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Fallout of Enron's collapse
By ALISA ULFERTS, Times Staff Writer TALLAHASSEE -- Florida's pension fund has fired an investment management company that contributed to the state's $306-million loss on Enron shares by continuing to buy the troubled stock during the company's downward slide. State Board of Administration director Tom Herndon said the state fired Alliance Capital late last week. Alliance continued to invest in Enron for the state because it thought a planned merger would pull the stock price up, Herndon said. "These kinds of bets don't always pay off," Herndon told board members Gov. Jeb Bush, Insurance Commissioner Tom Gallagher and Comptroller Robert Milligan. Houston energy giant Enron Corp., which had been in the forefront of energy development and trading, filed for bankruptcy protection this month in one of the largest corporate bankruptcies ever. Herndon noted that Alliance Capital, which has invested part of the state's $100-billion pension fund for almost 15 years, simply exercised the discretion given it by the state. Although the state had stepped up its monitoring of Alliance in recent months, it never told the company to stop buying Enron, Herndon said. "In retrospect, I wish we had," he added. In a letter to the state, Alliance Capital vice chairman Alfred Harrison said Enron failed to disclose to Alliance "negative information" about the company. Although Harrison didn't note it in his letter, Enron already faces a shareholder lawsuit that accuses 29 Enron officers and directors of engaging in "massive insider trading" and making "false and misleading" statements about the company's financial performance while selling about $1.1-billion of stock during the past three years. Harrison, who could not be reached for comment Tuesday, said in his letter that Enron's proposed merger with Dynegy persuaded Alliance to buy Enron stock, despite its drop. "Dynegy withdrew this (merger) offer, however, when the ratings agencies downgraded Enron debt to junk status," Harrison wrote. "I sold the stock on Friday, November 30th. The company went into Chapter 11 bankruptcy that weekend," he added. State officials have said the state's projected $306-million loss amounts to less than 1 percent of the pension fund's value and that state employees and retirees need not worry. Florida also will join a federal class action suit against Enron on Friday, Herndon said Tuesday. In doing so, it will join a long list of creditors and shareholders, few of which expect to see any real money. "If we could get 50, 40 or 30 cents on the dollar, we'd be happy," Herndon said.
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From the Times Business report Robert Trigaux
From the AP
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