In a letter to the Securities and Exchange Commission’s director of enforcement, written and sent on behalf of the employee and retiree by Stephen Diamond, a law professor at Santa Clara University in California, they challenged the use of a $4.4 billion “convertible note” as part of $30 billion in funding for a retiree health care trust that would be financed by GM and controlled by the UAW, according to the Detroit News.
The letter said GM had not disclosed enough detail about its plans for the note, should have released a formal prospectus and that the trust could be at risk if GM filed for bankruptcy. The details “fell dramatically short of the standards,” Diamond wrote, according to the news report.
GM spokeswoman Renee Rashid-Merem told the Detroit News, “[W]e are confident that we have complied with applicable securities laws.”
The UAW and GM agreed to create the trust, called a Voluntary Employees’ Beneficiary Association (VEBA), as part of a new tentative four-year contract to shift $50 billion in retiree health care liabilities to the union (See GM and UAW Agree to Retiree Health Care Trust ). GM’s 73,000 UAW workers are now voting on the tentative contract. After the contract is ratified, GM will detail the approvals needed by regulatory agencies and the U.S. District Court.