|The Labor Department filed a civil suit against him two weeks ago. It is kind of amazing that this did not get more attention. The main course is yet to be serves...and it will be served.|
Labor Department Sues Enron on Pensions
Fri Jun 27, 2:47 AM ET
By MARCY GORDON, AP Business Writer
WASHINGTON - The government is seeking to recover hundreds of millions of dollars in retirement money that Enron employees lost, bringing suit against the now-bankrupt
The Labor Department (news - web sites) filed a civil lawsuit Thursday alleging that the company and its officials, including President Bush (news - web sites)'s friend and contributor Kenneth Lay, mismanaged retirement plans full of overpriced company stock.
The energy trading company spiraled toward bankruptcy in late 2001 and the stock collapsed. Employees were not told about the deteriorating finances and were blocked for a time from selling the declining Enron stock in their retirement accounts.
It was the government's first legal action against Lay, who had been Enron's chairman, and former chief executive Jeffrey Skilling.
More than 20,700 participants in Enron's 401(k) plan had nearly two-thirds of their assets invested in company stock. Private suits filed on behalf of the employees allege that they lost more than $1 billion.
Lay disputed the government's allegations. His attorney, Michael Birrer, said the Labor Department was trying to create new law by requiring a company to apply a strict new standard for evaluating its own stock that is held in employee retirement plans.
While seeking to recover the retirement savings of Enron employees, Labor Secretary Elaine Chao said the action also is intended to send a message to pension plan officers.
"You have a solemn duty to safeguard your employees' pension assets. If you put those assets in jeopardy through neglect or malfeasance, we will hold you accountable," she said.
The department suit, filed in federal court in Houston, seeks to have the defendants barred from any future positions of responsibility as trustees of pensions funds and, in some instances, seeks financial damages from them.
It also names Enron's former directors, who include Wendy Gramm — former head of the Commodity Futures Trading Commission and wife of ex-Sen. Phil Gramm, R-Texas.
The specific allegation against the company's outside directors is that they failed to appoint a trustee to manage the Enron stock held by the employee stock ownership plan, which was separate from the company's 401(k) plans.
The allegation was disputed by Neil Eggleston, the Washington lawyer representing the outside directors. The board did appoint Northern Trust Co. as trustee in August 1999, and it was later replaced by another bank, he said.
The government's complaint "that the Enron board breached its duty by failing to appoint a trustee of the employee stock ownership plan is wrong," Eggleston said.
Enron spokeswoman Karen Denne declined comment on the suit. Calls to a lawyer and a spokeswoman for Skilling were not immediately returned Thursday.
Chao noted that Lay "went so far as to tout the (Enron) stock as a good investment for his own employees — even after he had been warned that a wave of accounting scandals was about to engulf the corporation."
Birrer, Lay's attorney, said his client made those statements "based upon the opinion of external auditors, bankers, lawyers and advisers as well as internal finance, accounting and department heads. At the time, Mr. Lay, like countless Enron employees and pension advisers, did believe strongly that Enron was a sound investment," he said.
The highest-ranking Enron executive charged to date in the corporate scandal is former chief financial officer Andrew Fastow, who faces nearly 100 criminal charges including fraud, money laundering, conspiracy and obstruction of justice. Fastow has pleaded innocent and is free on $5 million bond as he awaits trial
On the Net:
Labor Department: dol.gov