Partial settlement reached in suit over Enron 401(k)

By Christine Dugas
USA Today

Former Enron workers who suffered retirement plan losses when the energy giant collapsed in 2001 reached a partial settlement of their lawsuit for $85 million, a lawyer said yesterday.

The Labor Department separately reached an agreement yesterday with the former outside directors, who will pay $1.5 million of their own money to settle government charges that they failed to protect Enron's retirement assets.

The workers' class-action lawsuit agreement, which is subject to court approval, settles claims against Enron's former outside directors and the committee that oversaw the 401(k) plan.

But it does not resolve legal claims against Enron, former chairman Kenneth Lay, former CEO Jeffrey Skilling and other advisers. That portion of the lawsuit against them is continuing in federal district court in Houston.

The partial settlement is the largest amount ever recovered in a case involving company stock losses in retirement plans, says Seattle lawyer Lynn Sarko, who represents the workers.

The retirement savings of many Enron workers were wiped out because their 401(k) assets were heavily concentrated in company stock. In early 2001, the Enron stock in the 401(k) plan was worth more than $1.3 billion. At the time, it was trading at about $83 a share. The company filed for bankruptcy protection in late 2001. Today, its stock is worth about 4 cents a share.

The lawsuit contends that the defendants breached their duty by selling employees company stock when they knew it was artificially inflated and by locking employees into the stock as it fell in price.

The proposed settlement will tap the $85 million insurance policy that covered the retirement plan.

But the money won't go far in restoring the retirement nest eggs of many of the 20,000 401(k) plan members. After court costs and legal fees, they will get a minimum of $66.5 million, the Labor Department said.