Enron domino effect reaches 8 PGE executives
They could lose millions as a result of affiliate's Chapter 11 filing
Eight retired high-level executives of Portland General Electric probably will lose millions of dollars in compensation in the latest fallout from the Enron Corp. bankruptcy.
Portland General Holdings Inc., a wholly owned Enron subsidiary, filed for Chapter 11 reorganization June 27 in New York bankruptcy court, citing no income and $61.5 million in debt.
The company, an affiliate of PGE, administered six compensation and retirement plans for the utility's executives and outside directors. It also oversaw life insurance benefit plans for both managers and directors.
Although PGE would not release any names, those expected to be affected by the Portland General Holdings bankruptcy are Don Kielbock, former human resources executive; Al Alexanderson, former chief counsel; Ken Harrison, former chairman and chief executive officer who engineered PGE's sale to Enron; and Joe Hirko, former chief financial officer, who was indicted two months ago for conspiracy, securities and wire fraud in relation to his work at Enron Broadband.
'This is a sad case for a handful of people,' said Enron spokesman John Ambler. 'Hopefully, they can work out something positive through the bankruptcy process.'
Because the executives' retirement benefits are not protected by federal pension law, Portland General Holdings' assets Ñ including an estimated $47 million held in trust by Wachovia Bank in Winston-Salem, N.C. Ñ may be used to pay the company's debts.
Other employees unaffected
'As we are moving toward getting a plan of bankruptcy reorganization approved and moving forward, it was necessary to clean up all the issues,' Ambler said.
'In the case of Portland General Holdings, 'we decided that the best and most effective way to deal with this was in the context of bankruptcy. An unfortunate consequence is that eight former executives of the company, who have deferred compensation and other kinds of benefits held by PGH, are affected by this.
This does not affect medical or pension benefits available to other PGE employees, he said.
Some executives, such as former PGE power supply chief Walt Pollock, had withdrawn their Portland General Holdings savings in one lump sum upon retirement and were not affected.
Portland General Holdings' bankruptcy filing may be more ominous, however, than Enron executives are letting on, said Dan Meek, who is leading a grass-roots effort to create people's utility districts in PGE's service territory.
'This portends a future PGE bankruptcy and has serious implications,' he said.
PGE spokesman Scott Sims called Meek's comment 'completely false and could not be more so.'
Enron did not include the profitable PGE, which is rated above investment grade, in its original bankruptcy filing.
Government lawsuit filed
This is the second time that PGE employees have been hit in the pocketbook by the aftershocks of the Enron bankruptcy. Hundreds of employees lost their retirement savings when Enron's stock plummeted in value during October 2001. The company filed for bankruptcy a month later. Some PGE employees filed a class-action lawsuit to recover the funds.
The U.S. Department of Labor on June 26 sued Enron and its former executives for failing to prudently protect Enron workers' retirement assets invested in Enron stock. The suit seeks restoration of financial losses.
As an Enron subsidiary, Portland General Holdings' bankruptcy will be consolidated with its parent company's filing. Portland General Holdings' other assets include Portland-based MicroClimates Inc., Portland General Broadband Wireless and Enron Communications Inc. Ambler said payments would continue to employees of those companies as well as retirees.
'There are opportunities for further review by the court, but for the most part they are able to continue as is,' he said.
Pension, medical checks continue
Portland General Holdings also distributes pension and medical checks to PGE's retirees, but because the pension fund is held in trust by plan administrator Northern Trust Co. and protected by federal pension plan law, it is not considered part of the Portland General Holdings bankruptcy.
'They write the check, that's it,' said Bill Miller, business manager for Local 125 of the International Brotherhood of Electrical Workers, the bargaining unit for PGE linemen. 'This will have no effect on payments. It's the same as if PGE were holding the money.'
U.S. Department of Labor spokeswoman Gloria Della said PGE employees' pensions are protected because they are retained separate from the bankrupt corporation.
'The trust is not a part of the corporation; it is for the benefit of the people there but set apart from the assets,' she said.
Portland General Holdings Ñ whose directors include Peggy Fowler, PGE's chief executive officer, and other PGE managers ÑÊhas not generated income since 2001. Its bills include $5.2 million owed to PGE and $207,904 owed to its subsidiary, MicroClimates.
The deferred compensation plans that Portland General Holdings administered allowed executives to set aside future bonuses and pay into a savings account with a higher than average interest rate and company contribution. The income was only taxable upon withdrawal.
Its other compensation plans included the outside directors' deferred compensation plan, the supplemental executive retirement plan and the retirement plan for outside directors.