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The Gottesdiener Law Firm Announces Class Action Lawsuit Against Enron : New Lawsuit Would Allow Workers to Rescind Stock Purchases and Recover $850 Million in 401(K) Plan Losses
Monday, November 26, 2001 03:04 PM GMT
HOUSTON, Nov 26, 2001 (BUSINESS WIRE) -- Enron Corporation, the troubled Houston-based energy producer and trader, was sued again on Monday by several current and former employees seeking to recover for themselves and their
co-workers the approximately $850 million they have lost in 401(k) retirement savings due to the recent collapse in the price of Enron stock. The Class is being represented by The Gottesdiener Law Firm.
In recent weeks, the value of Enron's common stock has plummeted from a high of $90 to a low recently of $5 in the wake of revelations that for years Enron materially misled investors concerning the Company's profitability and concealed
billions of dollars of debt through secret off-shore partnerships set up to borrow and covertly funnel money to the Company.
The new suit, filed under the federal Employee Retirement Income Security Act ("ERISA") and federal securities law, is similar to two other 401(k) lawsuits in recent days. Like the other suits, the new suit alleges that Enron and other
Enron-related defendants breached their fiduciary duties under the law by selling employees Enron stock knowing the price was artificially inflated, and by locking employees into Enron stock because of an administrative change to the
Company 401(k) Plan.
But the new suit also contends that Enron violated federal securities law by offering and selling employees Enron stock without the required prospectus, which, if proven, would give workers the automatic right to rescind their purchases (made, in many cases, when the stock was selling for $90 a share) and
receive their money back, with interest. The suit also alleges that Enron violated its federal fiduciary duties by enforcing a provision of the Plan that prevented employees under the age of 50 from selling the stock they received from the Company as its "employer matching contribution," even though the
Company knew it was imprudent for those employees to continue to hold Enron stock.
Plaintiff Gary Kemper, 57, of Banks, Oregon, a maintenance foreman with an Enron affiliate, said, "How am I going to retire now? Everything I've worked for for the past 25 years has been wiped out. Meanwhile, the executives got out while
the getting was good." Kemper was referring to the fact that while the stock price was still high, many top Enron officials sold tens of millions of dollars of Enron stock, apparently knowing that those prices would not last.
Washington, D.C. lawyer Eli Gottesdiener, who is spearheading related 401(k) and pension class action litigation against New York Life Insurance Company and SBC Communications, filed the new suit. Gottesdiener recently concluded two 401(k)
cases against First Union Corporation for $26 million.
Gottesdiener said he hopes his, and the related suits will serve as "a wake-up call to Congress."
"Congress sensibly placed a 10% limit on company stock in traditional defined benefit plans back in 1974, but at the behest of the corporate lobby, it placed no such cap on defined contribution plans. Today, when workers have been forced to assume virtually all of the investment risk and responsibility for funding their retirements, having no such cap is completely indefensible," he explained.
Although investment advisers generally recommend investing no more than 5-15% of an investment portfolio in any single stock, participants in 401(k) plans offering an employer stock option invest on average around 33% in company stock,
based on studies. Enron employees had more than 60% of their retirement savings invested in Enron stock, according to Gottesdiener, who accused the Company of encouraging employees to "load-up" on Enron stock when the Company knew it was not prudent to do so.
"How many workers have to lose both their jobs and their retirement savings before Congress steps in and puts a stop to this by placing some a cap on the amount of company stock that can be in a 401(k) plan?" he asked. Referring to
other past cases in which workers lost big when their company's stock took a beating, he said, "Ikon, Rite-Aid, Lucent and now Enron -- this is going to happen over and over again unless and until Congress changes the law. Something has to be done."
For more information on the suit and a copy of the Complaint, see www.enronsuit.com