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OPA News Release: [06/26/2003]
Contact Name: Lisa
Kruska
Phone Number: (202) 693-4676
U.S. Labor Department Sues Enron, Executives and Plan
Officials for Failing to Protect Workers
WASHINGTON—Secretary of Labor Elaine L. Chao announced that
the department today sued Enron Corporation, former chief executive officers
Kenneth L. Lay and Jeffrey K. Skilling, the former board of directors, and the
former administrative committee for Enron's retirement plans for failing to
prudently protect Enron workers’ retirement assets invested in the stock
of Enron. More than 20,000 participants in the savings and employee stock
ownership plans experienced a substantial erosion of their retirement assets
due to the drop in the value of Enron stock owned by the plans.
“Today, the Department of Labor is filing suit in federal district
court in Houston, Texas to recover losses that Enron employees suffered due to
the mismanagement of two of Enron’s pension plans. This action will
strengthen the American workforce's confidence in their retirement
savings,” said Secretary Elaine L. Chao. “As I said when we opened
our investigation, ‘Enron’s employees have gotten the short end of
the stick in the collapse of this company, and we are committed to doing
everything we can to help them.’ This lawsuit keeps that
commitment.”
The suit names as defendants former board of directors Lay, Skilling,
Robert A. Belfer, Norman P. Blake Jr., Ronnie C. Chan, John H. Duncan, Wendy L.
Gramm, Ken L. Harrison, Robert K. Jaedicke, Charles A. LeMaistre, John
Mendelsohn, Paulo V. Ferraz Pereira, Frank Savage, John Wakeham, and Herbert S.
Winokur Jr; and former administrative committee members James S. Prentice,
Roderick J. Hayslett, Tod A. Lindholm, Cindy K. Olson, Sheila D. Armsworth and
Paula H. Rieker.
The Secretary’s lawsuit alleges that the defendants violated the
Employee Retirement Income Security Act (ERISA) when they failed to consider
the prudence of Enron stock as an appropriate investment for the retirement
plans and did nothing to protect the workers and retirees from extensive
losses.
Enron, Lay, Olson and Lindholm withheld information about Enron’s
financial condition from other plan officials. The board of directors failed to
properly appoint and monitor a trustee to oversee the Employee Stock Ownership
Plan (ESOP), leaving the ESOP participants without this legally required
fiduciary to protect them. The administrative committee members ignored the
repeated warning signs of the corporation's financial troubles, ignored the
fact that the stock plummeted in value throughout 2001 and failed to consider
reducing or eliminating the plan’s investments in Enron stock. Lay also is
charged with misrepresenting Enron’s financial condition to employees and
plan officials.
The suit, filed in federal district court in Houston, seeks a court
order requiring the defendants to restore to the plans all losses with
interest, forfeit their right to benefits from the plans and permanently bar
them from serving as fiduciaries to any plan governed by ERISA.
The suit resulted from a comprehensive investigation conducted by the
Dallas regional office of the department’s Employee Benefits Security
Administration and the Office of the Solicitor. In the course of that
investigation, the department has collected and reviewed over 2.5 million pages
of documents, questioned 110 witnesses and issued 78 subpoenas.
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