Under the accord, a dozen former Enron directors and a former executive have agreed to turn over $85 million in insurance coverage and pay more than $1.5 million individually in a partial settlement of suits related to fund stock losses in 2001, when Enron filed for bankruptcy protection. The losses came after Enron disclosed that it had hidden billions of dollars in debt in off-the-books partnerships.
“We settled this part of the case to get some money for victims of this massive fraud now rather than forcing them to wait for the outcome of the bankruptcy case,” said Lynn L. Sarko, a Seattle-based lawyer who represents former and current workers of Enron, which is reorganizing under court supervision.
The accord is contingent on the willingness of insurers to pay the $85 million, Mr. Sarko said. The insurers issued policies covering directors’ liability for certain conduct. Not all directors sued are covered by the settlement, Mr. Sarko said. “If they refuse, the deal is off,” he said.
In their lawsuits, Enron employees accused the company’s leaders of encouraging them to buy Enron shares for their 401(k) accounts, while executives sold millions of dollars of company stock. The funds held 25 million Enron shares.
The settlement, which also resolves a suit filed by the Labor Department over the failure of directors to protect employees from pension fund losses, does not resolve claims against Enron, its former chairman, Kenneth L. Lay, or its former chief executive, Jeffrey K. Skilling, Mr. Sarko said.
The agreement also does not settle claims against the Northern Trust Corporation, a trustee for the pension plans, or Arthur Andersen, Enron’s former auditor, he added.