By Robert Salonga
Daily Bruin Staff
The University of California took the helm of solving a national
business debacle Friday when it was named lead plaintiff of the
class-action lawsuit against senior executives of Enron Corp. and
their auditor, accounting firm Arthur Andersen LLP.
“We look forward to working closely with all of the
plaintiffs to vigorously pursue this litigation with the shared
goal of securing substantial recovery for all shareholders,”
UC General Counsel James Holst said in a statement.
A conference is scheduled for Feb. 25 for Judge Melinda Harmon
of the Southern District of Texas to review the case with the
plaintiff and counsel. The parties will then determine the schedule
for proceeding with the rest of the case.
The university has retained the San Diego-based firm Milberg
Weiss Bershad Hynes & Lerach LLP as its counsel for the suit.
The case will be litigated under the direction of the UC Board of
Regents, according to university spokesman Trey Davis.
The UC lost $145 million after selling off its stock in November
while Enron headed toward bankruptcy.
Enron executives allegedly released false financial statements
to inflate stock prices, and senior members cashed nearly $1.1
billion in stock before the company met financial doom.
Harmon selected the UC based on its “ability as a single
investor to coordinate the litigation, and various
plaintiffs’ patterns of stock transactions,” according
to Friday’s statement released by the university.
Since the bankruptcy, hundreds of investors have filed suit
against Enron and Arthur Andersen. The number of plaintiffs in the
class-action suit is open-ended at this point, Davis said.
“The UC is in the process of forming a consolidated
amended complaint that will pull all of it together,” Davis
said.
University officials say the litigation could take years to
complete.
Among the hardest hit by the stock fall were the Florida State
Pension Fund ($325 million), Georgia State Prison Fund ($127
million), Ohio Public Employees and Teachers ($114.5 million) and
the New York city pension plan ($110 million).
The university was in a better position to lead the suit than
the Florida fund because the latter had already been involved in
several similar lawsuits, said UC attorney Christopher Patti.
Federal law prohibits an entity from being a “professional
plaintiff” by limiting the number times a group can head a
class-action lawsuit.
The UC’s loss of $145 million ““ based on 2.2 million
Enron shares ““ accounted for only 0.3 percent of its
diversified portfolio, which is worth about $54 billion.
“The loss will have no impact upon the retirement benefits
provided to UC retirees,” UC Treasurer David Russ said in a
statement.
“Nonetheless, the university feels a strong obligation to
recover monies that rightfully belong to the university, its
employees and the other class members,” he stated.