I normally do not rebut every anti-Enron story to come down the pike but this story by Suzane Barlyn at The Street has gone so far across the line that I feel I must speak up.
Suzanne begins her article thus:
As a former Enron shareholder, I’m not expecting a huge windfall from a pending class-action suit against the company.
But I intend to claim every last cent of the paltry sum that may be awaiting me.
Let me be clear: I have no issue with litigant/plaintiffs accepting monies that they might have won in a just lawsuit. However, the Enron lawsuit that I believe Ms. Barlyn is speaking about is the one in which its primary litigant, Bill Larach, is readying himself for prison for securities fraud after a guilty plea. Larach is deserving of a post of his own to detail all the various dirty tricks he’s participated in, but it will have to wait.
What grinds my gears about Ms. Barlyn’s statement is the assumption (which many people share) that she’s due something even after the company collapsed. Investments are called investments and not savings accounts precisely because they could make money or they could fail, and the investor could lose money. Barlyn knows this; I refuse to believe she’s in an imbicile with no investing experience. Yet her comment reflects a strange entitled quality that exists in otherwise smart people when discussing Enron.
More than six years have passed since Enron, the former energy-trading giant, filed for bankruptcy, costing its investors as much as $60 billion in market value. The debacle is a historical milestone for American business that’s now synonymous with corporate corruption and fraud.
Agreed. But any thoughtful examination of the facts shows the Enron was not, in fact, corrupt. Because the corruption opinion was formed and entrenched so quickly, there is a lot of hard work to be done to correct those impressions. But I dislike when journalists take these facts for granted.
My husband, Ben, and I owned just a tiny fraction of the overall pot — 50 shares, once valued at about $3,000 — but we’re filling in every line of a claim form that arrived this month in a continuing class-action suit arising from Enron’s collapse.
Maybe, somewhere at the end of this tunnel, we’ll find a check totaling about $350 — a figure based on the average $6.79 per share distribution that shareholders who owned common stock are likely to receive.
What? With such a minuscule amount of money at stake, why the animus? Why the need for redress?
Last week, the U.S. Supreme Court refused to hear a $30 billion case filed by Enron shareholders against Merrill Lynch, Credit Suisse First Boston, and Barclays Bank, which, they allege, schemed with Enron by entering partnerships and transactions that helped the energy giant show revenues while it was actually incurring debt.
The Supreme Court’s refusal to hear the case means more empty pockets — and fewer deep ones — for shareholders. It’s also motivation to grab whatever we can right now.
Let me just take a wild stab in the dark here and assume that Ms. Barlyn would be full of righteous justification if the SCOTUS refused to hear a review of Roe V. Wade? Or since Ms. Barlyn has such trust in the journalists who assured her that Enron was corrupt, why is it so difficult to put trust in the Supremes who are, supposedly, impassionate moderators of these matters? Believe me, I have my own issues with the Supremes, but I rarely believe that they are attempting to screw any specific group of people with their judgements.
Sure, it would be a lot easier to toss the packet of legal papers in our recycling bin and walk away from the hassle. But that would only lower the percentage of investors who are enforcing their rights under the settlement.
A low percentage of claims, I think, sends a message that righting the wrongs committed by Enron executives, Arthur Andersen (the company’s former auditor), and a slew of financial services firms (including JP Morgan Chase and Citigroup who had a hand in peddling the securities, just doesn’t matter anymore.
Maybe they never happened in the first place. I realize its a difficult position to take, but I think if you review the facts, you begin to see a picture emerging of a company that really was not corrupt. But I’ll put that aside for a moment. What does it matter anymore, Ms. Barlyn? Why do you feel so directly victimized by Enron, Arthur Andersen, and the banks? Particularly since you owned less than one half of one half of one percent of the shares? I’m curious if she’d accept a hypothetical situation in which I’d send her a check for $350 instead of her filing a claim. I am betting no; she would say it’s not the money (obviously); it’s the principle of the thing. She wants to punish the company (which doesn’t exist anymore). She wants to ‘send a message’.
Michael Donnelly, a principal in Donnelly Steen & Co. Wealth Advisors in Marlton, N.J., says several of his clients and friends have also received the lengthy Enron class-action paperwork.
“We all have a responsibility to participate solely based on the message that a united front might indicate to other companies in the future who have a moral and ethical dilemma and hope that they make a wiser decision,” he says.
Right. Okay.
Donnelly and I share the same views about participating in most other class-action suits — they’re typically a waste of time with few meaningful benefits to the so-called “injured class” they purport to protect.
This is, I think, the only thing I’ve agreed with thus far.
[Ms. Barlyn describes class action suits against Toys R Us and Netflix but I didn't see any relevance to the discussion of Enron so cut it.]
But Enron is far different from these types of claims, which are seemingly devised by plaintiffs’ attorneys for their own benefit. The chain of fraud that soaked investors and had a catastrophic impact on thousands of jobs and employee retirement plans permeated the company’s C-level, including the office of Kenneth Lay, Enron’s now deceased former CEO.
That is a drastic statement. I would challenge Ms. Barlyn to tell me what fraud she’s talking about here, because I really don’t think she knows.
As Donnelly, the financial adviser says, “Each and every shareholder must participate, and complete the paperwork in order to try to recapture a small piece of what so-called ‘trusted business executives’ and Wall Street banks bilked them out of.”
He’s right.
Red meat words, but okay.
At worst, my family can fund about one-and-half weeks of groceries with my $350 distribution from the $7.2 billion Enron settlement fund. At best, we can buy groceries and have a small voice in the aftermath of an historical event that continues to transform corporate governance standards in America.
What voice? What are you saying by accepting the $350? I really don’t know.
The average distribution per share of common stock is likely to increase from $6.79, based on the percentage of shareholders that don’t file, according to Patrick Coughlin, the San Diego-based lawyer who represents the Regents of the University of California, lead plaintiff and an institutional investor who claims to have lost $145 million in the Enron disaster.
Lawyers stand to walk away with the most cash in the Enron aftermath — and just about every other class action suit. Coughlin’s firm has requested just less than 10% of the $7.2 billion settlement fund (which has been accruing additional interest for several years). That would be more than $700 million dollars, off the top of the fund, if the court approves.
Our approximate $350 check may pale in comparison.
But it’s still our cash and we want it back.
That’s the issue. It’s not your cash. It was an investment in a company. Did you read the prospectus? Did you read any of the 10ks or 10q forms? If you claim fraud now and believe that the company was bad, bad, bad and will ‘learn something’ if you and your fellow claimants actually take the paltry amounts, then do you likewise believe you can ‘learn something’? Or do you feel that you’re a victimized aggrieved party in need of redress, with no responsibility at all for your own investment choices?
“Investments are called investments and not savings accounts precisely because they could make money or they could fail, and the investor could lose money.”
This is a an ingenius point. And something that I would love to smack most people upside the head with. Brilliant post.