The lawsuit alleges that the defendants violated the Employee Retirement Income Security Act (ERISA) when they failed to consider the prudence of Enron stock as an appropriate investment for the retirement plans and did not protect the workers and retirees from extensive losses.
The suit seeks a court order requiring the defendants to restore to the plans all losses with interest, forfeit their right to benefits from the plans and permanently bar them from serving as fiduciaries to any plan governed by ERISA.
More than 20,000 participants in the savings and employee stock ownership plans experienced a substantial erosion of their retirement assets due to the drop in the value of Enron stock owned by the plans, according to Secretary of Labor Elaine L. Chao.
“Today, the Department of Labor is filing suit in federal district court in Houston, Texas to recover losses that Enron employees suffered due to the mismanagement of two of Enron’s pension plans. This action will strengthen the American workforce's confidence in their retirement savings,” says Secretary Elaine L. Chao.
The lawsuit also alleges Enron, Lay and others withheld information about Enron’s financial condition from other plan officials. The board of directors failed to properly appoint and monitor a trustee to oversee the Employee Stock Ownership Plan (ESOP), leaving the ESOP participants without this legally required fiduciary to protect them, according to the department.
Labor Department filed a lawsuit yesterday against Enron Corporation, former chief executive officers Kenneth L. Lay and Jeffrey K. Skilling, the former board of directors, and the former administrative committee for Enron's retirement plans, alleging they failed to prudently protect Enron workers’ retirement assets invested in the stock of the company.