Enron staff told to repay last minute bonus

The committee representing Enron's former employees in its bankruptcy case is attempting to recover $72 million in bonuses paid to 292 executives in the final hours before the company filed for bankruptcy.

    Early litigation targeted Enron's main executives, but not on those lower down in the former company

    Richard Rathvon, co-chair of the employees' committee, said: "We intend to hold 11th-hour bonus recipients accountable for their self-dealing as Enron fell into bankruptcy."
    Filed by the group earlier this year in federal bankruptcy court in Houston, four lawsuits seek to recoup individual bonuses ranged from $200,000 to $5 million.

    The bonuses infuriated laid-off employees who received relatively small severances, Rathvon said.
    "Even as thousands of regular Enron employees and retirees were facing the loss of life savings, health benefits, their jobs or pensions, these favored few were scheming to get millions more for themselves." 
    Unauthorised payments

    The employees' committee says the checks paid to the employees did not clear Enron's account until after the bankruptcy was filed.

    Thus payments were not authorized by the New York bankruptcy court handling Enron's case and should be returned, according to the committee.

    Employees who lost most of the value of retirement accounts packed with now-worthless Enron stock are suing dozens of individual former Enron executives in a federal court in Houston.

    But the retention bonus lawsuits are unique in that they seek those funds handed out as Enron was failing. Also lawsuits are now going further down the corporate food chain. 
    High profile bankruptcy

    Houston-based Enron collapsed into bankruptcy in December 2001. Company executives have said the bonuses were paid on the eve of bankruptcy to retain some workers.
    One lawsuit names Jeffrey McMahon, who became chief financial officer after Andrew Fastow stepped down in October 2001.

    According to the employee committee and papers filed in the lawsuit, McMahon signed a contract on 25 October 2001 and received a $300,000 payment in exchange for a commitment to stay at Enron for six months.
    On 29 November, the last day of business before the bankruptcy filing, McMahon amended his employment agreement.

    The following day, he received $1.5 million to remain 90 more days with Enron until the end of February. 
    Further litigation

    Another lawsuit names James Fallon, former president and CEO of Enron Broadband Services, who also received a $1.5 million payment on 30 November.

    Enron's broadband unit was never profitable and the company laid off broadband employees when downsizing the unit months before the bankruptcy.
    A third lawsuit names 56 commodity traders and the final legal action names 228 traders and other employees.

    SOURCE: Agencies


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