U.S. to Seek Retirement Plan Control At Enron
By:
Albert B. Crenshaw
The Washington Post, February 11, 2002
The Labor Department announced yesterday that it is
seeking to remove, through court action if necessary, the Enron Corp.
officials who oversee the company's retirement plans and replace them with
independent experts.
The department has been investigating Enron's handling
of its retirement plans, in which about 20,000 workers and retirees lost
more than $1 billion because of the energy-trading company's bankruptcy.
Labor officials said their move is an outgrowth of that investigation, but
declined to give specific grounds for their action.
Labor Assistant Secretary Ann Combs said in a statement
that the Enron officials "serve as plan fiduciaries, with
responsibility for operating the plans and protecting the rights of
participants and beneficiaries."
"Our objective is to replace them with an
independent fiduciary, expert in [pension law] and experienced in protecting
the interests of participants and beneficiaries in complex pension plans
like Enron's," she said.
Combs added that if the department can "reach an
advantageous agreement [to replace the fiduciaries], without engaging in a
lengthy court proceeding, we will do so. If no agreement is reached in the
very near future, we will seek a court order replacing these people with a
qualified independent fiduciary."
During hearings last week, Enron workers and retirees
described how their savings have been wiped out and their lives changed
because of the company's collapse.
Some members of Congress called for the removal of plan
officials after hearing testimony that several Enron officials who are
members of administrative committees sold large blocks of Enron stock before
the collapse, but had not thought it necessary to warn workers and retirees
that the plans might be in danger.
Enron's executive vice president, Cindy Olson, netted
about $3 million and James S. Prentice, another member of the panel, made
$900,000, according to their testimonies.
Olson also testified that whistleblower Sherron Watkins
had come to her before sending her now-famous letter warning of a potential
accounting scandal resulting from the company's accounting practices and
described what she was going to say.
Olson testified that she had talked over the matter
with a few other retirement plan officials, but none thought it necessary to
take any action.
On Friday, Rep. George Miller (D-Calif.), ranking
minority member of the House Education and the Workforce Committee, wrote to
Labor Secretary Elaine L. Chao asking her to bring legal action to remove
Olson from the administrative committee.
"Frankly, I was shocked by Ms. Olson's
testimony," Miller said at the time.
At the same time, lawyers for current and former Enron
employees said that based on Olson's testimony they would ask a federal
court in Houston to remove all the Enron executives from the plan.
The proper response of "any prudent, disinterested
fiduciary" would have been to convene an emergency meeting of the plan
administrative committee, disclose Watkins' allegations, and
"immediately suspend any further the use of Enron stock as a plan
investment . . ., pending a committee investigation conducted independent of
Enron" and its accountants and lawyers, said Eli Gottesdiener, a
Washington lawyer representing Enron workers and retirees who are suing over
their lost benefits.
"None of this, of course, was done, which is
tragic because had it been done, Ms. Olson, together with the committee,
could have saved participants literally hundreds of millions of
dollars," Gottesdiener said.
Enron had several different retirement plans with
different administrative committees, though there is much overlap among the
members, according to the Labor Department. The plans included a 401(k)
plan; an employee stock ownership plan; and a traditional pension, also
known as a defined benefits plan.
The defined benefits plan is insured by the federal
government and is still operating.
The other two plans were heavily invested in Enron
stock, both because the company contributed its own stock to the plans and
because workers, believing it was a good investment, put in their own money
as well. Many Enron retirees did not withdraw or diversify their accounts
after retiring.
Workers younger than 50 were barred from selling Enron
stock that was contributed to the 401(k) plan by the company. And in a
controversial move, the company undertook to change plan administrators last
fall, freezing worker accounts even as the stock was plummeting.
The fate of the Enron retirement plans has triggered
intense debate on Capitol Hill over ways to protect other workers from
"future Enrons."
The Bush administration has proposed a plan that would
require that companies allow workers to sell stock contributed by the
company after the worker had been with the company for three years.
President Bush also would require that workers be given at least 30 days'
notice before any freeze of accounts and would bar executives from selling
stock received through stock options and other company plans at any time
during which the workers could not sell theirs.
Some members of Congress, including Sens. Barbara Boxer
(D-Calif.) and Jon Corzine (D-N.J.) and Paul Wellstone (D-Minn.) have
propose legislation that would place limits on the amount of company stock
that could be held in a 401(k) plan. The administration opposes such limits.
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