Bloomberg News

Philadelphia Orchestra’s Pension Claims Labor Deal Cancels Fund

October 12, 2011

Oct. 12 (Bloomberg) -- The Philadelphia Orchestra’s pension fund claims a new collective bargaining agreement the company reached with its union allows it to cancel the fund.

The American Federation of Musicians and Employers’ Pension Fund claims the Orchestra has misrepresented its financial situation to avoid up to $35 million in obligations to the fund.

The orchestra “has distorted aspects of its financial condition so that it could eliminate its obligations to pay for pension benefits that were already earned,” said Raymond Hair, co-chair of the pension fund, in a statement today.

Lawrence G. McMichael, a lawyer representing the orchestra, wasn’t immediately available to respond to a phone call seeking comment on the fund’s allegations and the new labor accord.

The musicians will vote on the new contract tomorrow, said Susan Martin, an attorney for the union, in an e-mail. Joseph Parente, president of the Local 77 AFM Philadelphia Musicians’ Union, did not immediately return a call for comment.

The pension fund sought court permission last week to investigate donations received by the orchestra, to determine if the funds would be available to satisfy its claims, according to court documents.

Alan Raphael, co-chair of the pension fund, said in the statement he “sees no alternative to litigation” to protect the musicians.

The company has about $120 million in endowments which can’t be used to pay general operating expenses, according to the statement. The fund said it has already discovered that a $2 million donation was mischaracterized.

The April bankruptcy filing was partly blamed on the high cost of the musicians’ pensions. The orchestra, which listed less than $50 million in both assets and debt, also needed to renegotiate the musicians’ labor contract.

The case is In re The Philadelphia Orchestra Association, 11-13098, U.S. Bankruptcy Court, Eastern District of Pennsylvania (Philadelphia).

--Editors: John Pickering

To contact the reporter on this story: Michael Bathon in Wilmington, Delaware, at mbathon@bloomberg.net; To contact the reporter on this story: Steven Church in Wilmington at schurch3@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net.


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