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July 12, 2005
Enron Agrees to $356M Settlement of Lawsuits

Enron has agreed to set aside $356.25 million in its bankruptcy for participants in the company's retirement plans, but the Department of Labor expects plan participants to receive just a fraction of that amount because the company lacks the assets to pay the full settlement along with its other debts.

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Although the proposed agreement provides for a $356.25 million claim, the final amount paid depends on the total amount of assets available for distribution in the bankruptcy court. The Department of Labor expects that "tens of millions of dollars" will be paid to plan participants as a result of the agreement.

The proposed settlement would give $305.36 million for its 401(k) and employee stock ownership plan (ESOP) and $50.89 million for its cash-balance plan.

The final agreement is subject to approval by the New York Bankruptcy and Texas district courts. The agreement will resolve a lawsuit by the Labor Department and a private class action suit brought on behalf of the plans' participants as well as funding and termination issues relating to the cash balance plan raised by the Pension Benefit Guaranty Corporation. The agreement does not settle the department's claims against Kenneth L. Lay or Jeffrey K. Skilling.

On June 26, 2003, the department sued Enron, its board of directors, Lay, Skilling, the Enron officers and the plans' administrative committees for mismanagement of the plans, in violation of the Employee Retirement Income Security Act (ERISA). The suit alleged that the defendants failed to consider the prudence of Enron stock as an appropriate investment for the retirement plans and did nothing to protect the workers and retirees from extensive losses. The suit also alleged that the board of directors failed to properly appoint and monitor a trustee to oversee the employee stock ownership plan (ESOP). Lay was also accused of misrepresenting Enron's financial condition to employees and plan officials and encouraging them to buy the stock.

The board of director defendants, the Enron officers, and administrative committee members who were sued for mismanagement of the employee benefit plans have already paid $86.85 million under settlements with the department and the private plaintiffs.

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