Amir Peretz is in for a surprise. The Construction Workers Pension Fund is going to sue the Histadrut for NIS 650 million. Thus, in addition to all the other troubles he has with the Histadrut's massive deficit, he now will face a huge lawsuit that appears to be totally justified.
The workers committee in Solel Boneh, on the basis of a completely flawed system, established the Construction Workers Pension Fund in 1945. The fund did not use an insurance plan based on actuarial balances so that what the worker deposited over the years would cover their pensions. Instead, like all the other Histadrut pension funds, it invented a new "system" that doesn't exist anywhere else in the world - the "generation to generation" scheme.
It was based on the assumption that Mapai would rule the nation for ever and ever, and would also control the work place for the same time. It would make sure membership in the fund would rise over the years with population growth, and the new generation would finance the older generation heading into retirement - and so the wheel would turn, from generation unto generation. Who needed an actuarial table when there was to be an ever-increasing number of fund members? It was the financial invention of the century.
The years passed and the fund grew, and there didn't seem to be any problems. But then came 1967, and the Six-Day War. Palestinians entered the construction industry's labor market, replacing Israelis. They weren't made members of the pension fund - neither were the foreign workers who came after them, so the number of paying members dropped and the "generation to generation" system simply imploded.
At least if the fund had been properly - even honestly - managed the crisis might have been contained. But it was totally corrupt. The fund financed various strange Histadrut and Hevrat Ovdim activities. State Comptroller's Report 43 said: "For years the Construction Workers Pension Fund paid the Histadrut and its institutions significant amounts of money for activities that had no connection to the fund's membership." Elsewhere, the report said: "Valuable buildings that the fund built at its expense were never registered as belonging to the fund, but rather as belonging to Hevrat Ovdim." Thus, while the workers thought the fund was carefully protecting their pensions, it was being plundered.
The waste was astonishing in its mindless arrogance. A little fund, which needed one office and a few professionals, turned into guaranteed jobs for scores of cronies. In the depths of the corruption the fund had 200 workers and 50 branches across the country. The branches were staffed with all sorts of political apparatchiks from the Histadrut, who had particularly high salaries and excellent perks - like cars - without actually having any work to do. The fund also provided especially generous pensions to cronies at the expense of the rest of the membership - the rank and file construction workers.
The fund maintained a separate fund, called "the half-thousandth." This received half a thousandth of a percent of the all the premiums paid into the main fund. Officially, it was supposed to provide special loans for urgent cases of members in trouble, but the loans for the needy went elsewhere. In the early 1970s, the fund granted the CEO of Solel Boneh an unlinked loan, almost interest free, and large enough to buy two apartments. In the years of hyperinflation the loan was virtually wiped out. Loans like that went to lawyers who worked with the fund, to well-known contractors, and to other pals of comrades. None of the workers with "urgent cases" ever knew there was a fund to provide emergency loans for them.
Over all those years, the treasury turned a blind eye, and the government a deaf ear. Nobody wanted to grasp the hot potato, until the day came when there was no choice. In 1996, a new state-appointed manager was named to run the fund, because it had simply run out of money to continue paying pensions to its 18,000 members.
Since then, the manager has been drawing NIS 500 million a year from a special fund established for such cases. But that fund is also going to run out of money in two years. So, the Construction Workers Pension Fund plans to sue the Histadrut for the corruption of the past - just so it can continue paying pensions to its members.
There are two main elements in the suit. The first is for unlinked loans the fund gave to Hevrat Ovdim - to the tune of NIS 300 million. The second is NIS 350 million for payments the fund made to various Histadrut bodies, such as salaries for Mishan workers - or subsidies for Hapoel Tel Aviv. Yes, that too was done in the name of the construction workers. Now they must start praying today that they win - just so they can continue getting their pensions.
Want to enjoy 'Zen' reading - with no ads and just the article? Subscribe todaySubscribe now