A Profitable Divorce

Continental Airlines is suing nine of its pilots, reports ABC News, claiming they faked divorces in order to draw down their pension funds before retirement. The airline became suspicious when some of the couples continued living together and all nine couples eventually reunited. Continental believes the pilots became worried about the safety of their pension funds, especially after seeing what’s happening at other airlines. [%comments]


MikeM

I can't watch the video, but what are they suing them for, a sham divorce? Either they got legally divorced or not. I don't think there's anything in the law enforcing the terms of divorce outside the divorce agreement. It just sounds like Continental has a loophole they need to close.

Donnie

And yet, gays and lesbians can't get married...

Martin

"All nine couples eventually reunited"... this is obviously selection bias. Couples who divorced but did not reunite, and couples who never got divorced, were not included in the lawsuit.

Publius

It's criminal fraud on the company, plain and simple. At best, it was unethical.

These pilots told their employer they intended to divorce their spouses, which entitled the non-employee spouses to get an early distribution of 1/2 the pension (and we're talking nearly a million dollars in some cases).

The reality was the divorce was a complete sham. Each of these couples continued living together and acting in every way as if they were still married. They didn't even inform their families, children or anyone else of the "divorce." All of them "reconciled" and legally remarried shortly after getting the money. (Gee, what a coincidence.)

Even if not "legally" married, they all continued in common law marriages, so the withdrawals were simply not warranted. There's no loophole to plug up. It's theft.

Publius

Selection bias is fallacious reasoning. That is like saying the police should arrest and the courts prosecute people who walk out of a store without shoplifting, because otherwise it is selection bias agains the people who steal.

These "divorces" were shams. People who behave like they are truly divorced are not acting fraudulently. The comparison is not legitimate.

Avi Rappoport

Pretty clear economic incentive, if true. I would say this is rational behavior, and that they just gamed the system a bit.

Adrien

The legal status of the pilots' relationships shouldn't be any of the airline's business. They ought to get rid of the pension or stop treating married, unmarried and divorced people differently.

paul

Another example of why there should be NO discrimination (by employer OR government) on the basis of marital status. It's ridiculous!

Leilani Karp

People divorce, or refrain from marriage, to protect Social Security and pension status; sometimes it's necessary to divorce for health care reasons, credit problems, tax reasons, and who knows what else.

Invoke the law of unintended consequences. I would like to know who gave Continental or any other employer the right to determine the marital health of its employees. What's their opinion on never-married co-habitants, or pilots who enjoy a wild bachelor/bachelorette lifestyle? How is this their business?

Why don't they ask themselves why their employees do not trust the leadership's ability to keep the company alive?

Rohan

The pension is probably a benefit that gets divided between the spouses in a divorce, similar to all the other property. Rather than Continental end up paying each partner a separate amount, the divorcing couple cashes out and splits the cash. That way Continental doesn't owe the spouse money 20 or 30 years later.

I don't think they're making a moral judgement at all.

J

A divorce settlement can be structured so that 100% of a spouse's accrued pension benefits become payable to the other spouse when the divorce becomes final. I agree with Publius that what these folks did was grossly unethical, but if the state in which they divorced has no restriction on why a couple can get divorced, I don't see where any law has been broken or, for that matter, where any sort of fraud has occurred.

If there are such restrictions, then they will have problems, as has been demonstrated in other cases like this, and there have been a lot of them. I had to chuckle at the idiot who said this is too complicated for pilots to think of, and the reporters clearly did almost no research; this exact scenario has played out - on a much larger scale - at at least two other airlines that I know of. Perhaps Captain Steve could discuss the issue.

bunnyblaster

I support Avi Rappoport's position. They simply knew how to play the game well.

Nothing in the legal terms indicated they cannot divorce and remarry. If they wish to make a clause for future individuals that wish to do it, that's fine. I see nothing wrong with what the couple did. This is tantament to finding an undervalued security that no one else discovered and profit when it blooms in a few weeks when everyone else discovers it and gains zero economic profit.

Peter

Publius,

The reason it might not be considered theft is that United did in fact owe them that amount of money.

Thom Chu

It appears that the issue here is more the fact that the firms ought not to treat married and non-married employees differently--an alternative plan would allow employees to buy an annuity for a spouse/partner/family member of their choice at their expense out of their deferred income.

OrganicGeorge

I have no sympathy for the corporations, they game the system to meet their needs over the needs of their employees all the time.

If you were worried that your pension benefits might at an time vanish, which is a very real concern, what would you do to protect your retirement income? These pilots are now underpaid and over worked, if you believe the hero of the Hudson, Captain Sullenberger.

If these couples legally filed for divorce and the courts accepted their actions then we now have the ethical problem of a corporation determining who is legally divorced, or sick, etc

There comes a time when the power of the corporations has to be reigned in and this looks like a good place to start.

Eric M. Jones

@Publius #4

If Continental should be upset with anyone, it should be the overpaid lawyers who crafted this stumblebum agreement. It just does not comport with reality.

The attitude could be summed up by the attorney in the video. "You can't expect (mere) pilots to come up with such a plan."

By the way...I sense some sexism tone here. The assumption is that the pilots were men and the wives were chatel. Weren't there any female pilots? Were the wives Continental employees too and didn't they have a part to play in this? This has an oddly 1950's flavor.

Sean

These pilots were desperate because they are forced into these unethical situations by hard times, especially in today's economy. While their actions were definitely not justified, I believe that they were acting in the best interest for themselves and their families. Sometimes, when times are tough, bending the rules is necessary for survival and prosperity.

Chance

Unethical? Perhaps. Illegal? Fraud? I'd want to see exactly what the contracts said. Unless there is a clause concerning common law marriages and/or remarriages, then I say "tough luck Continental". Heck, I kind of admire the pilots for their cleverness.

Fred

Sean,

While some may feel that hard times justify bending of the rules, the problem is that they were stealing from the other pilots who did not participate in the fraud. If I were a participant in the plan, I would want them in jail for fraud. What was in their best interest was not in the groups best interest. In fact, it would be in my best interest (and assist in my prosperity) to rob you blind, assuming I did not get caught. However, an an ethical person, I have no intention of doing so.

Chris Dickey

So in the early eighties it was ok for Continental to use bankruptcy to get unions off the property cut wages and destroy Eastern airlines (or any of the recent airlines who declared bankruptcy to cut employee wages and cancel pensions, something they could not do by negotiation) but then shortly after this bankruptcy become profitable and give management multi million dollar bonuses is ok. Employees are simply finally learning to play the game just like the management of corporations have for years.

People are fed up with the faliure of leadership and morals in government and corporations and are tired of getting screwed by this lack of leadership and morals.

Can't beat them join them lose the morals and take the money and run.