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IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

 

INTRODUCTION

1. Plaintiffs bring this class action under the Employee Retirement Income Security Act ("ERISA") §502(a) (29 U.S.C. § 1132(a)) and §404(a) (29 U.S.C. §1104(a)), on behalf of all current and former Enron Corporation ("Enron" or the "Company") employees and the beneficiaries of the Enron Corporation Savings Plan (the "Plan" or the "401 (k) Plan"), an employee benefit plan established by Enron, and on behalf of the Plan itself. Defendants are the Plan's former Trustee, the Plan's former record-keeper, the administrators and trustees of the Plan, the Company's directors, and the Company's accountant, consultant and other inside and outside professionals (collectively, "Defendants").

JURISDICTION AND VENUE

2. This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1331 and 29 U.S.C.,§1132(e)(1) (ERISA § 502(e)(1)), which grants to United States District Courts jurisdiction over these claims.

3. This Court has personal jurisdiction over Defendants because pursuant to 29 U.S.C. §1132(e)(2) one or more of the Defendants may be found in this District. The Company is headquartered in Texas. Defendants systematically and continuously do business in this state, and the case arises out of Defendants' acts within this state.

4. Venue is proper pursuant to 29 U.S.C. §1132(e)(2), because Defendants administered the Plan in this district, some or all of the actionable conduct for which relief is sought occurred in this district, and one or more of the Defendants may be found in this district.

Complaint, 24 January 2002, page 2.

THE PARTIES

5. Severed Enron Employees Coalition ("SEEC") is an association of former Enron employees. It presently numbers well more than 400 former Enron employees and is growing daily.

6. Plaintiff Larence R. Jordan is a resident of Houston, Texas. Jordan was a participant in Enron's 401 (k) Plan and held Company stock directly or through the Enron Stock Fund in his Plan account. He is Co-Chairperson of SEEC.

7. Plaintiff Deborah S. DeFforge is a resident of Houston, Texas. DeFforge was a participant in Enron's 401 (k) Plan and held Company stock directly or through the Enron Stock Fund in her Plan account. She is Co-Chairperson of SEEC.

8. Plaintiff Diana Peters is a resident of Houston, Texas. Peters was a participant in Enron's 401 (k) Plan and held Company stock directly or through the Enron Stock Fund in her Plan account. She is a member of the Executive Committee of SEEC.

9. Enron Corporation is not named as a defendant in this action as it has filed for protection pursuant to Chapter 11 of the U.S. Bankruptcy Code. Plaintiffs reserve the right to add Enron if the bankruptcy stay is lifted with respect to these claims against Enron.

10. DefendantThe Northern Trust Company ("Northern Trust") is a wholly-owned subsidiary of Northern Trust Corporation, a multi-bank holding company. Northern Trust served as the Plan's Trustee throughout the relevant time period. It was a directed trustee within the meaning of ERISA § 403(a)(1) (29 U.S.C. § 1103(a)(3), insofar as, pursuant to the terms of the Plan, it was subject to such proper directions of Enron's Administrative Committee (and/or other named fiduciaries) that were both made in accordance with the

Complaint, 24 January 2002, page 3.

Plan's terms and not contrary to the provisions of ERISA.

11. Defendant Northern Trust Retirement Consulting, L.L.C. is a wholly-owned subsidiary of Northern Trust Corporation. It served as the Plan's record keeper throughout the relevant time period.

12. Defendant Philip J. Bazelides is listed as Chairman of the Administrative Committee of the Plan in Enron's filings with the Securities and Exchange Commission ("SEC") during the relevant time period.

13. Defendant Robert A. Belfer was, during the relevant time period, a Director of the Company. He served on the Executive and Finance committees of the Board of Directors. He is believed to have received approximately $51 million from the sale of his Enron stock.

14. Defendant Norman P. Blake, Jr. was, during the relevant time period, a Director of the Company. Blake also served on the Finance and Compensation committees of the Board of Directors. He is believed to have received approximately $1.7 million from the sale of his Enron stock.

15. Defendant Ronnie C. Chan was, during the relevant time period, a Director of the Company. He served on the Audit and Finance committees of the Board of Directors. He is believed to have received approximately $337,000 from the sale of his Enron stock.

16. Defendant John H. Duncan was, during the relevant time period, a Director of the Company. He is believed to have served on the Compensation committee of the Board of Directors and to have received approximately $2 million from the sale of his Enron stock.

Complaint, 24 January 2002, page 4.

17. Defendant Lou Pai is a former Chairman of an Enron subsidiary and is believed to have received approximately $353,000 from the sale of his Enron stock.

18. Defendant Ken Rice is a former President and Chief Executive Officer of Enron Broadband Services and is believed to have received approximately $72 million from the sale of his Enron stock.

19. Defendant Mark Frevert is a former Chairman of Enron North America. He is believed to have received approximately $50 million from the sale of his Enron stock.

20. Defendant Joseph Sutton is a former Vice-Chairman of Enron and is believed to have received approximately $40 million from the sale of his Enron stock.

21. Defendant Clifford Baxter is a former vice chairman of the Company and is believed to have received approximately $35.2 million from the sale of his Enron stock.

22. Defendant Joseph M. Hirko is a former Chief Executive of Enron Broadband Services and is believed to have received approximately $35.1 million from the sale of his Enron stock.

23. Defendant Richard A. Causey is a former Chief Accounting Officer of the Company and is believed to have received approximately $13.3 million from the sale of his Enron stock.

24. Defendant James V. Derrick is or was General Counsel of the Company and is believed to have received approximately $12.6 million from the sale of his Enron stock.

25. Defendant Mark E. Koenig is or was a Vice President of the Company and is believed to have received approximately S9.1 million from the sale of his Enron stock.

26. Defendant Cindy K. Olson is or was a Vice President of the Company and is believed to have received approximately $6.5 million from the sale of her Enron stock.

Complaint, 24 January 2002, page 5.

28. Defendant Richard B. Buy is or was Chief Risk Officer of the Company and is believed to have received approximately $4.3 million from the sale of his Enron stock.

29. Defendant Michael S. McConnell is or was President of Enron Global Markets and is believed to have received approximately $2.3 million from the sale of his Enron stock.

31. Defendant J. Mark Metts is or was Vice President and Director of the Company and is believed to have received approximately $1.4 million from the sale of his Enron stock.

32. Defendant Stan Horton is a former Chairman and Chief Executive Officer of Enron Transportation Services. He is believed to have received approximately $45 million from the sale of his Enron stock.

33. Defendant Wendy L. Gramm was, during the relevant time period, a Director of the Company. It has been reported that she worked for institutions that received donations from Enron and its officials, including The Mercatus Center at George Mason University, where she is director of the regulatory studies program. She is a former chairwoman of the Commodities Futures Trading Commission. She is believed to have received approximately $276,000 from the sale of her Enron stock.

Complaint, 24 January 2002, page 6.

of his Enron stock.

35. Defendant Robert K. Jaedicke was, during the relevant time period, a Director of the Company. Mr. Jaedicke also served on the Compensation and Audit committees of the Board of Directors. He is believed to have received approximately $841,000 from the sale of his Enron stock.

36. Defendant Mary K. Joyce has been alleged to have been Plan Administrator in certain of Enron's SEC filings during times relevant to this action.

37. Defendant Kenneth L. Lay was, during the relevant time period, a Director of the Company and Chairman of the Board of Directors. Lay also served as Enron's Chief Executive Officer from 1986 until February 2001. He resigned his position as Chairman on January 23, 2002. He is believed to have received approximately $101 million from the sale of his Enron stock.

38. Defendant Andrew Fastow is former Chief Financial Officer of the Company, and is believed to have received approximately $30.4 million from the sale of his Enron stock.

39. Defendant Jeff McMahon is former Chief Financial Officer of the Company, and is believed to have received approximately $2.7 million from the sale of his Enron stock.

40. Defendant Charles A. LeMaistre was, during the relevant time period, a Director of the Company. Dr. LeMaistre has been alleged to have served as Chairman of the Compensation and Management Development Committee responsible for monitoring the Company's benefit programs. He received approximately $841,000 from the sale of his Enron stock.

Complaint, 24 January 2002, page 7.

41. Defendant Rebecca P. Mark-Jusbasche was, during the relevant time period, a Director of the Company, and is believed to have received approximately 879 million from the sale of her Enron stock.

42. Defendant John Mendelsohn was, during the relevant time period, a Director of the Company. Dr. Mendelsohn was a member of the Board"s Audit and Compliance Committee and the Nominating and Corporate Governance Committee.

44. Defendant Paulo V. Ferraz Pereira was, during the relevant time period, a Director of the Company. He was on the Audit and Compliance Committee.

45. Defendant James S. Prentice has been alleged to be listed as Chairman of the Administrative Committee of the Plan in Enron's filings with the SEC during times relevant to this action.

46. Defendant Frank Savage was, during the relevant time period, a Director of the Company. Savage is alleged to have served on the Compensation and Management Development Committee responsible for monitoring the Company's benefit programs.

47. Defendant Jeffrey K. Skilling was, during the relevant time period, a Director of the Company. Skilling also served as the Company's President and Chief Operating Officer until February 2001, when he became Chief Executive Officer. Skilling resigned as President and Chief Executive Officer in August 2001. He is believed to have received approximately $67 million from the sale of his Enron stock.

Complaint, 24 January 2002, page 8.

49. Defendant John Wakeham was, during the relevant time period. a Director of the Company. He was also paid substantial consulting fees by Enron.

50. Defendant Herbert S. Winokur was, during the relevant time period, a Director of the Company. He is believed to have been affiliated with the privately owned Enron supplier, National Tank, which made $370,294 in sales to Enron in the year 2000.

51. Defendant Arthur Andersen, L.L.P. ("Arthur Andersen") and/or Andersen, L.L.P. is an accounting and consulting firm engaged by Enron for many years to provide "independent" auditing, accounting and management consulting services, tax services, examination and review of filings with the SEC, audits and/or reviews of financial statements which were included in Enron's SEC filings, including audited and unaudited information, and annual reports for qualified employee benefit plans. Arthur Andersen and/or Andersen, L.L.P. was also engaged to perform the internal auditfunction for Enron. As a result of the myriad of services it rendered to Enron, Arthur Andersen and/or Andersen, L.L.P. personnel were present at Enron corporate offices and operations continuously from 1997 through 2001 and had continual access to and knowledge of Enron's private and confidential corporate information and business information. Arthur Andersen and/or Andersen, L.L.P. received many millions of dollars in fees during the relevant period, on information and brief, more than $100 million, including $52 million in 2000 alone.

52. Defendants John Doe Nos. 1 through 10 were individuals who are currently unknown to Plaintiff but can be generally described as members of the Administrative Committee of the Plan during the relevant time period.

Complaint, 24 January 2002, page 9.

53. Defendants Jane Doe Nos. 11-20 were individuals who are currently unknown to Plaintiff but can generally be described as inside and outside professionals, other than Defendants stated in ¶¶ 10, 11, and 51, that provided advice or guidance to Defendants identified in T1[ 12 through 50 during the relevant time.

54. The defendants referenced above in 1[I[ 10-11 may be referred to herein as the "Northern Trust Defendants." The defendants referenced above in ¶¶¶¶ 12-50 may be referred to herein as the "Individual Defendants." The defendants referenced above in ¶ 51 may be referred to herein as the "Andersen Defendants."

55. Because of the Individual Defendants' and the Andersen Defendants' positions with the Company, they had access to adverse undisclosed information about its business, operations, products, financial statements, markets and present and future business prospects via access to internal corporate documents (including the Company's operating plans, budgets and forecasts, and reports of actual operations compared thereto), conversations and connections with other corporate officers and employees, and attendance at meetings of management, board of directors and committees thereof and via reports and other information provided to them.

THE UNNAMED CO-CONSPIRATORS

56. Others currently unknown are believed to have conspired with Defendants in the wrongful conduct alleged in this complaint. The Defendants are liable for the acts of all members of any conspiracy in which Defendants joined.

FACTUAL BACKGROUND

57. During the relevant period, Defendants knew or should have known, but failed to disclose to Enron's current and former employees, that concentrated investments

Complaint, 24 January 2002, page 10.

in Company stock were imprudent. Defendants strongly encouraged Enron employees to invest in Company stock while, at the same time, Defendants put restrictions on their employees' ability to sell Company stock in their 401 (k) plans. Defendants also failed to provide Plan participants with adequate information about the Company's true financial condition despite the offering of Company stock as a Plan investment.

58. The Individual Defendants and the Andersen Defendants structured financial dealings in such a complicated and impenetrable manner that the Plaintiffs were unable to know the true financial status of the Company. Despite Defendants' failure to provide Plan participants with accurate information about the Company and its financial situation, Defendants continued to offer and furnish the Company's stock to Plaintiffs as a Plan investment.

59. The Individual Defendants and the Andersen Defendants also knew about, yet failed to disclose to Plaintiffs, problems with Enron's ongoing financial situation, including:

a. Enron's Board of Directors waived its Ethics Code on two separate occasions in 1999 to allow Enron to create various entities with insiders, which resulted in enormous financial gains for certain Enron insiders to the detriment of Enron.

b. Enron had entered into a series of transactions involving partnerships, limited liability companies and other related entities, both domestic and foreign which, as structured, hid the true extent of Enron's debt.

c. Enron insiders sold thousands of shares of Enron stock during the relevant time period.

Complaint, 24 January 2002, page 11.

d. Enron issued financial statements which did not include unprofitable and debt ridden subsidiaries in violation of Generally Accepted Accounting Principles ("GAAP") and which also failed to provide reasonable disclosure.

e. Enron engaged in complicated hedging transactions in the broadband market, thereby subjecting the Company to heightened risk and uncertainty.

f. In violation of GAAP, Enron misclassified its exchange of $1.2 billion of common stock for a note receivable as an asset rather than as a reduction in shareholder equity, which also failed to provide reasonable disclosure.

g. In its fiscal-year 1997 annual report, Enron failed to record $45 million in losses from partnerships it failed to consolidate.

h. In its fiscal-year 1998 annual report, Enron failed to record $107 million in losses from partnerships which it neglected to consolidate.

i. In its fiscal-year 1999 annual report, Enron failed to record $153 million in losses from partnerships and $95 million in losses from a subsidiary it failed to consolidate.

j. In its fiscal-year 2000 annual report, Enron failed to record $91 million in losses from certain partnerships and $8 million in losses from a subsidiary it failed to consolidate.

60. Enron restated its fnancial results for fiscal years 1997, 1998, 1999, and 2000, and the first three quarters of 2001 to correct errors that had inflated Enron's income by at least $591 million during those years.

61. Had Defendants adequately disclosed the above practices to Plaintiffs, and given them accurate information concerning the Company's prospects, Plaintiffs would not

Complaint, 24 January 2002, page 12.

have invested their retirement assets in Company stock and, if allowed, would have sold Company stock issued to them.

62. Defendants had no strict and objective process for actively monitoring the prudence of Enron stock as an investment option for the Plan. Nor did Defendants have any protocol for discontinuing the use of Company stock when it was no longer a prudent investment for Plan assets. Defendants failed to establish, implement and adhere to adequate standards for prudent investment of plan assets and for monitoring same.

63. On October 16, 2001, Enron announced that the Company was taking nonrecurring charges of $1.01 billion after-tax in the third quarter of 2001. Although the Individual and Northern Trust Defendants knew or should have known that Plan participants holding Company stock would want and should have had the opportunity to sell their Company stock following this announcement, the Individual and Northern Trust Defendants proceeded to transfer the trustee and record keeper of the Plan from Northern Trust to Hewitt Associates Inc., triggering an administrative lockdown period when no Plan participant could sell any investment in his or her account. The lockdown period began on October 19, 2001 for some employees and on October 26, 2001 for others. The Individual and Northern Trust Defendants had ample time to postpone the lockdown following October 16, 2001 but declined to do so. During the lockdown period, some or all of the Individual Defendants sold their Company stock.

ENRON's 401K PLAN

64. At all relevant times, Plaintiffs were participants or beneficiaries of the Plan within the meaning of ERISA §3(7) (29 U.S.C. §1002(7)).

Complaint, 24 January 2002, page 13.

65. At all relevant times, the Plan was and continues to be a "defined contribution plan" within the meaning of ERISA §3(34) (29 U.S.C. §1002(34)), and an "eligible individual account plan" within the meaning of ERISA §407(d)(3) (29 U.S.C. §1107(d)(3)). The Plan is not a party to this suit; the relief requested in this action, however, is for the benefit of the Plan.

67. Defendants acted as fiduciaries of the Plan pursuant to ERISA §3(2)(21)(A) (29 U.S.C. §1002(21)(A)). Defendants exercised discretionary authority and control over the management and administration of the Plan and/or Defendants exercised control in the management and disposition of the Plan's assets and/or Defendants rendered investment advice for a fee or other compensation, directly or indirectly, with respect to monies or property of the Plan or had some authority or responsibility in that regard.

68. Enron was designated as the Plan Administrator of one or more of the Plan's various investment funds, thereby making it a fiduciary pursuant to ERISA §402(a)(1) (29 U.S.C. § 1102(a)(1)).

69. The Plan authorized a participant to contribute from 1 % to 15% of their eligible base pay in the Plan in any combination of before-tax deferrals or after-tax contributions. Participants directed the investment of their contributions, in 1 °/o increments, to the various investment options in the Plan. These contributions were deducted automatically from the participant's pay.

Complaint, 24 January 2002, page 14.

Company contributions be funded with or invested in Company stock in the Enron Corporation Stock Fund (the "Enron Stock Fund").' The terms of the Plan prohibited participants from removing Company contributions from the Enron Stock Fund and placing them in any other investment vehicle until the participant reached age 50.

71. As a result of these restrictions and the Company's encouragement to invest in the Company's stock, Enron's common stock constituted 54% of all Plan assets as of December 31, 2000.

72. Defendants imposed Plan restrictions that effectively deprived Plaintiffs of the opportunity to exercise control over all of their Plan assets. Defendants deprived Plaintiffs of the opportunity to exercise control over their Plan assets because Plaintiffs did not have the "opportunity to obtain sufficient information to make informed decisions with regard to investment alternatives available under the plan, and incidents of ownership appurtenant to such investments" pursuant to 29 C.F.R. §2550.404c-1(b)(2)(i)(B).

73. Moreover, Plaintiffs could not exercise independent control over the assets in their Plan because Defendants subjected Plaintiffs and Plan participants to improper influences and/or concealed material facts regarding certain investments, in violation of 29 C.F.R. §2550.404c1(c)(2)(i)-(ii).

DEFENDANTS' BREACHES OF FIDUCIARY DUTY

74. ERISA is a comprehensive statute covering virtually all aspects of employee benefit plans, including retirement savings plans. ERISA requires all covered Plans be in Enron Oil & Gas employees could choose to receive the Company's matching contribution
in either Enron common stock or Enron Oil & Gas common stock. Enron's matching contributions for all Bargaining Unit Employees were funded with Enron common stock All Enron employees were prevented from selling their matching contributions until they reached age 50. Complaint; 24 January 2002, page 95.

writing, and that Plan administrators furnish to each participant a document called a "summary plan description." The summary plan description must apprize participants of their rights in a manner calculated to be understood by the average Plan participant. ERISA §102 (29 U.S.C. §1022(a)).

75. Under ERISA, "fiduciary" is defined broadly to include all people or entities who exercise any discretionary authority with respect to the management of a plan or payment of benefits. ERISA §3 (29 U.S.C. §1002(21)). Thus, a person who appoints a fiduciary has a fiduciary responsibility to monitor the person appointed. Upon information and belief, during the relevant period, the Board of Directors of Enron, and its individual members, had the fiduciary responsibility to appoint and monitor the members of the Administrative Committee. To that extent, the Board and its members acted as fiduciaries of the Plan during the relevant time period. ERISA places strict duties on all plan fiduciaries.

76. ERISA imposes on a plan fiduciary a duty of prudence, which requires the fiduciary to "discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and ... with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of alike character and with like aims." ERISA§404(a)(1)(B) (29 U.S.C. §1104(a)(1)(B)).

77. ERISA imposes on a plan fiduciary a duty of loyalty, which requires each fiduciary to "discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and ... for the exclusive purpose of ... providing benefits to the participants and their beneficiaries." ERISA §404(a)(1)(A) (29 U.S.C. §1104(a)(1)(A)).

Complaint, 24 January 2002, page 16.

78. A plan fiduciary's duties of loyalty and prudence include a duty to disclose and inform. This duty entails: (1) a duty not to misinform; (2) an affirmative duty to inform when the fiduciary knows or should know that silence might be harmful; and (3) a duty to convey complete and accurate information material to the circumstances of participants and their beneficiaries. This duty to disclose recognizes the disparity in knowledge that may exist, and in this case did exist, between the fiduciaries, on the one hand, and the participants and their beneficiaries, on the other hand.

79. In a plan with various investment funds, such as the Plan in this action, this duty to inform and disclose also includes: (1) the duty to impart to plan participants material information which the fiduciary knows or should know is sufficient to apprize the average plan participant of the risks associated with investing in any particular fund; and (2) the duty not to make material misrepresentations. Moreover, the employer's selection of investment options for the retirement plan is a fiduciary function subject to the general duty of prudence. 29 C.F.R.§2550.404c-1.

80. Defendants breached their fiduciary duties of loyalty and prudence with respect to the Plan's use of Company stock as a Plan investment. The excessive percentage of Company stock in the Plan's portfolio was an undiversified investment in a single stock that carried an inherently high degree of risk and volatility. Defendants were obligated to provide Plaintiffs and Class members with complete and accurate information about the Company's stock and the risks associated with Plan's substantial investment therein. Instead, Defendants withheld and concealed material information from Plaintiffs and Class members. Defendants, in violation of their duty to inform and disclose, encouraged Plaintiffs to continue to make and maintain substantial investments in the

Complaint, 24 January 2002, page 97.

Company's stock in his Plan.

81. Defendants breached their fiduciary duties with respect to providing sufficient information to each participant to allow each participant to make informed decisions with regard to investment alternatives available under the Plan, by failing to provide a description of the investment objectives and risk and return characteristics of each designated investment alternative, and by otherwise violating the provisions of 29 U.S.C. § 2550.404c1.

82. Defendants' duties of loyalty and prudence also entail a duty to conduct an independent and continuing investigation into the merits of the Plan's investmentsto ensure that each investment is a suitable option for the Plan. Defendants breached their fiduciary duties of loyalty and prudence by failing to investigate and monitor the suitability of the Company's stock as an investment option. During the relevant period, the Company's stock was not a suitable investment for Plan participants.

83. Defendants' duty of loyalty also entailed a duty to avoid conflicts of interest and to resolve them promptly should they occur. Under ERISA, a fiduciary must always act for the sole benefit of the participants and beneficiaries of the plan he or she serves. Defendants breached their duty of loyalty by failing to avoid conflicts of interest and to resolve such conflicts promptly when they did occur. Defendants continued to invest the participants' and beneficiaries' monies in Company stock and imposed restrictions on the sale of Company stock despite their knowledge of the unsuitability of such a risky, volatile investment. Thus, Defendants failed to act to protect Plaintiffs' and Class members' interests in the administration of the Plan.

Complaint, 24 January 2002, page 18.

84. The Plan suffered substantial losses and Plaintiffs were damaged by Defendants' breaches of their fiduciary duties because a substantial percentage of the Plan's assets were invested in Company stock and because the value of the Company's stock dropped dramatically. Since the Plaintiffs did not have independent control over how their assets were ultimately invested, Defendants were responsible for ensuring the Plan's investments were and remained prudent. Defendants' liability to Plaintiffs for damages stemming from imprudent Plan investments in the Company's stock is based on proof that such investments were or became imprudent and resulted in losses in the value of the assets in the Plan during the relevant period, without regard to whether Plaintiffs relied on Defendants' statements, acts or omissions.

85. To the extent Plaintiffs relied on Defendants' representations and omissions in making and maintaining investments in the Plan, Plaintiffs relied to their detriment on incomplete or inaccurate information and consequently suffered a loss.

86. The Individual Defendants and the Northern Trust Defendants breached the fiduciary duties they owed Plaintiffs by proceeding with an administrative lockdown of the Plan after October 16, 2001, thus preventing participants from selling some of all of their Company stock during that time.

87. Each of the Defendants participated knowingly in fiduciary breaches of its co-fiduciaries, enabled its co-fiduciaries to commit such fiduciary breaches by its own failure to comply with the provisions of ERISA § 404(a) (29 U.S.C. § 1104(a)), and had knowledge of the breaches of its co-fiduciaries and failed to make reasonable efforts to remedy such breaches.

Complaint, 24 January 2002, page 19.

CLASS ACTION ALLEGATIONS

88. Plaintiffs identified in Paragraphs 5 through 8 bring this action on their own behalf and, pursuant to FED. R. Civ. P. 23, on behalf of all similarly situated persons who were participants in or beneficiaries of the Plan, excluding the Defendants, at anytime from September 1, 2000 to the present, and who made or maintained investments in the Company stock funds. The class members represented by the Plaintiffs are so numerous that joinder of all of the members is impracticable; there are questions of law or fact common to all class members and these questions of law or fact common to the members of the class predominate over any questions affecting only individual members; the claims or defenses of the Plaintiffs are typical of the claims of the class; the Plaintiffs will fairly and adequately protect the interests of the members of the class; and class litigation is superior to other available methods for the fair and efficient adjudication of the controversy.

COUNT I

BREACH OF FIDUCIARY DUTY

89. Plaintiffs incorporate by reference and reallege ¶¶1-88.

90. The Plan is governed by the provisions of ERISA, 29 U.S.C. §§1001, et seq., and Plaintiffs and members of the Class are participants and/or beneficiaries in the Plan. Each of the Defendants are fiduciaries or co-fiduciaries with respect to the Plan pursuant to the provisions of ERISA. As co-fiduciaries, each of the Defendants is liable for the other's conduct.

91. Defendants violated their fiduciary duties of loyalty and prudence in investing such a large percentage of the Plan's assets in Company stock.

Complaint, 24 January 2002, page 20.

92. In failing to adequately investigate and monitor the merits of the investments in Company stock and to take steps to eliminate or reduce the amount of Company stock in the Plan, Defendants breached their fiduciary obligations.

93. By failing to give Plaintiffs and Class members adequate information about the composition of the Plan's portfolios and accurate information about the Company and its financial situation, Defendants breached their fiduciary duties to disclose and inform.

94. By instituting and failing to postpone an administrative lockdown of the Plan, Defendants breached their fiduciary obligations.

95. Defendants failed to have a mechanism in place for monitoring the appropriateness of Company stock as an investment of the Plan, and this failure constituted a breach of Defendants' fiduciary duties to investigate and monitor Plan investments.

96. Defendants breached their fiduciary duties to avoid conflicts of interest and to resolve them promptly if they occur by continuing to offer Company stock as a Plan investment option and by instituting and failing to postpone an administrative lockdown of the Plan.

97. As a result of Defendants' breaches of fiduciary duties, Plaintiffs and other Class members, as well as the Plan, suffered damages, the exact amount of which will be determined at trial. Defendants are personally liable to Plaintiffs, all class members and the Plan itself for these losses.

COUNT II

VIOLATIONS OF ERISA DISCLOSURE REQUIREMENTS

98. Plaintiffs incorporate by reference and reallege ¶¶1-88.

Complaint, 24 January 2002, page 21.

99. Defendants failed to advise Plaintiff and the Class that their investment in the Plan was at substantial risk because Company stock constituted a large percentage of the Plan's total assets and Defendants could not provide accurate or complete information about the Company and its financial situation.

100. Unbeknownst to Plaintiffs but known to Defendants, Enron's participation in hopelessly complicated partnerships and finance projects prevented Defendants from conveying accurate and complete information about the Company and its financial situation. Because of this disparity in knowledge between Defendants and Plaintiffs, Plaintiffs relied on Defendants to provide them with accurate and complete information, which was material to the suitability of Company stock as an investment option.

101. By failing to convey complete and accurate information to Plaintiffs, Defendants violated their affirmative duty to disclose sufficient information to apprize Plaintiffs of the risks associated with investment in Company stock when Defendants knew or should have known that silence might be harmful.

102. As a result of Defendants' failure to disclose and inform, Plaintiffs and the Class suffered damages, the exact amount of which will be determined at trial. Defendants are personally liable to Plaintiffs, the class and the Plan itself for these losses.

COUNT III

KNOWING PARTICIPATION IN THE BREACH OF FIDUCIARY DUTIES

103. Plaintiffs incorporate by reference and reallege x¶¶1-88.

104. Defendants (excluding Jane Does 11-20) owed a fiduciary duty to the Plan. Jane Does Nos 11-20 knew of the fiduciary duties Defendants (excluding Jane Does Nos 11-20) owed to the Plan. John Does Nos 11-20 instructed, aided and abetted and/or

Complaint, 24 January 2002, page 22.

conspired with Defendants (excluding Jane Does Nos 11-20) to commit the acts and omission that breached their fiduciary duties as alleged in by this Complaint. By doing so, John Does Nos 1-10 are liable to Plaintiffs, the class and the Plan itself for these losses.

REMEDIES

105. Plaintiffs bring this action pursuant to ERISA § 502(a)(2) (29 U.S.C. § 1132(a)(2)), which authorizes a plan participant to bring a civil action for appropriate relief under ERISA Section 409 (29 U.S.C. § 1109). Section 409 requires "any person who is a fiduciary . . . who breaches any of the . . . duties imposed upon fiduciaries . . . to make good to such plan any losses to the plan . . . ." Section 409 also authorizes "such other equitable or remedial relief as the court may deem appropriate . . . ."

106. Plaintiffs are entitled to: (1) recover losses to the Plan resulting from the breaches of fiduciary duties in an amount to be proven at trial; (2) injunctive and other appropriate equitable relief to remedy these breaches; (3) reasonable attorneys' fees and expenses as provided by ERISA Section 502(g) (29 U.S.C. § 1132(g)); (4) taxable costs; and (5) prejudgment and post-judgment interest at the highest rate allowed by law.

PRAYER FOR RELIEF

107. Plaintiffs pray for judgment as follows:

a. Determining that this is a proper class action under FED. R. Civ. P. 23;

b. Declaring that Defendants have violated the duties, responsibilities and obligations imposed upon them as fiduciaries and co-fiduciaries and that they violated the ERISA disclosure requirements as described above;

c. Awarding extraordinary, equitable and/or injunctive relief as permitted by law, equity and the federal statutory provisions sued hereunder, pursuant to Rules 64

Complaint, 24 January 2002, page 23.

and 65 of the Federal Rules of Civil Procedure, including an order compelling the Defendants to make good the losses to the Plan and to restore to the Plan any profits made through each ERISA breach and including removal of the Enron Defendants from a position of trust with respect to the Plan and the appointment of independent fiduciaries to safeguard the interests of the Plan and the Plan's participants;

d. Under ERISA § 501(a)(3) (29 U.S.C. § 1132(a)(3)), an injunction enjoining the Defendants from any act or practice violating the statute and/or the Plan, including the offering of imprudent stock to participants, restitution, rescission, an accounting, imposition of a constructive trust, disgorgement, and/or all other appropriate equitable relief to redress the Defendants' violations of ERISA;

e. Awarding Plaintiffs and the Class both compensatory and punitive damages;

f. Awarding Plaintiffs pre-judgment and post-judgment interest, as well as their reasonable attorneys' fees, expert witness fees and other costs; and

JURY DEMAND

Plaintiffs demand a trial by jury.

Complaint, 24 January 2002, page 24.

Respectfully submitted,

Randy J. McClanahan
State Bar No. 13391500
Southern District No. 1273
McClanahan & Clearman, L.L.P.
4100 Bank of America Center
700 Louisiana
Houston, Texas 77002
Telephone: (713) 223-2005
Facsimile: (713) 223-3664

By: RANDY J. McCLANAHAN

ATTORNEY-IN-CHARGE FOR PLAINTIFFS SEVERED ENRON EMPLOYEES COALITION (SEEC), LARENCE R. JORDAN, DEBORAH S. DEFFORGE, and DIANA PETERS, on behalf of themselves and all others similarly situated, and on behalf of the Enron Corporation Savings Plan

Complaint, 24 January 2002, page 25.

MCCLANAHAN & CLEARMAN, L.L.P.

4100 Bank of America Center
700 Louisiana
Houston, Texas 77002
Phone: 713-223-2005
Fax: 713-223-3664

Scott M. Clearman
State Bar No. 04350090
Southern District No. 11041
Michael D. Myers
State Bar No. 00791331
Southern District No. 19938
Dwaine M. Massey
State Bar No. 00791199
Southern District No. 18418
Robert H. Espey II
State Bar No. 24007163
Southern District No. 23947

DIES & HILE, L.L.P.

1009 W. Green Avenue
Orange, Texas 77630
Phone: 409-883-4394
Fax:409-883-4814

Martin W. Dies, III
State Bar No. 05853800
Southern District No. 4283
Richard C. Hile
State Bar No. 09620500
Southern District No. 16570
Don Carona
State Bar No. 03832600
Southern District No. 11000

Complaint, 24 January 2002, page 26.

SPIVEY& AINSWORTH, P.C.

48 East Avenue
Austin, Texas 78701
Phone: 512-474-6061
Fax: 512-474-1605

Broadus A. Spivey
State Bar No. 00000076
Southern District No. 11146

WHITTENBURG WHITTENBURG & SCHACHTER, P.C.

P.O. Box 31718 (1010 Harrison, 79101)
Amarillo, Texas 79120
Phone: 806-372-5700
Fax:806-372-5757

George Whittenburg
State Bar No. 21397000
Susan L. Burnette
State Bar No. 03437200
Karl L. Baumgardner
State Bar No. 01931940
C. Jared Knight
State Bar No. 00794107

and

2300 Plaza of the Americas
600 North Pearl, L.B. 133
Dallas, Texas 75201
Phone: 214-999-5700
Fax:214-999-5757

Cary Ira Schachter
State Bar No. 17717700
Raymond P. Harris, Jr.
State Bar No. 09088050
Cynthia Schiffer
State Bar No. 24025634

13572.8

Complaint. 24 January 2002, page 27.

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