May 13, 2004, 11:10AM
Enron workers who saw their stock-based retirement plans vaporize in the wake of the company's collapse could recoup some of their losses with the partial settlement of two lawsuits announced Wednesday.
The lawsuits stem from complaints that Enron executives and others breached their duty owed to employees under pension laws.
Should U.S. District Judge Melinda Harmon give her blessing to the deals, current and former employees would receive $69.2 million of the $86.5 million settlement sometime in the late summer or fall.
Lawyers for the workers would receive $17 million.
That would leave about $3,500 per employee, assuming there are as many as 20,000 eligible current and former workers. The actual number of employees who qualify and how the money will be divided could be quite different.
The larger of the two settlements Ebetween the lawyers for employees in the would-be class action lawsuit and certain members of the board of directors, an administrative committee and human resources staff Eis for $85 million.
That money will come from two Enron insurance policies.
The other $1.5 million will come from a U.S. Department of Labor settlement of its lawsuit mirroring the employee complaint. The government is settling only with outside directors, and they are to personally pay the $1.5 million, not Enron's insurance carriers. About $300,000 could be paid to the government as a penalty.
"It's nice to get something," said Matt Hommel, a former Enron information technology specialist currently working as a consultant at Texas Instruments. "But seeing as the lawyers are getting $17 million, maybe I should take my piece and put it toward a law degree."
"I would be shocked if this is all the money employees receive. This will be a small piece of the ultimate recovery," said Lynn Sarko, a Seattle-based lawyer for the employees.
He said the lawsuit will still proceed against former Chairman Ken Lay, former CEO Jeff Skilling, Enron itself, Arthur Andersen and Northern Trust Co., a bank that worked specifically on the plan and could still be seen as a deep pocket in the case.
Sarko said there is $50 million in fidelity bonds that he thinks the employees should have, and he has high hopes of collecting billions from Enron itself through the bankruptcy.
Other creditors, like the banks, will fight such a payout from the bankrupt company.
Houston-based lawyer Robin Harrison, also representing employees, said this is the largest recovery to date for employees in a retirement plan case involving company stock.
Harrison also said he anticipates additional recoveries from the remaining defendants.
"It's nice to hear and will be nice to get, but they can't pay me and my family back for what they did to us," said Mike Boutcher, a former manager of business development at Enron, now an engineering manager at Exelon in Chicago.
"I've buried the hatchet in so many different ways and am fully engrossed in a new job," Boutcher said. "But it's good for everybody who needs it, and for those who don't, it's icing on the cake."
The Labor Department action, filed in June 2003, mirrors the employee lawsuit filed in late 2001. The department charged that Lay, Skilling and others misled employees about the value of Enron 's stock and did not properly monitor the committee appointed to manage Enron 's retirement plans.
Employee retirement plans plummeted in value when the company's stock, which at one time sold for $80 a share, fell to less than $1 a share.
The 12 Enron directors who must pay the $1.5 million from their own funds are: Robert A. Belfer, Norman P. Blake, Ronnie Chan, John H. Duncan, Wendy Gramm, Robert K. Jaedicke, Charles A. LeMaistre, John Mendelsohn, Paulo V. Ferraz Pereira, Frank Savage, John Wakeham and Herbert S. Winokur. Wendy Gramm is the wife of former U.S. Sen. Phil Gramm.
Several lawyers familiar with these kind of settlements said the Labor Department's $1.5 million seemed small.
But others said the department may have been pivotal in getting the $85 million settlement through.