Investors should learn to protect themselves

The Leckey File

Your Money

July 24, 2005|By Andrew Leckey

CHUMP CHANGE. That's what those damaged financially by Enron Corp. will receive.

The state of California and former Enron employees reached separate settlements of $1.5 billion and $356 million, respectively, with the energy company, which filed for Chapter 11 bankruptcy protection in December 2001. They'll be lucky to get 15 cents on the dollar.

Bondholders, lenders and other shareholders also are waiting in line to see what a bankruptcy judge decides. Estimates on what shareholders alone lost when the firm collapsed run as high as $60 billion.

Those of us covering business have seen this happen over and over. Cocky companies make a big splash, then a big mess - and honest folks who acted on good faith are shortchanged. The aftermath is painful.

Employees should follow their own company as carefully as they would an investment in a faraway firm. You are the first line of defense for your job and your stockholdings in your company (and don't go overboard on company stock ).

You know the questions to ask. You suspect what may be wasteful, wrongheaded or fishy. The annual report, the Securities and Exchange Commission filings or the financial press can't deliver all the answers. Even a thoroughly honest company's practices and strategies should be monitored.

This is not being disloyal. It is being prudent.

Be a squeaky wheel, raising questions on the job, at staff meetings or at annual meetings because your family's future depends on it.

Dinner conversation must have been somber for the families of Enron's Ken Lay, Jeff Skilling and Richard Causey after former WorldCom Chief Executive Officer Bernard L. Ebbers received a 25-year prison term. The three former Enron leaders face their trials on fraud and criminal conspiracy charges in January, all having pleaded not guilty.

Sixteen Enron executives have entered guilty pleas, and prosecutors contend that more than 100 co-conspirators acted with Lay, Skilling and Causey. You mean nobody else at the company had a whiff that something strange was going on? One financial fact is certain: Enron's new directors are being paid in full.

Because handling Enron affairs "exceeded the levels anticipated," directors running its restructuring recently gave themselves significant raises. Chairman John Ray III now earns $1.2 million on an annual basis as sole full-time director. The vice chairman is receiving $420,000 and three other directors $300,000 apiece.

The modest amount of money Enron left behind keeps shrinking. As is always the case in corporate bankruptcies triggered by greed, those who need the money the most will receive the least.

Andrew Leckey is a Tribune Media Services columnist.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.