>US District Judge Melinda Harmon in Houston ruled that there were enough issues involving Lay, Northern Trust Corp. and others who oversaw Enron’s retirement programs for her to not throw out the case, the Wall Street Journal reported. She said the defendants had a responsibility to ensure that the plans’ investments were prudent and that this responsibility extended to decisions about the use of Enron company stock in the plans.
Filed in the months after the energy-trading company’s collapse, the employee lawsuit accused the company, Lay, other Enron executives, the retirement plans’ administrators – Northern Trust – and others of misleading company employees by encouraging or requiring them to hold Enron stock in their retirement accounts, when the stock price was artificially inflated.
Also in the ruling, Harmon threw out racketeering claims against Enron, company executives, and a series of outside groups, including a group of large investment banks and Enron’s outside law firm. In news reports, some observers bemoaned the fact that the dismissals might make a monetary recovery more difficult.
Washington benefits lawyer Steve Saxon , who filed a friend-of-the-court brief on behalf of the Society of Professional Administrators and Recordkeepers (SPARK) in the Enron case, told PLANSPONSOR.com that it was unfortunate that Harmon found that the administrator, Northern Trust, could be held responsible for what happened with the Enron plans.
>If the finding is affirmed by later rulings, Saxon said, costs of directed trustee services could rise “dramatically” if they are forced to undertake detailed legal fiduciary reviews of all plan events. Saxon said Harmon found Northern Trust’s fiduciary liability in the fact that the company had the power to postpone a recordkeeper change for Enron – authority the lawyer argued Northern Trust never had.
Attorneys involved in the case and others who have been watching it closely said it and other recent rulings in similar cases could have a significant impact on the benefits industry. “It sends a loud and clear message to all trustees and fiduciaries of retirement plans that they need to take their job seriously,” Lynn Sarko of Keller Rohrback LLP and a lead plaintiffs attorney told the Journal.
In a statement, Northern Trust said it “fulfilled all of our obligations to the participants in the Enron benefit plan and have acted in accordance with all applicable laws.”
The Harmon opinion is at
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