Andersen LLP, Others Target of RICO Allegations Over Enron Role, Hagens Berman Announces
`Retirement Plan Conspiracy' blamed for $1.3 billion loss by employees
Wednesday January 23, 9:57 am Eastern Time
Press Release
SOURCE: Hagens Berman
Law Firm Hagens Berman Announces Class Action Lawsuit Against Andersen LLP
HOUSTON--(BUSINESS WIRE)--Jan. 23, 2002-- In a class-action lawsuit filed yesterday in U.S. District Court, Enron Corp.(NYSE:ENE - news) employees charged Andersen LLP and individual Enron officers with violations of the Racketeering Influences and Corrupt Organizations Act (RICO), claiming they conspired to hide Enron's true financial condition by withholding critical information, which caused employees to lose more than $1.3 billion from their retirement funds.
Despite the many lawsuits filed in the Enron collapse, this is the first suit to charge Andersen with violations under the RICO act.
Filed by attorney Steve Berman of the Seattle-based law firm Hagens Berman, the proposed class action was filed on behalf of more than 100 named plaintiffs and seeks to represent an estimated 21,000 Enron savings plan participants.
The suit claims Andersen's chief auditor David Duncan repeatedly certified financial statements he knew were false in an attempt to cover debts and losses, while Enron CEO Kenneth Lay knowingly used that false information to promote the overvalued Enron stock to employees in order to provide `compensation,' secure their loyalty and to have stock holdings available as a tool to fend off any hostile takeovers.
``We will show that Enron and Andersen had a dirty little secret: both organizations knew Enron was in deep trouble a long time ago,'' said Berman. ``The problem is they had an obligation -- both legally and ethically -- to share that information. Instead, we will show that they conspired to propagate a myth that Enron was doing well, solely to serve their interests.''
The suit alleges that Andersen's actions make the company liable under RICO, which prohibits any person from using the assets of any employee pension benefit plan for their own use.
Also charged with RICO violations, several Enron officers are accused of conspiring to defraud Enron employees by contributing worthless Enron stock to retirement plans as part of what the suit describes as a ``Retirement Plan Conspiracy'' run jointly by Kenneth Lay, other high ranking Enron officials and Andersen.
According to Berman, each time Enron officers matched an employee's contribution with Enron stock, they knowingly contributing stock that was worth much less that the purported value. ``Employees were earnestly planning for their future, thinking Enron's stock contribution was putting them further down the road to retirement,'' Berman noted. ``In fact, we intend to prove that Enron knew it was matching employees' contribution with the modern-day equivalent of plugged nickels.''
According to the suit, every transfer of Enron stock to the class members' savings plan constituted a violation of the RICO act, which makes it a crime whenever any person ``embezzles, steals, or unlawfully and willfully abstracts or converts to his own use or to the use of another, any of the moneys, funds, securities, premiums, credits, property, or other assets of any employee welfare benefit plan or employee pension benefit plan, or of any fund connected therewith.''
``The RICO act is a powerful tool to punish those who conspire to defraud, and one we think fits Andersen and Enron like a glove,'' Berman added.
According the suit, Andersen maintained a core group of employees who specialized in certifying Enron's off-kilter financial statements. These employees earned tens of millions of dollars for Andersen while setting Enron employees up for losses, the suit claims.
The suit makes several claims of wrongdoing by Andersen, Northern Trust (Nasdaq: NTRS - news), and several Enron officers and retirement plan administrators, including:
Lockdown of Employee Savings Plans in Violation of ERISA: Northern Trust and Enron savings plan administrators breached their fiduciary duty to Enron employees by locking down employee savings plans from Oct. 17 to Nov. 19 without advance notice that the lockdown would begin on Oct. 17, and when they knew, or should have known, that Enron was on the brink of collapse, according to the suit. Furthermore, Northern Trust and the savings plan administrators should not have allowed the planned Oct. 29 lockdown to proceed, since Enron's financial troubles were already partially disclosed.
Wrongfully Encouraging Employees to Purchase Enron Stock: Enron savings plan administrators promoted employee contributions to Enron savings and stock option plans when they knew, or should have known, that Enron was not a prudent investment, the suit alleges.
Using Enron Stock For Matching Contributions in Violation of ERISA: Enron savings plan administrators repeatedly breached their fiduciary duties by making employer contributions with stock they knew, or should have known, was worthless, the complaint claims.
Retirement Plan Conspiracy - Violations of RICO: Andersen chief Enron auditor David Duncan, Enron CEO Kenneth Lay and other Enron officers conspired to save Enron hundreds of millions of dollars in savings plan contributions by donating what they knew to be worthless Enron stock, the suit alleges.
Several accounting principals also demonstrate that Andersen and Enron officers released intentionally misleading financial statements, the suit claims. Enron's complete restatement of every financial statement from 1997 to 2000, rather than a simple change in financials, proves that both Andersen and Enron officers knew the off-balance sheet partnerships were being covered up, according to the suit.
About Hagens Berman
Steve Berman is managing partner of Hagens Berman in Seattle. Recently cited as one of the nation's top 100 influential attorneys by The National Law Journal, Berman is a nationally recognized expert in class action litigation. Berman represented 13 states in lawsuits against the tobacco industry that resulted in the largest settlement in the history of litigation. Berman also served as counsel in several other high-profile cases including the Washington Public Power Supply litigation, which resulted in a settlement exceeding $850 million, and the proposed $92.5 million settlement of The Boeing Company litigation. Other cases include litigation involving the Exxon Valdez oil spill; Louisiana Pacific Siding; Morrison Knudsen; Piper Jaffrey; Nordstrom; Boston Chicken; and Noah's Bagels. |
