Lucent Retirees Organization

K. O. Raschke, President

231 Pinetuck Lane    Winston-Salem, NC 27104   Phone: 336-765-9765

June 13, 2004


Ms. Elaine L. Chao, Secretary of Labor

U.S. Department of Labor

200 Constitution Avenue NW

Washington, DC 20210


Dear Secretary Chao,


The Department of Labor has advised retirees they are often in the best position to be a watchdog over their pension plan in order to catch problems. The Lucent Retirees Organization (LRO) has endeavored to be an advocate for pensioners to obtain answers from Lucent about its investments of monies to secure the future of Lucent retirees.  However, Lucent has thwarted our every attempt to gain information that would help 235,000 Lucent retirees and their dependents sleep better at night knowing that their pensions are secure.


I am writing to ask your agency’s guidance on what can we do when Lucent has recently turned down our request for a face-to-face meeting to address proposed agenda items on our health care trusts.  And, on June 11, Lucent Chairman and CEO Patricia Russo rejected the LRO’s request for an independent audit of the pension trust funds.  In both these instances Lucent gave written responses that left us feeling the assurances were far from adequate to give us confidence the funds to support our pensions and benefits are safe and being properly managed.


What’s a retiree to do when we read almost daily that companies have defaulted on their committed pensions and other earned benefits?  How can a retiree not worry when we read  reports from the Securities and Exchange Commission that it levied a $25 million penalty against Lucent for its “lack of cooperation” in the SEC’s investigation of securities fraud charges against Lucent?  Are retirees just supposed to depend on prayer alone that something similar hasn’t happened with the administration of their pension and health care trust funds?


On March 29, the Wall Street Journal published a lengthy front-page article that revealed: (1) How Lucent has been able to use assets from pension and benefit trust funds to help it pay for repeated rounds of downsizing; (2) How—thanks to accounting rules—Lucent received hundreds of millions of dollars of income from the pension and benefit trust funds; (3) How through a separate accounting maneuver, the cuts that Lucent made in the benefit plans last fall will contribute hundreds of millions of dollars more in income over future years, and (4) How in most years the pension and retiree benefit plans have enhanced Lucent’s earnings, not burdened them.


After reading an article like this, how can retirees who have had their survivor’s benefits and health care coverage eliminated or severely reduced accept Lucent’s “trust me” response that their pensions are secure?


The LRO embodies the hopes of men and women in their “golden years” who don’t want to have happen to them what retirees of Enron and WorldCom have had to endure.  We need your help.  What advice or support can the Department of Labor provide to Lucent retirees who want genuine assurance that their pension and benefits trust funds are protected?  Does the DOL have the authority to require an independent audit of Lucent’s pension and benefit trust funds?  Please ask someone from your agency to contact me so we can establish a dialogue.  If your agency cannot help us, please contact me personally and let me know to whom in our government we should turn for assistance.






K. O.  Raschke



Copy to:

Ellen Schultz – Wall Street Journal 






      Lucent Retirees Organization


K.O. Raschke, President

231 Pinetuck Lane    Winston-Salem, NC 27104   336-765-9765




Ms. Patricia F. Russo, Chairman and CEO

Lucent Technologies Inc.

600 Mountain Ave.

Murray Hill, NJ 07974


Dear Pat,


I am writing to you on behalf of retirees to request an independent audit of the pension funds.


With the continuing sad news in the press regarding the many companies that have defaulted on their committed pensions and other earned benefits, Lucent retirees are increasingly concerned about the security of their pension trust funds.


As a step toward addressing our concerns and reassuring all retirees, our organization recommends the examination of the pension fund books by independent auditors.  By independent auditors we mean those who are separate and apart from those who perform Lucent’s normal corporate auditing functions.  A truly independent audit is the only way that all Lucent retirees can have peace of mind that their future income is secure.


Your help is needed to meet the interests of many retirees who feel that the summary reports and forms filed with government agencies do not provide enough details to create a general understanding of how the monies set aside for their future pensions are being managed.


We look forward to your positive response.  And, the LRO still stands ready to help Lucent however we can.





K. O. Raschke




From: Russo, Patricia (Patricia) []
Sent: Friday, June 11, 2004 10:07 AM
To: 'Ken Raschke'
Subject: LRO


June 11, 2004


Mr. Kenneth O. Raschke


Lucent Retirees Organization

231 Pinetuck Lane

Winston-Salem, NC 27104


Dear Ken:


I received your letter on behalf of the LRO and I wanted to respond to the LRO's request for a review of Lucent's pension funds by independent auditors.   


As we have shared with you on several occasions both in writing and via informal conversations, our pension plans are adequately funded to meet their obligations.  As stated in our recent 10Q, filed with the SEC on May 6, 2004, we do not expect to make any contributions to our U.S. pension plans during fiscal year 2004 through fiscal year 2006. 


If you are requesting a financial audit of our pension fund, as we have previously stated, PricewaterhouseCoopers LLP (PwC), serves as Lucent's Independent Auditor and performs an annual audit of the records and accounts of our pension plan as required under ERISA guidelines.  The pension plan is audited in accordance with Generally Accepted Auditing Standards (GAAS) as directed by the American Institute of Certified Public Accountants, and the plan's financial statements are compiled in accordance with Generally Accepted Accounting Principles (GAAP) promulgated by FASB.  PwC's audits are filed as part of Lucent's IRS Forms 5500, and are available for inspection by plan participants. 


PwC is totally independent and ultimately accountable to Lucent's Board of Directors and the Audit and Finance Committee of the Board, of which all members meet the independence requirements of the New York Stock Exchange.  In addition, Lucent engages PwC solely for audit, audit-related, tax, and other accounting and financial-related services. 


If you are requesting a review of our pension plan asset allocation policies, they are ultimately the responsibility of the Board of Directors.  The Board sets the overall investment strategy for the pension fund, which is the asset allocation decision for plan investments.  The Audit and Finance Committee of the Board reviews and recommends changes to the Board for funding policy and contributions to the pension plan.  Under ERISA's funding rules, the company bears the full responsibility for making up any shortfall in investment performance.  We follow the applicable disclosure rules, and those documents are publicly available.  In addition, all of our directors are aware of their fiduciary responsibilities regarding the investment of pension assets, including the requirement that they make their asset allocation decisions regarding pension plan assets solely for the benefit of the plan participants.  As you know from previous conversations, we are fortunate in having an outstanding investment management team.  And if you look at our pension fund performance, as of May 31, 2004, the pension has outperformed the five- and ten-year average of their allocation benchmarks.  


Given all of the information we have provided in this and previous communications, and that we are in full compliance with ERISA guidelines, we do not think that any additional financial audits or reviews of asset allocation policies would provide any additional useful information. 




Pat Russo