published Jul 16, 2005
Settlement Is Reached With Enron
By JAD MOUAWAD
New York Times
More than four years after rolling blackouts and skyrocketing electricity bills shook California and the rest of the West Coast, the Enron Corporation finally settled claims that it played a major role in the energy crisis of 2000 and 2001.
Enron, the former highflying energy trader now operating under bankruptcy protection, announced yesterday that it had reached an agreement to pay as much as $1.52 billion to the State of California and other parties.
But actual payouts are likely to be only a fraction of that amount. Under the bankruptcy plan, Enron will pay unsecured claimants - and California is one of them - about 20 cents on the dollar on average, said Jennifer Lowney, a spokeswoman for Enron.
Enron and other power companies are accused of gouging consumers by artificially inflating electricity prices during the California energy crisis. The crisis led to billions of dollars of surcharges for consumers and businesses on the West Coast.
One of the fastest-growing companies in America in the 1990's and a star on Wall Street, Enron collapsed into bankruptcy in December 2001 amid accusations of widespread financial irregularities and fraud. It is now facing an estimated $65 billion in claims from investors, consumers, employees and government agencies it defrauded. Against that, the company's estate is valued at about $13 billion, and Enron has so far paid out $580 million to claimants in other cases, Ms. Lowney said.
Enron's rapid fall was the first in a string of accounting and financial scandals that rocked corporate America. The company's former chairman, Kenneth L. Lay, and former president, Jeffrey K. Skilling, are under federal indictment on fraud charges. Their trial is scheduled for January 2006.
"This settlement represents the latest in a series of significant issues that have been resolved in Enron's bankruptcy proceedings," Stephen Cooper, Enron's interim chief executive and chief restructuring officer, said in a statement. "Settlements such as this one allow us to remove claims against the estate so that we can accelerate distributions to all other creditors."
The parties that entered into the agreement are the Pacific Gas and Electric Company, the Southern California Edison Company, the San Diego Gas and Electric Company, the California Department of Water Resources, the California Electricity Oversight Board, and the attorneys general of California, Oregon and Washington.
The settlement "will squeeze justice from this corporate turnip," Bill Lockyer, the attorney general for California, said in a statement.
"After masterminding one of the largest rip-offs in history, Enron collapsed under the weight of its own greed and corruption," said Mr. Lockyer, who represented California in the settlement.
With this latest agreement, total settlements stemming from the energy crisis that hit the Western states have reached nearly $6 billion, according to the Federal Energy Regulatory Commission.
"The dark cloud of litigation and regulatory uncertainty has been hanging over California for five years now," Joseph T. Kelliher, the commission's chairman, said in a statement. "That's too long. It's time for all of us to step up to the plate and resolve these remaining issues."
The latest Enron agreement includes $47.3 million in cash, $875 million in unsecured claims for the parties in California, and a $600 million penalty for the three states that were hit by the power cuts.
But the exact amount Enron will pay under the settlement will not be known until its Chapter 11 bankruptcy proceeding is completed and secured claims are paid out. Under its bankruptcy plan, Enron plans to pay 22.8 cents on the dollar in the case against Enron Power Marketing Inc., the subsidiary that was the target of the California power claim.
The agreement is still subject to the approval of the energy commission, the California Public Utilities Commission and the Bankruptcy Court for the Southern District of New York, where Enron filed for protection four years ago.
Enron has agreed to settle government and employee claims against its retirement plans for $356.25 million, the Labor Department said on Monday. There, too, actual payouts will probably be far less. The deal on the retirement payout did not cover claims against Mr. Lay or Mr. Skilling. >