UC Named Lead Plaintiff in Enron Class-Action Suit

A Houston federal judge Friday picked the University of California over two other groups of public pension funds to be the lead plaintiff in a massive class-action lawsuit against senior executives of Enron Corp. and its auditor, Andersen.

Enron’s stock collapse cost the university system $145 million in pension and endowment funds it had invested in the company.

Though that is a tiny fraction of the $54 billion of pension and endowment funds held by the university system, the organization has taken an aggressive role in trying to recover the money, hiring veteran class-action law firm Milberg, Weiss, Bershad, Hynes & Lerach.

Two other shareholder groups contended for lead-plaintiff status. One was composed of public pension funds from Florida and New York City; the other was a four-state consortium composed of Ohio, Washington, Georgia and Alabama.

“This lawsuit is a rare and extraordinary legal step for the university, but it is warranted by the extreme and unique circumstances surrounding Enron’s collapse and the damage that collapse has caused so many,” James E. Holst, the university’s general counsel, said in a statement.

U.S. District Judge Melinda Harmon in Houston made the ruling Friday afternoon.

The university said she based her decision on several factors, including the “UC’s ability as a single investor to coordinate the litigation.” The other plaintiffs are made up of groups of investors.

As the lead plaintiff, the university system will take on the primary role of managing the case and monitoring developments for other plaintiffs.

The case is expected to take several years to litigate.

The university joined the lawsuit in December, claiming that it was duped by a “massive insider trading” scheme in which the company and Andersen accounting firm issued false financial statements and made “false and misleading statements about the company’s purportedly record results and strong operating performance.”

The university at one point owned 2.2 million Enron shares. CalPERS, the state public employees retirement system, said it has lost $45 million in Enron shares. The California State Teachers Retirement System lost about $40 million.