In the incendiary case that taught all of America the importance of 401(k) diversification, it seems that some Enron employees may be slightly closer to relief, according to the Houston Chronicle.
The estate of co-founder Kenneth Lay, who died in July just before sentencing, is expected to settle a lawsuit brought by thousands of the energy company's former employees claiming that Lay and former Chief Executive Jeffrey Skilling failed to adequately diversify the company's 401(k) selection, and relied too much on Enron's own stock.
As a result, when the company imploded in 2001, the retirement accounts of thousands of employees were wiped out with losses totally hundreds of millions of dollars.
If Lay's estate settles as expected, Skilling will be the only remaining defendant. Enron is in bankruptcy proceedings.
U.S. District Court Judge Melinda Harmon said she was pleased with the progress of the case. She previously approved settlements of $264.3 million for former Enron employees; however, the amount to each employee shrinks significantly after deductions of $23 million for legal fees and nearly $875,000 in expenses. In July, Harmon approved another settlement for $37.5 million with Northern Trust, which served as Enron's plan administrator.
How much Lay's estate will contribute is still unknown, but many speculate that the settlement is an attempt for Lay's family to put the case behind them. Before his death, Lay claimed that the criminal case left him $250,000 in debt, although he still had a home valued at $5 million and a $6 million investment account at Goldman Sachs.
"It basically says that the Lay family is ready to resolve their differences and pay a fair percentage of their responsibility," said Joel Androphy, a defense attorney in Houston.
The estate is still embroiled in a shareholder lawsuit and another from the Securities and Exchange Commission. The SEC delayed its suit until after Lay's criminal trial, for which he was found guilty on all 10 counts.
Skilling's sentencing is scheduled for Oct. 23. Prosecutors are expected to demand he had over $183 million he allegedly profited through fraudulent bookkeeping.
Now left as the lynchpin in the employee suit, Skilling is not expected to settle soon, if at all, Androphy said.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.