DoL Seeks Hewitt Contempt Order over Enron Fund Disbursement

February 7, 2008 ( - The U.S. Department of Labor (DoL) wants Hewitt Associates to be held in civil contempt for its failure to follow a court-approved disbursement formula for paying Enron employees.

The DoL claims Hewitt’s failure to follow the allocation plan has produced a $9.1-million shortfall in the repayment fund.  In papers filed in federal court in Houston, the DoL also asked a federal judge to   require Hewitt to pump enough money into the Enron reimbursement fund to allow for the court-approved allocation formula to be properly carried out.

The department also asked the court to prohibit Hewitt from collection, repayment, and other actions against participants who received overpayments without the court’s permission.   The DoL noted in a news release that Enron has separately asked the court to hold Hewitt fully responsible for an interest-free loan to Enron’s pension plan for the full amount needed to properly pay the underpaid participants (See Enron Looks to the Courts to Force Hewitt to Recalculate Settlement Distributions ). 

Early in July the news broke that Enron employees might have to give back a portion of the initial payment they were awarded as part of a settlement agreement over losses to their employee stock ownership and 401(k) plans that were brought on by the company’s collapse (See Former Enron Workers’ First Settlement Payments Miscalculated ).

According to news reports last year, Hewitt had miscalculated nearly $22 million of the $89 million initial amount – overpaying about 7,700 employees and short-changing about 12,800. The DoL confirmed the $22 million figure on Thursday.  

Enron attorney John Strasburger told U.S. District Judge Melinda Harmon in July that Hewitt had used faulty computer software to make the calculations, but the company has been slow in correcting its mistake. Hewitt lawyer Bill Boies told the Houston Chronicle at the time that his client realizes its mistake and plans to fix it.

According to the DoL, the fund holds recoveries obtained by the department and class-action plaintiffs in related lawsuits regarding Enron’s pension plans.  

In a statement issued Thursday after the DoL announced its action, Hewitt insisted it continues to try to rectify the problem.

“Hewitt is reviewing the claims in the Department of Labor’s motion and preparing a full response for the court. Hewitt has been working closely with both Enron and the Department of Labor since the error in this first distribution from the settlement trust was discovered,” Hewitt said in the statement. “We are surprised that the Department of Labor is pursuing this action against Hewitt since Enron is, in fact, the defendant in this order. Our primary goal has always been to find a solution that is in the best interest of the plan participants, and this continued legal action is likely to further slow down that process.  

The DoL request is here .