Fla Pension Plan To File For Lead Role In Enron Suit Fri


By: Christiane Bird
The Wall Street Journal, December 21, 2001


NEW YORK -- The $94 billion Florida Retirement System plans to file as lead plaintiff in a class-action lawsuit against Enron Corp. (ENE) in Houston federal court Friday.

No other pension plan have joined with the Florida pension system to date, "but we're talking with a number who are wrestling the equation. We expect others to join us over the next few days and weeks," said Tom Herndon, executive director.

The Florida Retirement System lost as estimated $306 million in value when Enron declared bankruptcy earlier this month, following allegations of financial impropriety and investment fraud. However, "the pension system is still in good shape, this won't affect our pay-outs," Herndon said.

A number of other class-action cases against Enron have already been filed, mostly by Enron employees who lost hundreds of thousands of dollars in their 401(k) retirement plans due to large investments in company stock. 

Account With Alliance Capital Terminated

The Florida Retirement System has also terminated its account with Alliance Capital Management Corp. (AC), the asset management firm that oversaw most of the plan's Enron investment through a large-cap growth fund, Herndon said.

Alliance bought the plan 4.9 million Enron shares from August through mid-November, despite signs that the company was in trouble, he said. Alliance then sold about 7.5 million Enron shares at about 25 cents each in late November, just after the Dynegy Inc. (DYN) deal to acquire the embattled energy giant fell through, he said.

In total, the Alliance investment in Enron cost the system $281 million; another $25 million was lost with smaller investments through various other money management firms.

Herndon noted that the Florida system had worked with Alliance for about 15 years, and that its large-cap growth fund had been handled by Alliance Vice President Alfred Harrison, a veteran manager who also oversees the $11 billion Alliance Premier Growth Fund.

Among asset management firms, Alliance Capital had the largest exposure to Enron stock, holding 43 million shares as of Sept. 30. Harrison, speaking at a press briefing in early December, said that in hindsight, "nobody really dug into footnotes" in the company's financial statements. "Shame on me for not doing something on it," the manager said at the briefing.

Florida has since transferred its former Alliance portfolio into an internally managed index fund, Herndon said. "We'll probably keep it there until we start up our new (defined contribution pension plan) in the spring - we'll need some liquidity then, and rather than hire another manager, we'll just wait until then," he said.