A federal judge in Texas ruled that former Enron Corp. Chairman Kenneth Lay and Northern Trust Corp., trustee of Enron's 401(k) retirement plan, can be sued under federal pension law for allegedly failing to protect Enron employees.
The ruling could lead to greater protections for workers with employer stock in their 401(k) and other retirement programs. Companies using their own stock in employee-retirement plans, a widespread practice, came under increased scrutiny from Congress and government regulators after Enron's stock collapse devastated its employees' retirement savings.
The wide-ranging, 329-page ruling by U.S. District Judge Melinda Harmon in Houston came in response to motions brought in lawsuits by former employees of Enron, which filed for bankruptcy-court protection in late 2001. The ruling said Mr. Lay and Northern Trust -- along with others who oversaw Enron's retirement programs -- had a responsibility to ensure that the plans' investments were prudent. This responsibility extended to decisions about how much Enron stock employees held in their retirement accounts, the judge said.
More than 60% of Enron's $2.1 billion in 401(k) assets were invested in the company's own shares at the end of 2000. The plan covered about 20,000 Enron employees, retirees and their beneficiaries. Enron stock, which peaked at about $90 a share in 2000, currently trades for less than 10 cents a share in over-the-counter trading.
This is a wise ruling that demands accountability from those in charge of company retirement plans, who are effectively the stewards of their employees' retirement savings. The attachment of Northern Trust to this ruling only adds credibility to the obvious failure of prudent executive oversight.
Too bad it's too late. With this kind of legal exposure, expect Ken Lay to declare personal bankruptcy, after which Linda "Jus' Stuff" Lay will probably get another chance to weep glycerine tears on television. Ken Lay has had over two years to sequester all his purloined wealth in assets that are often protected from bankruptcy, such as real estate, annuities, and offshore accounts.
What needs to stay at the forefront of this story is not the talk-show punchline of Lay's criminal behavior, but rather the intimate connection between one irresponsible, thieving failure of an executive and another — George W. Bush.
