Former Owner of RG Steel to Stand Trial July 6
YOUNGSTOWN, Ohio — The U.S. Pension Benefit Guaranty Corp. lawsuit against the former owner of RG Steel, Renco Corp. is slated to go to trial July 6.
In 2013, the agency filed a complaint against billionaire industrialist Ira Rennert’s Renco Group, alleging the company evaded paying millions of dollars in pension obligations by selling a stake of RG Steel to a venture capital firm before it filed for bankruptcy in May 2012.
In Manhattan, U.S. District Court Judge Richard Sullivan has scheduled a trial for July 6 after rejecting motions from both parties to decide the case in its favor.
Last month in a separate case, a federal jury found that Renco owner Ira Rennert looted one of his companies during the mid-1990s to finance the construct a lavish mansion in The Hamptons. The mansion is assessed at $248.4 million and considered the largest inhabited private residence in the country.
Rennert, worth an estimated $6 billion, was ordered to pay $16.2 million personally and Renco Group $101 million to trustees who represent MagCorp. The plaintiffs argued that Rennert borrowed $150 million secured by the assets in the company to build his mansion, but did not reinvest the money to fix MagCorp’s problems.
Renco Group owned RG Steel, a group of three steel mills that included the former WCI plant in Warren, where more than 1,100 worked. RG Steel also consisted of mills in Sparrows Point near Baltimore a third in Wheeling, W.Va.
The complaint alleges that Renco Group sold a 24.5% stake in RG Steel to Cerberus Capital Management LP with the intent of evading its pension obligations to steelworkers, which at the time was underfunded by $70 million. Four months after the sale, RG Steel filed for bankruptcy.
According to court documents, Renco Group encountered financial difficulties one year after purchasing the mills from Severstal, a Russian conglomerate that bought the assets from bankrupt WCI in 2008.
In its complaint, the PBGC says that it had prepared to terminate RG Steel’s pension plans in January 2012, but did not do so after Renco’s assurances that it had no intention to sell off a portion to another party. Four days later, Renco informed the PBGC that it had closed the deal with Cerberus, the complaint says. Had the PBGC terminated the plans before the sale, Renco would have been liable for the plans.
The government is suing Renco for $97 million, alleging the company misled the PBGC about its intent to sell equity to dissuade the agency from terminating the plans.
RG Steel then filed Chapter 11 bankruptcy in May 2012, leaving the PBGC to assume the company’s pension obligations.
The PBGC is a government insurance agency that steps in to guarantee workers’ pensions up to a certain level when large manufacturers such as RG Steel go bankrupt.
RG’s Warren plant was auctioned off piecemeal and demolition is underway at the sprawling complex along Pine Avenue. The owner of the property, BDM Warren Steel Holdings, recently donated an old office building to the Tech Belt Energy Innovation Center to house graduate companies from that incubator.
Copyright 2023 The Business Journal, Youngstown, Ohio.