Insurance to Cover Enron Executives’ Legal Bills

A federal judge Thursday cleared the way for Enron Corp. executives and directors to start collecting insurance payments to cover their legal bills arising from the nation’s biggest business failure.

Opponents had argued it would be improper for payouts to go to people who might have helped destroy Enron. But Judge Arthur J. Gonzalez in U.S. Bankruptcy Court in Manhattan said the officials are entitled to legal coverage under the company-purchased insurance policies.

Dozens of current and former Enron executives and directors, including former Chairman Kenneth L. Lay, former Chief Executive Jeffrey K. Skilling and former Chief Financial Officer Andrew S. Fastow, have been named in lawsuits and investigations stemming from the energy trading firm’s collapse. Lawyers for some of them said delays in obtaining the payouts could jeopardize their defense.

Jeff Boyd, deputy attorney general for Texas, had asked the court to require Enron officials to put up collateral for any insurance funds they receive so that the money can be recovered if they are later found to have engaged in wrongdoing and therefore are ineligible for coverage.

Gonzalez declined to set any such conditions, but neither did he issue what Boyd called a “get-out-of-jail-free card” that would have exempted Aegis, the lead insurance company, from liability if it makes payments to executives who are later found ineligible.