Participants in the Enron Corp. 401(k) plan will be able to sue the company charging breach of its fiduciary responsibilities and civil conspiracy on June 20, said Eli Gottesdiener, principal of the Washington-based Gottesdiener Law Firm, which is representing the 11,000 plan participants.
On that date, a judge has ruled, a ban on lawsuits against Enron will be lifted. The participants seek to recover some $1 billion that "evaporated from their 401(k) accounts in the wake of Enron's collapse," he said. The only asset that is earmarked to compensate Enron participants is an $85 million fiduciary liability insurance policy, which covers both the individual plan fiduciaries and the corporation.
The lawsuit originally was filed against, among others, Enron; certain current and former Enron directors and officers; the firm's former accountant, Arthur Andersen LLP; and The Northern Trust Co. and Northern Trust Retirement Consulting LLC, which were the record keeper and consultant of the Enron 401(k) plan. However, the complaint never was served on Enron because it had filed for Chapter 11 bankruptcy protection. Any bankruptcy filing carries an automatic stay preventing lawsuits.
The participants filed a request seeking an early end to the stay, and the judge agreed.
Fiduciary breach
Now, Mr. Gottesdiener said, participants will sue Enron claiming the company, its executives and advisers breached their fiduciary duties. Participants claim company stock was an imprudent investment option for Enron's $2.1 billion 401(k); the employee stock ownership plan, which in December 2000 held some $1 billion in Enron stock; and the $250 million cash balance plan, according to the consolidated complaint filed April 8. Enron had matched - in company stock - 50% of participant contributions up to a maximum of 6% of base pay. Andersen and Northern Trust are being sued for their roles in recommending and imposing the 401(k) plan blackout period while Enron was changing record keepers from Northern Trust to Hewitt Associates LLC, Lincolnshire, Ill. The participants argue that during the blackout period, Enron's stock was volatile and Enron should have delayed the blackout period.
The trial will begin no later than Dec. 1, 2003.
