Saving your retirement|
Enron workers testify before Congress about the need for reform to the 401(k) system.
NEW YORK (CNN/Money) - They were hardworking folks who lost everything. Now, they want to make sure it doesn't happen to you.|
Enron Corp. employees left with worthless 401(k)s after the company collapsed warned Washington lawmakers on Tuesday that the retirement system needs an overhaul.
In story after story, Enron employees told members of a House Ways and Means subcommittee that company executives pushed them to invest in the stock, even as it was teetering on a cataclysmic fall. The workers helped build the company and were left with stacks of unpaid bills and destroyed retirement dreams.
"I worked hard to save for my future and now it is gone," said Dary Ebright, 54, who worked as an equipment tester. "I believe the system is broken."
Congress has been on the war path to make changes after Enron filed for bankruptcy in December. Workers lost about $1 billion in their 401(k)s when the company's stock plunged in value.
The Enron workers on Tuesday sat in front of microphones with long faces, reminiscent of the testimony of their former disgraced bosses, Jeffrey Skilling and Kenneth Lay. Wall Street analysts also wound up in the hot seat to explain how they continued to rate the stock a "buy."
The bosses insist the stock is solid
Ebright, who worked for the Enron subsidiary Portland General Electric, said Skilling and Lay repeatedly told workers that the stock was a good buy. Lay, who was dumping shares of his own, e-mailed the work force as late as Aug. 27, 2001 that the stock would rise.
"All over the company, people said Enron was the best investment you could make," Ebright said. "Words like 'concrete' and 'bullet-proof' were drifting through the halls."
EMPLOYEE PROPOSALS FOR 401(K) REFORM:
Employees should be able to sell stock in their 401(k)s when they want
Congress should regulate plan "lockdowns"
Executives shouldn't be able to sell shares during lockdowns
Company stock represented $495,000 of Ebright's 401(k) at its height. He eventually sold his stock in February for $2,300. Some colleagues lost much more: A 55-year-old equipment tester lost $1 million, he said.
"We didn't know the company was lying to employees," he said. "Enron was pulling the wool over our eyes."
Another witness, Deborah Perrotta, a former senior administrative assistant at Enron, said five of her friends lost a total of $6 million.
"This may sound like these were rich people, but this was money that they were planning to live off in retirement," Perrotta said. "For my friends in their 50s, this money simply cannot be replaced."
Helpless to make changes
To make matters worse, employees were helpless to dump their shares when it was sliding, they told lawmakers.
Enron notified workers in September it was changing plan administrators, and that the last date for transactions was Oct. 26, 2001, Perrotta said. Certain transactions would be prohibited after Oct. 19 - the same day the company announced a $1.2 billion write-down.
"In retrospect they knew about the issues," Perrotta said. "And yet they still locked the employees in without any chance to salvage what was left. They could have canceled this process but they chained us to the sinking ship."
Meanwhile, a handful of Enron executives received bonuses of $55 million, while the rank-and-file had their severance checks frozen after the bankruptcy filing, she said.
(In an unrelated development, a lawyer representing some employees said Enron may start distributing $5 million in hardship aid to laid-off employees by the end of the week.)
Pushing for change to protect workers
The witnesses told Congress that workers should have the right to sell their shares when they want, and that there should be better regulation of† company lockdowns. There should also be independent oversight of 401(k) plans.
"No one who was running the 401(k) seemed to have our interests at heart; at every turn, they seemed to be making decisions that were in the best interests of Enron, not employees," Ebright said. "That's why we got nothing but lies from the management of Enron."
Perrotta added that management shouldn't be allowed to sell their shares during lockdowns, and that employees should be involved in the administration of the plans.
"It seems that there are too many loopholes for corporations to use the retirement laws to their advantage and not that of their employees," she said.
Tuesday's session also included testimony from witnesses representing corporate interests, such as James Klein, president of the American Benefits Council, and employees who support stock ownership.
"We want to see the strength and weakness of the retirement system," said subcommittee Chairman Amo Houghton, R-NY. "The problem with the Enron situation is a wake-up call."
Still, change won't happen overnight. (Click here to read more about the issue in CNN/Money's special report.) Dozens of bills have been proposed.
Most recently, U.S. Rep. Rob Portman, R-Ohio, proposed legislation that would give employees the right to diversify out of company stock and require more disclosure of lockdowns. All of the proposals will require more hearings and debate.
Click here to send mail to Martine Costello