Weekend - DOL Blotter - Enron Flashback

It was a slow news week at the Department of Labor's EBSA enforcement division - so this time we will take this opportunity to review some Enron-related goings on in February and March 2008 which actually related to Hewitt, the behemoth HR outsourcer. This issue has largely stayed out of the mainstream media news coverage.

On February 7, 2008, the DOL posted a news release on it's website: "U.S. Labor Department seeks contempt order against Hewitt over improper distribution of assets from Enron litigation settlement fund." The news release claimed:

The U.S. Department of Labor today announced that it has asked a federal district court in Houston, Texas, to hold Hewitt Associates LLC in civil contempt for failing to comply with an allocation formula approved by the court when it disbursed court-supervised settlement funds to Enron employees at the end of 2006. The proposed motion for civil contempt must be approved by the U.S. District Court for the Southern District of Texas.

Hewitt caused the settlement fund to have insufficient cash to pay Enron workers, retirees and beneficiaries all amounts due them. The fund holds recoveries obtained by the department and class-action plaintiffs in related lawsuits regarding Enron's pension plans. Even with other corrective action being undertaken by parties to fix the misallocation, there will be a $9.15 million shortfall in the settlement fund as a result of Hewitt's noncompliance with the court-approved allocation formula. Hewitt served as the administrator for the settlement fund.

"This department has been relentless in seeking to protect the retirement security of America's workers and their families," said U.S. Secretary of Labor Elaine L. Chao. "With this legal action we are seeking to ensure that the pension plan participants receive all the funds they are entitled to."

Hewitt did not perform the allocation correctly and some participants received too much in settlement proceeds at the expense of the remaining participants — amounting to $22 million being overpaid. The settlement fund now has insufficient funds to pay the correct amounts to participants who were underpaid.

The Labor Department asks the court to require Hewitt to provide funds sufficient to permit the allocation of settlement funds in accordance with the allocation formula approved by the court. The department also asks the court to prohibit Hewitt from collection, repayment and other actions against participants who received overpayments without the court's permission. The department's motion is in addition to a separate motion filed by Enron to hold Hewitt 100 percent responsible for an interest-free loan to Enron's pension plan for the full amount needed to make whole the underpaid participants.

Then, inside of one month, the DOL posted this news release: "Hewitt and Enron to restore $11.2 million to Enron litigation settlement fund"

Thus bringing an end to the sordid pension drama (just kidding). The news release quoted Secretary Chao stating that this settlement will result in "...all pension plan participants will receive all the funds to which they are entitled."

What was left unaddressed was what about the participants who were overpaid?