U.S. pension agency's ex-chief refuses to testify

By Kim Dixon

WASHINGTON (Reuters) - The former head of the U.S. agency that insures corporate pensions refused to testify Wednesday at a Senate hearing examining allegations that he had improper contacts with Wall Street firms.

Charles Millard, the former director of the Pension Benefit Guaranty Corp, invoked his Constitutional right to avoid self-incrimination after being subpoenaed to testify at a Senate Aging Committee hearing.

"Against the advice of senior leadership, he participated directly in picking the winners" of contracts that eventually went to BlackRock, JPMorgan and Goldman, PBGC Inspector General Rebecca Anne Batts told the hearing.

The contracts were part of a plan PBGC agreed to in early 2008 to boost its returns by investing in a broader range of instruments, including private equity, real estate and international equities.

"He engaged in extensive calling and emailing with Wall Street firms. Mr. Millard said these contacts were OK because these were his friends," Batts said.

After the hearing, a bipartisan group of six senators asked the Justice Department to explore the links between the bidders and the ex-chairman.

The agency, which insures traditional corporate pensions, said Wednesday it had a $33.5 billion deficit for the first half of fiscal 2009, worsening from a $10.7 billion deficit at the end of fiscal 2008. It sees substantial underfunding in plans by automakers, auto parts and other industries.

The agency blamed the ballooning deficit on new pension plan terminations, expectations distressed companies would turnover their retirement accounts to the government and a decline in interest rates which are used to value liabilities.