ERISA, Pension Funds & 401(k) s – Eight Years After Enron

Millions of Americans lost money in the stock market in 2008 – and what happens in 2009 is still anyone’s guess. In today’s volatile market, the last thing people need to worry about is a company mismanaging their pensions and 401(k) plans. However, even though it’s been eight years since the Enron debacle, companies still mismanage retirement funds.

Was Enron a “typical” case of mismanagement?

We asked Ron Dean, a California attorney who has been practicing ERISA (Employee Retirement Income Security Act) law for over 35 years, whether Enron a “typical” case of a company mismanaging funds. Here’s what he told us in a recent interview:

We have to remember that a fiduciary is not always the “company.” In the Enron case, the company was engaged in financial shenanigans to boost its stock price to artificially high levels. The fiduciaries of the pension plan, who were also corporate officers, knew about the shenanigans and yet they continued to hold, and even buy more, Enron stock in order to help keep the price up. When the house of cards crashed, so did the pension plans.

We see a lot of these “employer stock” cases, big and small, where the employer’s stock is not a good investment for a pension plan (usually because it’s too risky or doesn’t produce a properly diversified portfolio), yet the employer, acting as a fiduciary, mismanages the fund by putting the interests of the company ahead of the interests of the plan participants.

Post Enron protections; Did they really help?

While many people think that a great deal has been done to protect employees in the post Enron environment, the truth is that those protections only go so far. Dean explained, “Well, there were a whole slew of new laws, including the Sarbanes-Oxley law, to try to regulate these kinds of things. [Passed in 2002, Sarbanes-Oxley established new or enhanced standards for all U.S. public company boards, management, and public accounting firms so that situations like Enron wouldn’t be repeated.] They helped some, but didn’t get to the core problem. If someone with financial problems (or excess greed) has access to someone else’s money (such as pension plans), it’s only a question of time…”

Scandals not just limited to big business

Dean says that small businesses are greater sources of abuse because there are more of them, corporate owners are more likely to think of the pension money as their own and there are fewer checks and balances with a small employer.

If you’ve been denied valid benefits under ERISA, consult with an experienced ERISA attorney to discuss your situation and evaluate your options. Consultations are free, without obligation and strictly confidential.

Case Studies: ERISA, Pension Funds & 401(k)s in the Aftermath of Enron

Case Study 1: Employer Stock Mismanagement

In the aftermath of the Enron scandal, the mismanagement of retirement funds remains a concern. One case involves a company where the employer’s stock is an unsuitable investment for the pension plan, either due to its high risk or lack of diversification. However, the employer, acting as a fiduciary, prioritizes the company’s interests over those of the plan participants.

When the stock value plummets, the pension plans suffer significant losses. In this case, the affected employees and plan participants seek legal recourse and file claims under ERISA to hold the employer accountable for mismanaging the funds. They work with ERISA attorneys to navigate the complexities of the law and protect their retirement savings.

Case Study 2: Post-Enron Protections

While regulatory measures like the Sarbanes-Oxley Act have been implemented to enhance accountability and prevent similar scandals, the protections they provide have limitations. The core problem of individuals with financial troubles or excessive greed having access to pension funds persists. This issue is particularly prevalent in small businesses, where corporate owners may view pension funds as their own and have fewer checks and balances in place.

In one such case, employees of a small business discover that their pension funds have been mismanaged, possibly due to the owner’s financial difficulties or improper handling. They consult with ERISA attorneys to evaluate their rights, explore potential legal action, and seek fair compensation for their losses.

Case Study 3: Seeking Valid Benefits Under ERISA

Employees who have been denied valid benefits under ERISA have the right to challenge such denials and fight for their rightful retirement benefits. In a case where a company wrongfully denies benefits to an employee, the affected individual engages an ERISA attorney to discuss the situation and explore legal options.

The attorney helps the employee understand their rights, evaluates the strength of their case, and guides them through the process of filing a claim and pursuing a resolution. By leveraging the protections provided by ERISA, individuals can hold employers accountable and seek the benefits they deserve.