ENRON Software Glitch Results In Overpayment In Settlement

HOUSTON (AP) – Enron Corp. told a federal judge Friday it continues to be stonewalled in its attempts to fix a computer error that resulted in more than 20,000 former workers being overpaid or underpaid during the initial payment of a lawsuit settlement over retirement funds lost during the company’s collapse.

Last year, former Enron workers received about $89 million, the first payment that is part of a lawsuit settlement over money they lost through Enron’s employee stock ownership and 401(k) plans.

But nearly $22 million of the initial payment was miscalculated because of a software glitch that was the fault of Hewitt Associates, a company Enron hired to be the fund administrator and allocate the settlement proceeds, said John Strasburger, an attorney for Enron, now known as Enron Creditors Recovery Corp. Strasburger asked U.S. District Judge Melinda Harmon to approve a motion by Enron asking that Hewitt redo its calculations and certify them within 30 days.

Enron is also asking that former workers be given a way to protest if they disagree with the new numbers. Enron has been waiting for months to get the corrected figures but Hewitt has been uncooperative, Strasburger said. “Here we are six years after the fall of Enron and Hewitt has added insult to injury by botching the allocation,” Strasburger said.

About 7,700 ex-workers were overpaid, and about 12,800 were underpaid. Lynn Sarko, an attorney representing the ex-Enron workers, said until Hewitt turns over its redone calculations, it’s unclear if any former workers will have to pay back money if they got too much. If that happens, either Enron or Hewitt and not the workers or the fund itself should have to pay back that money, he said.

Enron attorneys also asked Harmon to certify Hewitt as the fund administrator and be under the court’s jurisdiction so it can be held accountable for any mistakes it makes. “I expect future problems,” said Peter Rush, another Enron attorney. “My fear is we won’t be able to get them to follow through.” Bill Boies, an attorney for Illinois-based Hewitt, told Harmon the miscalculation was the result of a mistake by his client.

A software program that Hewitt used to calculate payments used the wrong stock price. “Hewitt is prepared to do the work to correct the mistake,” Boies said, adding that Hewitt would agree to all the stipulations in Enron’s proposed court order, except for one. Hewitt never agreed to be the fund administrator, he said. Hewitt was only acting as a service provider for Enron, which was ultimately responsible for how the settlement funds were managed, Boies said. “They made the big decisions,” he said. “We acted as their arms and legs.”

Attorneys for the U.S. Department of Labor and Consulting Fiduciaries Inc., the independent fiduciary to the lawsuit settlement plans, joined Enron in court Friday in asking Harmon to approve the former energy giant’s motion. Harmon said she would make a ruling in the case by Monday.

The problems with the first settlement distribution could delay the next one, about $85 million. Rush said Hewitt will finish its work with the first settlement distribution but that Enron will look to hire another company for the second one. Also Friday, the lead plaintiff in a separate lawsuit that was brought by Enron shareholders and investors announced it is seeking public input on a proposed plan to allocate more than $7.3 billion that has been recouped in the litigation.

The regents of the University of California said a copy of their plan is available online at www.enronfraud.com/allocationplan.html. Public comments about the plan may be submitted no later than Aug. 20, by mail or online at www.enronfraud.com/allocationplan.html. The regents said the earliest that money would be distributed would be late 2008.

Their $40 billion suit, which alleges that various financial institutions played roles in the accounting fraud that led to Enron’s collapse, was put on hold earlier this year by a federal appeals court ruling. Enron, once the nation’s seventh-largest company, entered bankruptcy proceedings in December 2001 after years of accounting tricks could no longer hide billions in debt or make failing ventures appear profitable.

The collapse wiped out thousands of jobs, more than $60 billion in market value and more than $2 billion in pension plans. Enron founder Kenneth Lay and former chief executive Jeffrey Skilling were convicted last year for their roles in the company’s collapse.

Skilling is serving a sentence of more than 24 years. Lay’s convictions for conspiracy, fraud and other charges were wiped out after he died of heart disease last year.

(Copyright 2007 by The Associated Press. All Rights Reserved.)