On Dec. 18, the Senate Commerce Committee heard from former employees and shareholders of the collapsed energy trading company Enron, who watched retirement plans tied up in the company’s stock vanish while executives cashed theirs out.
Mary Baines Pearson, a 70-year-old Enron shareholder and widow of former Texas state representative G.P. Pearson, told the committee, “I am just a pebble in the stream, just a little bitty stockholder, but both my granddaughter and I have lost money we had set aside for our future and do not know how we will replace those losses.”
Charles Prestwood, a 63-year-old retired Enron employee from Conroe, Tex. said, “I can tell you, without pulling punches, something stinks here. There are people at Enron who made millions selling Enron stock, while we, the rank and file, got burned.”
Implicit in their testimony before the Commerce Committee was a plea for Congress to take action to force the company ? whose CEO Kenneth Lay has earned $300 million through stock options ? to make reparations to its employees.
Said Robert Vigil, an electrical machinist who worked for 23 years at the Pelton/Round Butte Hydroelectric Project in Madras, Ore., “We are looking for solid, truthful answers so that we may possibly recoup some of this money, maintain our dignity and prevent further theft from occurring to others who work their entire lives only to become victims of robbery.”
Enron’s case has moved more quickly than many business and government observers anticipated. The company was President Bush’s largest campaign contributor and its proximity to political power in Texas while Bush was governor afforded it an advantage in influencing the revolutionary deregulation of energy markets. The close relationship has continued. Last April, CEO Lay was consulted by Vice President Dick Cheney’s secret energy task force.
Congressional initiatives have so far focused on chiding employees’ reliance on company stocks for their retirement plans ? even though employees say they were pressured into buying the stocks and were locked into the retirement plans as it became apparent that the company was in trouble. In contrast, there has been little attention paid to the company’s liability for its employees’ financial devastation and the top executives have so far ignored calls to testify before Congress.
Sen. Barbara Boxer (D-Calif.) and Sen. Jon Corzine (D-N.J.) introduced legislation on Dec. 18 that would limit company stocks to 20% of employees’ overall retirement packages. If passed, this law could affect companies like Coca-Cola, Texas Instruments and McDonalds whose retirement plans are comprised of 60% company stock.
“We want to make sure that the life savings of our nation’s workers are protected ? even when an employer’s stocks collapses,” said Sen. Boxer.
The slow crawl of justice may accelerate this month as the Senate Committee on Governmental Affairs conducts new hearings on Enron on Jan. 24. Congress issued 51 subpoenas last Friday relating to the company’s conduct.
Perhaps sensing a process that has slipped from its grasp, the Bush Administration has made a hasty attempt to control the damage. On January 10, President Bush made a terse statement before the press: “There needs to be a full review of disclosure statements to make sure that the American stockholder is protected.”
The Justice Department announced that it was forming a special task force of prosecutors to conduct an inquiry into Enron’s collapse. Attorney General John Ashcroft recused himself because of possible conflicts of interest due to campaign contributions he accepted from Enron during his failed 2000 Senate race.
Enron’s lawyer Robert S. Bennett lauded the Justice Department’s decision to take the case. “I’m pleased that there now appears to be some centralization and coordination, because it is very difficult and expensive to deal with half a dozen other entities,” said Bennett. “This is a company in bankruptcy, and it needs to be given a fair shot to come out of bankruptcy and increase the value for shareholders. If we get caught in a cumbersome scandal machine, that may not happen.”
Meanwhile, Enron is anxious to auction off assets around the world ? including a mega-dam in India, which has inspired massive protests by displaced farmers. Officials at the company worry that employees will flee as corporate control breaks down. Earlier this month, the London-based investment bank UBS Warburg beat out BP and Citibank for control of Enron’s energy trading business, while Houston-based Dynegy has already finalized an agreement to take over the prized Northern Natural Gas Pipeline, which runs from Texas to the Canadian border.
Jordan Green is Editorial and Research Associate at the Institute for Southern Studies.