Citing the demands of overseeing Enron Corp.'s complex bankruptcy, the directors who now run the defunct company voted pay increases for themselves that have at least doubled their compensation, and in one case, increased the pay sixfold.
Under Enron's bankruptcy reorganization plan, the directors were paid $150,000 a year, except for Interim CEO Stephen Cooper, who received $200,000.
However, in a filing last Wednesday with the U.S. Bankruptcy Court for the Southern District of New York, which oversees the case, the board said it had voted to increase its compensation, effective June 1, 2005 on a "temporary" basis, which would be reviewed within six months.
Enron Chairman John J. Ray III, a bankruptcy specialist, now earns $1.2 million on an annualized basis, and Vice Chairman Robert M. Deutschman, an investment banker, now receives annualized pay of $420,000 a year. The other three directors -- Stephen D. Bennett, Rick A. Harrington and Jim R. Latimer of Dallas -- have doubled their salaries to $300,000 each on an annualized basis.
According to the filing, "the involvement of the directors has exceeded the levels anticipated" since Enron emerged from bankruptcy. "Directors have held dozens of in-person or telephonic meetings and, in particular, have become more heavily involved in many aspects" of Enron's remaining business, which includes outstanding litigation.
Also last week, Enron agreed to a $356.25 million payment to settle litigation against the company regarding its bankrupt retirement plans that were brought by the Department of Labor (DOL) and former and current employees.
However, the DOL said in a statement that because the pending bankruptcy court claims against Enron exceed its assets, payouts to pension plan participants will be in the "tens of millions of dollars," rather than the full value of the $356.25 million settlement. Still, DOL Secretary Elaine Chao said the agreement "makes possible a significant recovery for Enron retirees and their families."
The lawsuits were consolidated in the U.S. District Court for the Southern District of Texas, and the settlements apply to Pamela A. Tittle, et al. v. Enron Corp., et al., the class action lawsuit, and Elaine L. Chao v. Enron Corp., et al., the DOL lawsuit. The cases were brought on behalf of DOL and former and current Enron employees who alleged certain breaches of fiduciary duty by the company and related parties with respect to the management of Enron's retirement plans.
"We are extremely pleased to have resolved another issue in the bankruptcy proceedings and removed a significant hurdle in the termination of Enron's pension plans," said interim CEO Cooper. "These settlements remove more than $7 billion of claims against the Enron estate and will accelerate distributions to all other creditors."
Enron also reached an agreement with the DOL that required the appointment of an administrative committee to oversee the retirement plans. The committee is required to retain independent fiduciaries that will select an annuity provider for the plans and oversee the enforcement of the class action settlement agreement. The committee and its independent fiduciaries will replace State Street Bank & Trust Co.
The proposed settlement remains subject to court approval.
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