Pa. suffers losses due to Enron

The collapse of former energy giant Enron Corp. has left dozens of pension plans nationwide with heavy losses, and Pennsylvania has been hit particularly hard.

The Pennsylvania Public School Employees Retirement System suffered a $59 million loss as a result of the company's demise. Additionally, the Pennsylvania State Employees System suffered a net loss of roughly $10 million, according to the fund's chairman Nicholas Maiale.

Both plans had been invested in the Houston-based energy trading company. Enron's stock plummeted from $84 per share in 2000 to less that $1 per share when the company filed for bankruptcy in December.

Officials had sold both plans' Enron stock before the company declared bankruptcy, but the stocks' value had plummeted before they were able to sell the shares.

State Attorney General Mike Fisher is currently working toward a class action lawsuit against Enron, which would include the public school retirement system and possibly the system for state employees. Attorney generals of other states that suffered similar losses due to Enron's collapse are also pursuing such actions.

"We have been working with the Public School Employees Retirement System to ensure that they are included in a class action lawsuit," Fisher spokesman Sean Connolly said. "We are also working with them [to file a proof of claim] in bankruptcy court. We have been working with state agencies to determine if they have lost any money and whether there are any remedies."

Fisher was spurred on last week by several Democratic state senators who sent a letter urging Fisher to pursue an Enron lawsuit. Among the Democrats was Philadelphia Sen. Vincent Fumo, who has had disagreements with Enron in the past.

"In Sen. Fumo's case, he had some rather disturbing transactions with Enron going back to 1997," Fumo spokesman Gary Tuma said.

Tuma was referring to a proposal Enron made following Pennsylvania's deregulation of energy in 1996. Enron asked to pay PECO Energy -- the primary energy supplier for the Philadelphia area -- for the right to be the area's default energy server to customers who did not select any service provider.

Enron was offering customers a rate cut that would have been twice that of PECO, which they planned to make up through their monthly customer charges. However, Enron's proposal was rejected.

"It was a very dishonest offer to get market shares and mislead... the public, so Sen. Fumo did not really have a high opinion of Enron based on what they've done," Tuma said.

"It's encouraging that [Fisher] is going to do something. We'll have to wait and see what comes of it," Tuma added, in response to the attorney general's proposed actions.

Despite the large figures and the possible lawsuits, the $59 million loss represents only one-fourth of a percent of the school retirement system's investments.

"By maintaining a highly diversified portfolio, [the system] minimizes the risk that any one loss would have a significant impact on investment returns," Pennsylvania Public School Employees Retirement System spokesman Douglas Bonsall said in a statement.

Additionally, the benefits of all employees, both retired and current, will not be affected by the losses. Instead, employers and taxpayers will contribute more funds to accommodate losses such as these.

The school retirement system "is a defined benefit pension plan; therefore, the amount of a member's pension benefit is not tied to the market performance of the fund," Bonsall said.

The Public School Employees' Retirement Code, which controls the amount of funding for the school retirement system's benefits, calls for a blend of contributions from employers, the state, system members and investment returns.

"In essence, the law provides for the setting of periodic employer and Commonwealth contributions," Bonsall said. "That, together with member contributions and an actuarially determined rate of investment return, are adequate for the payment of benefits. Members contribute at a fixed rate that is specified in the Code."

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