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October 01, 2002
CEOs May Be Liable for 401(k) Losses
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Observers call the brief a boost to former Enron employees who want to hold former chief executive officer Ken Lay and other top executives personally liable for millions of dollars in retirement plan losses.
The brief, filed with the judge hearing the Enron employees' lawsuit, states that if Enron executives were aware that workers were misinformed about the stability of Enron stock, they were obligated to protect them.
The brief lists the remedies the executives could have pursued: notifying all investors of the risk, freezing the investments, or removing Enron stock as an investment option and as the company matching contribution.
The duty to protect workers doesn't rest only on the trustees who directly oversee a 401(k) plan, according to the brief. Any top executives or directors who appoint the trustees are responsible for monitoring the plan and are liable for breaches in fiduciary duty, it says.
USA Today notes Enron workers' claim that they continued to accumulate company stock because executives had said it would rebound. Last year, Enron's stock price plummeted from about $83 to below $1. Some workers lost virtually all their retirement savings.
The judge is under no obligation to accept the agency's view, but the brief represents the agency's most detailed clarification of many legal issues relating to retirement plans.
If the courts accept it as a basis for rulings, it could have more impact than the pension reforms being considered by Congress, says Fred Reish, a Los Angeles pension lawyer.
"It will provide a clearer road map for all employers," Reish tells USA Today. He also says it will mean that executives' own "bank accounts and investments are on the hook."
To read the USA Today article, click here.
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