Judge OKs Enron Plan to Retain Senior Workers

The judge in the Enron Corp. bankruptcy case on Tuesday approved a bonus and severance program of up to $140 million that Enron hopes will stem the flood of senior employees who are leaving the crippled energy company at the rate of one every working hour.

After a five-hour hearing in U.S. Bankruptcy Court, Judge Arthur J. Gonzalez endorsed the plan, subject to changes that address the objections of the Securities and Exchange Commission and Enron creditor, employee and shareholder groups.

Under the proposal, about 1,700 employees would share $40 million in retention bonuses, $7 million in severance payments and from $47.4 million to $90 million in incentive bonuses based on the amount of cash raised from asset sales.

Daniel P. Leff, chairman and chief executive of Enron Energy Services Inc., testified that the bonus program is needed to preserve “hundreds of millions, if not billions” of dollars in value that could slip away from Enron if experienced workers aren’t kept in place while the company reorganizes.

As it is, 35 to 40 of “the most talented employees” are walking away from the firm each week, for an annual attrition rate of 87%, Leff said.

Since filing for bankruptcy protection Dec. 2, Enron has lost more than 800 workers, including layoffs and voluntary separations. That is in addition to the 4,500 workers who were fired at the time of the Chapter 11 filing.

The SEC and other objectors had faulted Enron for failing to disclose the names of those who would receive bonuses and the dollar amounts.

Enron management decided against naming names because of “the significant amount of pressure,” including outright harassment, directed at workers who collected $105 million in bonuses in the weeks before the bankruptcy filing, Leff said.

That included a few dozen traders who split $50 million in anticipation of the since-failed merger with Dynegy Inc. plus more than 500 others who shared in $55 million in bonuses handed out Nov. 28. In return for the payments, both sets of workers agreed to remain at Enron through Feb. 28.

Under a controversial provision of the new retention plan, the 228 workers still at Enron who received those earlier bonuses would get legal waivers exempting them from having to give back any of that money in the event lawsuits were filed to recover those funds. Some critics have challenged the pre-bankruptcy bonuses as improper.

Judge Gonzalez ordered Enron to reveal the names of anyone receiving such waivers and the amounts in question.

Enron agreed to include legal language providing that any employee found guilty of wrongdoing would forfeit the waiver.

Alistaire Bambach, SEC assistant regional director for enforcement, said the ruling was fair and satisfied the agency’s concerns.