Class-action suit seeks recovery of big 401(k) losses
Enron Corp. lawyers and Portland General Electric workers this week began a battle over recovering millions in 401(k) retirement money sunk into now-worthless Enron stock.
PGE linemen Steve Lacey and Roy Rinard traveled to Houston to give testimony in a class-action lawsuit, which they filed in December 2001 on behalf of 19,000 Enron employees enrolled in the company's 401(k) plan.
The lawsuits, filed in U.S. District Court in Portland, allege that energy trader Enron hid financial irregularities as it persuaded employees to invest in company stock, then froze access to the 401(k) plan in October 2001 when Enron's extensive financial problems came to light.
Company attorneys counter that employees had access to the stock even before it sunk from $80 a share to less than $1 in October 2001, shortly before Enron filed for bankruptcy.
'They're trying to make it our fault, like we were a stupid investor,' said Lacey, who was quizzed for 7 1/2 hours by Enron attorneys. 'My response was, the reams of e-mails and newsprint from managers that told us to dive in there and invest.'
Enron spokesman John Ambler could not be reached for comment.
The suit names numerous banks, including Morgan Stanley and Citicorp, former Enron Chief Executive Officer Kenneth Lay, President Jeff Skilling and the company's top 25 managers, who cooperated with Enron 'in the ruse,' said Rinard, who had accumulated $481,000 in now-worthless Enron stock.
'They had fiduciary responsibility to manage our 401(k),' Rinard said.
Rumors have begun flying through PGE headquarters that Enron and its insurers made a settlement offer of $27 a share. Rinard denied there had been a settlement offer, and he predicted that Enron Ñ which bought PGE in 1997 Ñ would take the case to trial.
'They haven't made any other overtures to us,' he said.
Counties move forward
Meanwhile, a week after the Portland City Council voted to spend $500,000 to pursue negotiations with Enron creditors to take over PGE, officials in Multnomah, Clackamas, Washington and Marion counties on Wednesday decided to move ahead with a public-private power plan called Willamette Valley Power.
The plan proposes to issue revenue bonds to purchase PGE assets for $2.8 billion from the bankruptcy court Ñ and by doing so avoid taking on PGE's liabilities. The utility would be overseen by a municipally appointed board and private managers.
'We're moving forward,' said Rece Bly, an attorney with Miller Nash LLP who is organizing the Willamette Valley Power plan.
'We believe there is a real public interest here and in proceeding with public ownership,' said Washington County Commission Chairman Tom Brian, who has been contacted by several regional companies that support the plan, citing its potential for both rate reduction and stability.
'We also concluded that the WVP vehicle is a good vehicle for doing that,' Brian said.
Multnomah County Commissioner Lisa Naito, who has raised questions about the plan, said the counties also are interested in exploring a public power plan with Portland.
'Everything is tentative at this point,' she said. 'The WVP proposal may still be on the table, but we are looking at options beyond that with Portland.'
The Willamette Valley Power plan is one of three pending proposals in the increasingly contentious fight over PGE's future.
In a letter to Multnomah County commissioners Friday, public power proponent Dan Meek urged them not to support WVP because it 'is a creature of Wall Street investment banks.'
Meek contends that the public-private organization would generate more money for Enron's creditors because Oregonians would pay more for PGE and also would end up paying Wall Street investors high underwriting fees.
He also argues that using the power of eminent domain Ñ which Bly says commissioners won't do Ñ is an effective tool in holding down the sale price of PGE.
The city of Portland also is proposing to use condemnation of PGE as a last resort.
Bly said Willamette Valley Power would pay about the same amount that NW Natural previously offered for PGE, $2.8 billion, and has made no secret of the interest expressed by the Goldman Sachs investment bank in underwriting the plan.
'He's making that up,' Bly said of Meek's charges. 'Has Dan Meek ever prosecuted a condemnation in his life? I have. He keeps saying you get a big bargain, and I'm saying that's not how it works. Where does he get these numbers?'
PGE also has tried to poke holes in the WVP plan, linking with Pac/West Communications Ñ a firm operated by lobbyist and former state Sen. Paul Phillips Ñ to research the proposal. Phillips' newly created group, Oregonians for Jobs and Power, recently issued a report on the issue.
Meeks hopes to create five public utility districts in the area now served by PGE; if necessary, the Portland utility's assets would be acquired by eminent domain. The PUDs would be created via the initiative process in six counties: Washington, Clackamas, Multnomah, Yamhill, Marion and Polk.
He said organizers are on their way to getting the 6,300 signatures needed to get the initiative on the March 2003 or May 2003 ballot.
'He wants to break the utility in six pieces?' Bly said. 'That doesn't make sense. You lose all the synergies of one utility.'