Reuters Business Report
Enron Paid Top Executives $744 Million
By David Brinkerhoff
NEW YORK (Reuters) - Former energy giant Enron Corp. (Other OTC:ENRNQ.PK - News) reported on Monday it paid senior executives more than $744 million in cash and stock in the year up to its bankruptcy filing on Dec. 2, the biggest in U.S. history.
These "insider payments" to 140 top Enron managers in late November, also included 90-day retention bonuses paid to some executives and other employees to keep them from fleeing the failing Houston-based trader as investors lost confidence and its stock plummeted.
While Enron called the bonuses "a staple in bankruptcy planning," some legal experts said these "stay bonuses" were improperly paid ahead of the filing to avoid scrutiny by a bankruptcy judge, who must approve compensation and sales.
"This is not a normal practice," said Lynn LoPucki, law professor at the University of California at Los Angeles. "They evaded the court's control. This is an unusual way to pay and an unusual amount of money."
The list of payments is part of 16,000 pages of financial documents Enron expects to file over the next day or so, giving a snapshot of its condition at the time it filed for bankruptcy in December. Such filings are required by bankruptcy law.
UCLA's LoPucki said the creditors committee, which is trying to recoup billions from Enron's bankrupt estate, would likely add the compensation to its list of things to investigate.
Enron spokesman Mark Palmer said the payments were a way "to make sure that the people critical to retaining value (of the company) continue working."
He said Enron employees who received the bonuses signed a contract requiring them to stay through February. Since then, Enron and its creditors have told those same employees they must stay with the company through August to avoid liability for breach of contract.
Palmer said he was uncertain if any of those affected employees had left the company.
According to financial statements filed in the Bankruptcy Court for the Southern District of New York, payments amounted to $309.9 million in cash and stock options with a potential value of $434.5 million. Total compensation included salary, bonuses, long-term incentives and restricted stock.
The payments included at least $152.6 million in cash and potential stock for former Enron Chairman Kenneth Lay, who quit the company in January, and $34.8 million in cash and potential stock for former chief executive Jeffrey Skilling.
The Wall Street Journal, citing an unnamed source familiar with the documents, reported Monday that Enron paid its top managers $681 million, with Kenneth Lay receiving $67.4 million and Skilling about $40 million in cash and stocks.
Enron said it did not know how the newspaper calculated its figures.