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Lawyers confident taking on Alliance

Lawyers contend Florida's contract puts the state in the driver's seat should it sue over Enron.

By HELEN HUNTLEY, Times Staff Writer

© St. Petersburg Times
published March 8, 2002


Florida has a strong case against the money managers whose Enron investments cost the public pension fund millions of dollars, according to two lawyers who are leading candidates to manage a lawsuit on the state's behalf.

Florida officials are still mulling whether to bring a lawsuit against Alliance Capital Management, which bought 7.6-million shares of Enron Corp. for the pension fund portfolio, then sold it at a $283-million loss. Most of the purchases were made in a buying spree last summer and fall even as Enron spiraled toward bankruptcy. Other money managers' Enron stock investments cost the state fund an additional $42-million.

Claims of negligence, breach of contract and breach of fiduciary duty form the basis for a potential lawsuit against Alliance, said Guy Burns, senior partner in the Tampa office of Johnson, Blakely, Pope, Bokor, Ruppel & Burns.

Burns said Florida's case is bolstered by its contract with Alliance, which holds the company to higher standards than those found in typical contracts between money managers and their clients.

By contract and by law, the full responsibility for managing the portfolio belonged to Alliance, added Naples lawyer Thomas Grady of Grady & Associates, who is working with Burns on the Alliance case. He said suggestions that the State Board of Administration, which manages the pension fund, should have been more vigilant in monitoring Alliance are off base.

"There would be no reason whatsoever for the State Board of Administration to micromanage a manager," Grady said.

Burns and Grady said board officials told them their firms would be recommended to represent the state against Alliance if there is a lawsuit. Lawyers from six other law firms also were interviewed, and no recommendation has been made public.

"We have not even discussed it," board spokeswoman Lee Baldwin said. She said no decision would be made until after Florida Attorney General Bob Butterworth completes a separate investigation of Alliance.

Alliance's attorneys have been spending time in Florida stating their case. They are echoing the arguments of Alfred Harrison, the Alliance money manager who handled Florida's account. He has explained the investments by saying he met with Enron managers frequently and thought Enron's announced merger with Dynegy made the stock a good investment. Dynegy called off the merger.

Baldwin described a meeting Thursday morning between representatives of Alliance and the Board of Administration as "cordial."

"The only decision made was to continue the dialogue," she said.

Burns and Grady said a settlement is unlikely because state law would require it to be made public, which means other Alliance clients would know about it. Some of the company's mutual fund shareholders already have filed lawsuits over Enron investments in the Alliance Premier Growth Fund.

"Everything Mr. Harrison managed had this similar fact pattern," Burns said. "A settlement with Florida would send a signal to the rest of the customers."

Burns, 54, and Grady, 43, have extensive experience in securities and financial fraud cases and have worked together in the past.

-- Helen Huntley can be reached at huntley@sptimes.com or (727) 893-8230.

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