Enron Corp. confirmed Thursday that it paid $55 million to about 500 key executives, traders and other employees last week on the eve of filing the biggest bankruptcy petition in U.S. history.
As those 500 were paid on average $110,000 to remain with the company, the 4,000 Houston-area employees who have since lost their jobs each got $4,500 before taxes and have lost almost all their retirement savings because of the plunge in Enron's stock price.
Enron paid the "retention incentives" to employees "from all parts of the organization and at all levels," spokesman Mark Palmer said. About 75% of the bonuses went to workers below the level of vice president, he said.
Such retention bonuses, though not unusual for companies operating under bankruptcy-law protection, frequently generate controversy. PG&E Corp.'s Pacific Gas & Electric utility was criticized for paying more than $50 million in previously scheduled bonuses to 6,000 managers and other employees in April just before it filed for Chapter 11 protection, and then followed with a $17.5-million bonus program for management.
The Enron incentives had been rumored for days on Internet message boards--where investors, employees and former employees have heaped vitriol on the fallen Houston energy trader and its management--before media reports started appearing Thursday.The Securities and Exchange Commission has launched an investigation into Enron's dealings with affiliated partnerships, and the Labor Department is investigating the way Enron handled its employee retirement funds. Several congressional panels are looking into the rapid downward spiral of the Houston energy giant. More than 15 lawsuits have been filed against Enron and its executives.
Enron paid the bonuses "to try to keep critical employees in the seats on the day after the bankruptcy filing," Palmer said. "Without those people, there is a very real possibility you couldn't operate the business, and then 21,000 people would be out of work."
Enron plans to negotiate with its creditor committee, once one is named, to get more severance pay for fired workers and additional retention bonuses for remaining employees, Palmer said.
Terminated employees, dubbed "alumni" on Enron's Web site, must pursue claims individually in U.S. Bankruptcy Court in New York, where the company filed Sunday, for back vacation pay and other wages owed, Enron advised. The next hearing in the bankruptcy case is scheduled for Jan. 7.
Enron fell 35 cents to 66 cents on the New York Stock Exchange.