U.S. Secretary of Labor Elaine L. Chao Announces $356.25 Million Bankruptcy Claim for Enron Retirement Plans

Archived News Release — Caution: Information may be out of date.

WASHINGTON — U.S. Secretary of Labor Elaine L. Chao today announced an agreement giving the Enron 401(k) and employee stock ownership (ESOP) plans a general unsecured claim of $305.36 million in Enron's bankruptcy. The proposed settlement also gives Enron's cash balance plan a claim of $50.89 million.

"This agreement makes possible a significant recovery for Enron retirees and their families," Secretary of Labor Elaine L. Chao said. "Corporate malfeasance will not be tolerated and every effort will be made to protect workers who are harmed by it."

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. It is expected that tens of millions of dollars will be paid to plan participants as a result of the agreement. 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 sued for 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.

The department's suit resulted from a comprehensive investigation conducted by the Dallas regional office of the department's Employee Benefits Security Administration and the Office of the Solicitor.

Chao v. Enron (Civil Action No. H-03-2257/Consolidated with H-01-3913)

Archived News Release — Caution: Information may be out of date.