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DOL Goes After Hewitt Over Enron Disbursements

The agency has asked a federal court hold the HR firm in civil contempt for failing to comply with a court-approved allocation formula in distributing settlement funds to Enron employees. Hewitt says the settlement fund will be $9 million short.

February 8, 2008
Related Topics: Miscellaneous Legal Issues, Finance/Taxes, Ethics, Latest News
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The Labor Department wants Hewitt Associates held in contempt of court for not complying with an approved allocation formula in distributing settlement funds to Enron Corp. employees.

Hewitt said the settlement fund will be $9.15 million short of being able to pay Enron workers, retirees and beneficiaries the total amount due them, the Labor Department said Thursday, February 7.

Hewitt was administrator for the settlement fund.

The agency asked the U.S. District Court for the Southern District of Texas in Houston to hold the Lincolnshire, Illinois, human resources firm in civil contempt for failing to comply with an allocation formula approved by the court when it disbursed the settlement funds at the end of 2006.

The settlement fund includes money recovered by the agency and class-action plaintiffs in lawsuits regarding bankrupt Enron’s pension plans.

Some participants were overpaid by a total of $22 million, leaving too little in the fund for remaining participants, DOL said.

“This department has been relentless in seeking to protect the retirement security of America’s workers and their families,” Labor Secretary Elaine Chao said in a release.

“With this legal action we are seeking to ensure that the pension plan participants receive all the funds they are entitled to.”

The DOL is asking the court to require Hewitt to provide funds to cover the allocation formula approved by the court. The agency also is asking the court to prevent Hewitt from collecting overpayments without the court’s permission.

Enron, the Houston energy company that went into bankruptcy in 2001 and started a cascade of business accounting scandals, also took a separate action against Hewitt asking that Hewitt be required to make the company an interest-free loan for Enron’s pension plan to cover the full amount needed to pay underpaid participants. 

Filed by Sarah Hansard of Investment News, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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