Employees’ Lawuit Says Enron Hurt Retirement Funds
Two Enron Corp. workers are suing the company, claiming it endangered their retirement funds.
The lawsuit, filed in federal court in Houston under the Employee Retirement Income Security Act, asserts that Enron encouraged the employees to invest more heavily in company stock just before the stock tanked. The lawsuit was filed by Portland, Ore., utility lineman Roy Rinard and co-worker Steve Lacey.
Enron shares have plunged more than 90% over the last several months since the departure of the company’s chief executive and an accounting controversy that prompted the firm to restate its earnings since 1997, eliminating more than $580 million of reported income.
Steve Berman, managing partner for the law firm of Hagens Berman in Seattle, said Enron touted the value of its shares and encouraged employees to put their entire portfolio into Enron stock.
Enron officials didn’t emphasize the risk and instead painted the situation as positive, especially when the company’s stock began to slide, said Berman, who is hoping to get the suit certified as a class action.
Berman wants to prove that the company’s 401(k) plan executives failed to act responsibly when they knew about serious business problems. He’s also hoping to break new legal ground with his case.
The lawsuit is patterned after a case against Lucent Technologies in which Lucent employees sued their employer this summer for matching their 401(k) contributions with company stock that tanked. That case is still in litigation.
Earlier this year, Rinard, 54, had $472,000 in his Enron 401(k) plan, which had been growing for 21 years.
Today, his plan is worth about $40,000. Enron gives its employees their 401(k) match in company stock.
In January, Enron was trading for $84.87. Wednesday it closed at $5.01 a share on the New York Stock Exchange.
The problem was compounded when many employees, including Rinard, saw Enron’s stock doing so well that they decided to put their entire account into Enron stock.
Enron executives had talked about how the stock price was poised to climb above $100 a share, Rinard told the Houston Chronicle.
In addition, Enron employees were not allowed to make trades in the 401(k) plan for about a month, starting Oct. 17. That was the day after Enron surprised the market with the news it was taking a $1.01-billion after-tax third-quarter charge to get out of bad investments.
Enron officials, who could not be reached, have said they had planned the lockdown for several months because the company was changing plan administrators.
