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.

Ron Dean
Contributing Author: Attorney Ron Dean Erisa Law Attorney

Ronald Dean has been engaged in employee benefits litigation primarily on behalf of participants for over 37 years. He is currently a member of the Board of Senior Editors of the ABA/BNA text, Employee Benefits Law, on the Advisory Board of BNA Pension and Benefits Reporter, and on the Advisory Board for ALI-ABA’s Employee Benefits Programs. He is a Fellow of the College of Labor and Employment Lawyers, a Charter Fellow of the American College of Employee Benefits Counsel, and a member of its Board of Directors from 2001 to 2007. He was named by the National Law Journal as one of the top forty benefits lawyers in the country, and by Southern California Super Lawyers as one of 12 Employee Benefits “Super” lawyers in Southern California. Mr. Dean was trial and appellate counsel in 15 published Ninth Circuit Court of Appeals opinions involving ERISA issues. He is a frequent lecturer for the American Bar Association's CLE programs as well as those of ALI-ABA, Glasser LegalWorks, the Law Education Institute and the Western Pension & Benefits Conference.

Article last updated or revieewed on August 5, 2019

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