Tussle Over Enron Execs' Legal Fees
Thirty-three states are asking a bankruptcy court to block Enron Corp. executives from securing millions of dollars from the company for their legal defense.
“Enron's directors and officers should not be advanced money for their civil or criminal defense costs before the issue of their individual liability has been resolved,” Oregon Attorney General Hardy Myers, the lead attorney for the group, said in a news release.
Thousands of Enron employees lost their retirement savings in accounts loaded with Enron stock as the company plunged into bankruptcy on Dec. 2. The energy giant and its executives face a growing number of lawsuits over the collapse.
U.S. Bankruptcy Judge Arthur Gonzales is expected to hear objections to the advance fee request Wednesday in New York City, said New Mexico Attorney General Patricia Madrid.
“Enron is seeking an advance payment from bankruptcy court of at least $30 million to pay for the defense costs of its officers and directors. I object,” Madrid said.
She said advancing of funds might accelerate depletion of insurance money while tens of thousands of innocent people have been harmed in the Enron collapse.
Oregon and New Mexico were joined in the request by attorneys general from Alaska, Arizona, California, Connecticut, Florida, Georgia, Hawaii, Indiana, Kentucky, Louisiana, Maine, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Jersey, Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Vermont, the U.S. Virgin Islands, Virginia, Washington, West Virginia, Wisconsin and Wyoming.
Myers explained that under Oregon law, any director found liable to the corporation may be disqualified from reimbursement for defense costs.
“As far as is known from the court's records,” Myers said, “none of the directors has provided the affirmation required by Oregon law of their good faith belief that their conduct was not unlawful or opposed to the best interests of the corporation.”
Separately, a videotape of a meeting at Enron shows company executives urging employees to invest all their retirement money in Enron stock, a Democratic congressman said.
Rep. Henry Waxman said a video from 1999 seems to conflict with recent Senate testimony by Enron executive Cindy Olson. She testified Feb. 5 that the company would like to have given investment advice telling employees to diversify their holdings but was legally prohibited from doing so.
In a letter Thursday to Sen. Joseph Lieberman, Waxman said a woman identified only as "Cindy" on the video responds "absolutely" when asked by an employee, "Should we invest all of our 401(k) in Enron stock?"
Enron executive Jeffrey Skilling nodded in agreement to the word "absolutely," according to Waxman. The California Democrat said Enron Chairman Kenneth Lay, chief operating officer Skilling and vice chairman Joseph Sutton were at the podium when the question was asked ad answered.
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Lieberman chairs the Senate Government Affairs Committee. During a visit Thursday with Portland General Electric employees in Oregon, he said Congress should not wait until hearings are over before passing legislation to protect retirement plans.
"We need to act as soon as possible," he said.
When Olson testified before Lieberman's panel, she testified that Enron would have encouraged employees to diversify their holdings.
"We tried to talk about diversification with respect to choice in the 401(k)," Olson said. But "there's a fine line that employers have with respect to giving investment advice. And so we were concerned about stepping over that line."
The videotaped evidence "seems to contradict testimony that Ms. Olson gave the committee about her own role in encouraging Enron employees to invest their 401(k) savings in company stock," Waxman wrote.
The congressman said Enron lawyers recently provided nine videotapes of the company's all-employee meetings, which consisted of presentations and responses by management to employees' questions.
The videotape about the 401(k) plan nd Enron stock is labeled Feb. 1, 1999, but Waxman said the meeting refers to events that took place well after that date and that the meeting probably took place in early December 1999.
In another development, Arthur Andersen LLP has reportedly begun contacting attorneys for various Enron Corp. groups offering to settle a pending class-action lawsuit to prevent the accounting firm from being put out of business by the scandal caused by the failed energy company.
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