Attorney General Hardy Myers took action today to block Enron Corp.'s attempt to get authorization from the bankruptcy court to advance payment of at least $30 million in expenses incurred by unnamed directors and officers of the corporation and its approximately 3500 subsidiaries. Enron Corp. is an Oregon corporation.
"Enron's directors and officers should not be advanced money for their civil or criminal defense costs before the issue of their individual liability has been resolved," Myers said. "Under Oregon law, any director found liable to the corporation may be disqualified from being reimbursed for his or her defense costs."
The Oregon Department of Justice intends to file its objection today in the bankruptcy court in New York City. The Attorneys General of Alaska, Arizona, California, Connecticut, Florida, Georgia, Hawaii, Indiana, Kentucky, Louisiana, Maine, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Jersey, New Mexico, Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Vermont, U.S. Virgin Islands, Washington, West Virginia and Wyoming have joined Oregon in opposing the advancing of funds.
Technically, the source of the advanced funds would not be the bankruptcy estate but instead Enron's insurance policies providing liability coverage to directors and officers. Nevertheless, such advancing of funds under the policies might accelerate exhaustion of insurance coverage and expose the bankruptcy estate itself to liability for the defense costs of individuals who ultimately qualify under law for such payment of costs. This would reduce the amount of the bankruptcy estate available to pay other creditors' claims, including the claims of states.
"Enron has not met the minimum requirements of Oregon law for advancing defense costs to corporate directors," Myers said. "As far as is known from the court's records, none of the directors has provided the affirmation required by Oregon law of their good faith belief that their conduct was not unlawful or opposed to the best interests of the corporation. They cannot receive advance payment of costs until this affirmation has been made."
The Honorable Arthur J. Gonzales, United States Bankruptcy Judge, is expected to hear objections to advanced payment costs at 10 a.m., February 27, 2002 in the bankruptcy court in New York City.
Kristen Grainger, (503) 378-6002