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ETA News Release: [07/11/2005]
Contact Name: David
James or Gloria Della
Phone Number: 202-693-4676 or x8664
Release Number: 05-1354-NAT
U.S. Secretary of Labor Elaine L. Chao Announces
$356.25 Million Bankruptcy Claim for Enron Retirement Plans
Agreement Clears Way for Restoration of Retirement
Assets to Workers and Retirees
WASHINGTON — U.S. Secretary of Labor Elaine L. Chao today announced
an agreement giving the Enron 401(k) and employee stock ownership (ESOP)
plans a general unsecured claim of $305.36 million in Enron's bankruptcy.
The proposed settlement also gives Enron's cash balance plan a claim of
$50.89 million.
"This agreement makes possible a significant recovery for Enron retirees
and their families," Secretary of Labor Elaine L. Chao said. "Corporate
malfeasance will not be tolerated and every effort will be made to protect
workers who are harmed by it."
Although the proposed agreement provides for a $356.25 million claim,
the final amount paid depends on the total amount of assets available for
distribution in the bankruptcy court. It is expected that tens of millions of
dollars will be paid to plan participants as a result of the agreement. The
final agreement is subject to approval by the New York Bankruptcy and Texas
district courts. The agreement will resolve a lawsuit by the Labor Department
and a private class action suit brought on behalf of the plans' participants as
well as funding and termination issues relating to the cash balance plan raised
by the Pension Benefit Guaranty Corporation. The agreement does not settle the
department's claims against Kenneth L. Lay or Jeffrey K. Skilling.
On June 26, 2003, the department sued Enron, its board of directors,
Lay, Skilling, the Enron officers and the plans' administrative committees for
mismanagement of the plans, in violation of the Employee Retirement Income
Security Act (ERISA). The suit alleged that the defendants 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. The suit also alleged that the board of directors failed to properly
appoint and monitor a trustee to oversee the employee stock ownership plan
(ESOP). Lay was also sued for misrepresenting Enron's financial condition to
employees and plan officials and encouraging them to buy the stock.
The board of director defendants, the Enron officers and administrative
committee members who were sued for mismanagement of the employee benefit plans
have already paid $86.85 million under settlements with the department and the
private plaintiffs.
The department's 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.
Chao v. Enron (Civil Action No. H-03-2257/Consolidated with H-01-3913)
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