US alleges fraud in Sun Capital case

WILBRAHAM, Mass. (WWLP) - The pensions of hundreds of Friendly's employees and retirees could be affected because of actions allegedly taken by company owner Sun Capital Partners.

The government agency that insures employee pension plans is accusing the owner of Friendly's Ice Cream Corporation of illegally moving assets to avoid paying out $105 million dollars in retirement benefits.

Court documents filed by the Pension Benefit Guaranty Corporation say the company transferred the assets from the ice cream chain to another Sun Capital affiliate days before Friendly's filed for Chapter 11 Bankruptcy.

The documents claim this move lets Sun Capital still control the company, without needing to pay out the retirement benefits.

The Pension Benefit Guaranty Corporation claims Sun Capital left the pension plan abandoned and underfunded, while giving the PBGC no way to recoup their losses for insurance payouts.

The private equity firm has not yet responded to our request for a comment.

Here is Friendly Ice Cream Corporation's statement on the matter:

The Pension Plan will continue to be maintained and administered by the Plan Trustee and benefits will continue to be paid from plan assets in accordance with its terms and consistent with past practice. 

It is important to know that the assets of the Pension Plan are held in a trust and, under law, can only be used to pay pension benefits and certain related plan expenses.  Under the law, neither the Company nor any creditor of the Company may access these plan assets for any other purpose than to pay benefits or expenses under the Pension Plan.

As part of our restructuring, we are evaluating all options available to us with respect to the Pension Plan.  It is possible that, as part of the Company’s restructuring, the Pension Plan may be taken over by the Pension Benefit Guaranty Corporation (PBGC) which will continue to pay our retirees their pension benefits as per PBGC guidelines.   In general, when the PBGC assumes a pension plan it is normally a smooth transition with the PBGC continuing to administer the plan in accordance with the plan documents and PBGC rules.  However, it is too early to predict what impact, if any, there could be on each individual participant.