Government seeks removal of Enron executives from retirement plan

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Posted 8:15AM on Monday, February 11, 2002

WASHINGTON - The Labor Department is working to replace Enron Corp. officials with an independent legal representative on a committee that oversees the company's retirement plans. The department is investigating whether the officials legally responsible for Enron's 401(k) plan -- called fiduciaries -- were prudent and acted only in the interest of the employees and the plan, as required under the Employee Retirement Income Security Act of 1974, or ERISA, which governs employer-provided retirement plans. "Our objective is to replace them with an independent fiduciary, expert in ERISA, and experienced in protecting the interests of participants and beneficiaries in complex pension plans like Enron's," Ann Combs, assistant labor secretary for pension and welfare benefits, said Sunday. So far, no legal action has been taken and negotiations with Enron lawyers that began about a month ago are continuing. Combs said she hopes an agreement can be reached without a "lengthy court proceeding" "If no agreement is reached in the very near future, we will seek a court order replacing these people with a qualified independent fiduciary," she said. A message left on the pager of Enron spokesman Mark Palmer was not returned Sunday. Eli Gottesdiener, a Washington attorney suing the company on behalf of employees and retirees who had 401(k) retirement plans at Enron, said he would file a motion Monday in federal court in Houston seeking removal of the Enron executives overseeing the savings plan. "We see it as a very positive development that the Labor Department agrees with us that these people are unfit to serve as plan trustees," Gottesdiener said. Enron's administrative committee includes the executive vice president for human resources, Cindy Olson, who testified at several congressional hearings last week. Olson testified that she was warned by Enron executive Sherron Watkins in November about possible accounting practices that she feared could destroy the company. Enron filed for bankruptcy protection in December and laid off 4,500 workers. Olson said she arranged a meeting between Watkins and chief executive Kenneth Lay, but did not warn officials in charge of the retirement plans. She said that was because the Watkins allegations weren't documented. She also testified that she had missed at least four meetings of the administrative committee last year. Her testimony prompted Rep. George Miller, D-Calif., to write a letter to Labor Secretary Elaine Chao urging Olson's removal from Enron's administrative committee. "Despite the repeated signs and warnings and a loss to Enron employee retirement savings estimated at over a billion dollars, the plan's fiduciaries, including Ms. Olson, continue to serve on the plan's administrative committee," Miller's letter said. Overall, the 20,795 participants in Enron's 401(k) plan had about 63 percent of their assets invested in company stock. Investigators are looking at the steps taken by the company to block workers from selling stock in their 401(k) plans for about three weeks as Enron's stock price was plunging. Many employees lost 70 percent to 90 percent of their retirement assets as Enron stock declined steadily over a period of several months even before the 401(k) plan was frozen.