US - Enron employees have begun legal action against the fallen energy giant, claiming that the firm recklessly endangered their retirement funds whilst company executives profited at their expense.
The lawsuit, filed by attorneys Hagens Bermen, claims that Enron illegally prevented employees from selling company stock in their 401(K) retirement plans. The lawyers claim that the October 17 lockdown of the 401(K) plans made it impossible for employees to protect their retirement plans from a 70% drop in the value of Enron stock.
In addition to preventing the firm's employees from limiting their losses, the lawsuit claims that Enron's executives profited from insider trading at their expense. The suit alleges that Enron’s executives knew about the company's precarious financial position and that prior to October 16 they engaged in extensive insider trading.
Filed by Steve Berman, managing partner at Hagens Berman, the suit claims Enron retirement plan managers withheld crucial information on the risks of investing in Enron stock. Instead of being warned of the risks, employees were encouraged to invest heavily in Enron stock, according to the suit.
Named plaintiff Roy Rinard, a long-time Enron employee, had more than $470,000 of his retirement savings invested in Enron stock on the advice of Enron plan administrators, Hagens Berman claim. Rinard's retirement fund is worth just $70,000 now, a loss of $400,000 in a little more than a month.
The class-action suit seeks to represent as many as 21,000 employees who invested in the Enron Stock Plan between January 20, 1998 and November 20, 2001.
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