Risk & Compliance

Creditors Can Sue Dead Enron Exec

A bankrutpcy judge said creditors can try to collect $1.3 million from the estate of Cliff Baxter, who died in 2002.
Stephen TaubSeptember 20, 2006

A judge has ruled that the estate of a former Enron executive who committed suicide is fair game for creditors.

U.S. Bankruptcy Judge Arthur Gonzalez said in a recent ruling that the creditors can try to recover $1.3 million from the family of former Vice Chairman Cliff Baxter, who died of a self-inflicted gunshot wound January 25, 2002, less than two months after the former energy giant filed for bankruptcy, according to Bloomberg. The judge ruled that creditors can recover the funds because Baxter was paid within 90 days of the energy company’s bankruptcy filing, said the wire service. The 90 day limit makes Baxter’s payout a preference payment, which is recoverable in bankrutpcy proceedings.

“Although we are gratified by the court’s ruling, this case is tragic on many levels, and no one is pleased under the circumstances,” said creditors attorney Ronald Sussman, in a statement, according to Bloomberg.

In the fall of 2001, Baxter—who had warned of accounting irregularities at Enron—was one among 113 employees who had received $53 million under the company’s deferred compensation plan, noted the Associated Press. Lawyers for Baxter’s estate argued that the matter should be considered by a probate court. They also asserted that Enron did not prove that Baxter benefited from the entire $1.3 million, as required, because nearly $500,000 went to taxes, said Bloomberg.

Famed whistleblower Sherron Watkins named Baxter in her fateful memo sent to then chairman Kenneth Lay, said AP. She reportedly predicted Enron would “implode in a wave of accounting scandals” unless it changed its accounting practices, adding, “Cliff Baxter complained mightily to (then-CEO Jeffrey) Skilling and all who would listen about the inappropriateness of our transactions with LJM.” She, of course, was referring to those off-balance sheet partnerships that were at the center of the accounting scandal.