New Enron Bonus Plan Draws Fire

Enron Corp. asked a Bankruptcy Court judge Friday for permission to hand out up to $137 million in bonuses and severance payments to remaining employees over the next year.

The proposal drew immediate fire from a lawyer representing former employees, who said it is unfair to more than 4,000 fired Enron workers who got about $5,600 each in severance.

The proposed retention and severance plan covers about 1,700 employees and could end up costing $47.4 million to $137 million depending on the success of Enron’s push to sell assets, the company said. The new bonus plan is potentially even more generous than the $55 million paid to about 550 people Nov. 30, two days before Enron filed the largest corporate bankruptcy in U.S. history.

Critics have demanded that Enron and its creditor committee challenge those early bonuses, but no action has been taken. Enron said Friday that the creditor committee has approved the new bonus and severance plan and has agreed not to challenge bonuses already paid to any employee who remains with the company through Aug. 31.

Enron said it needs to pay the latest round of retention and incentive bonuses and to provide a severance plan to keep key employees laboring at the task of salvaging a smaller version of the company.

“For Enron to successfully reorganize the viable power and pipeline business and to liquidate certain non-core assets to maximize value for our creditors, we need to ensure that our critical employees are committed to the completion of these tasks,” Enron interim Chief Executive Stephen F. Cooper said.

Attorney Lowell Peterson, who represents several laid-off Enron workers, acknowledged that retention bonuses are not unusual in bankruptcy cases, but added: “It’s the enormous disparity that bothers me.”

“We have people who can’t afford medicine” after losing their Enron jobs, Peterson said. “What I have a problem with is the creditor committee absolutely opposing any severance for thousands of employees, but then saying, ‘Yeah go ahead and pay something like $137 million to a handful of executives.’”

Calls to lawyers for the creditor committee were not returned Friday. A hearing is scheduled for April 12 on a motion to pay former Enron workers as much as $30,000 each, Peterson said.

The Enron plan breaks into three pools:

* Retention bonuses for nearly 1,300 employees valued at about $40 million. These are paid quarterly over the next year and are based on each eligible employee’s salary.

* Severance benefits valued at up to $7 million. The 1,700 eligible employees would each receive at least $4,500 and as much as eight weeks of pay.

* An unusual “liquidation incentive” payment plan tied to how much cash Enron employees generate through asset sales, which could total as little as $7.4 million or as much as $90 million. Between 150 and 200 Enron employees will participate, Enron spokesman Eric Thode said.

Enron’s management committee, a group of about 20 top executives including Chief Operating Officer Jeffrey McMahon, are not included in the bonus plan, Thode said. Also not included are about 21,000 employees of Enron subsidiaries that have not filed for bankruptcy protection.

Kenneth N. Klee, a UCLA law professor who specializes in bankruptcy, said he has never seen a bonus plan tied to asset sales.

“It’s almost the kind of commission you would give to an auctioneer or a liquidation agent,” Klee said.

“Generally, a turnaround manager would be compensated for that. However, it aligns incentives. Those who are doing the work get paid.”