Cerberus: The darker side of buyout firms

With respect to Cerberus and Chrysler: Consider the sad fate of MG-Rover. Phoenix, a hedge-fund operator, bought into the operations of one of the last harbingers of England’s auto industry, and so today, MG-Rover does not exist. The company’s few assets are owned by Tata Group of India and Nanking, a Chinese automaker. Studebaker suffered a similar fate when the big bankers declared thumbs down in the early 1960’s, just as the company bought out some innovative products that turned the company around, much as the Larklike K-cars did for Chrysler in the early 1980’s.
Today, Chrysler’s CEO is Bob Nardelli, the ex-Home Depot CEO. NArdelli fell off his game because of archrival Lowe’s, and so Nardelli was rewarded with a golden parachute that would make King Midas blush. Another hardware-store guy, Malcolm Bricklin had visions of being the next Lee Iacocca in the 1960’s, when he bought the first Subarus to America. These were terribly underpowered cars, not suitable for U.S. driving conditions(think Fiat, as in Topolino), and so Fuji Heavy Industries, Subaru’s parent, took matters into its own hands and developed cars better-suited to North American driving conditions. A decade and a half later, Bricklin returned to America with the Yugo, a repackaged version of the old Fiat 128, and by the mid-1990’s, Yugo was history. I don’t believe Chrysler can survive Cerberus for long, not without drastic restructuring and the intervention of another vehicle maker. My candidate would beBombardier, the Canadian giant, would be a good strategic fit. Bombardier knows the vehicle business, and owns two quintessential American barnds: Evinrude and Learjet. In fact, Bombardier is so prominent in business aircraft, railroad rolling stock and snowmobiles, that its chief competitors are few and far between:Polaris Industries, Embraer of Brazil,and Sumitomo and Kawasaki Heavy.
Wall Street just doesn’t get it. Hedge-fund operators don’t know diddlysquat about what it is they’re managing. And, as the late Commodore Grace Hopper said, “You can manage things all you want to, but people can only be lead”.
Bruce Raphael
Framingham,MA 01702

I think that Ceberus should not be allowed to spend any money on anything else until they take care of the employees that the swindeled out of there health care coverage. It’s unconcionable. Bob Nelson, Indianapolis, IN

For all the people with pre-existing conditions, THE PLAN WAS STILL IN FORCE UNTIL JUST A COUPLE OF DAYS AGO. Some people were still be insured so they LIED to the bankruptcy court when they said the plan had already been cancelled. The law clearly states they must provide COBRA if a plan is in place before they file BK. THEY HAVE BROKEN THE LAW. THEY HAVE LIED TO THE BANKRUPTCY COURT. I have proof I was insured as of the 20th. I was able to get a prescription filled even though Aegis told me I would have no coverage as of the 10th. UHC knew nothing about it.

We need to find someone who knows the COBRA laws who can help us. As a group we have power, as individuals, not so much… They should not be able to lie so they could maintain their insurance until they were through dismantling what was left of the company. When they finally did cancel the insurance they made it effective the 10th. They backdated the termination.

I wish this all helps shed a light on Cerberus’ greed. It’s extremely depressing to go into work every day not knowing if we will be paid. I went to the Aegis Career Expo yesterday and the majority of the companies brought in were looking for administrative positions and didn’t pay enough to cover our bills. They brought in multiple staffing companies, the police department and Indymac bank from Austin, TX. The staffing companies told me they really couldn’t help out and I have 7 years experience in the mortgage / loan servicing industry. I guess I will be moving. Do the guys at Cerberus really think they helped us out? Thanks for wasting more of our time and money. They ought to be ashamed of what they’ve done.

Founders of businesses realize that their employees are key to their growth and survival. With private equity firms, it’s all about the money and returns to its investors. In a turnaround, all bets are off. If done poorly, good people get fired, good customers get mistreated and all stakeholders lose. Did Cerberus lose? No. Did their reputation suffer, probably not. After all, investors are only looking for healthy returns, not moral or social justice. Who’s to blame–top management and its main supporter–Cerberus. Who’s to blame for the social injustice of Cerberus–investors who only care about their returns.

Mr. Rivas. Your “get another job” comment is as bad as what Cerebrus did. I’m sure some of those 782 people were making above average salaries. Some were probably older workers. Try getting another job when you’re 61 or 62 years old. Try getting another job that pays $50,000 or $60,000 a year. Suddenly being deprived of health insurance isn’t, as you so brilliantly put it, “whinning.” Your lack of tact is only surpassed by your lack of humanity.

“Buyout firms like to present themselves as a can’t-fail combination of operational genius and financial support”

I have had the misfortune of dealing with the “genius” of Cerberus at it’s higher levels.

Just a little observation: No one, and I mean NO ONE, goes into “Wall Street”, or “Buyout firms”, because they’re too smart to do anything else. They do it for one thing and one thing only: insatiable greed. They have great drive and ambition (or considering their childish outburst, is it more like the total lack of self-control?) to feed this hunger of theirs, therefore, they are very “successful” at it.

In another other civilized society, they would be considered sociopaths, but in the land of uncontrolled capitalism, they are all but idolized.

Assuming that the health plan was not actually terminated, former employees should realize that they will have to pay the COBRA premiums. Those premiums are set at 103% of what the company paid. That is an awfully big expense for someone who has just been laid off.

Cerberus’ aka “the three headed dog guarding the gate to hell” actions are beyond belief.

We were given 3 days notice that our insurance would be cancelled and some ill-bred executives think this is right? How can any normal human being justify this? Not only did they destroy our pregnant and ill employees they did the same to their families. We have 3 pregnant women in the office and many others with scheduled surgeries. We were left with no COBRA eligibility and due to the short notice no time to extend or get new coverage for pre-existing conditions.

The following Tuesday at around 2:30PM, after being promised we would be paid on Wednesday, we were told that our pay check would be delayed. Many people have automatic drafts from their accounts for mortgage payments, car notes, etc. and if you are familiar with this you know that 2 hours is not sufficient notice to stop the transaction. This second blow resulted in over draft fees for many employees. I under stand that this is a result of the bankruptcy but Cerberus’ attorneys knew this and no one gave us a warning.

Cerberus brought in multiple “consultants” who were going to prepare the Servicing Division for marketing. That wasn’t a success because the egotistical Cerberus executives didn’t accept offers that came in to purchase the Servicing platform and decided to file for bankruptcy a month or two later. Oh and I shouldn’t forget to add that one of the “consultants” had to be transferred out of Aegis for multiple sexual harassment claims against the female employees.

We were lied to multiple times and told that Aegis was one of the top sub-prime lenders in the industry and we were protected from layoffs. Why did Cerberus mislead over 1000 employees knowing things were going down hill? Why haven’t any of the insensitive executives accepted offers to speak to the media if they feel they were not at fault? Why can’t they respond to the media’s attempts to get the truth? I hope they are too ashamed of their actions but I highly doubt that’s the case. They had an outstanding group of loyal employees who would have appreciated a little notice and a lot less lies. It is a surprise that these cowards can sleep at night knowing over 1000 people cannot.

I can’t understand why people are so upset by the actions of these corporate titans. We voted in the current administration, knowing that they would siphon as much wealth upward to their cronies and laterally to the military-industrial complex as fast as they could shovel it (to mangle a few metaphors). Now we refuse to remove them from office despite their appalling obliviousness to even fundamental economics, much less compassion for the ordinary worker. As the old saying goes, “Ya gets what ya votes for.”

In the 1970’s, my husband and I went through company bankruptcies. We formed an association and hired lawyers as a group and went to court and WON! I hope all the laid off people at Aegis and other entities do this. Each one of us threw in several hundred dollars and we won several thousand dollars and as a side benefit, the guy who did this to us was investigated by both the SEC and Interpol!

Don’t give up! Fight back!

The sad part of the story is the employees real life struggles including those individuals with cancer and other medical problems who lost insurance coverage. No COBRA for many employees will completely devastate many families in both Louisiana and Texas where most employees were based forcing states to cover cost of medical treatment. The situation is a travesty for all and should not be tolerated in Federal or state laws. Federal and State officials should step in and set precedence so that this does not happen again.

The truth of the situation is that many of us employed by Aegis had to fight for severance a couple of years ago when Richard Thompson was CEO; there was no severance package for most non-managerial employees in the past. Many of the employees have gone through multiple layoffs during the past couple of years. Recently, a handful of key employees were offered retention bonuses to stay until some of the business units were sold or closed. At this time Aegis and Cerberus have refused payment. This situation has been bad for me due to the fact that I had to pay for an almost fatal asthma attach caused when I was asked to go to the Baton Rouge office of Aegis Lending during a mass layoff of employees of the lending division. Most of the employees were terminated in one day and equipment was moved which stirred up dust which I am allergic. I did not file workman compensation for fear that I would lose my job.

I have been affected three fold on this situation including lose of health insurance, loss of my job, and loss of additional wages to cover cost of medical coverage not covered by insurance. Also my home was destroyed by hurricane Katrina and some of the funds were going to be used to rebuild in an area were construction cost are high. The point is that this could happen to any person unless the Federal and State Governments do something to end the endless loopholes that protect big, medium, and small business.

None of this is suprizing. The basic game plan these guys follow is, buy a sick company, gut the expenses, layoff people, show (temporary) profits. Then, unload it at a profit to some other fool. In the real estate business I came from, this was called “deferred maintenence.” Afterwords, the property went down hill, the quality of the tennancy declined and the neighborhood suffered.

Same goes for these “Private Equity” deals. It’s just financial engineering, with no real value added.

Don’t believe it? Consider; what does Cerberus, or Bob Nardelli know about making great cars? I rest my case.

Thompson, who was CEO until October 2006, when Cerberus ousted him is making all the noise and no doubt he was right in line to collect his fat bonus when everything was going well in 2004, 4 and 5. That is no doubt true of those on commission who were selling the loans. I feel sorry for the lowly clerks who always get screwed but, for the others who were in the know, tough. There were no secrets in a company like that on what could happen if……..and no doubt there was much internal discussion on the risk being taken. Too much greed will get you everytime.

What an absolute disaster. It’s amazing a company as large as Cerberus could not manage to make provisions available for COBRA or even pay me for August’s ($845.28). It’s my understanding that the “close out” team weren’t paid their PTO either…..How can this be legal????

To John Rivas: I’ve been in the mortgage industry for 35 years. I’m too old to change careers (companies want young workers) and too young for Medicare. With thousands of mortgage people laid off in the last three weeks what do you think my chances are of finding a job? Your comments were unnecessary…not only for Aegis employees but all the other mortgage company employees in the same boat as we are.

This is exactly what will continue to happen as the greed gets wrung out of these busted deals. The “trickle down” based policies of the current administration favors large corporations with its corporate welfare. Who gets hurt? Average Jane and Joe. Who walks away with billions? Bush’s “base”.

I was laid off by Aegis several months prior to the bankruptcy. I received a week’s pay for each year of service along with accrued PTO.

I considered myself one of the lucky ones since I received severance then I discovered even though I had been paying for Cobra, it was cancelled and I was not given any notice. Talk about being caught off guard. After paying for insurance and then to find out you don’t have coverage. Aegis was self-insured with United Healthcare as the administrator. Since Aegis was self-insured, they didn’t want to give employees notice of the insurance plan being terminated as the employees would have had time to fill their much needed prescriptions and Aegis would have been stuck picking up the cost.

When Aegis was under the direction of Rick Thompson, it was a great place to work. Cerberus was a capital investor for 10 years. They took all the profits and when the going got tough, they hung the employees who had earned them those profits out to dry.

I pray those employees who have current illnesses the best and I hope they can find the right attorney to help them get the much needed insurance coverage they need and deserve.

By the way, all the Executive and Senior level managers still have their jobs. Aegis could have continued to fund the insurance plan probably with just one or two of their salaries. Why do they still need all of them.

One of Aegis’s corporate values was “always do the right thing”. I hope the folks at Cerberus can sleep at night.

God speed to those employees who are suffering!

I will personally boycott everything that Cerberus owns.

I hope that labor unions organize every single entity that Cerberus owns. That is the only protection that these individuals will ever have.

Chrysler’s union employees need to prepare for the battle ahead. I hope that you fare better than we did at Aegis.

How do you think I feel about this, I currently am employed with Option One. Talk about the light at the end of the tunnel.

I am a former employee of Aegis as of August 7th at 5pm. The employees (at least our branch office) knew what we were facing on Monday morning about 9am with our jobs. By Tuesday (everyone knew because we were sending company wide emails wishing each other good adventures) the 7th at about 2pm after the “conference call” is when we were all advised in regards to no benefits, vacation pay, COBRA and that insurance stopped at midnight on Friday the 10th… I have personally called UHC yesterday the 20th and was advised that my plan did in deed stop on the 10th. Other x-coworkers say they still have active insurance. Aegis informed us on the 7th that the reasoning of the no COBRA option was -if there is no “plan” in place then what plan would COBRA to fall with in. If there is truly a plan still in place then I feel that we employee’s should have had the option of COBRA and it should be back dated to the 10th. My son has a pre-existing condition with due to his heart. It is really sad that this is what corporate America is coming to “Greed” “the richer get richer and the poorer get poorer” IT IS UNCONSCIONABLE!!!

I truly feel that “united we stand” is B.S. it should read “every person for themselves” I know that this might upset some of you but if you really look at everything and the direction that this country is going!!!!!!!!! — I agree with “God help our children PLEASE”

As to the statement to us “whining” – We are looking for jobs and some of us have already found new jobs. You must not understand what “pre-existing” means no matter if we do find new jobs – there are most of the times waiting periods to get under another plan with in our new jobs in which means some of us even after re-insured some of OUR PRE-EXISTING conditions WILL NOT covered at that point, so I can say that is a justifiable reason for “whining”. Just say your blessing & pray that you and your family says in good health and thank your blessings…

As to “permanently terminating the employment of all its employees” within in 60 days, not on the day that the company filed for bankruptcy. As one astute reader points out, the WARN 60-Day Notice Act was created to give employees two months to prepare for poverty. Aegis gave everyone less than 24 hours.” This is very true – When I received this in my mail – I just laughed

The private equity buyouts, like Cerebus’ purchase of Aegis Mortgage, could likely lead to many more companies going out of business. Private equity folks will be quick to cut and run once losses start to mount. Sending in a Cerebus guru to run the company may end up being a huge mistake unless that executive takes the effort to understand the company and the business. There are no short cuts in turning around a business. Businesses didn’t get in trouble overnight and cannot be fixed overnight. Outstanding leadership is what is needed to fix the messes.

I also am an ex Aegis employee who had just started very recently, and I feel we were all very mislead. We were urged to work hard and bring in loans, given higher basis points very recently and were actually supposed to be going in on Monday for a sales competition, and the bomb was dropped. We had no real warning, and a lot of us who recently were hired, had passed up offers with various other companies still in business and were VERY mislead. We all have in writing a contract for employment which gave us all a monthly guarantee to get our customers signed up and running, so not only are we without healthcare, we are out money also. As for the individual who said just quit whining and go out and get another job, blow it out your butt, there are no jobs and no one is safe at this moment. How many of us can you hire??????

Tripleheaded monter from Hell, the mascot of Cerebus is. Remember we get the government we deserve by voting for the same clowns every year! P.T. Barum said never give a sucker an even break! We have not learned a bit from this or any other future ‘Looting of the Middle class” It is all very very sad at least we have the right to bear arms? Wait, that was taken away here too!

Cobra is about $1,000 a month for a family of 4.

Max UI is $450 a week before Fed taxes.

That is what is quoted when I was laid off due to relocation.

Great deal Huh ?

I worked for a company that Cerberus ( try taking a look at the definition of Cerberus, it will blow you away ) bought and they immediately came in slashed pay, benefits and layed people off. The sad part is that they did not know the company culture, work ethic and standards by which we operated but yet they did not hesitate to do these things to us thus decreasing their profitabilty even further.

There is a big difference between the profitabilty of a company and the health of a company. Cerberus is only concerned about the profitabilty of a company and could care less about the intangibles and health of an organization.

There are companies where the executives actually care more about their people than they do the bottom line. These organizations will go down in history as some of the best companies to work for and these executives will be honored for generations. Unfortunately Cerberus is not one of these organizations.

I believe in Capitalism and a free market enterprise combined with high moral and ethical standards. Aegis employees are suffering ( as I am )from ” the love of money which is the root of all kinds of evil ” by those at Cerberus.

To Chrysler employees: start retraing yourselves, continue education and make the appropiate lifestyle adjustments. Heed the words of employees that suffered under Cerberus.

As a former employee and current job seeker I hesitate to list name.

Pride cometh before a fall.

Most companies will do whatever is in the best interest of their CEO and other top executives, regardless what effect that has on the rest of the employees, shareholders, or customers. If they get the biggest payday by laying off workers and cancelling benefits then that’s what they’ll do.

If people don’t like that then they should be pushing Congress to change some laws. If you want companies to “do the right thing”, then pass laws that make it most profitable for executives, especially the CEO, to “do the right thing”. Whether you use the carrot or the stick doesn’t really matter.

To quote an earlier responder, Richard from Austin, TX, among others, ‘What Cerberus did to employee health coverage was worse than what Enron did; it is unconscionable. The precedent is set now; no longer can employees of Cerberus-owned companies expect they might get a fair shake on medical insurance if their company runs into trouble. Dollars first, lives second.

The one decision Cerberus made that was right on: they picked the correct name for their company, that’s for sure.’–from Richard, Austin, TX

Messing with the COBRA coverage through “cororate-smart” decisions is precisely what leads to anger against corporations. COBRA was enacted precisely to prevent employees from being impaled on the bad decisions of others–and, frankly, I hope smart lawyers will turn this into a class action suit with a stay on the prevention of COBRA. Employees have, at best, 63 days in which to get new health insurance without being considered “never insured.” To let the clock run on this I consider morally reprehensible, as apparently does one of the founders of the company.

If the law states that the company does not have to provide COBRA eligibility as long as the company has no benefit plan in place at the time they file for bankruptcy, what happens if the benefit plan is truly in place? Word has it, that the benefit plan is still in place and that Aegis may not have been entirely truthful regarding the status of their healthcare plan at the time they filed for BK.

All Aegis formr/current employees should call their health insurance provider and just double check whether or not their plan is still active. I did, and sure enough, the insurance company showed that the policy was still in effect and that they had no “end date” as of yet. My former coworkers all state the same. We were all let go on the 7th and told benefits would be terminated at midnight on August 10th. They filed BK on the 13th and stated at that time that there was no benefit plan in place. Why are they lying? As of this morning, the 20th, benefit plan was still in force.

Perhaps certain people at the top are not quite ready to let go of their health insurance? Who knows why, I can only venture to guess, but one thing I do know is that they are a bunch of liars, telling the press one thing tryng to save face, while doing the exact opposite to their employees.

My understanding is that a company must offer COBRA if a healthcare plan is in place. The plan is in place so are there laws being broken here?

Are there any COBRA experts out there?

The poor working class always bear the brunt of anything that went soured, regardless of which country we live in. Many companies doesn’t really care about their employees well beings. All they actually care are their profits and their growth. In the case of Cerberus and Aegis private equity falters is a perfect example of corporate America.

There is a whole loadful of lies that are being spin by these Private Equity (PE) funds - how many of them ever had any hands on experience in managing, owning an operation with real people clocking in the hours and producing real goods and services ?
These PE managers are FUN Managers, putting their selfish, no good bonus payout foremost.

Assuming that paying taxes to Governments is the least efficient way to allocate resources, one of which is to provide aid where it is needed most and promptly, Private Equity Foundations rightfully can do better. After all, they earn more than a basket of countries put together in a single year and ipso-facto, can create sovereign rights over the funds they hold.

The conundrum is the flipside to every Private Equity investment of the targets - massive layoffs! A musical chair so to speak. Laidoff workers do not pay taxes, they can’t pay the mortgages, they spend less, etc…; consequently, other segements of the industries are affected - domino effect. Then, with their surplus funds, they get involved in aiding and abetting the securitisation of subprimes and what a mess they are in. The Private equity (possibly the same set of people) comes in, buy them up at basement prices, wait out and offload when tax payers money come to bailout !

Where would average Joe be going to next ? Let us read more about these.

This story has been rewritten several times by this website/author as it has been here for over a week so I do not trust all the facts here. However, it seems like Cerberus is being blamed for a situation/company that had been already been trending negative (IPO cancelled, trouble in another business unit.)

Since I don’t have all the facts I won’t bash either side here. However the quick brushover of the company history seems like poor reporting. It seems to me that Cerberus stepping in may have allowed many of these people to have their jobs maybe longer than they otherwise would have under the old management. Who knows but its worth exploring. Would this company have survived for as long as it did without Cerberus? Did Cerberus violate any laws with their actions? These questions need to be asked and answered.

While I feel terrible for what happened to the employees maybe you guys who write these articles and look to bash big private equity becuase its fashionable now might want to fairly present the real situation both pre and post Cerberus ownership. The article reads a little one sided to me and without all the facts how can any of us have a real opionion on this?

tHEY SHOULD ALL GO TO JAIL NOT ONLY HAVE THE EMPLOYEES BEEN HIRT BUT MILLIONS OF PEOPLE WHO ira AND 401k HAVE LOST MONEY OVER THEIR GREED.

The events unfolding with Aegis have nothing to do with the fact that it was bought by a private equity firm. It has to do with the fact that we live in a society of unfettered capitalism. We are living in the 21st Century’s version of Upton Sinclair’s “the Jungle.” The primary difference is that today, instead of human victims of capitalism being ground into sausage with rats and rusty nails, they are abruptly cut off from their jobs, health insurance, retirement plans, and any semblance of worth as human beings and left to die a slower death than the mid- to late-nineteenth century victims of capitalism run amok. WAKE UP AMERICA! THERE IS A BETTER WAY AND IT’S HAPPENING RIGHT NOW IN CANADA, AUSTRALIA, NEW ZEALAND, AND ALL OF WESTERN, SOUTHERN, AND CENTRAL EUROPE!

As a business owner, I understand that bad things do happen and owners are faced with making horribly difficult decisions. But for Cerberus to take these actions, only to avoid payment for 18 months, come on. You would think they would pay it only to insure a lasting peace with the UAW. Chrysler employees are definitely watching, and wondering. And that could have a real impact on Cerberus.

Cerberus - the “Hound of Hell” in mythology - cancelled the health insurance for its Aegis Mortgage employees on Friday afternoon, then filed for bankruptcy protection the following Monday morning. Pregnant women, people with pre-existing medical conditions, and many others no longer are insurable at any cost.

I understand that continuing the insurance plan at Aegis would have cost the company a money–but, once laid off, the former employees would have been guaranteed coverage at their personal cost under COBRA. Canceling the plan, however, made that moot–impossible.

What Cerberus did to employee health coverage was worse than what Enron did; it is unconscionable. The precedent is set now; no longer can employees of Cerberus-owned companies expect they might get a fair shake on medical insurance if their company runs into trouble. Dollars first, lives second.

The one decision Cerberus made that was right on: they picked the correct name for their company, that’s for sure.

Why can’t these people just get another job? My God, quit whining…

As an afterthought, I’d like to add that it would appear as though the only way to protect yourself in a corporation is to:
1) buy enough company stock to have a clear voice in its decision-making processes. (Good luck on that one, unless you make a salary that pretty much protects you anyway)
2) stash cash as far away from your company as you can, so the b******s can’t seperate
you from it.
3) Post all executives involved on YouTube–anonymously, of course. Then again, the Whistleblower Act prevents retaliatory
recrimination, so let your conscience be your guide.

Please tell me that the owner(s)/founders of that company do not intend to inflict more pain upon the weary working world with another show of ineptitude; i.e., a startup. One brazen ,stupid series of mistakes is enough. I could never trust a financial corporation that breached its fiduciary responsibility. Fannie Mae, anyone?

At minimum, the company should allow people who have been laid off to qualify for COBRA. This is as despicable as Ken Lay (Enron) and Nacchio (Qwest) and a dozen other CEOs that have been in the news in the past few years. When are we as Americans going to ban together and demand that corporations treat us like human beings instead of robots they can just discard?

Sam’s comments hardly warrants response, but his lack of knowledge regarding this particular situation is understandable. This is “Gordon Gecko meets Enron”.

Cerberus and its wealthy investors made a ton of money off Aegis over 9 years. This was not the result of market strategy, but as a result of hard work by numerous employees. Cerberus and the management DID venture into risky markets without reasonable risk protection and good business strategy, all in the hopes of big profits.

When the market turned on them and the “cash cow” fell over, they jettisoned the company. BUT, Cerberus pockets had been filled with lots of Aegis money and they left many employees with zilch by manipulating dates and the system with creative Cerberus attorneys.

If you worked for a company for a number of years and significantly contributed to their profits,HOW WOULD YOU FEEL if the insurance and severance you were supposed to legally receive disappeared because the company manipulated the system, AND EVEN BETTER you had a very pregnant wife, kids with asthma, along with fellow employees who could not obtain health insurance because of “pre-existing” conditions?

Or even better, you were one of the few required to stay to shut down the company WITH NO HEALTH INSURANCE? God forbid you incur injury while helping the company that couldn’t afford to make sure your health insurance continued for a reasonable period of time.

Aegis Management deserves some of the blame, but Cerberus definitely got a return on its investment. No one is questioning Cerberus’ right to make a profit, but they did not have to be so cut throat and leave its employees hanging in the wind to such a degree.

Cerberus could have done the “right” thing at minimal cost and chose not to.

As an Aegis employee all that was reported in the article is true. As an American isnt that exactly what you have come to expect from corporate America? God help our children.

Last week, on Monday, August 6, Cerberus closed Aegis Mortgage’s production operations triggering widespread layoffs without 60 days notice or payment of severance. Aegis announced later in the week that its health insurance plan would be cancelled effective at midnight on Friday, August 10, terminating coverage for all employees and former employees covered under COBRA. Immediately thereafter, Aegis filed bankruptcy under Chapter 11 in Delaware. Madeleine, L.L.C. (an affiliate of Cerberus) will seek to recover its subordinated loan to Aegis through these proceedings. The money Aegis saves by not paying severance and cancelling health insurance should increase Madeleine’s recovery under its subordinated loan.

These actions by Cerberus and Aegis left thousands of families without health insurance on just 1-3 days notice, giving them little opportunity to obtain replacement coverage. I personally know many of these families who have major, critical health care needs, including cancer, heart disease, multiple sclerosis, and the like. They face financial devastation without medical insurance. Many are uninsured today or have resorted to high-risk pools with very large deductibles or no coverage for pre-existing conditions. I have heard of situations where Aegis employees have had to postpone major surgeries that were already scheduled for their family members. This did not have to be, and is not right.

I started Aegis with two partners in 1993 and left the company in October 2006 at the request of Cerberus. At the time of my departure, Aegis had $361 million of capital and loan-related reserves. I was confident in the continued success of the company.

As a founder of Aegis, one of our stated corporate values was “to always do the right thing.” My purpose in bringing these facts to light is to publicly ask both Cerberus and Aegis “to do the right thing” in this difficult situation. The right thing is to reinstate the company’s health insurance policy for the thousands of families affected by their actions last week, and to reverse their non-payment of severance for those whose employment was terminated.

Cerberus has become a major player in the global economy. Its many constituents rightly will expect a higher standard of behavior than was exhibited last week with Aegis.

It is not too late to do the right thing.

Rick Thompson

Why are some posts being deleted? The truth hurts? Nothing with profanities were stated, so why deleted?

Make sure I let everyone know about the politics of your website

Simple: I am glad I got laid off, that place was an absolute JOKE! Hope all of the management and investors rot in hell….or jail, whichever comes first. Good Luck to all the employees that were left holding their ankles.

Cerebus should not have layed off those employees without giving them some time to get health insurance in place. That is WRONG. What is not wrong was the company going out of business. That’s what happens in corporate America. Rick Thompson shouldn’t have sold the company. He is just as guilty as Cerebus is for the downfall of Aegis. Also, Rick is entitled to NOTHING. He should have thought about selling the majority of the company to an “investment firm.” I was an Aegis employee for 3 years and I left the company a couple of months ago because I saw the writing on the wall. Most of the employees should have taken responsibility for their families and themselves and gotten another job instead of waiting for Aegis to pay for their insurance and their severances.

After the first round of IT Layoffs, everyone should have seen this coming. Everyone should have gotten out and save themselves all of the head aches and grief. All of the management at Aegis are obviously money hungry crooks who can care less about their employees. Aegis turned out to be a giant disappointment, and the FCC needs to study the books to find out where all of the money is. All employees knew that they were growing too fast, too soon, and didn’t save anything in the tank for the bombing low budget market. Good riddance Aegis, Cerebrum ran the place into the ground.

My husband worked for Aegis and a on Tuesday employees were advised insurance would be terminated on that same Friday. THANKS FOR THE HEADS UP! Ceberus should be responsible as an “affliate company.”

Sometimes business stories just hit a nerve with readers, as did this story about the collapse of Aegis that I posted on Friday. [http://money.cnn.com/2007/08/17/magazines/fortune/benner_aegis.fortune/index.htm?postversion=2007082013]
Layoffs and bankruptcies are always upsetting, but this collapse drew more reader mail than most. This is in part because the Aegis debacle makes real so many of the vague fears people have about what happens if a private equity led turnaround fails. Portfolio companies close, workers are fired, yet the private investors march on. Sure their returns are lower, but they still collect decent paychecks and health care benefits.

Here’s a sampling of other messages that have come into my email box. Thanks for posting your comments.

Worse than we thought:

Lots of past and present employees wrote to say that the layoffs happened the day after they were given notice that Aegis was “permanently terminating the employment of all its employees” within in 60 days, not on the day that the company filed for bankruptcy. As one astute reader points out, the WARN 60-Day Notice Act was created to give employees two months to prepare for poverty. Aegis gave everyone less than 24 hours.

Moreover, several added that Aegis has not paid out some commissions to employees.

Assistance… not so much:

The health care and job assistance the Aegis says it’s providing got a lot of angry mail. Apparently, the company told the press before it told its employees. Then when it did notify current employees only:

“Why wouldn’t Cerberus, as our parent company, place employees under their insurance umbrella?”

“We were provided a list of about half a dozen insurance agencies to contact, none of which accepted pre-existing conditions like pregnancy, asthma, or HIV. All employees who have pre-existing conditions or dependents with same are left without any insurance coverage.”

“Aegis has refused my request to provide me with evidence that we were previously insured per HIPAA so we can purchase health insurance without being subjected to pre-existing condition clauses.”

As for the job training:

“The job training and employment location assistance was contracted out to a company that has been non-responsive.”

“Yes they set us up with a 20 minute interview with a company that wants us to go to a two-day seminar and teach us how to write resumes! If we go to the seminar, we won’t get paid because they stopped ALL benefits [including vacation time].”

Cobra should be required to be offered. If it takes a law to be passed to require it, then so be it. Unemployment benefits should be paid out before any funds go to creditors. Most employees that will need the benefit will not be the ones that made any major decisions. Creditors took a chance and if they lose, that is the chance they took.

Capitalism has many by products, good and bad. This time the bad side shows a big black eye. Private equity firms and hedge funds have only one goal: to make money at all costs. If they didn’t they wouldn’t be in business. But, this is an example that begs the question: Should there be more oversight on these funds? Would any other decent business walk away and stab it’s employees in the back? I have seen many business owners with more morals and decency. Beware the dak side of capitalism.

That’s quite a good 3rd grade education you got there Sam. You must be part of the ” No Child Left Behind Act”.

Let me guess, you drive a pickup truck and always vote for the good guys, the Republicans. Right, tell me I’m right.

Where any of theses managers from Enron?

I still work for what is left of Aegis in Houston, TX. No, I am NOT a socialist, but I would like to have health insurance like I did just 10 days ago. If I get sick, then the meager savings I have will be eaten up in no time flat.

I am NOT in management, and I had NO decision making in how Aegis was run. Yet, I am the one who is suffering now.

Please understand why I am not putting my name on this at this time. I still need a job and am actively looking for one.

is it Socialism to give someone more then a 2 day warning? Let me know what you think “sam Houston” i’ll make sure to tell those who were getting treated for cancer your resonse.
You cant get more Conservative then me and i think all those dumb @#$ over there should get a spine and take care of their employees. i was so anti-union until i went through this BS.

The guy from Eugene Oregon should read the article again.
Eliminating health benefits days
before laying-off employee so they DON’T qualify for COBRA is down right despicable.

Cerberus’s portfolio companies now generate revenues of more than $60 billion a year and employ about a quarter-million.

And they can’t help 782 people get health coverage.

Sam, please put that attitude away. The management at Cerberus is arrogant and very large risk takers. Welcome to big business. Either of those goes away and you don’t have a business. All COBRA did was attempt to protect employees. However, since Cerberus claimed bankruptcy (smart move on their part to avoid paying more money out for unemployment claims and health insurance!) they are now free to negotiate with their creditors and attempt to get the company back up on its feet or mothball it completely and nurse its wounds. Should the employees be eligible for COBRA? Sure, I don’t see why not. Here are people that are willing to pay for health insurance (albeit less than if they were to get it as individuals!) and they are being turned away. THAT is not a good message to send to the working masses. It will just lead to more media attention and pushing our politicians to make more reforms to the system and make it better, yada, yada, yada. Shhhhh! Keep it on the down-low. Things like this blow over pretty quick. Let’s keep it that way before we end up giving it too much more attention and having big brother get involved and raise our taxes accordingly.

as a person who started a business and went thru lots of problems and losses to get it started, it makes me sick to see large groups take over businesses with no committment to the people who make them run. Bad decisions at the top cause many people a lot of pain

Sounds like bashing Cerberus and other wealthy operations to score points with socialists.

It doesn’t make sense that after a company goes bankrupt and you no longer work for it that you would receive medical insurance or other benefits.

Its unreasonable demands and regulations like that which cause businesses to fail in the first place.

There is an increasing need for individuals to educate themselves about healthcare options should they ever be in this situation. In the Aug 13 issue of Forbes, Steve Forbes talks about using MEdical Tourism to lower health insurance costs. Private medical facilities in India can provide quality care at low prices (often one tenth). http://www.medical-treatment-in-india.blogspot.com is a great forum for these issues and links of stories where others have successfully beaten the system by relying on Medical treatment in India.

In business as in life listen to
those who have been there.
I was onced promised alot for
a little by an american express
financial advisor,before they were
sued for hundreds of millions.
I did not take it on the advice of
my father.