State okays lawsuit over losses

Florida will sue Alliance Capital Management Corp. for losing $300-million in pension funds in the Enron collapse.

By JULIE HAUSERMAN, Times Staff Writer
© St. Petersburg Times
published May 8, 2002

TALLAHASSEE -- Florida is going ahead with a lawsuit against the money management firm that lost more than $300-million worth of Florida pension funds in the Enron collapse.

Florida is suing Alliance Capital Management Corp., which directed state investments to Enron stock even after the energy giant began to collapse.

"We've been very patient. We've given Alliance the chance to settle. Now it's time to sue," Gov. Jeb Bush said Tuesday.

Bush and the other members of the State Board of Administration -- Treasurer Tom Gallagher and Comptroller Bob Milligan -- have talked for weeks about filing suit. Wednesday, they officially voted to do it. The state already has joined a federal class-action suit in Texas against Enron and the Arthur Anderson accounting firm.

Even if the state is successful in the federal class-action case against Enron, it likely would recover just 30 cents to 50 cents for every dollar lost.

Florida hired a legal team that includes lawyers Guy Burns of Tampa and Tom Grady of Naples.

The state accuses Alliance of negligence for buying Enron stock even though the company was unstable. Alliance waited until right before Enron declared bankruptcy to sell the stock because it hoped an announced merger would help the stock to recover. The merger never materialized.

Tuesday, Alliance spokesman John Meyers said the company is extremely disappointed that Florida decided to sue.

"Any suit of this kind would have to ignore the fact that Alliance Capital, like thousands of other investors, was misled by what appears to have been a massive fraud perpetrated by Enron. The action would also be unfortunate given the track record we've compiled for the state. We managed money for Florida for 17 years. During those 17 years, we generated more than a billion dollars of wealth over and above what the stock market earned, and that includes the Enron losses."

Bush and other state officials said Tuesday that Alliance hasn't been forthcoming with information, and hasn't been willing to settle. Last month, the board told the lawyers to try one more time to reach a settlement.

Also Tuesday, board postponed indefinitely a vote replacing retiring SBA director Tom Herndon with his deputy, Coleman Stipanovich. The delay gives state investigators time to look into a sexual harassment complaint by Debby Jane Minot, the SBA's human resources director.

Herndon said Minot has sought protection under the state's Whistle Blower's Act.

Herndon said the state should not move forward "until the slate is clear and clean."

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