The next stop for some top Enron Corp. executives and the company’s auditor, Arthur Andersen LLP, should be jail, said Sen. Barbara Boxer (D-CA), after listening Tuesday to Enron employees, retirees and individual investors tell horror stories of fortunes lost.

“I hope some of these people wind up in jail…And I mean that extends to [the] people who audited the books,” she said on Capitol Hill Tuesday. “The Justice Department should go after these people, and they should be penalized” to the fullest extent of the law.

“We’re going to see if Enron broke the law. I personally think they broke many laws,” said Boxer, who was a broker in the 1960s. The senator was pumped up hearing how Enron workers, retirees and individual investors lost millions because they reportedly were barred from selling their Enron stock last fall when the stock began its free-fall to below the $1 mark.

“…[Y]ou look upon the faces of these people, hardworking, loyal company employees, who have nothing. They are physically sick over this.”

Boxer and Sen. John Corzine (D-NJ) are planning to introduce legislation to “try and fix the system so that we do not have anymore Enrons,” she said.

The bill would limit to 20% the amount that employees can invest in a single stock in their individual pension plans, limit to 90 days the period that employers can bar employees from selling an employer’s matching stock contribution in an individual plan, limit to 50% the tax deduction that employers can take on matching contributions if the contributions are made in stock, and lastly would include a provision that would allow employees to diversify their pension plans at a much earlier age.

The meltdown of Enron appears to have been caused by a “combination of incompetence, greed, rampant speculation with investors’ money, and perhaps some criminal behavior,” said Sen. Byron L. Dorgan (D-ND), who chaired a Senate hearing Tuesday that primarily focused on lost pensions.

“Investigations will sort [this] all out. But in the end, tens of thousands of employees and investors will have lost tens of billions of dollars” while “some at the top of the pyramid got rich,” he said in his opening statement to the hearing.

Enron called its decision to “lock down” trading in employee 401(k) shares while the company stock prices began their steep free-fall a “coincidence,” but whatever it was, “all we could [do was] just sit there and watch it melt down,” a retired Enron worker told senators.

“I still have all my stock, but the most important thing about that stock is the ink on it. That’s about what it’s worth,” testified Charles Prestwood, who worked 33 years in the natural gas business, mostly with Enron. He estimated he lost about $1.3 million when Enron stock hit the skids.

To those who ask him why he didn’t sell his Enron stock earlier, Prestwood said, “I go back to that one simple word of ‘loyalty.” Loyalty to a corporation, loyalty to something that I helped build.” Moreover, he noted the company estimated last January that the value of its stock would be between $122-$126 at the close of 2001, and $145 at the end of 2002. “Common sense would tell you, you don’t get rid of stock like this.”

Employees and other Enron investors believed these figures, Prestwood said. “The bookkeeping and the accounting…was way over our heads. We didn’t know anything about that,” he told the Senate panel.

Now, “I hope and pray that there’s something that can be done about it, and I hope and pray that there’s some laws that could be set up to where every corporation in the United States will be on the same page [when it comes to] keeping books,” he said. “I can tell you that without pulling punches that something stinks here.”

Appearing on behalf of all Portland General Electric (PGE) employees, electrician Robert Vigil estimated he lost most of the $163,000 that he had in Enron stock, and reported that eight other PGE workers alone lost a total of more than $2.88 million.

Even if the lockdown on 401(k) stock trading hadn’t occurred, Vigil said Enron employees still would have lost most of the value of their stock due to certain restrictions in the plan. For example, he noted it prohibits employees under the age of 50 from trading the company’s stock contributions, and until very recently employees above the age of 50 were limited to trading only 25% of the company’s stock contribution per year.

“It seems strange to me that as soon as the really bad news came out from Enron we found ourselves unable to move out of the [stock],” he remarked. Enron says employees were locked out of their 401(k) accounts for 10 days of trading — late October to mid-November. But Vigil claims that “as early as Sept. 26” his co-workers found they couldn’t conduct transactions in their accounts.

Enron employees “had no choice but to ride the stock into the ground,” he noted, urging the Senate committee to fully investigate once-powerful Enron. “We’re not looking for a handout. We’re looking for solid, truthful answers as to what happened here so that we may possibly recoup some of this money…and prevent further theft from occurring” at other corporations.

“When I saw the stock drop, I called to sell and was told that I was locked out. So I had to stand by and watch my savings disappear,” recounted Janice Farmer, who retired from Florida Gas Transmission, an Enron partnership, last year. She noted her Enron stock fell from nearly $700,000 to $20,418.

Don Eri, a retired PGE employee in Gresham, OR, was one of the lucky ones. He was able to trade most of his Enron stock before the company collapsed. “My exposure was only 600 shares, but Enron’s smoke and mirrors still cost me over $40,000.”

Several of those who testified said they were aware that top Enron executives had been selling large blocks of their company stock, but they said they were barred from taking similar action because of the restrictions in the 401(k) plan or because they continued to trust the company.

“I saw it [executive stock sales] on the computer…I never thought anything about it because I had great trust in our executives,” said Prestwood, who then conceded that should have been the “first red flag” for him to begin selling his own stock.

Committee member Sen. Ron Wyden, D-OR, said he had evidence that employees were locked out of selling their stock for nearly 30 days, from Oct. 17 to Nov. 14, while the company crumbled, not the 10 days that Enron claimed was required to change over administrators of the 401(k) plan. Wyden agreed with employees of PGE that there was no reason for restrictions on workers that prevented them from selling Enron stock from their retirement plans before they were 50 years old. Wyden questioned why executives of the company were not bound by the same rules.

Enron management told employees that investing in company stock would block attempts at a hostile takeover, Farmer said. “I trusted the management of Enron with my life savings…They betrayed that trust. My life savings are gone.”

Now, “I leave it to you and the courts” to decide if this was a “breach of trust” by the company and Enron’s pension plan administrator. “I cannot help but feel that I and thousands of employees like me have been lied to and we have been cheated…It may be too late for you to help me,” Farmer said, but Congress can and should take steps to prevent a repeat in the future.

“I’m just a pebble in the stream, a little bitty shareholder. I didn’t lose millions. I didn’t even lose a billion, but what I did lose seems like a billion to me,” noted Mary Pearson of Houston, a retired teacher/tutor and Enron shareholder. “I’ve always tried to handle my business in a logical manner, like you conjugate a verb…I don’t know what I’m going to do now. I’m going to go home and re-evaluate my life.”

As Enron stock “plunged like the Titanic…senior executives were on the deck, while the workers were locked in the boiler room, prevented from selling off 401(k) shares while they dumped their own,” Wyden said during the hearing.

He noted that he authored an existing law, the Financial Fraud Protection and Disclosure Act, that was designed to prevent the “carnage” that took place at Enron. It calls for “significantly stiffer” requirements on accountants to search for fraud and disclose it.

Although he is withholding final judgment on Enron, Wyden said “Given what is already on the record, it sure doesn’t look like much was done to detect and disclose the very conduct” that his act was meant to root out. “Here there were clearly related-party transactions that had financial hide and seek written all over them. Yet the auditors failed to have procedures in place to identify them.”

He called for the Senate to “pay particular attention to how it was that Enron transactions big enough to bring down this financial house of cards were not big enough to clearly and visibly be reported by the auditors.”

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