State Street To Get Nod for Enron Plans: WSJ

March 14, 2002 ( - US Department of Labor (DoL) Secretary Elaine Chao has apparently tapped State Street Corp. to take over Enron Corp.'s three retirement plans, the Wall Street Journal reported, citing unnamed news sources.

The report follows Chao’s announcement that the DoL and Enron were hammering out an agreement to replace members of the company’s pension administrative committee with an independent fiduciary.

ERISA gives Chao the authority to replace a plan’s fiduciaries either through an agreement with the company or by court order if the DoL feels that participants’ interests are not being protected.

Officials from the Pension and Welfare Benefits Administration (PWBA), the agency that would actually make the move giving plan responsibility to State Street, declined to comment on the situation.

The beleaguered energy trader’s pension plans have been the subject of much debate. Enron executives are alleged to have improperly pressured employees to buy company stock shares for the 401(k) accounts even as the share price was plummeting. Enron is now seeking federal bankruptcy protection in a Houston US Bankruptcy court.

Potential Conflicts

Complicating the are concerns over whether State Street could have a potential conflict because of its indirect Enron stock holdings through index funds or custodial accounts, the Journal report said.

According to Thomson Financial/First Call, a financial-information company, State Street held more than 527,000 shares of Enron stock for the quarter ended December 31, down from more than 16 million shares September 30.

Another potential problem lies with State Street’s position as a major pension-fund manager. It’s position as Enron fiduciary could put it in an awkward legal position of making allegations about the handling of the plans’ assets that it might come up against were State Street ever sued over its own oversight activities.

State Street Corporation has $6.2 trillion in assets under custody and $775 billion under management. It operates in 22 countries around the world.