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November 28, 2001
Enron Workers Lose Their Retirement Funds
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But workers are also furious because they were prohibited from changing their investments as the stock plunged, according to The New York Times.
Through the 401(k) retirement plan, Enron employees chose to put much of their savings in company shares, and Enron made contributions in company stock as well.
But around the time Enron disclosed serious financial problems last month, the company froze the assets in the plan because of an administrative change. For several weeks, as the stock lost much of its value, workers stood by helplessly as their retirement savings evaporated, the Times reports.
They were not allowed to switch investments at all, even though the plan had far less risky choices.
At the end of last year, the 401(k) plan had $2.1 billion in assets. More than half was invested in Enron. Since then, the stock has lost 94 percent of its value.
At Portland General Electric, an Oregon utility acquired by Enron four years ago, some workers nearing retirement have lost hundreds of thousands of dollars.
The utility has gone so far as to line up grief counselors to help them work through their problems.
"We had some married couples who both worked who lost as much as $800,000 or $900,000," said Steve Lacey, an emergency-repair dispatcher for Portland General. "It pretty much wiped out every employee's savings plan."
"Shortly after it was frozen, the articles started coming out about some of the questionable activities of Enron," Lacey added. "The stock took a tremendous drop, and we were pretty much helpless."
The Times notes that such losses are grim reminders of the danger of relying too heavily on one investment. Other stock plunges have wiped out the retirement savings of many employees of the Nortel Networks Corporation, Lucent Technologies Inc., and Global Crossing Ltd.
Escaping the turmoil, however, are Enron senior executives, who sold their stock during the last few years. Chairman Kenneth L. Lay made $20.7 million during the first seven months of 2001 by exercising stock options - and more than $180 million by exercising options during the three prior years.
Last week, Mr. Lay agreed to forgo a $60 million severance package after Enron traders and employees made clear how upset they were that he would profit from the proposed acquisition of the company by Dynegy Inc. while they were suffering.
Steve W. Berman, a lawyer from Seattle who represented states against the tobacco industry, has filed a lawsuit in Federal District Court in Houston seeking class-action status on behalf of Enron employees who lost money on the stock through their retirement plan. The lawsuit says that Enron schemed to pump up the price of the stock artificially and violated its fiduciary duty to its employees by failing to act in their best interests.
"They were promoting Enron as a retirement investment vehicle and matching employees' contributions with Enron stock, when they knew the stock was overvalued, and that's a breach of their fiduciary duties," Berman told the Times.
What's more, he said, the assets were frozen on Oct. 17, with the stock at $32.20, even though Enron executives knew there would be imminent disclosures about the company's accounting practices. "They knew the worst news was about to come out, but they froze the stock," he said.
To view the New York Times article, click here. Registration required.
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