Oil and Energy Industry News SampleJun 20, 2002 00:12:42
ENRON CORP.: Details In Bankruptcy Spark Anger, Plans For Legal Action
FREDERICK, Maryland (SunStream News) -- Top Enron Corporation employees reaped US$744 million of payments and stock in the year leading up to its bankruptcy filing, according to a Company report, the Associated Press reports. Representatives of former workers and shareholders responded angrily to the bankruptcy court filing, accusing the 144 senior managers, essentially, of raiding Enron’s coffers, while leaving their clients - the workers who participated in retirement plans and the shareholders - looking at great and even complete losses. Enron disclosed in a 1,436-page filing with the federal bankruptcy court in New York that the executives received US$309.5 million in salary, bonuses, long-term incentives, loan advances and other payments. The executives also exercised stock options and received stock valued at US$434.5 million. These funds were taken out of Enron Corp. during the period of the year leading up to the bankruptcy filing. Eli Gottesdiener, a Washington attorney representing 24,000 participants in Enron retirement plans who lost as much as US$1 billion on collapse of Enron’s stock, said, “It is outrageous. My clients find it outrageous, and it’s just more evidence that people at the top knew that they better get, while the getting was good … And they did, and my clients are left holding the bag. They drained the company of hundreds of millions of dollars.” The more than 4,500 who lost their jobs when Enron filed for bankruptcy have received a combined $43 million in severance, and a tentative agreement has been reached whereby they would receive an additional $30 million or so. Mr. Gottesdiener and other lawyers representing current and former Enron employees who lost hundreds of millions of dollars in the company’s 401(k) plans, could try to recover some of the money. They would need to prove that preferential payments were made, obstructing creditors from getting their share. Federal law prohibits “preferential payments” in the 90 days leading up to a bankruptcy filing. Figuring out when the payments were made will be critical. Enron retirees and former executives who were denied the ability to withdraw compensation and bonuses they had deferred say they were discriminated against because they already had left the company. About a dozen lawsuits have been consolidated into a single class action asserting the Enron violated federal pension rules. The case, to be heard in a Houston court, will be used to determine how much the class would be entitled to as an unsecured creditor, while any distribution of funds would be decided by the New York bankruptcy court. The use of the information, revealed in detail in the recent bankruptcy filing, relating to the large payments made in the 12-month period before Enron filed for bankruptcy protection, would provide an additional “hook” on which to hang a cause of action for compensation for workers and shareholders (the preferential payments), according to Mr. Gottesdiener. Such preferential payments, in addition to executives’ pay and awards, abounded. For example, as late as the fall of 2001 (Enron filed for Chapter 11 protection on December 2), Enron funded one retention bonus plan with US$50 million to keep 76 employees “deemed critical” to its wholesale trading operations. The company paid, in the same 12-month interval, another US$54.6 million in bonuses to employees in various subsidiaries, payments the company said were crucial to the “future” of these businesses. On November 28, 2001, the Company’s proposed merger with rival Dynegy Inc. fell apart, and four days later Enron filed for bankruptcy.
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Source: Class Action Reporter
Publication Date: 2002-06-20
NWS: BCY LBR LAW
COY: ENE
IND: OIL
GEO: n-us-ny n-us-tx
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