Contemporary article about Enron's 401k.
The suit alleges that Enron "locked down" 401(k) accounts on October 17, preventing employees from changing the investments they held in their accounts until November 19.
During that period Enron reported its first quarterly loss in four years and took a $1.2 billion charge relating to off-balance-sheet deals that are now being investigated by the Securities and Exchange Commission.
Enron's stock plunged from $30.72 at the close of trading October 16 to $11.69 on November 19.
Enron spokeswoman Karen Denne said that employees' access to their accounts was blocked from October 26 to November 19 due to a previously planned change in the administration of the retirement plan, according to published accounts.
Lacey, 45, who has worked for Portland General Electric for 21 years, told wire services that the freeze on retirement account actions came while bad news about Enron was seemingly being released daily. "We couldn't take our money out of Enron stock into another portfolio. Basically they had us locked down to where we had no say over our own future," he told wire services.
Before Enron's share price took a nosedive, Rinard had $472,000 in his 401(k) plan. He says his plan is currently worth just $40,000.
Enron matches employees' 401(k) contributions with company stock. Many Enron employees, including Rinard, put their entire retirement account into Enron stock when Enron executives predicted that the stock would rise above $100 a share, Rinard told the Houston Chronicle.
The lawsuit is reportedly being patterned after a case brought by employees against Lucent Technologies last summer concerning matching 401(k) contributions with company stock. As with Enron, the share price of Lucent has also dropped dramatically over the past year.
Yes, it's dangerous to have all (or even most) of your retirement locked up in your company stock no matter how well it is performing at the moment. If the company tanks, you'll be out of your job and lose your retirement savings.
Enron (and apparently Lucent, according to the story) did more than just encourage employees to buy their stock - they prevented them from getting out in an attempt to prop up the stock. If that wasn't a scheduled, routine blank-out period, then the managers should be charged with stock manipulation (or something).
I don't think Enron's shareholders should be "made whole" (even if that were possible, which it isn't). I do think that fraud, deceptive practices, etc., should be punished and the people responsible should be liable for reasonable and fair civil penalties (not that any Enron shareholder class would collect much of anything if they're successful).
FWIW.
Cheers,
Scott.
