Tuesday, June 18, 2002
Top Enron employees reaped $744 million
'Raiding' in the year leading up to bankruptcy filing
By BRAD FOSS
AP Business Writer
NEW YORK In the year before Enron Corp. filed for bankruptcy, former chairman Kenneth Lay amassed $152.7 million in payments and stock more than 11,000 times the maximum amount the company's laid-off workers will likely get in severance.
Enron detailed the payments to Lay and 143 other insiders, who reaped an additional $591 million in pay and awards, in a filing made late Monday with the federal bankruptcy court in New York.
Representatives of former workers and shareholders responded angrily, accusing Enron's senior managers of essentially raiding the company's coffers while leaving their clients with a pittance.
Enron disclosed in the 1,436-page filing that top employees received $309.5 million in salary, bonuses, long-term incentives, loan advances and other payments. They also exercised stock options and received stock valued at $434.5 million.
Lay, one of the many top executives who has been criticized and scrutinized since Enron's rapid collapse, received $81.5 million in loan advances, among other payments, and exercised $34.3 million in stock options.
Other executives who shared in the pay and awards were former chief executive Jeffrey Skilling; former chief financial officer Andrew Fastow; and Army Secretary Thomas White, who ran Enron's retail energy services unit.
Skilling's cut was valued at nearly $35 million, while White received more than $17 million.
Eli Gottesdiener, a Washington attorney representing 24,000 participants in Enron retirement plans who lost as much as $1 billion on the collapse of Enron's stock, said: It's outrageous. My clients find it outrageous and it's just more evidence that people at the top knew that they better get, while the getting was good.
And they did, and my clients are left holding the bag. They drained the company of hundreds of millions of dollars, he said.
The more than 4,500 people who lost their jobs when Enron filed for bankruptcy have received a combined $43 million in severance and a tentative agreement has been reached whereby they would receive an additional $30 million or so.
Employees would get no more than $13,500 in total severance, minus any payments they have already received, based on their salary and length of employment.
Gottesdiener and other lawyers representing current and former Enron employees who lost hundreds of millions of dollars in the company's 401(k) plans could try to recover some of the money the executives collected before the bankruptcy. They would need to prove that preferential payments were made, obstructing creditors from getting their fair share.
About a dozen lawsuits have been consolidated into a single class-action case asserting that Enron violated federal pension rules. The case, to be heard in a Houston court, will be used to determine how much the class would be entitled to as an unsecured creditor, while any actual distribution of money would be decided by the New York bankruptcy court.
Figuring out when the payments were made will be critical. Enron retirees and former executives who were denied the ability to withdraw compensation and bonuses they had deferred claim they were discriminated against because they had already left the company. Federal law prohibits preferential payments in the 90 days leading up to a bankruptcy filing.
Besides the executives pay and awards, Enron funded one retention bonus plan in the fall of 2001 with $50 million to keep 76 employees deemed critical to the energy company's wholesale trading operations. Two prominent players in the company's energy trading unit, John Arnold and John Lavorato, received $8 million apiece.
The company paid another $54.6 million in bonuses to employees in various subsidiaries, payments the company said were crucial to the future of these businesses.
Enron filed for Chapter 11 bankruptcy protection in order to reorganize and restructure on Dec. 2, four days after its proposed merger with crosstown rival Dynegy Inc. fell apart.
The bankruptcy filing followed revelations of questionable accounting that let Enron hide billions in debt through the use of off-the-books partnerships, some run by Enron executives, including Fastow.
The findings of an internal probe, made public in February, largely painted Fastow as the architect of the partnerships used to disguise Enron's true financial health. The Securities and Exchange Commission is investigating the matter. Fastow, who received more than $4 million from Enron in pay and awards, on top of the $30 million he made through the partnerships, has yet to offer an explanation of his own.
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