Benefits July 23, 2003

Enron Employee Group Demands Bonus Returns

July 23, 2003 (PLANSPONSOR.com) - In the final hours before Enron Corp. filed for bankruptcy protection, the company awarded executives and others in the company $72 million in bonuses.
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Now a group representing former Enron employees has gone to federal court to get the money back from the 292 people to whom it was awarded, according to an Associated Press news report.

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Richard Rathvon, co-chair of the employees’ committee, accused the people who got the payouts of “self-dealing.” “Even as thousands of regular Enron employees and retirees were facing the loss of life savings, health benefits, their jobs or pensions , these favored few were scheming to get millions more for themselves,” Rathvon said, according to the AP.

The last-minute bonuses ranged from $200,000 to $5 million, according to four lawsuits filed by the group earlier this year in federal bankruptcy court in Houston and recently consolidated (see Enron Employees Form Coalition, Wage New Suit ). The four lawsuits were filed in March, April and May. The employees’ committee says the bonus checks should be returned because they didn’t clear Enron’s account until after the bankruptcy was filed and therefore should have been authorized by the New York bankruptcy court handling Enron’s case.

Unlike a federal class-action suit against dozens of Enron executives over retirement accounts packed with now-worthless Enron stock, the retention-bonus lawsuits seek funds handed out as Enron was failing – and they go farther down the food chain. Enron officials said they had to pay the money to keep needed employees as the company collapsed in December 2001 (see Enron Execs Pursue Deferred Comp Claims ).

One suit names Jeffrey McMahon, who became chief financial officer after Andrew Fastow stepped down in October 2001. According to the employee committee and papers filed in the lawsuit, McMahon amended his employment agreement November 29, the last day of business before the bankruptcy filing, and the following day received $1.5 million to remain with Enron through February.

Another lawsuit names James Fallon, former president and chief executive of Enron Broadband Services, who also received a $1.5-million payment November 30. Enron’s broadband unit was never profitable, and Enron laid off broadband employees when downsizing the unit months before the bankruptcy. The other two lawsuits name commodity traders and other employees, according to the AP story.

Compliance July 22, 2003

Court Finds No Standing In Unpaid Medical Bill Suit

July 22, 2003 (PLANSPONSOR.com) - Never being billed, combined with no indication that a participant would ever be billed, leads to a participant's lawsuit for unpaid medical bills having no standing.
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>US District Judge Barbara Crabb of the US District Court for the Western District of Wisconsin determined the participant’s lawsuit had no standing under Article III of the US Constitution and thus granted summary judgment for the defendant in Bollig v. Christian Community Homes and Services Inc.   Crabb said to have standing, a plaintiff must have suffered a concrete injury or be on the verge of suffering one, according to Washington-based legal publisher BNA.

>However, the court denied the employer’s request for attorneys’ fees, saying the lawsuit was not brought in bad faith. The participant’s suit “appears to have been prompted by a genuine concern that they might some day be held liable for unpaid medical bills. On the record in this case, I have found that [Bollig’s] concerns are too speculative to support standing, but I cannot conclude that their suit was intended to harass or vex [the employer],” the court said.

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Unpaid, Unbilled

>Dolly Bollig was covered under the ERISA-governed Christian Community Homes and Services’ health insurance plan when her son received medical services related to a liver transplant at Fairview University Medical Center costing over $100,000.   Following the procedure, the health plan refused to pay for the medical services.

>Bollig then informed her son’s medical provider she was eligible for Wisconsin Medicaid.   However, when the provider submitted the claim to Medicaid, the claim was denied because it was submitted more than a year after the provider was first notified the son was eligible for Medicaid. The provider never billed Bollig for her son’s medical services, and said it would never bill her.

>Regardless, Bollig brought a lawsuit under ERISA for monetary relief against her employer for the unpaid medical expenses.

The case is Bollig v. Christian Community Homes and Services Inc., W.D. Wis., No. 02-C-532-C, 7/10/03.

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