Florida Pension Fund Defeated in Enron Losses Legal Battle

April 19, 2005 (PLANSPONSOR.com) - A Florida public pension fund can't pin its Enron losses on Alliance Capital Management, according to a state court jury.

Alliance, the fourth-largest publicly traded fund manager in the nation, did not breach its contract with the Florida State Board of Administration and was not negligent in supervising the fund’s account, even though Enron stock was downgraded by a company analyst, the jury ruled. The pension fund lost $281 million when Enron collapsed, according to Bloomberg News.

The suit was launched in 2002, and claimed that negligence by Alliance led to the huge losses (See FL Fund: Alliance Kept Mum about Analyst’s Enron Warning ). The pension fund was seeking over $1 billion – including punitive damages – claiming that Alliance deviated from its usual processes in holding onto the company. The formal allegations included breach of contract, breach of fiduciary duty, fraud and negligence.

Lawyers for the pension fund told jurors that Alliance analyst Annie Tsao cautioned in mid-2001 that “something was about to blow up” at Enron, but the fund manager continued to buy and hold the stock.

The jury also told the pension fund to pay Alliance on its counterclaim for $1.1 million in unpaid management fees.

The state’s $100-billion pension plan includes 225,000 retirees and 650,000 active employees in state and local governments, in addition to public school teachers and university employees.