The suit also claims that, following a surprising third quarter loss announcement, Enron illegally locked down employee retirement plans – making it impossible for employees to shield their already damaged retirement funds from a 70% drop in Enron’s stock price.
According to the suit, Enron executives engaged in extensive insider trading prior to the October 16 earnings announcement, gaining millions of dollars in personal proceeds. Enron later revealed that a portion of the charge against third quarter earnings was related to the unwinding of investments with certain limited partnerships controlled by Enron’s CFO, and the company would be eliminating more than $1 billion in shareholder equity as a result of the unwinding of investments.
Retirement Plan Investments Threatened
The suit comes in the wake of one brought by Lucent employee-participant shareholders (see Lucent Workers Sue Over Company Stock). Industry experts have cautioned that slumping 401(k) balances, benefit cut-backs and waves of layoffs could put workers in a litigious frame of mind (see ERISA Lawyer Foresees More Company Stock Suits.
Just last July Federal Mogul announced that it was discontinuing its company stock program due to its concerns over its falling stock price and asbestos litigation that could further impact the stock (see Federal-Mogul Co. Stock Decision Unique, But Wise: Observers). In addition, economic woes have resulted in retirement plan concerns at firms such as Polaroid (see Polaroid’s Woes Extend to Retirement Plans) and Bethlehem Steel (see Bethlehem Steel’s Retirees Face Uncertainty ).
The Enron suit was filed by attorney Steve Berman of the Seattle-based law firm Hagens Berman on behalf of a proposed class of as many as 21,000 participants in the Enron Stock Plan. Named plaintiff Roy Rinard, a long-time employee, had more than $470,000 of his retirement savings invested in Enron stock ? before it plunged $400,000 in a little more than a month, according to the suit.
The class-action suit seeks to represent employees who invested in the Enron Stock Plan between January 20, 1998, and November 20, 2001.
– Nevin Adams email@example.com
MORE on Employer Stock litigation at Gimme Shelter