Human Capital & Careers

Never-ending Story: Enron Botches Payout

Reportedly, retirement reimbursement calculations were based on the wrong stock price—but a discrepancy remains regarding where blame should be pla...
Stephen TaubJuly 5, 2007

Talk about adding insult to injury. More than 20,000 former Enron employees who received a partial payment for retirement funds they lost due to the scandal were told that they were either overpaid or underpaid because of a software snafu, according to the Associated Press. As a result, some of the former workers may have to give back a portion of the money if they were overpaid.

Last year, ex-Enron employees received about $89 million in the first payment that is part of a lawsuit settlement related to losses suffered by workers who participated in the company’s employee stock ownership and 401(k) plans, said the AP. The payment pool was set up after the company collapsed in 2001 to remunerate affected employees. However, nearly $22 million of the payment was miscalculated, according to Harlan Loeb, spokesman for what is now known as Enron Creditors Recovery Corp.

About 7,700 former workers were overpaid while about 12,800 were underpaid, according to the wire service. The final tally will be announced after a recalculation is completed. Loeb blamed the problem on a software program provided by Hewitt Associates, a compensation consultancy hired to distribute the settlement proceeds. He said the wrong stock price was used, according to the report.

Enron officials said Hewitt had acknowledged that “virtually none” of the plaintiffs received the right amount in the distribution, noted the Houston Chronicle. Maurissa Kanter, a spokeswoman for Hewitt, told the AP that the company is focused on “working diligently with Enron to ensure that this matter is resolved as soon as possible for the plan’s participants and beneficiaries.”

Hewitt acknowledged in court filings that the problem was “due to an undetected data error,” added the AP. However, officials at the consultancy disputed Loeb’s claim that Hewitt was the fund administrator and thus was responsible for making sure funds were correctly distributed. “At all times, Hewitt has conducted itself as a service provider to Enron, with Enron having ultimate responsibility to direct all aspects of the allocation process and to direct Hewitt’s work in that regard,” Gregory Casas, Hewitt’s attorney, wrote in a court filing last month, according to the report.

In response, Loeb called Hewitt’s assertion that it is not the fund administrator “ridiculous.”

Now, all eyes are on U.S. District Judge Melinda Harmon, who is overseeing the case. She is expected to rule on a motion by Enron asking that Hewitt redo its calculations and certify them and offer former workers a way to protest if they disagree with the new numbers, according to the report.