Enron’s Many Victims

Enron, the Houston energy company that helped throw California into crisis last year, spirals downward. Its stock has fallen from a high of near $85 to $4 Tuesday. A planned rescue-merger is being renegotiated, and Enron’s executives are disgraced.

The only shame in this is that 15,000 Enron employees have seen their retirement accounts tank right along with the company stock. We can only wish them luck in their lawsuit filed this week against the company, which urged them right up until the stock crashed to keep buying Enron, then froze the retirement fund so employees couldn’t sell their stock while the price skidded. The freeze was billed as an administrative necessity while plan managers were being changed.

Considering that Enron Chairman Kenneth L. Lay made about $145 million on his stock options in 2000 and the first few months of 2001 alone, maybe he’ll volunteer to cover some of the $890 million in retirement plan losses. Fat chance. Ditto the nearly $60 million that former Enron President Jeffrey K. Skilling cleared on his options in 2000. It was Skilling’s August resignation that helped trigger Enron’s decline--that and disclosures that its executives had formed off-the-books partnerships that essentially concealed company debt.

Enron’s employees aren’t the only ones holding the bag. Enron and its chairman, Lay, essentially invented market trading in electric power. Lay was also a chief energy advisor to President Bush, as he had been to Bush’s father. Along with a handful of other companies, Enron profited so handsomely from deregulation that California consumers, except those in areas with municipal power like Los Angeles, will pay the price in higher electric bills for years. Pacific Gas & Electric declared bankruptcy, and Southern California Edison nearly did. The state itself is deeply in debt for the power it was forced to buy. Major shareholders in Enron, including the state employee pension fund, got burned. There is a lot of blame to pass around--after all, Edison itself was a main cheerleader for deregulation--but Enron remains a fat target.

Lay’s tendency to fulminate at the state and its officials at the height of the electricity crisis for not getting onto the free-market bandwagon deepened the wounds. When the price bubble fell victim to this year’s cool summer, a declining economy and the state’s purchase of long-term power contracts, the damage was done.


Californians can hope that the Securities and Exchange Commission will require companies to disclose the sorts of shenanigans that concealed Enron’s debt. Voters can ask themselves whether state legislators’ inexperience, a product of term limits, helped produce such a shoddily constructed deal on deregulation.

Nothing will bring back the ordinary shareholders’ lost money. At least the Enron employee lawsuit stands a chance of recovering some percentage of the retirement fund loss, even if not a penny comes from Kenneth Lay’s $145 million.