LandAmerica pensions to be fully funded

LandAmerica Financial Group Inc. and a federal agency that earlier this week moved to take over the bankrupt company's pension program have agreed to a plan to ensure it is fully funded.

The Pension Benefit Guaranty Corp. said in a statement last night that LandAmerica had agreed to set aside money from the sale of subsidiaries to ensure the retirement plan is funded properly.

LandAmerica continues to operate the pension plan, and the agreement must be approved by the bankruptcy court, the agency said.

The federal agency filed notice this week that it intended to take over the plan as LandAmerica was working to sell six subsidiaries. The move was an effort to protect a $36 million claim the agency had filed in U.S. Bankruptcy Court in Richmond, a spokesman said.

Filing the claim prior to the sale meant that the subsidiaries would be held liable for any portion of the plan that was unfunded.

LandAmerica said it believed its cash balance plan had adequate money, but the Pension Benefit Guaranty Corp. estimated the program was underfunded by $36 million, or 15 percent.

About 9,600 employees and retirees have a retirement plan with the Henrico County-based real estate services company.

Under the agreement, if any LandAmerica subsidiary is sold, the company will place 30 percent of the sale proceeds in escrow to be held in case the Pension Benefit Guaranty Corp. takes over the plan or has payable claims as part of the bankruptcy case.

In return for the agreement, the federal agency will release any sold or current subsidiary from any liability should the Pension Benefit Guaranty Corp. have to cover any pension payments that are unfunded.

If the money is not needed, the funds will revert back to LandAmerica's estate and be divided among creditors of the company, an attorney for LandAmerica said in bankruptcy court yesterday.

In another matter before the court, LandAmerica Financial Group and a subsidiary are heading to mediation over a $68.2 million claim.

So, too, are four test-case plaintiffs that filed complaints against subsidiary LandAmerica 1031 Exchange Services Inc.

Judge Kevin R. Huennekens agreed to a mediation plan yesterday, nearly six months after both companies filed for Chapter 11 bankruptcy protection.

The hope is that mediation will help build consensus and avoid further litigation that could be costly and take up more time, said Rachel C. Strickland, a New York attorney representing LandAmerica.

"I think this case is just screaming out for this kind of mediation," Huennekens said.

In mediation, a bankruptcy judge of Huennekens' choosing will first take on a claim that the Henrico-based LandAmerica filed against the exchange company.

The parent company gave a total of $65 million in loans to help the exchange company cover operating costs when investments in auction-rate securities became illiquid.

The hope is to have that claim solved by September.

The second phase of the mediation will be more complicated because it involves cases filed against the exchange company.

The Internal Revenue Service allows investors to defer capital-gains taxes on the sale of an investment property so long as they place it with a third party and then reinvest the money within a certain period.

The process is known as a like-kind exchange, or a 1031 exchange, which refers to the IRS code authorizing the tax deferral.

At the time of the bankruptcy, the exchange company owed $419.2 million to more than 450 customers. More than 85 exchange customers filed complaints alleging the money belonged to them and not the estate. Fraud and damages claims also were lodged.

Huennekens ordered test cases be tried to provide guidance as to how exchange claims should be handled. He ruled last week that the money belongs to LandAmerica's exchange company and not its customers.

The mediation will discuss how those cases are handled and what damages may be awarded, in order to avoid more litigation.

The mediation rulings are not binding and must be approved by Huennekens.

Contact Emily C. Dooley at (804) 649-6016 or .