Copley News Service

August 31, 2001 Friday

SECTION: ILLINOIS SPOTLIGHT

U.S. senator says feds still may investigate business closure

by Clare Howard Copley News Service

DATELINE: PEORIA

The U.S. Department of Labor still is considering an investigation into the disappearance of employee stock accounts at Foster & Gallagher Inc., U.S. Sen. Peter Fitzgerald said Thursday.

The Illinois Republican, speaking in Peoria, cited an Aug. 24 letter he received from U.S. Secretary of Labor Elaine Chao confirming her agency continues its probe into the Peoria direct mail marketing company.

"I'm very concerned with what happened to large investments employees had," Fitzgerald said prior to a "town meeting" at the downtown library. "I have questions how a company can do so well and suddenly after a $70 million debt to buy out original shareholders, the company is out of business." Fitzgerald stressed he is not in a position to judge if anything improper was done.

"But if something improper did occur, someone has to be held accountable," he said. "I do not want to lead anyone to believe there is a magic wand that will restore that money. It may be very difficult to restore the (employee stock ownership plan)."

One key question, he said, is whether there is any proof senior management knew at the time of the $70 million transaction that the majority of company revenues generated from sweepstakes were in jeopardy because of investigations into the legality of those practices.

At one time, Foster & Gallagher employed 1,500 people in Peoria. That was down to under 500 when the company finally closed and filed bankruptcy in early July. By then, employees had seen more than a 91 percent dip in their ESOP valuations, accounts which they had expected to use for retirement.

Judy Seiz, who worked 37 years at Foster & Gallagher, told the senator she was the most senior employee at the company.

"We've lost our jobs, and it looks like we've lost our retirement," she said.

In response to other questions from the crowd of more than 300 people, Fitzgerald said he does not favor borrowing from the Social Security trust fund to finance other government programs.

"Historically, I have supported legislation for across-the-board cuts in the federal budget to not dip into the Social Security trust fund," he said, noting that would come to about a 1.5 percent cut.

He said the notion of a budget surplus "is a myth" and charged that the former Clinton administration "cooked the books" to show a surplus by borrowing from 150 trust funds to beef up the general revenue fund.

Fitzgerald said raising taxes would be a major mistake. "The economy is a large ship and not easily turned around, but the process of turning is in progress," he said.

Fitzgerald said he supports legislation that would make improvements in the railroad retirement fund.

Among those changes is reducing the age required to earn a full pension from 62 to 60. One form of that legislation recently was approved overwhelmingly by the House and sent to the Senate Finance Committee.

Fitzgerald said that as a member of the Senate agriculture committee, "It is a safe bet the new farm bill will be good for corn and soybeans and cattle and pork."