Enron has agreed to set aside $356.25 million in its bankruptcy for participants
in the company's retirement plans, but the Department of Labor expects plan
participants to receive just a fraction of that amount because the company lacks
the assets to pay the full settlement along with its other debts.
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Get Your Report Now!Although the proposed agreement provides for a $356.25 million claim, the final
amount paid depends on the total amount of assets available for distribution
in the bankruptcy court. The Department of Labor expects that "tens of
millions of dollars" will be paid to plan participants as a result of the
agreement.
The proposed settlement would give $305.36 million for its 401(k) and employee
stock ownership plan (ESOP) and $50.89 million for its cash-balance plan.
The final agreement is subject to approval by the New York Bankruptcy and Texas
district courts. The agreement will resolve a lawsuit by the Labor Department
and a private class action suit brought on behalf of the plans' participants
as well as funding and termination issues relating to the cash balance plan
raised by the Pension Benefit Guaranty Corporation. The agreement does not settle
the department's claims against Kenneth L. Lay or Jeffrey K. Skilling.
On June 26, 2003, the department sued Enron, its board of directors, Lay, Skilling,
the Enron officers and the plans' administrative committees for mismanagement
of the plans, in violation of the Employee Retirement Income Security Act (ERISA).
The suit alleged that the defendants failed to consider the prudence of Enron
stock as an appropriate investment for the retirement plans and did nothing
to protect the workers and retirees from extensive losses. The suit also alleged
that the board of directors failed to properly appoint and monitor a trustee
to oversee the employee stock ownership plan (ESOP). Lay was also accused of
misrepresenting Enron's financial condition to employees and plan officials
and encouraging them to buy the stock.
The board of director defendants, the Enron officers, and administrative committee
members who were sued for mismanagement of the employee benefit plans have already
paid $86.85 million under settlements with the department and the private plaintiffs.