answer is a fairly loud Not Very
  Much. From the barely Democratic Senate, the answer is the opposite.


  The difference is as much ideological as partisan, but the battle lines
  have been drawn - in the form of two pieces of legislation that began
  moving through each chamber last week. Ironically, the struggle pits
  two men against each other who just finished an unlikely period as
  allies in fashioning a major reform of federal aid to the public
  schools - Republican Representative John Boehner of Ohio and Senator
  Edward M. Kennedy. Looming is the possibility of stalemate, which would
  leave intact the rules under which Enron operated toward employees and
  retirees before its collapse, which largely protected the company's
  unscrupulous executives and shafted thousands of workers.


  The Do Little approach goes no further than curbing the most glaring
  outrages exposed by the Enron debacle. The best example would permit
  employees who have held their company's stock as part of their 401(k)
  retirement plans for at least three years (a standard vesting period)
  to sell their shares whenever they want to. Other parts of the Boehner
  legislation would speed the flow of material financial information
  about their company.


  The House bill also contains one excellent idea that its Senate
  antagonist doesn't - a prohibition on stock sales by company officers
  during any period when workers are locked down. But that's it. As
  Kennedy and his supporters note, virtually all the damage done to
  Enron's employees could still have been done had this proposal been the
  law last year.


  The basic problem is that companies like to have built-in demand for
  their shares in house and are not shy about touting their stock beyond
  the limits of prudence. Backed by subsidies in the tax laws companies
  gently nudge their employees on their best days and nakedly coerce them
  on their worst.


  This is the atmosphere Kennedy's legislation would improve markedly, by
  mixing reforms that empower workers with others that foster truly
  informed choice. It also recognizes that while there are currently 42
  million workers in 401(k) plans holding some $1.8 trillion in assets
  (about 20 percent of it in the firms the workers toil for), there are
  still 50 million people in 600,000 defined benefit programs.


  Last December, there was much talk and one legislative proposal (by
  Democratic Senators Jon Corzine of New Jersey and Barbara Boxer of
  California) to limit to 20 percent the portion of any worker's 401(k)
  portfolio that could be in his own company's stock. The idea was never
  politically practical, though it should be remembered that all
  taxpayers subsidize these plans and it is a valid argument that federal
  tax subsidies shouldn't encourage one-company stock gambles.


  Kennedy, whose bill cleared committee last week along with Boehner's,
  attacks the issue differently. His proposal offers a choice: a 401(k)
  plan where the worker contribution is matched by the company with its
  own stock; or a separate program for investment by a worker in his
  company's stock. The company could offer both, but only if it also
  offered its employees a defined benefit pension. The idea is to enhance
  both choice and the security of a guaranteed benefit, which ought to be
  more in vogue post-Enron.


  On information and empowerment, Kennedy is very tough. Workers'
  representatives would be on retirement plan boards, and they would have
  to get at least 30 days' notice before the start of any lockdown period
  when they couldn't sell their shares. In addition, investment advisers
  to retirement plans could have no other ties to the companies whose
  workers they counsel; there would also be legal penalties for giving
  misleading financial information to employees.


  In the House, the Boehner proposal can probably make it on a partisan
  vote. In the Senate, however, a GOP filibuster could block Kennedy on
  the floor and force some compromises.


  The risk, therefore, is gridlock and no bill at all. In the corporate
  world, that would be welcomed. For workers, who are learning how little
  like a ''family'' most companies really are, the exposure to the next
  Enron would remain total.

Another good article on the debates in Congress...

http://www.washingtonpost.com/ac2/wp-dyn/A6222-2002Mar23?language=printer

401(k) Debate: The Jackpot vs. the Sure Thing


By Albert B. Crenshaw
Sunday, March 24, 2002; Page H04


The debate emerging from congressional efforts to rewrite the rules governing
401(k) and similar retirement savings plans highlights a key question that is
rarely asked aloud but underlies the structure of these plans:


Should they be designed to allow workers to try to get rich by taking big risks,
or should they be restricted so that there is less risk -- and potentially less
reward?


The question arose last week as the Senate Committee on Health, Education, Labor
and Pensions debated a set of rules proposed by Chairman Edward M. Kennedy
(D-Mass.).


To committee Republicans, 401(k) plans are a chance for workers to hit the
jackpot, "to accumulate wealth," as Sen. Judd Gregg (R-N.H.) put it, and if they
want to take risks to do that, they should be allowed to.


To Kennedy and other Democrats, these retirement plans are about security, not
riches, and workers should be restricted to a relatively prudent investment
strategy unless they are backstopped by a traditional pension.


"I don't think there is a more important priority for Congress than the
retirement security of American workers," Kennedy said.


At issue was a provision, sponsored by Kennedy, that would allow employers to
contribute their stock to workers' accounts or to include company stock among
the workers' investment options, but not both. Companies that also have a
traditional pension plan -- the kind that guarantees retirees a lifetime stream
of income -- would be exempt from the restriction.


This latter arrangement, under which a retiree would have Social Security, a
traditional pension and a retirement savings plan, is often cited as ideal.
Social Security and the traditional pension provide income that cannot be
outlived, and both are backed by the government. The 401(k) or other retirement
savings plan offers a chance to grab for the brass ring -- with the assurance
that if you miss you won't starve.


But such setups are becoming less and less common. For many workers, the 401(k)
is the primary pension plan, so if it goes on the rocks, as it did for employees
of Enron Corp., they have only Social Security and perhaps some other savings to
fall back on.


To Republicans, the potential payoff is worth the risk, and they argue that
well-informed workers can decide what is in their best interest better than the
government can.


"The way you protect people who have pension plans is you give them
information," Gregg said, adding that the Kennedy plan smacks of "paternalism."


To opponents of Kennedy's bill, the model is the clerk at Wal-Mart or some other
successful company who rides the stock to the end of the rainbow. "Many
Americans have retired with far more wealth than they ever would have dreamed,"
said Sen. Susan Collins (R-Maine).


Kennedy and his allies argue that workers who want to bet on their employer's
stock are free to do so in taxable accounts. But tax subsidies for retirement
plans cost the taxpayers $340 billion over five years, and what taxpayers expect
for that subsidy is a system that does not leave workers free to gamble with
their retirement plans and then go to the government for assistance when the
bets don't pay off.


Taxpayers have a right to demand diversification, Democrats say. This will
reduce your chances of getting rich, but it will also reduce your chances of
ending up poor, in their view.


In the debate, the Republicans ignored the exemption in Kennedy's plan for
companies with a traditional pension plan as well.


Traditional plans, they and many employers argue, are expensive and difficult to
operate. It's quite hard, they imply, for professional investment managers to do
well enough with their investments to ensure that the benefits can be paid for.


At other times, though, they argue that amateur investment managers -- i.e., the
workers -- guided only by advice from someone like a stockbroker, have an
excellent chance of racking up "real wealth" via their 401(k) plans.


If it were really that easy to rack up wealth, you'd think companies would be
falling all over themselves to set up traditional pension plans because under
current accounting rules they can count excess earnings from such plans as
corporate profits.


But there is no such rush. Evidently, companies think pension investing is too
risky to be left to the professionals and should be kept in the hands of
amateurs.


Whichever side prevails, there are going to be trade-offs.


The risks of permitting workers to concentrate in their employer's stock have
been made clear by Enron.


But a diversified portfolio doesn't guarantee success either. Such a portfolio
is more likely to approximate the performance of the market overall, and it will
provide an adequate retirement only if (a) the worker puts enough money in and
(b) the market performs well.


If policymakers were really serious about addressing the looming
retirement-income problem, they would be trotting out ways to encourage and
improve traditional pensions. Give Kennedy credit for trying a bit of
encouragement -- but otherwise, don't hold your breath.



   ----------


© 2002 The Washington Post Company


[Non-text portions of this message have been removed]

Pitt thinks there is more than enough regulation in place already relative to
the auditing of corporate accounts.  If you disagree, please let your
representatives in Washington know!  The voices of corporate lobbyists are
getting louder, insisting that congress do nothing...

Janet Krueger
-------------------------------------------------------------------------------
http://www.latimes.com/news/opinion/editorials/la-000021572mar25.story?coll=la%2\
Dnews%2Dcomment%2Deditorials

SEC Chief's Blind Eye

How's this for odd timing in the post-Enron era? At the same moment the Justice
Department is indicting the accounting firm Andersen for its role in a debacle
that surely will cost thousands their retirements, the chairman of the
Securities and Exchange Commission is speaking out against cracking down on the
industry that allowed such corporate abuse.

Nervous investors long for someone to restore the public's faith that capital
markets are free and fair. But SEC Chairman Harvey L. Pitt told the House
Financial Services Committee Wednesday that Congress should back off from
regulating auditors. Pitt does not deny that the industry has troubles.
Appearing Thursday before the Senate Banking Committee, he acknowledged that
Enron had shaken public confidence in corporate governance and accounting
regulation and he suggested that the 1990s bull market had pushed corporations
to fudge and obscure "potentially adverse results." In other words, "to lie."

Sens. Christopher J. Dodd (D-Conn.) and Jon Corzine (D-N.J.), members of the
Banking Committee, have proposed tough regulations that include forcing
companies to switch auditors every four years. Pitt, like others in the Bush
administration, sees any new regulation as onerous and says it would only hamper
industry. Instead, he wants to let the SEC and the free market handle all
problems. He is on the right track in arguing for stronger enforcement by the
SEC, more timely disclosure statements and stiffer penalties for senior
corporate officials who provide misleading information. He also wants to create
a private-sector "Public Accountability Board" to help oversee what little
regulation he does embrace. None of this would cause crooked accountants to lose
sleep.

The board that Pitt proposes would not wield subpoena powers. What's more, Pitt
refuses to tackle the most egregious problem, namely the lavish consulting fees
that auditing companies can collect from the very corporations whose books they
are supposed to police. (About half of the $52 million that Enron paid Andersen
in 2000 consisted of such fees.)

Lawmakers must decide whether to heed their angry, jittery constituents or Pitt.
We suggest the former. Move ahead with legislation to rein in the auditing
industry, whose work investors must trust completely if they are to regain full
faith in capitalism. For his part, Pitt could still play a constructive role. A
lawyer who amassed millions representing big accounting firms, he could stop
trying to protect his former employers and worry about protecting his new
client--the public.

If you want other stories on this topic, search the Archives at
latimes.com/archives. For information about reprinting this article, go to
www.lats.com/rights.

This administration is developing a reputation of hiring arsonists to
fill fire chief jobs, Harvey is another in a list growing by day.
Bring on the next enron and remember, IT's NOT POLITICAL every
TV station, radio, newspaper and of course politician says so,...
  so it must be true!



--- In ibmpension@y..., Janet_Krueger@c... wrote:
>
>
> Pitt thinks there is more than enough regulation in place already
relative to
> the auditing of corporate accounts.  If you disagree, please let
your
> representatives in Washington know!  The voices of corporate
lobbyists are
> getting louder, insisting that congress do nothing...
>
> Janet Krueger
>
----------------------------------------------------------------------
---------
>
http://www.latimes.com/news/opinion/editorials/la-000021572mar25.story
?coll=la%2Dnews%2Dcomment%2Deditorials
>
> SEC Chief's Blind Eye
>
> How's this for odd timing in the post-Enron era? At the same moment
the Justice
> Department is indicting the accounting firm Andersen for its role in
a debacle
> that surely will cost thousands their retirements, the chairman of
the
> Securities and Exchange Commission is speaking out against cracking
down on the
> industry that allowed such corporate abuse.
>
> Nervous investors long for someone to restore the public's faith
that capital
> markets are free and fair. But SEC Chairman Harvey L. Pitt told the
House
> Financial Services Committee Wednesday that Congress should back off
from
> regulating auditors. Pitt does not deny that the industry has
troubles.
> Appearing Thursday before the Senate Banking Committee, he
acknowledged that
> Enron had shaken public confidence in corporate governance and
accounting
> regulation and he suggested that the 1990s bull market had pushed
corporations
> to fudge and obscure "potentially adverse results." In other words,
"to lie."
>
> Sens. Christopher J. Dodd (D-Conn.) and Jon Corzine (D-N.J.),
members of the
> Banking Committee, have proposed tough regulations that include
forcing
> companies to switch auditors every four years. Pitt, like others in
the Bush
> administration, sees any new regulation as onerous and says it would
only hamper
> industry. Instead, he wants to let the SEC and the free market
handle all
> problems. He is on the right track in arguing for stronger
enforcement by the
> SEC, more timely disclosure statements and stiffer penalties for
senior
> corporate officials who provide misleading information. He also
wants to create
> a private-sector "Public Accountability Board" to help oversee what
little
> regulation he does embrace. None of this would cause crooked
accountants to lose
> sleep.
>
> The board that Pitt proposes would not wield subpoena powers. What's
more, Pitt
> refuses to tackle the most egregious problem, namely the lavish
consulting fees
> that auditing companies can collect from the very corporations whose
books they
> are supposed to police. (About half of the $52 million that Enron
paid Andersen
> in 2000 consisted of such fees.)
>
> Lawmakers must decide whether to heed their angry, jittery
constituents or Pitt.
> We suggest the former. Move ahead with legislation to rein in the
auditing
> industry, whose work investors must trust completely if they are to
regain full
> faith in capitalism. For his part, Pitt could still play a
constructive role. A
> lawyer who amassed millions representing big accounting firms, he
could stop
> trying to protect his former employers and worry about protecting
his new
> client--the public.
>
> If you want other stories on this topic, search the Archives at
> latimes.com/archives. For information about reprinting this article,
go to
> www.lats.com/rights.

Oh, MY GOD!

http://www.djurdjevic.com/Bulletins2002/08(IBM-Pension).html

DJ did a great job honing right into the eye of the bull.  I have
many of the same questions he has raised.

Here's my letter to the SEC:

Dear FASB:  What's wrong with this picture?  Can YOU find Waldo?

1) Fact.  The fair value of our trust fund has plummeted 12.3b since
1999. Our surplus has plummented 16.5b over the same period. HOW????
Well the primary reason IBM tells us is that the actual return we
received from our assets fell 15.5b. WHY????

Can anyone out there shed some light on this piece? Please allow me
to show you what 15.5b looks like. $15,500,000,000.00

2) FACT. Vapor income has increased over six fold since 1999. What's
that called? sixtrupled??? (as reported by IBM on page 96 Annual
Report, which includes the impact from ALL its plans.)


--- In ibmpension@y..., deep6ed <no_reply@y...> wrote:
> Oh, MY GOD!
>
> http://www.djurdjevic.com/Bulletins2002/08(IBM-Pension).html

I got my 2002 IBM proxy and IBM annual report. It is fine.

However, a co-IBMer with over 5500 shares of IBM, got only a proxy vote card and
instructions to go online to read proxy resolutions and the annual report.

He wants to read the proxy resolutions and went online. But he could not read
them immediately! He has sent in a request for resolution verbage. The
confirmation says that he will get the resolutions via e-mail, in a matter of
days! Nuts... e-mail as slow a snail mail to deliver IBM shareholder info!

Has anyone else had this occur to them? Why treat a shareholder this way? Just
to save the cost of paper, as IBM says? Could people somehow unknowingly
authorized e-mail IBM shareholder and proxy info only?  Hope this is rarely
occuring!

It's a shame this is happening. It will easily discourage voting.
Many won't even bother to read up on the issues at hand.

I prefer hardcopy so I can make personal notations in it (complete
with post-it-notes sticking out all over the place) and file it with
the others I hold.  I'd hate to think I have to spend my own ink and
paper to print out the entire book and proxy.  The price of ink is a
consideration all it's own!  With hardcopy, I can store the material
indefinately in my basement.  With e-mail or a web site, it can
dissapear overnight with the click of an administrator's keystroke.

If you want to read up on what the SEC thinks about this new delivery
method, here is the URL.  (yes, it is OK with the SEC, given certain
conditions are met)

http://www.sec.gov/news/studies/techrp97.htm


--- In ibmpension@y..., ibm_warrior <no_reply@y...> wrote:
> I got my 2002 IBM proxy and IBM annual report. It is fine.
>
> However, a co-IBMer with over 5500 shares of IBM, got only a proxy
vote card and instructions to go online to read proxy resolutions and
the annual report.
>
> He wants to read the proxy resolutions and went online. But he
could not read them immediately! He has sent in a request for
resolution verbage. The confirmation says that he will get the
resolutions via e-mail, in a matter of days! Nuts... e-mail as slow a
snail mail to deliver IBM shareholder info!
>
> Has anyone else had this occur to them? Why treat a shareholder
this way? Just to save the cost of paper, as IBM says? Could people
somehow unknowingly authorized e-mail IBM shareholder and proxy info
only? Hope that this sort of thing does not cost votes for the IBM
employee sponsored resolutions!

An SEC complaint filed yesterday in the
Chicago U.S. District Court charges a
Chairman of the Board and ex-CEO, along
with 5 company officers in a scheme
to inflate earnings to obtain
performance-based bonuses and valuable
stock options.

The accused ex-CEO had filed a suit
last month claiming that the SEC is not
entitled to sue him because the charges
are based on analysis by two former
consultants to his company who are
currently accountants within the SEC
enforcement division.

The ex-CEO firmly believes that "while under my watch,
all of Waste Management's fincancials were fairly
reported and in compliance with GAAP(generally
accepted accounting principles).  I was never
told otherwise , either by our internal accountants
or our outside auditors (Arthur Anderson LLP)".

Today's AP story explains that Anderson had supplied
32 "must-do" steps to cover up the scheme that ran
from 1992 until the company was acquired in 1997.
It was the 1997 incoming CEO's review of accounting
practices that led to a 1998 restatement of earnings
of -$1.7B and a subsequent decline in stock price.

According to the SEC, management received performance-
based bonuses and valuable stock options based on
inflated earnings with several cashing in their stock
before unfavorable earnings reports cut share prices.
In one instance, the SEC said, the CEO received a
tax benefit by donating inflated company stock to
his college alma mater to fund a building in his
name.

Last November, the company paid a $457M settlement
on a investor class-action suit of similar charges.
Yesterday's SEC complaint identified the CEO as "the
driving force behind the fraud."

American Benefits Council publishes full text of Kennedy committee-
approved Pension Reform Bill

  http://www.americanbenefitscouncil.org/main.shtml

    Excerpt: "This new version of the bill reflects the last-minute
changes by the Kennedy office in preparation for committee
consideration as well as the amendments adopted during the
committee's mark-up procedure." (American Benefits Council)

SEC Asked IBM to Amend '99 Report
Thu Mar 28

NEW YORK (Reuters) - The Securities and Exchange Commission asked
International Business Machines Corp. to consider amending its 1999
annual report, the Wall Street Journal reported in its online edition
on Thursday.

The SEC had sent letters to IBM in mid-2000 questioning the way the
No. 1 computer maker booked a $4.06 billion gain from the sale of its
Global Networks business, said the Journal, which obtained the four
letters under the Freedom of Information Act.

Instead of booking the gain separately, IBM included it as an offset
to expenses under the "Sales, General and Administrative" line in its
income statement, the paper reported.

The letters also asked whether the company had told investors enough
about the extent to which pension fund gains contributed to its
bottom line, the paper said.

IBM in a statement said that comment letters such the four are
routine for large, public companies and that the issues were closed
in a satisfactory manner, the paper reported.

The SEC request didn't lead to any changes in the company's annual
report.

Concerns that IBM used gains from the sale of a unit until late in
the quarter to meet fourth-quarter earnings expectations have hurt
the blue-chip company's share price in recent times.

Investors have become increasingly critical of corporate accounting
practices since energy trader Enron Corp.'s collapse.
--------------

I repeat a previous post of mine:
Fact. The fair value of our trust fund has plummeted 12.3b since
1999. Our surplus has plummented 16.5b over the same period. HOW????
Well the primary reason IBM tells us is that the actual return we
received from our assets fell 15.5b. WHY????

Can anyone out there shed some light on this?

SEC Urged IBM in 2000 to Consider Amending Its 1999 Annual Report
By WILLIAM M. BULKELEY Staff Reporter of THE WALL STREET JOURNAL
(exceprts - online for full article)

The Securities and Exchange Commission was concerned enough about
International Business Machines Corp.'s financial disclosure
practices two years ago that it asked the company to consider
amending its 1999 annual report.

In the letters, SEC questioned a number of IBM's accounting and
disclosure practices, including the way it booked a $4.06 billion
gain from an asset sale, and whether the company had told investors
enough about the extent to which pension fund gains contributed to
its bottom line. The four SEC letters were obtained through a Freedom
of Information Act request.

IBM declined to provide its responses to the SEC, but pointed out
that it didn't amend its financial filings for 1999 or the first
quarter of 2000, as the SEC staff had urged. In a statement, IBM
said "comment letters such as these are routine for large, public
companies," adding that the issues "were closed in a satisfactory
matter."

"We are concerned that your response ... was insufficient,
particularly with respect to the effects of pension and post-
employment plan assets and liabilities, and the effects of foreign
tax differentials, on operating results and financial position." -- A
2000 letter to IBM from SEC Assistant Director James M. Daly
expressed concerns about IBM's accounting practices.

But in a letter to IBM dated June 30, 2000, SEC Assistant Director
James M. Daly again questioned the treatment, saying "We would expect
material gains to be separately stated." He suggested IBM should
consider amending its 1999 annual report to change this and other
practices.

In the June 30 letter, Mr. Daly also urged IBM to further explain
about 20 other items, including the impact on earnings of pension
income and changes in its foreign tax rates.

The SEC criticized the "Management Discussion and Analysis" or MD&A
section of the 10-K and the 8-K report covering the first quarter of
2000 for its shortage of information about pension income.

Indeed, IBM didn't even mention pension income in that section of its
1999 10-K. But in a table covering its retirement plans it disclosed
they contributed $694 million, or 5.9% of IBM's $11.76 billion in
pretax income.

The SEC said in one letter that "the increasingly favorable impact of
the yield on employee plan assets would appear material to
understanding the quality of earnings and liquidity." It noted that
IBM can't directly use those assets in its operations, even though it
can book the income. A number of investors have noted that without
pension gains, IBM's pretax income this past year would have been
lower than it was five years ago.

In its second letter to IBM, the SEC said "we appreciate" promises
IBM apparently made to provide additional disclosure in future years.
In fact, in the MD&A in its 10-K for 2000, IBM did include
information on the gains on its pension plans which amounted to $1.17
billion that year.

And, following the Enron Corp. debacle and the heightened focus on
accounting issues at large companies, IBM in its recently filed 2001
annual report began separately reporting gains from asset sales,
citing a desire to meet investor demands for more complete disclosure.

In a separate letter also obtained under the Freedom of Information
Act request, the SEC said that the Enforcement Division "has
commenced an inquiry regarding certain matters." The SEC declined to
comment on that inquiry.

An IBM spokesman said that inquiry didn't relate to financial matters
but involved a long-running bribery case involving IBM employees in
Argentina. As reported, in December 2000, IBM settled SEC allegations
regarding the case by paying a $300,000 fine without admitting or
denying guilt. The SEC had said that IBM's 1994 report unknowingly
incorporated false data from its Argentine subsidiary.

--Mark Maremont in Boston contributed to this article. Write to
William M. Bulkeley at bill.bulkeley@... Updated March 28, 2002
-----------------------

I repeat a previous post of mine:
Fact. The fair value of our trust fund has plummeted 12.3b since
1999. Our surplus has plummented 16.5b over the same period. HOW????
Well the primary reason IBM tells us is that the actual return we
received from our assets fell 15.5b. WHY????

Can anyone out there shed some light on this?

I also found a similar article on CNN at:

http://money.cnn.com/2002/03/28/technology/IBM/index.htm

Following is a cut and paste from that article:

SEC asked IBM to restate data

Report: Agency questioned Big Blue's accounting practices, gains
in 1999 annual report.
March 28, 2002: 6:53 AM EST

NEW YORK (CNN/Money) - The
Securities and Exchange Commission
asked computer maker IBM to consider
restating its 1999 annual report due to
concerns about its disclosure practices
two years ago, according to a published
report.

The Wall Street Journal reported Thursday that the request, which
did not lead to any changes, came in the form of a series of testy
letters in which it questioned a number of IBM's accounting
practices, including the way it booked a $4.06 billion gain from
an asset sale.

Questions last month about how IBM accounted for gains from an asset
sale in its fourth quarter financial report sent Big Blue's stock
sharply lower and prompted the company to promise to disclose greater
details in future financial reports.

The Journal said it got access to the SEC letters to IBM through a
freedom of information request. IBM declined to give the paper copies
of its responses to the letters. The Journal quoted IBM as saying
that "comment letters such as these are routine for large, public
companies," and that the issues raised by the SEC were closed in a
satisfactory manner.

The paper says securities
lawyers said that while the SEC
questions about accounting
practices are normal, it is not
unusual for the issue of
restatement of an annual report
to be raised.

"When they talk about amending, that's serious," the paper quotes
Howard Schiffman, a Washington securities lawyer, as saying. He said
since IBM did not change the statement, it likely means that the SEC
staff did not believe the questions were serious enough to turn the
matter over to the agency's enforcement division.

A new attention to
accounting practices by
investors in the wake of the
collapse of Enron Corp. has
sent many different
companies' stocks sharply
lower in recent months when
there is any question raised
about the validity of their financial
data.

I read the following things on the ibmpension home page:
* * *
ibmpension · IBM Pension - A place to talk about IBM pension
conversions

See post summaries on www.ibmemployee.com. Posts will be deleted
if:

1)They advocate illegal activities, violence, vandalism, or
sabotage.
2) They are spam (advertising).
3) The author requests removal.
4) They denigrate other people.
5) They debate editorial policies of this board.
6) They have nothing to do with the topics of this board.
* * *
In my opinion, this board may have been originally created to
talk about IBM pension conversions but it seems to me it has
long since morphed into something else. Is its purpose really
to talk about IBM pension conversions now? If not, what is its
purpose?

There have been a number of different boards that have been
created as spring boards off of this one which have similar
purposes to this one. It would be logical to me to have more
than one board but to have different purposes for the different
boards so that folks can more easily find and discuss their topics
of interest.

ibmpension board founders, what are your thoughts?

See  http://www.plansponsor.com/content/News/Rules/jointtrusteereax

(registration may be required)

Of particular note is the fact that our friends at ABC (American
Benefits Council, an industry shill group) are busy at work:

"Delaplane continued that joint boards could potentially distort
ordinary fiduciary duties. "In some sense, a joint trusteeship is a
breeding ground for conflicts; employee representatives will be
elected by employees and will be seen as advocates of employee causes.
This can turn fiduciary decisions into adversarial and politicized
issues."


There must be a SELECTION but who says there has to be an ELECTION?

C.

'distort ordinary fiduciary duties'???
I promise Mr. Deleplane, I will NOT distort ordinary fiduciary
duties.  It's the inordinary fiduciary duties that concerns me.
Gosh, I do believe the SEC is concerned also.

'...will be seen as advocates of employee causes..???
So... What's your point Mr. Deleplane?  I don't have rights?  I don't
have a voice?

Court: you might want to post this one on the union board also.  It
is sooooooo ripe.

--- In ibmpension@y..., "courtault" <courtault@y...> wrote:
> See  http://www.plansponsor.com/content/News/Rules/jointtrusteereax
>
> (registration may be required)
>
> Of particular note is the fact that our friends at ABC (American
> Benefits Council, an industry shill group) are busy at work:
>
> "Delaplane continued that joint boards could potentially distort
> ordinary fiduciary duties. "In some sense, a joint trusteeship is a
> breeding ground for conflicts; employee representatives will be
> elected by employees and will be seen as advocates of employee
causes.
> This can turn fiduciary decisions into adversarial and politicized
> issues."
>
>
> There must be a SELECTION but who says there has to be an ELECTION?
>
> C.

--- In ibmpension@y..., choicer29yrs <no_reply@y...> wrote:
> I also found a similar article on CNN at:
>
> http://money.cnn.com/2002/03/28/technology/IBM/index.htm

And another one on:

http://www.msnbc.com/news/730815.asp?0na=x222C130-

< I repeat a previous post of mine: Fact. The fair value of our trust
fund has plummeted 12.3b since 1999. Our surplus has plummented 16.5b
over the same period. HOW???? Well the primary reason IBM tells us is
that the actual return we received from our assets fell 15.5b.
WHY???? Can anyone out there shed some light on this? >

I might be responsible for part of this loss, although, it wasn't by
my choice.

I was laid off in 2001.  As part of the layoff, I was given a
separation package of 26 weeks pay and medical benefits.  The cost of
these benefits came from somewhere.  There were no special charges
reported for the numerous layoffs that occurred last year.  There has
been some speculation these benefits were paid out of the pension
fund surplus.  Could that be the case and how much of the asset loss
can be attributed to layoffs?

One of IBM's favorite little baby is "The Masters Golf - Aug. 8-14"
where the Exec's, PEP Exec's, and Client Exec's like to fly in with
their customers and do a little smoozing on the company expense
account is comming up.


What a great opportunity to do a little PR work for our pension
cause. Naturally only the Pro's are allowed to drive down Magnolia
Lane, that leaves only 1 or 2 other entrances for all visitors to get
access to the course.

AKA...a perfect venu for a few demonstrators at the entrance gates.

I am sure Lou will be there being the "Hacker" that he is and the
downsizing "Hacker that he was".

Think about it.....all we really have to deal with are the redneck
cops from GA.

http://www.iseriesnetwork.com/nwn/story.cfm?ID=14140
by  Jill R. Aitoro
Industry Reporter

March 28, 2002

Earlier this month, IBM stockholders big and small sat at the edge of their
swivel chairs in anticipation of IBM
   ----------


's 2001 annual report. Big Blue promised to
provide more information about how it arrived at its numbers. But while some
observers say IBM delivered on that promise, others say the factors driving
IBM's public numbers are as elusive as ever.

The 2001 annual report released last week brought with it new and expanded
information in the management discussion and analysis section, as well as in the
financial statements. For starters, a couple of added items make the chore of
wading through the 112-page report somewhat less arduous.

A Road Map discussion gives perspective on the financial section and helps with
navigation, and a Focus Items of 2002 section highlights the year's performance
benchmarks. IBM better illustrates its Global Financing operation in the Debt
and Equity section with expanded discussion and a newly incorporated graph. And
formerly omitted details concerning such things as real estate and accounts
receivable are now in its Notes to Consolidated Financial Statements. "The data
in the annual report doesn't answer all the questions," says Gary Helmig, a
financial analyst at Soundview. "[But] it certainly provides the data so people
can understand it."

But of more interest to analysts and stockholders alike is the expansion of
disclosures included in the Retirement-Related Benefits section and in the
Expense and Other Income section. Specifically, IBM responded to the ruckus
caused by its arguably sneaky -- but entirely legal -- treatment of pension fund
surpluses as income. In an effort to come clean, Big Blue revised the pension
disclosure to include "the combined impact of all retirement-related benefit
plans and to provide a clearer discussion of pension assumptions," an IBM
announcement stated. That meant expanded discussion and a table with historical
actual average rates of return and assumptions about expected return.

"It doesn't answer the concerns raised in the past" regarding pension assets
because IBM still adds pension surplus to its bottom line, Helmig says. "But it
provides the data relevant to the issue. People still want to agitate about
whether or not it's fair to have a company report gains on the pension plan as
income gains, but that is the way companies are supposed to report."

Companies typically take an average of returns on pension plan investments and
predict what will happen going forward based on changes in the previous year,
Helmig says. "This is not something IBM just gooses around with," he says.
"People don't understand there are formulas -- a company can't make stuff up to
force a number."

Still, some folks are perturbed by the lack of explanation for the disappearance
of $17 billion from the pension fund over the course of two years, says Bob
Djurdjevic, president of Annex Research. "The report makes no reference as to
where the money went," he says. "Seventeen billion dollars vanished."

IBM handles the pension fund through a diversified asset management program,
says IBM spokeswoman Carol Makovich. Like millions of investors around the
world, IBM lost money -- including the $17 billion from the pension fund -- on
the international financial market. "The pension asset value still exceeds
future obligation," Makovich says. "Despite the decline, IBM doesn't anticipate
a need to make a contribution to the fund. It's still in good shape."

The 2001 annual report also included separate listings for intellectual property
and custom development income on the statement of earnings. While IBM should get
credit for showcasing just how much money its ingenuity generates, Helmig says
that this separate listing could lead to yet another debacle. "People are
probably worse off knowing the information because IBM used it to manage
earnings results," just as it did with its pension assets, Helmig says. "Being
invisible as to how it flowed quarter to quarter allowed IBM to do that. Now
that people see it visibly, they realize that what they thought was an element
of predictability on IBM's earnings actually can't be predicted at all."

All said, the changes to IBM's financial report amount to no more than a
facelift, Djurdjevic says. "The changes are cosmetic and a means of pulling the
wool over people's eyes." As compared to last year, he says, little of
significance changed in format.

But major change takes time, counters Helmig, particularly for a mammoth company
like IBM. "There's always more to report," he says. As time goes, he expects
that stockholders will get a more detailed look at IBM's finances. For example,
Helmig expects IBM will eventually break out the short-term, project-oriented
orders and the long-term, outsourcing orders from Global Services earnings.
"There will be more that IBM reports as time goes on," he says. "But it's a very
big company, with a huge number of $30 million transactions happening every
quarter. Analyzing every single one would drive anybody nuts."
-- Jill R. Aitoro, Industry Reporter, iSeries Network

Copyright 2002, Penton Technology Media
http://www.iseriesnetwork.com





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