- p. WASHINGTONCindy Olson, Enron’s executive vice president for human resources, sold her company stock for $6.5 million, mostly in the past year before the price plummeted.
Her 401(k) account, which once reached $800,000, is now worth about half.
On the other end, lab analyst Tom Padgett has a 401(k) now worth less than $15,000 after reaching $615,456 in December 2000.
The difference? Olson hired an independent financial adviser who prodded her to diversify. Padgett, paid hourly for his 12-hour shifts at a La Porte, Texas, chemical plant owned by Enron Corp. until August, trusted company executives who urged workers to buy stock even as they sold off their shares. “Our stock ownership was encouraged by Enron’s top management, who I now believe benefited handsomely from our commitment,” Padgett told a House committee Thursday. “Good investment decisions require honest information. We all know now that the information we were given was false.”
As some Enron executives refused to testify before hearings at the Capitol, citing their Fifth Amendment protections against self-incrimination, workers told lawmakers of their devastation and their hopes that Congress and the courts will set things right.
Enron’s stock peaked at $82 a share on Jan. 26, 2001. It was selling for $15.40 at the close of trading on Oct. 26, the day a lockout period began on the 401(k) program as the company changed plan administrators. By the time the lockout ended Nov. 13, a share of stock was selling at $9.98.
Sen. Edward Kennedy, D-Mass., blamed the retirement losses on “a crisis of corporate culture” revealed by the Enron implosion.
Kennedy, other lawmakers and the Bush administration are proposing ways to protect retirement accounts and place new regulations on the accounting, auditing and disclosure requirements of big firms.
Teresa Ghilarducci, an economics professor at theUniversity of Notre Dame,urged House members to impose a limit on 401(k) assets that can be invested in company stock. Workers have a psychological and emotional attachment to their investments, and putting a lot of money in company stock can be viewed as company loyalty, she said.
“Human psychology and spectacular equity growth work together to cause people to overvalue the equity market and expect returns to keep growing,” she said.
President Bush has not suggested capping the amount of company stock allowable in 401(k) plans, and many Republicans say such restrictions would deter companies from offering the tax-deferred retirement plans, which are voluntary.
Ghilarducci also pressed lawmakers to require that employees have representatives on boards that oversee retirement plans.
“The United States is the only industrialized nation that does not require representation on a pension board,” she said.
Enron workers gave an inside view of the damage.
“I could now understand why people jumped out of windows during the Great Depression,” Steven Lacey told a Senate hearing.
He said his outrage was rooted in the corporate cheerleading that executives delivered repeatedly last year, even as they must have known the company was in trouble.
Olson, Enron’s executive vice president for human resources, who was in charge of retirement plans, faced tough questioning about what some House members said was failure to do her duty of representing the interests of the 401(k) plan and its participants.
“I find that very baffling, very disturbing,” said Rep. Dale Kildee, D-Mich.
Olson was warned by Enron executive Sherron Watkins about possible accounting practices that she feared could destroy the company. But Olson, who set up a meeting between Watkins and Lay, did not warn officials in charge of the retirement plans because the allegations weren’t documented, she said.
“We didn’t have a crystal ball. We didn’t ultimately know where the stock was going to go,” Olson said.
She grew visibly irritated with the questioning, often answering abruptly and in few words.
Rep. Lynn Rivers, D-Mich., told Olson she was dismayed at what appeared to be “indifference to what ultimately was going to happen to employees,” and “what seems to be total indifference on your part.”
February 8, 2002