Enron Workers Testify On Lost Savings
At issue is a freeze of the company's 401(k) plan, during which sales of shares in employee accounts were prohibited. The company has said that the "lockdown" was caused simply by a long-planned change in plan administrators, and that it was in effect only from Oct. 29 to Nov. 12. Thus, it said, accounts were frozen only 10 trading days.
However, a panel of Enron workers and retirees told the Senate Commerce Committee that the freeze began Oct. 17, just as the company announced a quarterly loss and a sharp decline in shareholder equity, and its stock went into free-fall. The freeze lasted a month or more, several witnesses said.
One retiree, Janice Farmer, of Orlando, Fla., said she received no notice at all. When she tried to sell because of the stock plunge, she was told she couldn't. "Their main response was, 'Yes, the timing is very unfortunate,'" she said.
She lost nearly $700,000.
Another retiree, Charles Prestwood, of Conroe, Tex., said the notification he got was dated Oct. 8 and postmarked Oct. 10, giving him only a few days to decide.
"I lost all my savings, everything," as his $1.3 million stake in Enron evaporated, the 63-year-old Prestwood said.
Witnesses also told the panel, which is looking into the collapse of the giant energy company, that the company encouraged them to invest in it and gave them no inkling that it was in trouble – even as senior managers were selling millions of dollars' worth of stock.
Robert Vigil, 47, who works for Portland General Electric, an Enron subsidiary, said the loses of just eight of his co-workers totaled $2.882 million. "You can imagine how this catastrophe has affected us," he said. "Now multiply that feeling across thousands of other homes."
Witnesses were sharply critical of the accountants who vouched for Enron's financial reports and of the stockbrokers and investment banks that marketed the stock.
As late as September, there were 17 securities analysts covering Enron, and 16 rated the stock a "buy" or a "strong buy," said William H. Mann, an analyst for The Motley Fool, a firm that seeks to instruct investors about markets. The 17th analyst rated it a "hold," Mann said, and none rated it a "sell."
C. E. Andrews, managing partner for the global audit practice of Arthur Andersen, Enron's accounting firm, said that in retrospect it appears that "our team made an error in judgment" with respect to some of the partnerships that Enron engaged in, possibly to keep debt off its own balance sheet, but "it appears that important information was not revealed" to the Andersen auditors, and that resulted in about 80 percent of the original overstatement of Enron's profits.
He said the $52 million Andersen received in fees from Enron did not influence its audit findings. "We were independent," he said, and conducted the audits in compliance with professional rules.
Several senators said the Enron case may require changes in law and regulation.
"This is not your average business failure," said Sen. Byron Dorgan (D-N.D.), chairman of the Finance Consumer Affairs Subcommittee.