Senate Hearing on Enron Meltdown
By: The Associated Press
The New York Times, December 19, 2001
As the stock price plummeted, current and retired employees of failed Enron Corp. helplessly watched their life savings dissolve because the company barred them from selling Enron shares from retirement accounts.
Their anger and sense of betrayal after years of loyal service to the energy-trading giant were displayed at a Senate hearing Tuesday at which several Enron employees testified.
``We have been lied to and we have been cheated,'' retiree Janice Farmer declared at the hearing by the Senate Commerce subcommittee on consumer affairs, held to examine one of the biggest corporate failures ever.
Farmer had nearly $700,000 in Enron stock and now faces living on a $63 monthly pension check. Charles Prestwood, who retired after 33 1/2 years in the natural gas business, mostly with Enron, lost nearly all his $1.3 million in savings.
The employees disputed Enron officials' assertion that they were locked out of their accounts for 10 business days this fall, saying it was much longer -- increasing their losses.
``This is a tragedy for many, including the workers and investors who ... have been cheated out of billions of dollars,'' said Sen. Byron Dorgan, D-N.D., the subcommittee's chairman.
With the company's stock having hemorrhaged more than $60 billion in value in recent months, Dorgan said, ``Some at the top of the pyramid got rich and many at the bottom lost everything. It appears to me to be a combination of incompetence, greed, rampant speculation with investors' money and perhaps some criminal behavior.''
Sen. Barbara Boxer, D-Calif., was more blunt, telling reporters: ``I personally hope some of these people wind up in jail.''
The Justice Department is investigating Houston-based Enron for possible criminal conduct. The Labor Department and the Securities and Exchange Commission are pursuing civil investigations.
While ordinary employees were prohibited from selling company stock from their Enron-heavy 401(k) accounts, Enron executives cashed out more than $1 billion in stock when it was near its peak, lawmakers say.
And nearly 600 employees deemed critical to Enron's operations received more than $100 million in bonuses last month as the company faced a merger that unraveled and then went into bankruptcy.
Worth more than $80 a year ago, Enron's stock has tumbled to less than a dollar a share.
In addition to retirees and some 4,500 out-of-work employees, countless investors around the country have been burned by Enron's rapid descent into federal bankruptcy court in recent weeks.
Enron, which was the nation's seventh-biggest company in revenue and admired by Wall Street as a technological innovator, has acknowledged it overstated profits for four years.
The chief executive of its longtime auditor, Arthur Andersen LLP, told a House hearing last week that the accounting firm notified Enron's audit committee on Nov. 2 of ``possible illegal acts within the company.''
For the second time in less than a week, no Enron officials were present at a congressional hearing to defend the company's actions. Chairman and CEO Kenneth Lay declined an invitation to testify but told the Senate panel he would attend a future hearing. He is a friend of President Bush and a big campaign contributor.
Boxer and Sen. Jon Corzine, D-N.J., proposed a bill Tuesday aimed at preventing future Enron-style meltdowns for employees' retirement savings. It would restrict to 20 percent the amount an employee can have in any one stock in their accounts. There would be a 90-day limit on the period during which employers can bar workers from selling stock contributed by the company.