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News > Companies
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Fed in Enron probe
graphic December 5, 2001: 5:43 p.m. ET

U.S. labor department to probe crippled energy trader's handling of pension plans
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  • Enron looks at joint venture for energy trading business - Dec. 4, 2001
  • Enron files for protection, seeks $10B in Dynegy suit - Dec. 2, 2001
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    WASHINGTON (CNN) - The federal government on Wednesday said it will investigate Enron Corp. and probe the crippled energy trader's handling of its worker's retirement benefit plans.

    The U.S. Labor Department will determine if the company broke any federal laws in freezing employee 401(k) accounts even as company stock prices plummeted, said Labor Secretary Elaine Chao.

    As the company's stock price fell, some top executives, who did not use the employees' pension program, sold Enron shares at higher prices. For two weeks in October the holdings of employees in retirement plans were locked. Enron's stock fell 35 percent during the freezing of retirement holdings.

    "Many Enron employees lost 70 percent to 90 percent of their retirement assets after the company indicated that it would re-state profit reports," Chao said, adding that the department's Pension and Welfare Benefits Administration is conducting the investigation.

    The Labor Department investigation is being closely coordinated with the Securities and Exchange Commission's inquiry into Enron.

    Mark Palmer, a spokesman for Enron, said the company will fully cooperate with the probe. He said employee access was blocked as part of a previously-scheduled change in the administrator of the plan.

    The company notified employees via mail and e-mail beginning about six months ago that it was changing its administrator of the plan to Hewitt Associates, Palmer said.

    Shares of Enron (ENE: up $0.14 to $1.01, Research, Estimates) , which doubled Tuesday, surged more than 16 percent Wednesday. The stock is still off nearly 99 percent from its year high of $84.87.

    Separately, Amalgamated Bank filed a lawsuit Wednesday seeking to freeze the assets of senior executives at Enron Corp., alleging that the executives artificially inflated the price of the company's stock.

    New York-based Amalgamated Bank filed the suit in U.S. District Court in Houston. The bank claims that Enron insiders gained at least $1.1 billion by selling more than 17.3 million shares of stock over the past three years.

    The Amalgamated lawsuit seeks to freeze the accounts of 29 Enron officers who allegedly falsified Enron's financial condition while selling the company's stock. The lawsuit is not against Houston-based Enron itself, the bank said.

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    The Labor Department probe comes amid increased congressional scrutiny. House Speaker Dennis Hastert and House Minority Leader Richard Gephardt told CNN on Wednesday they support full-scale congressional investigations that may lead to federal safeguards on companies that trade in energy supplies.

    "We need to make sure everything was above-board," Hastert told CNN. "It's an important business, an important sector of our economy and we can't function without that. We need to make sure other types of companies aren't facing that same type of problem."

    Said Gephardt, "A lot of employees have lost their jobs and, as I understand it, their pensions are probably in question now. This needs to be looked at."

    Gephardt also said Enron's downfall is a cautionary tale for the White House and its push to partially privatize Social Security.

    The White House is paying special attention to the Enron debacle and is "aggressively monitoring" it, White House Press Secretary Ari Fleischer told CNN. Fleischer acknowledged the extra attention is because President Bush and Enron Chairman Kenneth Lay are close personal friends.

    Fleischer said the Enron episode "in no way" undermines the president's confidence in a partial privatization of Social Security.

    Houston-based Enron (ENE: up $0.14 to $1.01, Research, Estimates)  recently filed the largest bankruptcy in U.S. history after its $9 billion merger with rival Dynegy Inc. failed. Enron, which is seeking to reorganize under Chapter 11 protection, also laid off 4,000 employees, mostly from its headquarters in Houston. graphic

      RELATED STORIES

    Enron looks at joint venture for energy trading business - Dec. 4, 2001

    Enron files for protection, seeks $10B in Dynegy suit - Dec. 2, 2001





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