PGE retirees: Hands off our cash
Former execs fret that Enron creditors might nab benefits ranging from $6,000 to $19.3 million
Several retired executives and directors of Portland General Electric Ñ including former Chief Executive Officer Kenneth Harrison, who presided over the sale of PGE to Enron in 1997 Ñ are considering legal action to head off what they see as an Enron squeeze play to deny most of their retirement benefits.
The group, composed mostly of former employees, fears that their retirement and deferred compensation accounts Ñ totaling about $55 million Ñ may be claimed by Enron Corp. creditors in the wake of the June 26 bankruptcy filing of Portland General Holdings Inc., which administered the retirement accounts for the utility's managers.
'We believe there may be an effort under way by big New York banks to steal the money of all the retirees in Oregon,' said Don Kielblock, a retired PGE vice president of human resources.
Kielblock said he is negotiating with Enron's creditors committee, its bankruptcy counsel and Enron executives on behalf of 62 former PGE executives and directors and a handful of the utility's current executives.
Enron spokesman John Ambler said he couldn't confirm if the retirees would get all of their money back.
'Everyone wants to try to work this out,' he said. 'There are a lot of people who have their money in deferred compensation. It's not just Oregon people who are affected.'
PGE Chief Executive Officer Peggy Fowler was unavailable for comment, and company spokesman Scott Simms referred all calls on the subject to Enron.
'We're in a very significant battle with these big-time attorneys and big-time banks who are literally trying to steamroll us,' Kielblock said. 'These are the same banks that caused the problem in the first place, and their interest is in trying to recover some of our money. They can outspend us and run us over.'
If negotiations fail, Kielblock said the group intends to file lawsuits against the creditors, its trustee Wachovia Trust and PGE.
Enron's bankruptcy attorney and a representative of the creditors' committee did not return calls before deadline.
Big money at stake
Among those who may be left out by the PGH bankruptcy are former President and Chief Operating Officer Richard Reiten, who could lose about $1 million; Ruby Short, widow of Robert Short, a former CEO of PGE, $384,000; and former Albertsons CEO Warren McCain, a one-time board member, $266,000.
Harrison is owed the largest amount by PGH, about $19.3 million. The former CEO of PGE became an Enron director after the utility was sold to Enron and, according to the Washington Post, made $75 million on the sale of Enron stock before the Houston company went bankrupt.
Joe Hirko, a former CFO at PGE and later president of Enron Broadband Services, is owed about $8.5 million. He was indicted in May for securities fraud in the Enron bankruptcy debacle.
In a telephone interview, Harrison said he supports Kielblock's efforts 'because he's trying to help a lot of people. It affects me, but I'm more worried about the others.'
Though none of the high-level retirees lack for necessities, many are dipping into their savings to cover the loss of the monthly check, Kielblock said. The retirees already have lost thousands of retirement dollars invested in their 401(k) accounts when Enron stock plummeted in value.
Former PGE board member Gwyneth Gamble Booth is hopeful that they'll recover the money.
'We're taking a wait and see attitude,' said Booth, who had $113,000 in the account. 'I don't think the money is gone forever. I don't see how the bankruptcy court can take that.'
Petition filed with court
The group of 62 has filed a petition in New York bankruptcy court, Kielblock said, asking the court-appointed trustee to support the retirees in obtaining counsel and to set up their own creditors panel.
Several major New York banks, including JP Morgan and Citicorp, make up the other creditors committees. Enron also is seeking to sell PGE to raise cash to pay creditors.
'We can't afford to hire counsel of this magnitude,' Kielblock said. 'To them, $10 million is spending nothing.'
Kielblock said he expects the creditors' committee to make a decision on sparing the retirees' money by early next week.
'We've informed them they can't just take this money,' he said. 'I am a creditor, but more important, I administered these plans. What I care about more than anything is these managers.'
Kielblock and another source said Enron and PGE management decided in March to move millions of dollars in executive retirement funds from the holding company and put them under PGE's supervision, thus protecting the funds from the bankruptcy courts.
PGE's Fowler, Senior Vice Presidents Fred Miller, Pamela Lesh, Mary Turina and James Piro Ñ all directors of PGH Ñ were not among the 62 on the list of PGH's creditors. Fowler and a number of current executives elected not to have their deferred compensation in PGH, Ambler said.
Kielblock, however, said he believes that the March move was made to protect the current executives and left the others vulnerable to Enron creditors.
'It does bother me,' Kielblock said. 'What they did was legal. It didn't feel right. They would tell you they did it because Enron was getting ready to sell PGE, not PGH, and they needed to stand alone.'
Retirees suspicious of bankruptcy
Enron creditors have been eyeing Portland General Holdings funds since the Houston oil firm filed for bankruptcy in November 2001, Kielblock said. PGH is an Enron subsidiary and a one-time shell company for PGE's nonregulated companies. Under its auspices, PGH held six different retirement accounts for executives, middle managers and outside directors.
Some of the retirees said they were suspicious of the PGH bankruptcy, which lists no other debtors besides PGE, Enron and the 62 executive savings accounts. PGH also owes PGE $5 million and Enron $25 million.
Three days after the holdings group filed court papers, its bankruptcy was consolidated with Enron and its reorganization plan was announced prior to any claims being submitted.
Documents filed in U.S. Bankruptcy Court in southern New York show that PGH's board, including PGE's Fowler and Miller, resigned June 20 Ñ a week before the company filed for bankruptcy.
'They knew they were going to file for bankruptcy and didn't want to tangle up anyone in PGE,' Kielblock said of the resignations. 'It left us extremely stranded. There was no one for us to talk to.'
The group of employees, including some middle managers, were enrolled in management-deferred compensation and supplemental retirement plans, which allow them to deposit earnings and bonuses in an account with higher interest rates and a company match. The money was held tax-free and dispersed in monthly payments.
The former members of PGE's board of directors, meanwhile, were enrolled in their own deferred compensation plan.
At this time, Kielblock said, the creditors want the employees to get only about $12 million of the $55 million they saved over the past three decades.
'The creditors want 30 cents on the dollar; we want a dollar on the dollar,' he said. 'What we're fighting for is the total amount.'
At first, it seemed that few PGE executives had been affected by the PGH bankruptcy. When interviewed last week, PGE and Enron said only eight executives would be affected by the PGH collapse.
Enron's Ambler said they did not include the other 54 executives and directors because they had filed claims previously in court.
'Our counsel felt that some of these 62 people, including the others filed under other subsidiaries, should be included in the PGH filing,' Ambler said. 'These are not new claims. I'm sorry if I misconveyed that previously.'
Kielblock said it's PGE that will suffer the most damage if the retirees pursue litigation because any potential buyer of the company would shy away from additional liabilities. A sale to the city of Portland reportedly fell apart over the cost of potential liabilities facing PGE, according to city Commissioner Randy Leonard.
'The creditors have said all along we're not going to get PGE wrapped up in Enron's bankruptcy,' Kielblock said. 'They want it whole to sell it. That's where they stand to lose the most. They need all the public support they can get to get most dollars out of PGE. Buyers won't be interested if there are all these threats to PGE.'
Ambler said he doesn't believe that the retirees' next step will harm any potential PGE sale.