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September 23, 2003
Judge Lets Enron, Employees Seek Return of $53 Million

Enron and a group of former employees may pursue the return of $53 million in accelerated deferred compensation paid by the company shortly before its bankruptcy filing, a U.S. bankruptcy judge ruled Monday.

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According to the Houston Chronicle, 114 current and former Enron executives had been allowed to make withdrawals from their deferred-compensation accounts in the 30 days before Enron sought bankruptcy protection.

New York U.S. Bankruptcy Court Judge Arthur Gonzalez approved a settlement reached by Enron's current management, the unsecured creditors' committee, and the employee committee over the issue, lawyers for the employees told the Associated Press.

"Simply put: this is the right decision," said Ronald R. Sussman of Kronish Lieb Weiner & Hellman, the New York firm representing the employee committee. "The payments made to a select few individuals, when Enron was insolvent, were preferential, improper and in violation of the Bankruptcy Code. These monies should be returned to unsecured creditors, which include former employees and retirees."

Enron and other former employees have sent letters to the recipients of the deferred compensation, demanding the return of between 40 and 90 percent of the money. The Chronicle reports that those who remained with the company will be asked to repay less because they are perceived to have provided a post-bankruptcy benefit to Enron's creditors.

The will have until Oct. 31 to agree to the terms of the settlement with Enron and the former employee committee. If they choose not to pay, they will be subject to litigation by the employee committee for payment in full, plus legal fees.

The Chronicle gives this breakdown of the proposed settlement:

  • Those who received payments who are still working at Enron must return 40 percent of the money they received.

  • Those who were laid off by Enron in the last 20 months must repay between 40 percent and 85 percent of the money, based on how long they remained after bankruptcy.

  • Those who left Enron voluntarily or were fired for performance reasons, must repay 90 percent.

Several employees in the third group had challenged the sliding scale Monday. They said whether an employee was terminated or quit should make no difference in the value of their service to Enron.


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