At one time, United Airlines mechanic Ted Trimble had more than $120,000 worth of company stock.

Now, if United files for bankruptcy as expected, Trimble's stock will be virtually worthless.

Like workers at Enron, the failed energy company, United employees heavily invested in the company have watched much of their retirement savings go down the drain.

They couldn't do a thing about it because they were not allowed to cash in or sell their stock until they retire.

The loss was the result of a controversial Employee Stock Ownership Plan, called an ESOP, that was once viewed as the savior of the company.

But like many mechanics at United's Chicago facilities, Trimble never liked it.

"From stem to stern it was a mistake because it was set up wrong," Trimble said.

To avoid being sold or split up, United started its ESOP in 1995 to give pilots, machinists and salaried management 55 percent ownership of the company in return for pay cuts and wage freezes.

Promotional material said a 30-year-old mechanic could retire with $2.3 million in the bank and a $24,000 monthly pay out.

At first, the plan appeared to work well, as the company made record profits, and stock prices soared over $100 per share.

But stock shares are only credited to employees' accounts in a trust; the employees can't cash in or sell their shares until they leave.

The new manager of United's ESOP, State Street Bank, recently began selling shares of United, after considering that the shares could lose all their value in a bankruptcy.

Some employees were angered by the sale. Some wondered why the stock was being sold against their will just as the company most needed investors, while others asked why the stock wasn't sold earlier when it was worth more.

But United's ESOP was unique as the only publicly traded company in which the employees owned the majority of stock.

It was also unusual in having a termination date, under which employees stopped getting stock in 2000.

The plan's failure teaches valuable lessons, said Michael Keeling, executive director of the ESOP Association, an advocacy group in Washington, D.C.

For one thing, Keeling said, the plan was rare because it was created in return for wage cuts, so many employees saw it as a short-term investment.

Secondly, the flight attendants voted not to participate, so there was dissension among the employees.

Also, the company never created a culture of ownership among the employees in which they could help make decisions about how the company was run.

It's difficult to make an ESOP work at such a large, global company, Keeling said. But a Washington State study showed companies with ESOPs paid better and paid twice the retirement income than non-ESOP companies.

Other analysts have noted that diversification is a key principle of investing, and that many 401(k) retirement plans limit investment in the employee's company to 10 percent.

To make matters worse, United workers said, contributions to 401(k) plans were limited by the ESOP, and by law, pilots must retire at age 60, ready or not.

United spokesman Joe Hopkins noted employees also got three seats on United's board of directors out of the deal, and said many other factors were at work in United's financial spiral.

"It was a great idea when it started," Hopkins said. "As an investment it's down almost to nothing, which is unfortunate, but nobody foresaw it."

United workers are left to worry about losing their jobs at the same time they have lost their retirement savings.

"We've given our blood and sweat out there," said Daniel Kaulback, an O'Hare baggage handler. "It's not worth squat."

・Daily Herald staff writer Jamie Sotonoff and news services contributed to this report.

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