A new class-action lawsuit filed Tuesday in U.S. District Court claims Enron Corp. recklessly endangered its employees’ retirement funds, causing some of them to lose hundreds of thousands of dollars almost overnight. The suit was filed by Steve Berman of the Seattle-based law firm Hagens Berman on behalf of a proposed class of participants in the Enron Stock Plan.

The suit also claims that after a surprising third quarter loss announcement, Enron illegally locked down employee retirement plans, making it impossible for employees to protect their already damaged retirement funds from a 70% drop in Enron stock price. It also 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 employee, had more than $470,000 of his retirement savings invested in Enron stock on the advice of Enron plan administrators. Now his retirement fund is worth just $70,000 — 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 Jan. 20, 1998 and Nov. 20, 2001.

The action came as the company’s stock dipped again, giving up gains it had made since the announcement last week that Dynegy would buy Enron. The $2.07 drop Tuesday to a close of $6.99 came after the company revealed in a 10-Q filing after the market closed on Monday that it will have to find some collateral to guarantee some of its debts, or it could be forced to pay off a $690 million note by next week. The company has said it is negotiating with the note-holder and expects to make alternative payment arrangements.

Curt Launer, an analyst with Credit Suisse First Boston, said he expected the obligation to be renegotiated, satisfied out of the current cash position of $1.5 billion or collateralized. He said much of what was disclosed in the 10-Q had already been revealed in Enron’s conference call with analysts Nov. 14.

“In assessing a 90% probability that the Dynegy/Enron deal will be completed,” Launer said, “we note that ENE is not a going concern without it, DYN demonstrably benefits by it and Chevron/Texaco supports it.” Noting the upside potential, Launer continues to rate Dynegy a strong buy. “Our current eps estimate for DYN of $2.55 for ’02 moves to $3.25 or higher with a completed deal.

©Copyright 2001 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.