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KWAME HOLMAN: When one-time corporate titan Enron collapsed last fall, thousands of workers lost their jobs– and their life savings, too.
REPORTER: How much did you lose?
WOMAN: About $170,000.
REPORTRE: About how much did you lose in 401(k) and/or pension?
WOMAN: I had $40,000 last year, and I have $3,333 now.
KWAME HOLMAN: At Enron, like many companies, workers saved for retirement by putting pretax dollars into a company-run 401(k) plan. The Enron plan offered 20 investment options, from mutual funds to shares of company stock. Enron matched some employee contributions with stock in the company, but only workers age 50 and over were allowed to sell such shares.
In all, more than half of 401(k) investments company-wide were in Enron stock. That was good news last year, when the stock price was more than $80 a share, but with a slowing economy, last spring the stock began a steady decline. Then, in mid-October, Enron disclosed losses of $618 million, and that its bookkeeping was under investigation by the Securities and Exchange Commission. T
he stock fell further. Soon afterward, Enron banned employees from selling their rapidly falling Enron shares. Enron said the ban was necessary while it changed retirement plan administrators.
Enron and many workers disagree about how long the ban lasted. In December, with the stock price at less than a dollar, the company declared the largest corporate bankruptcy ever. It’s estimated $12,000 Enron employees lost more than a billion dollars invested in Enron through their retirement accounts. Now, many are looking for jobs, and suing the company at the same time. One lawsuit charges Enron executives, including chairman Kenneth Lay, with insider trading– knowing the stock price was based on bad numbers, and hiding that from employees and shareholders.
WOMAN: But in my opinion, it was criminal, because we lost our retirement. I have to start all over, and at my age, it is hard to get out there and find another job.
WOMAN: It really ticks me off that they’re off jetting around. They’re enjoying themselves and I’m worried about going to the grocery store.
KWAME HOLMAN: In response, President Bush has tapped Treasury Secretary Paul O’Neill to look at possible reform of pension plan rules.
PAUL O’NEILL, Secretary of the Treasury: The president’s directed me to see if there are rule changes, or legal changes, that need to be made so that employees are not left high and dry. On first blush, it looks like Enron operated within the rules and regulations that existed and still exist today with regard to how they manage their 401(k) plan.
KWAME HOLMAN: The Labor Department also is examining Enron’s 401(k) plan. And at least one bill in Congress would mandate employees have no more than one-fifth of their pension savings in their companies’ stock.