Judge: Enron Funds Could Be Frozen
biz.yahoo.com
Wednesday January 9, 6:25 pm Eastern Time
Judge Says She Could Freeze Millions in Enron Stock Proceeds, But Needs to Be Convinced
By KRISTEN HAYS
Associated Press Writer
HOUSTON (AP) -- A federal judge says she has the authority to freeze proceeds of more than $1 billion allegedly gained by top Enron Corp. (NYSE:ENE - news) officials who sold millions of shares before the energy giant collapsed.
But U.S. District Judge Lee Rosenthal in Houston also said in a ruling issued Wednesday that lawyers for Amalgamated Bank and other plaintiffs need to present a stronger argument to convince her to freeze those proceeds.
Rosenthal's ruling emerged from a lawsuit filed last month on behalf of Amalgamated and other Enron investors against 29 current and former Enron executives and board members who sold huge chunks of stock before the company imploded late last year.
The suit alleges that the defendants, including chairman Ken Lay and Texas Sen. Phil Gramm's wife, Enron board member Wendy Gramm, engaged in a three-year pattern of fraud and deception that caused Enron shares to fall from a high of about $80 a year ago to less than a dollar.
The suit alleges further that defendants sold $1.1 billion in stock while hiding the company's true financial condition.
Amalgamated Bank claims it lost more than $10 million in the meltdown, and the suit is seeking $25 billion in damages.
Plaintiffs want stock sale proceeds from Oct. 1998 through last November frozen so their allegations can be investigated further. They also want to prevent any defendants from dissipating or concealing those profits.
Over that time span, Lay sold the most among the defendants, at 1.8 million shares for $101 million. Gramm sold the fewest -- 10,256 shares for $276,912.
Lawyers for the defendants argued last month that the judge lacked authority to order a freeze, and that it would be a monumental task to liquidate real estate, stocks or other assets bought with proceeds from Enron stock sales so the money could be frozen.
Rosenthal dismissed arguments about her authority, but said plaintiffs' lawyers need to do a better job showing that Amalgamated and the other investors will be hurt if she doesn't order a freeze.
``We have surmounted a major hurdle toward getting the insider proceeds frozen,'' William Lerach, one of the San Diego-based plaintiffs' attorneys, said Wednesday.
Attorneys representing Lay, Gramm, and former chief financial officer Andrew Fastow and a spokeswoman for former chief executive Jeff Skilling did not immediately return calls for comment.
Amalgamated Bank's lawsuit is among more than 60 filed on behalf of shareholders as well as employees who watched their 401(k) accounts shrivel as Enron collapsed.
Enron, once the country's seventh largest company in terms of revenue, descended into bankruptcy last month after a mid-October announcement of massive third-quarter losses began a string of damaging revelations.
Among those were questionable partnerships, run by Fastow, that allowed Enron to maintain good credit ratings while keeping half a billion dollars in debt off its books. Enron also eliminated millions in profits when the company acknowledged it had overstated profits for four years.
The Securities and Exchange Commission, a congressional committee and the Justice Department are investigating Enron's collapse.
Enron shares closed at 79 cents Wednesday, up 6 cents. |
