EDITOR'S NOTE — After World War II, thousands of companies made a promise to their workers: Invest your most productive years with us, and we'll take care of you with a pension when your working days are over. In recent years, hundreds of thousands of workers and retirees have seen those promises broken. This story looks at one small Ohio company.

HOWLAND, Ohio —It had been another tense week at Ajax Magnethermic Corp. But after 35 years at the struggling company, Jim Necastro was glad just to have his job, especially with retirement a few years away.

Certainly that was worth a toast on this June afternoon. He cracked open a cold beer and stretched out on his back patio.

Then Don, a neighbor who worked for a local security company, trotted across the lawn.

"Hey, Jimmy," the neighbor half-shouted. "My guard just called me from Ajax. He said they just closed and he's supposed to lock the gates."

By evening, the windows of the plant on Overland Avenue were dark, the gates were padlocked and a sign hung from the chain-link: "Closed Until Further Notice."

The shutdown was so sudden and unexplained that the following Monday, 90 of Ajax's 138 employees showed up for work.

Necastro's job was gone, but that was hardly his only worry.

Somewhere behind the padlocks, alongside the stilled machines and vacant desks, could his pension be in there too?

LOST PROMISE

A pension is a promise. And through the years, Ajax's workers had no reason to doubt the word of the company's owners, three men who knew each worker by name.

But the company changed hands. And changed hands again. And again. By 2002, Ajax was owned by a subsidiary of Citigroup Inc., the nation's biggest bank. When Citigroup decided to walk away from Ajax, that promise was lost.

Nobody ever explained to Ajax workers nearing retirement just how that could be the case. They would have to figure it out on their own. It would take three years of waiting, of sifting through clues and wrestling with bureaucracies.

Three years to learn that money they'd been counting on would not be coming.

The company wasn't big, but it played a key role in the Mahoning River Valley's economy, making electric melting equipment for the area's steel mills.

ACCOUNTS ERODING

In 2002, the company shut Ajax's satellite plant in Richmond, Ky.

"What about our retirement benefits?" workers there wrote to the CEO. "Will we be left with nothing?"

Dave Hanton, a mid-level manager in Howland, began stopping by the desks or calling the homes of co-workers over 55, asking them to chip in to hire a lawyer to check on their pensions. About 100 workers kicked in $50 each.

Then, more bad news.

In May 2002, the company announced it was scrapping severance pay. Two days later, nearly 60 employees were called into the cafeteria and were told they were terminated. Two weeks later, the company announced that "due to unforeseen events" it was eliminating health insurance.

Finally, on June 28, Ajax ran out of cash and its lenders would give it no more.

By evening, the gates were shackled.

Abandoned employees puzzled over what to do.

"Not sold. Not bankrupt? How do I get pension?" Necastro scribbled in a note to himself.

As it turned out, money set aside for the pensions was safe, but there wasn't as much of it now. The stock market and interest rates had dropped, leaving the accounts with less than half of what was needed for the benefits.

With Ajax shuttered, who was responsible for making up the difference?

NO ONE RESPONSIBLE

In their search for answers, workers flocked to Mother—Ajax, an Internet discussion board set up by Mike Smith, a salesman who lost his job in the May layoffs.

That's where many first heard about a deal to resurrect Ajax. It was complex, and some elements of it are still unclear. But county court papers, state incorporation records, federal pension files obtained through a Freedom of Information Act request, and securities filings — tell much of the story.

The banks that were Ajax's main creditors decided to get out with what they could. In July 2002, they sold the right to collect the debt for pennies on the dollar.

Park-Ohio Holdings Corp., a Cleveland company, was the buyer, in a deal that essentially gave it control over how Ajax would be liquidated. Park-Ohio reopened the plant, rehired many workers and then acquired Ajax's equipment and assets.

But Park-Ohio did not buy Ajax itself — so it had no legal responsibility for the pensions.

Those responsibilities remained with Ajax, now an empty vessel, still owned almost entirely by Citigroup's venture capital company. But not for long.

Citigroup sold most of its interest in Ajax to a shell company set up just for that purpose by Jerry Crawford, brother of Park-Ohio's chairman and CEO.

When the deal was done, ownership in Ajax was dispersed, with no one owning 80 percent of it.

The figure is important. Under federal law, no company could be held responsible for paying for the $9 million pension shortfall unless it owned at least 80 percent of Ajax.

That raises questions: Why was a shell company formed to buy control of a worthless Ajax? Was the sale structured intentionally to avoid responsibility for coming up with money for the pensions?

Crawford wouldn't answer and referred the questions to an attorney who did not return phone calls. His brother Edward, the Park-Ohio CEO, also declined to comment. So did a spokesman for Citigroup, and a spokesman for Credit Suisse First Boston, the lead lender to Ajax.

Structuring a deal specifically to evade responsibility for pensions is illegal. The federal Pension Benefit Guaranty Corporation, which is responsible for enforcement, investigated but found no evidence of evasion. It's difficult to prove, said spokesman Gary Pastorius.

However, a staffer for the federal organization who worked on the later stages of the case, said the agency apparently was unaware that the shell company that bought the largest share of Ajax was owned by the brother of Park-Ohio's CEO. That might merit a second look, he said.

CHECKS CUT IN HALF

The Pension Benefit Guaranty Corporation has a big stake in how this all turns out. Its main role is to insure pensions, covering the shortfall when companies default on their obligations.

That has been happening with increasing frequency, pushing the agency into record deficits. In just the past year, the agency has shouldered 120 terminated pension plans, assuming responsibility for the benefits of 235,000 workers and retirees. The problem has grown so serious that the Bush administration and Congress have been working to craft a law that would require companies to fully finance their pension plans.

Almost 2 1/2 years after Ajax closed, letters sent to the oldest Ajax workers informed them that the agency would begin paying their pensions. Part of the money would come from $7.9 million that the agency recovered from Ajax pension accounts — of $16.7 million owed to workers. Taxpayers will cover the rest.

But Ajax workers will not get all the retirement income they had been counting on.

The Pension Benefit Guaranty Corporation provides workers only with benefits they earned before their pension plan was terminated. But in most plans much of a pension is accumulated in the last few years of an employee's working life. For many Ajax workers who were near, but not yet at, retirement age, the loss is considerable.

Necastro was expecting to retire at 65 with a pension of $1,600 a month. Instead, he gets $785.70.

Hanton was expecting $2,300 monthly. Instead, at 63, he'll get $1,305.85. In the time spent waiting for the first check, he burned through much of his savings and is now doing odd jobs for neighbors and repairing old tractors, a longtime hobby.

Sitting at his kitchen table, Hanton recounts the sermon on financial planning he preached to his son and the son's response.

"He said, 'Dad, look at you. You did all the things that you were supposed to do and look what happened to you,' " Hanton recalls.

"And, you know, I couldn't give him an answer."