State Retirement Systems Look To Recover Enron Losses

January 21, 2002 ( - The list of states and state retirement systems joining a class-action suit against Enron continues to grow, with as much as $1 billion in retirement savings at stake, according to published reports.

In addition to pursuing action against Enron, several other states are examining their ties to accounting firm Arthur Andersen or weighing legal action against it, according to Dow Jones.

While the retirement savings of individual public employees and the retirement funds’ financial stability overall is not at risk, the amount of money involved – and the circumstances under which the investments evaporated – has drawn the attention of attorneys general in several states.

State ‘Lines’

Thus far, attorneys general in Georgia, Ohio and Washington state have asked a federal court in Texas to make them the lead plaintiffs in existing investors’ securities fraud litigation. Pension funds in Florida, New York City , and California have also petitioned the courts for lead plaintiff status in the suits.

According to Dow Jones, the money lost on Enron by the states includes:

– $320 million in Florida
– $103 million in Washington
– $127 million in Georgia
– $35 million in Arizona.

Sunshine ‘State’

The Florida Attorney General’s office has subpoenaed documents from Enron as part of a racketeering investigation into the sale of the energy company’s stock to the state pension fund while the share price was plunging.  The Texas Board of Public Accountancy has initiated an investigation into whether the firm violated state auditing standards.

Meanwhile, Connecticut Attorney General Richard Blumenthal is reportedly seeking a similar investigation, drawing comparisons to a 1990 real estate investment scam.

Judge Budge

Judge Melinda Harmon has replaced Judge Lee Rosenthal after Rosenthal recused herself from the Enron cases with no explanation. Rosenthal once was a partner at Baker & Botts, the law firm currently representing Dynegy, whose plan to merge with Enron last year was called off.

Harmon will hold a hearing tomorrow in connection with the destruction of Enron-related documents by its accounting firm, Arthur Andersen.  Harmon will also hear Amalgamated Bank’s request for expedited discovery, as well as a motion for a temporary restraining order prohibiting Andersen from destroying evidence. Andersen said it has ordered a halt to the destruction of any Enron-related documents and has fired David Duncan, the lead Enron auditor.

House investigators last week requested that Andersen hand over additional notes or records from the 14 participants who met five months ago to look into potential accounting issues.