CBSN

Enron Big Shots Will Be Sued

enron
AP
The Labor Department is suing bankrupt Enron Corp. and its former officers, claiming they broke the law by allowing employees to accumulate overpriced company stock in retirement plans that ended up going broke along with the company.

Congressional leaders praised the move, which department officials planned to announce Thursday after a 19-month investigation.

"The department's action puts corporate executives and pension plan administrators on notice: take your fiduciary duty to act in the best interests of your workers seriously or the Labor Department will hold you accountable," said Rep. John Boehner, R-Ohio, chairman of the House Education and Workforce Committee.

Word of the suit followed a decision Wednesday by federal energy regulators to bar Enron from competitively selling electricity and natural gas in the United States.

More than 20,700 participants in Enron's 401(k) plan had nearly two-thirds of their assets invested in company stock. Accounting problems caused the stock to plummet in value, ultimately bankrupting the company in December 2001 and siphoning the retirement savings of thousands of workers.

Pension laws require trustees to act in the interests of plan participants.

"After a long delay, the Labor Department appears finally to be taking a strong action against Enron regarding the enormous losses its employees suffered in their retirement accounts because of corporate abuse," said Rep. George Miller of California, the top Democrat on the House committee.

With help from the AFL-CIO, about 4,000 former Enron employees eventually received up to $13,500 in severance pay as part of a $29 million deal approved by a bankruptcy judge. But relief from Congress to recoup the retirement losses never materialized, and pension legislation to protect workers from similar cases also died.

But the Labor Department succeeded in ousting Enron executives from control of the retirement plans and installing a private company as trustee of the plans.