Enron

1. Enron Rights of the Employees Presented By Ho-Min Lee Mike Forbes

2. Agenda: • Overview • Timeline • Rights of Employees • Under Bankruptcy (creditors) • ERISA • WARN Act • Legislation in Action (H.R. 3762 & S. 1992) • Conclusion

3. Enron: An Overview • Dec. 2, 2001: Enron files for Chapter 11 Bankruptcy. • 4,000+ employees were laid off • Nearly 20,000 employees lost an estimated $1 billion in stock (Savings & Pension Plan).

4. Timeline • Nov. 28, 2001- Enron shares falls below $1 • Dec. 2, 2001- Enron files for Chapter 11 Bankruptcy and bars employees from selling their shares tied into their retirement plans. • Jan. 9, 2002- US Justice department begins a criminal investigation of Enron. • Jan. 23- FBI begins investigation of document shredding. • Jan. 28- A class action lawsuit is filed by 400 employees (present and former) against Enron executives, Arthur Anderson, and others to claim damages for their lost pension plans. • Feb. 4- Enron’s top executives implicated in plot to inflate profits and hide losses. • March 20- Both the House and Senate offer pension reform plans, in light of situation with Enron. • April 11- The House passes Bush’s new pension reform bill.

5. Rights of Employees • Chapter 11 Bankruptcy • Lists employees as unsecured creditors • As an unsecured creditors, employees are entitled to claim their losses after, and only after government (taxes), administration, lawyers, and secured creditors have collected from the bankruptcy. • Government (taxes), administrative expenses, & lawyers • Secured Creditors • Unsecured Creditors

6. Rights of The Employees • Employee Retirement Investment Securities Act of 1974 (ERISA) • Federal statute that protects employee pensions and other benefits • Overrules almost all state laws • Enforced by the Department of Labor *Notable Rules: States that employers have a fiduciary obligation to act in the best interest of employees and their pensions. *Violations: Enron, Arthur Anderson, Enron executives, etc. breached there fiduciary duties to inform employees that Enron stock was a bad investment.

7. Rights of Employees • Worker Adjustment & Retraining Notification Act (WARN) • Applies tocompanies with 100+ employees laying off 50+ employees within a 30 day period • Employer must give employee 60 days notice of termination • Employees are entitled to $500 for every day they are not notified, for up to $30,000. • Enron laid off over 4,000 the day they went bankrupt. Although Enron is protected by the employment-at-will doctrine, they failed to give employees sufficient notice of termination, thus violating the WARN Act.

8. Proposed Legislation • President Bush calls for new legislation to protect employee pensions. • H.R. 3762 Pension Security Act (Boehner-Johnson) • Notification of blackouts • Stops insider trading during blackouts • Allows employees to sell company stock after 3 years • S. 1992 Protecting America’s Pensions Act of 2002 (Miller-Rangel) • Places a cap on amount of company stock in pension plans • Increases fiduciary liabilities • Mandatory elected joint trusteeships

9. Conclusion • In conclusion, the Enron bankruptcy has left employees with very few legal options. • The WARN act gives them some compensation for their termination. • As unsecured creditors, it is doubtful that they will reclaim their losses from the bankruptcy. • Most employees are relying upon ERISA laws to collect their lost pension funds (by way of class action lawsuit). • Because of the Enron collapse, new legislation (although controversial) is currently underway that will better protect employee retirement plans.

11. Proposed Website • List how employees have been effected by Enron Bankruptcy • List the laws that protect employees • List new legislation • Impact of Enron Bankruptcy