An undisclosed number of former Caesars Entertainment Corp. employees have lost their retirement income because of the casino company’s bankruptcy restructuring of its largest operating division.
The retired employees were notified by the company through a form letter/memorandum that was sent Jan. 15, the same day Caesars Entertainment Operating Co. filed a pre-packaged Chapter 11 bankruptcy plan in Chicago that is expected to eliminate $10 billion of debt.
The employees were told the company would no longer make payments under a Supplemental Employee Retirement Plan (SERP).
“Instead of receiving notification of my direct deposit, I received this letter,” said Betty Wilson, a retired certified public accountant who worked for Caesars World. Caesars World is one of the former entities acquired by then-Harrah’s Entertainment in the company’s 2005 buyout of Caesars Entertainment for $9 billion.
A Caesars official familiar with the matter but not authorized to speak on behalf of the company said there are several similar retirement plans offered by other companies that were subsequently acquired by Harrah’s/Caesars.
He said there are “fewer than 50 people” under these plans affected by the bankruptcy.
The Caesars official said the bankruptcy filing did not affect the company’s 401(k) retirement plans or other deferred compensation programs.
Caesars declined any official comment.
Wilson, 68, who lives in a rural community 30 miles east of St. Louis, but spends winters in Needles, Calif., said she feels cast aside by the company. She has been receiving $4,000 per month since she fully retired from the gaming industry at the end of 2003. She and her husband both receive Social Security payments.
“Retirees count on these pensions,” Wilson said. “The company went to great lengths to say they are taking care of their current employees, but what about us? We lived on that pension and now it’s been totally taken away. It’s quite devastating.”
According to the memorandum, the payments were halted for Wilson and other former Caesars employees who received SERP distributions.
“Under the bankruptcy code, the SERP payments you were receiving are considered a general unsecured pre-petition obligation of the debtor and cannot be paid without specific authorization from the bankruptcy court.”
The memorandum was signed by Caesars Executive Vice President of Human Resources Mary Thomas.
“The senior management team and I are grateful for you past contributions and dedication in service to our guests,” Thomas wrote. The letter also provided the contact information for Caesars Vice President of Compensation Russell Goldich to answer questions.
Wilson said she contacted Goldich, who she described as “cordial.”
“I honestly don’t know what else I can do,” Wilson said. “I hope the judge understands this is our primary source of income.”
Another former Caesars employee, who asked not be identified, received the same letter as Wilson. He said he was part of Hilton Gaming’s retirement fund. Hilton Gaming was the predecessor to Park Place Entertainment, which acquired Caesars World in 2000. Park Place eventually took on the name Caesars.
“At my age, I’m no longer employable and will have to sell my home and somehow drastically reduce our expenses,” said the former employee.
In its bankruptcy filing, CEOC listed more than $19.8 billion in total obligations, but did not list how much of the debt is unsecured. Of the top 50 unsecured creditors, the largest amount is $530 million owed to Law Debenture Trust Co. of New York. The SERP funds were not listed.
TOO EARLY IN PROCESS
UNLV Boyd School of Law professor Nancy Rapoport, who specializes in bankruptcy matters, said it’s too early in the process to determine if the SERP creditors will receive any portion of the retirement funds.
“A lot depends upon how much value is in the estate and what is left over for the unsecureds,” Rapoport said. “I have seen bankruptcies where the unsecureds are paid in full, but it’s rare.”
Wilson worked for ITT Corp. in St. Louis when the company acquired Caesars World in 1995. She moved to Las Vegas in 1995 to head the company’s tax department.
She left Caesars in 2000 when the company was acquired by Park Place and went to work for three years at the former MGM Mirage Corp.
Last week, the federal bankruptcy judge said Caesars could tap into $847 million in cash to be used for operational purposes over the next five weeks. Several creditors objected to the request.
“I hope the judge is aware of how we have been treated,” Wilson said.
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