A federal judge in Houston has ruled that former Enron Corp. Chairman Kenneth Lay and the trustee of Enron’s 401(k) retirement plan, Northern Trust Corp., may be sued under federal pension law for allegedly failing to protect the bankrupt company’s employees.

The 329-page ruling by U.S. District Judge Melinda Harmon was in response to motions brought under lawsuits by former Enron employees. Harmon wrote that Lay, Northern Trust and others who oversaw the company’s retirement plans, had a responsibility to ensure that the 401(k) plans investments were prudent. Harmon ruled that the responsibility extended to decisions about how much Enron stock individual employees held in their accounts.

Harmon dismissed racketeering charges related to the retirement accounts against Enron, company executives, Enron’s outside law firm and various Enron investment institutions. The judge let stand complaints of alleged breach of fiduciary duty, however, the ruling does not establish wrongdoing on the part of any individual or company.

The consolidated lawsuits accuse Enron, Lay, Northern Trust and various Enron executives and retirement plan administrators of misleading employees by encouraging them — and in some cases requiring them — to hold Enron shares in their retirement accounts during the time when the stock price was falling from an artificially inflated level. Similar to other corporations, Enron contributed shares to the employees’ retirement accounts and then placed restrictions on when the assets could be moved to other investments.

Enron had no comment on the ruling. In a statement, Northern Trust said it had “fulfilled all of our obligations to the participants in the Enron benefit plan and have acted in accordance with all applicable laws.”

In other news, Lea Fastow, wife of ex-Enron CFO Andrew Fastow, requested Wednesday that her criminal trial be moved from Houston. Her lawyer claimed that the jury pool may be tainted by the saturation of Enron publicity as well as the presence of Enron victims.

The former Enron assistant treasurer, who worked for the company from 1990-1997, has pleaded not guilty to six counts charging her with conspiracy to commit wire fraud, money laundering and making false tax returns (see Daily GPI, May 2).

Lea Fastow’s trial is scheduled to begin next year with jury selection set to begin Feb. 10, 2004. Her husband, former CFO Andrew Fastow, has pleaded innocent to 109 criminal charges and is scheduled to stand trial in April 2004 also in Houston.

“Mrs. Fastow is the first individual scheduled to have an Enron trial in this community,” said her lawyers, Mike DeGeurin and Nanci Clarence. “She may well bear the initial brunt of local incense over the company’s collapse.”

The motion to U.S. District Judge David Hittner requested that whether the judge moves the trial or not, Lea Fastow’s lawyers want an opportunity to individually question potential jurors about their knowledge and opinions about Enron. The impact in Houston is unique, the motion states, but Enron also has entered the national vocabulary as well, with prejudicial publicity nationwide.

The lawyers compared Houston to Oklahoma City following the bombing of the federal building because of the unique local publicity, notoriety and impact. The motion also claimed local media saturation, prejudicial coverage and community bias because of Houston’s victims and government-generated prejudicial publicity.

Among other things, the motion stated, “The local interest with the Fastows has grown obsessive: their vacation plans; his high school habits; her extended family; and arson at their former house — even the procedural motions in their cases — all are considered `newsworthy’ in Houston if nowhere else.”

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