Risk & Compliance

Enron Workers: Check Is in the Pipeline

''The settlement at this point would save great expense and would give the plaintiffs hard cash, a bird in the hand,'' the judge reportedly wrote.
Stephen TaubMay 27, 2005

A federal judge approved a settlement that will use two Enron Corp. insurance policies to put about $69 million into the hands of former Enron employees who lost their pension funds, according to the Houston Chronicle.

Since the deal covers more than 20,000 current and former employees, the average check will amount to only about $3,500 per person. The paper stressed, however, that the number of employees who will eventually qualify for payments has not been finalized and that the distribution per person may vary as well.

In her ruling, U.S. District Court Judge Melinda Harmon wrote that she preferred a settlement to a trial, which would probably have used up any funds that would ultimately have been awarded, according to Reuters. “The settlement at this point would save great expense and would give the plaintiffs hard cash, a bird in the hand,” she reportedly wrote.

Indeed, an additional $17 million or so from the two insurance policies will be paid out to the lawyers who worked on the former employees’ behalf, according to the paper.

“The Enron plaintiffs are thrilled,” plaintiffs lawyer Lynn Sarko told the Chronicle. “We are hopeful that this will allow monies to be distributed to class members this year.”

Lawyers for the former employees — who had argued that Enron executives and others breached their duty to employees under pension laws — had argued that employees might be owed as much at $1.5 billion, according to the Chronicle. Judge Harmon reportedly indicated, however, that she doubted this amount would have been awarded.

Former Enron chairman Kenneth Lay and former chief executive officer Jeffrey Skilling had opposed the deal, arguing the funds came from Enron’s corporate insurance policies that were to be used to help pay for their legal defense, according to Reuters.

The Chronicle pointed out that the lawsuit regarding breach of duty is still expected to proceed against Lay, Skilling, Enron, and Northern Trust Co., which worked on the pension plan.

Lay, Skilling, and former Enron chief accounting officer Richard Causey are scheduled to stand trial beginning in January on criminal charges related to the energy company’s collapse.