Enron Employees’ Suit OKd
Employees whose retirement funds were decimated by the collapse of Enron Corp. can move forward with a class-action lawsuit against the company, a federal judge ruled Wednesday.
Also Wednesday, the Overseas Private Investment Corp. said it could be on the hook for $658 million in Enron-related projects abroad, although that figure is less than previous estimates.
And the exodus of top Enron executives continued, with the announced retirement of General Counsel James V. Derrick Jr., effective March 1.
The decision by U.S. Bankruptcy Court Judge Arthur J. Gonzalez is a major boost for the 15,000 current and former workers who say Enron mismanaged their 401(k) plans, costing them up to $1 billion in losses.
Among their complaints, employees say it was wrong for the bulk of their 401(k) assets to be in Enron stock, which has been rendered nearly worthless by the company’s demise.
However, employees won’t necessarily receive money if they win their lawsuit. Gonzalez’s ruling allows the workers to proceed with a retirement-related suit in federal court in Houston. The suit had been automatically put on hold by Enron’s Dec. 2 bankruptcy filing.
But any award from the Houston case would have to be approved by the bankruptcy court in New York, which would balance the employees’ claim against those of other unsecured creditors.
Still, employee lawyers were buoyed by Wednesday’s ruling, saying their case could have been delayed for years without it.
“This is a very significant victory for our efforts to have our day in court against Enron and for the people who have seen their life savings decimated,” said Eli Gottesdiener, an employee attorney.
Gonzalez also ruled that Enron must turn over to employees all the documents that it has provided to Congress and federal regulators who are investigating the company’s downfall.
Gonzalez is scheduled to decide next week on a separate request from the employees to allow them access to $85 million in their retirement funds case, Gottesdiener said. The money is contained in a liability-insurance policy that was earmarked for the 401(k) plan.
Also Wednesday, documents were released detailing Overseas Private Investment Corp.’s loans to Enron ventures. OPIC has loaned a total of $544 million since 1993 to five projects involving Enron, ranging from a diesel-fueled power plant in the Philippines to a gas processing facility in Venezuela.
The documents showed that OPIC would have a maximum exposure of $658 million for Enron-related energy projects in developing countries, less than the $1-billion figure reported earlier this year.
OPIC, which provides loans and risk insurance to U.S. companies operating abroad, said the outstanding loan balances total $453.7 million. The agency faces an additional $204 million in potential exposure from political risk insurance policies issued to 10 Enron-related energy projects around the world. Such policies pay off when a U.S. company’s assets are seized by foreign governments or damaged by terrorism.
During the same period, another government agency, the Export-Import Bank--which supports exports by U.S. companies--gave more than $650 million to Enron-related projects overseas, though it’s unclear whether there is any taxpayer money at risk.
“These projects obviously were a tremendous benefit to Enron’s operation,” said Sen. Charles E. Grassley (R-Iowa), who requested the information from OPIC.
“The disclosure of this information sheds light on the government’s action in support of Enron over the years.”
OPIC’s maximum exposure was dramatically reduced last week when the agency terminated two loans to projects in Brazil totaling $390 million, according to OPIC spokesman Lawrence Spinelli. The loans were canceled before the funds were released because the projects failed to meet preset deadlines and conditions, he said. As a result, the loan commitments expired.
OPIC officials are optimistic that most of the remaining loans will be repaid in full.
“Four of the five projects are operating very successfully and are providing a revenue stream to pay off the loans,” Spinelli said.
The loans were not made directly to Enron, but instead were issued to separate entities or joint ventures. As a result, the entities are not directly affected by Enron’s bankruptcy.
OPIC’s biggest exposure comes from the $2.9-billion Dabhol Power Co., a joint venture including Enron, Bechtel Corp. and General Electric Co. The power plant, about 150 miles from Bombay, has been shut down after a dispute with an Indian electricity board. OPIC, which provided about $160 million in loans and $180 million in political risk insurance, is working to find a buyer for the plant.
Derrick’s retirement was “purely voluntary,” according to company spokeswoman Karen Denne, although the company noted that it was coming “in connection with the restructuring and reorganization” of the company.
The 57-year-old Derrick, who also is executive vice president, joined Enron in 1991 from the company’s now-beleaguered law firm, Vinson & Elkins. He will be replaced by deputy general counsel Robert H. Walls Jr.
Separately, Jeffrey K. Skilling, Enron’s former chief executive, has resigned his seat on the board of the Houston branch of the Federal Reserve Bank of Dallas.
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Hamilton reported from New York and Sanders from Washington. Staff writer Nancy Rivera Brooks, in Los Angeles, contributed to this report.
