Judge Arthur Gonzalez asked for the records of conversations between the Department of Labor (DOL) and Enron, noting that the information is “relevant” because it will determine “what may or may not have motivated (Enron’s) management” to conclude it is in the company’s interests to pay for the fiduciary services provided by State Street, according to Dow Jones.
The conversation records sought are those between Eugene Scalia, solicitor of Labor, and Robert Walls, Enron’s general counsel, and span the period leading up to the date of the filing of the reconsideration motion. Enron creditors have pushed to conduct personal interviews, but Gonzalez says other means should be used first to determine if the deposition request is warranted.
Creditors have accused Enron, which initially struck a deal with the DOL on the fees and then apparently reneged on the deal, only to again reverse course two months later, of switching its position in response to threats of litigation by the DOL.
The Department of Labor had chosen State Street to oversee the Enron plans last March (see State Street Gets Nod for Enron Plans ). That move came in the wake of the DOL’s decision to replace members of the Enron Corporation Administrative Committee with an independent trustee (see DOL Taps Enron Fiduciary Replacements ).
The original agreement between the Labor Department, Enron, and State Street called for the company to pay the new trustee’s fees for up to three years to a maximum of $1.5 million per year plus expenses. However, in April, Judge Gonzalez instead supported a group of Enron’s creditors who think that the pension plans should bear the service costs directly. (see Judge Overrules DoL, State Street Agreement on Enron ).
.Those creditors, whose claims would be impacted by fees set aside from Enron corporate assets, argue that the State Street contract was too expensive – and that opening company assets to this type claim would ‘open the floodgate’ for other claimants. Enron reneged on the deal with the Department of Labor, saying the firm didn’t want to be “taxed” by being responsible for State Steet’s fees (see Enron Balks at State Street Fees ).
Less than two months later, Enron was back in bankruptcy court, asking the court for permission to pay trustee fees for its three retirement plans from company, rather than plan, assets (see Enron Shifts Gears On Trustee Fees ). Creditors have accused the DOL of threatening litigation in coercing Enron to change its position on the issue.
Attorneys representing Labor and Enron both said they will provide the creditors with “the best recollection of” Scalia and Walls “as to what was said during their conversations,” according to the Dow Jones report.
For now, the issue regarding creditors’ fact-finding motion must be resolved before the court will consider Enron’s renewed request to pay State Street – a hearing not expected until late next month.