State Treasurer Randall Edwards and Attorney General Hardy Myers today announced an additional legal filing in the Enron bankruptcy. The motion, filed yesterday in the New York bankruptcy court, seeks to elevate Oregon's claims above the claims of creditors who may have participated with Enron's former management in the decisions that caused Enron to go bankrupt.
As part of the bankruptcy proceeding, Enron's court-approved current management sued many of the financial institutions with which the former management of Enron had done business. In a 500-page complaint, Enron alleges seventy six "counts" of liability against the banks, investment banks, their subsidiaries and affiliates. The defendants have filed claims totaling as much as $26 billion.
In one count, based on the banks' alleged conduct, Enron asks the court to place their claims in a lower category than claims of other general unsecured creditors. Creditors at the top of the list generally recover a greater proportion of what the bankrupt company owes than creditors at the bottom. Typically, banks are ranked higher than general creditors.
The banks' alleged improper actions helped Enron's insiders conceal the company's true financial condition. As a result, general creditors were induced to extend credit based on false information. In addition, investors, relying on the same information, kept the company's stock price high through the period leading up to the bankruptcy.
Although investors as well as general creditors can claim injury from the actions Enron alleges, the complaint as written does not recognize these injuries to investors. In fact, while seeking to lower the priority of payment on the banks' claims, Enron would still put the claims of financial institutions that may have acted improperly ahead of claims by investors who had to sell their shares at great loss, including the Oregon Public Employee Retirement Fund (OPERF). The motion asks the court to allow Oregon to argue that its claims against Enron be paid from the bankruptcy before any claim of any creditor that contributed to Enron's demise is paid.
"The Enron bankruptcy is like a chess match - many of the moves made now will have a profound effect on the final outcome," said Edwards. "We want to ensure that the people of Oregon are no less protected than any of the big financial institutions involved in this disaster."
To date, creditors have filed over 24,000 claims in the bankruptcy case representing over $900 billion. The state of Oregon has submitted claims totaling nearly $420 million in direct and indirect losses to OPERF and for penalties arising from violations of Oregon law in the manipulation of the west coast energy market. The bankruptcy proceeding, which is in its third year, may continue for a decade or longer before its final conclusion.
Kevin Neely, Justice, (503) 378-6002
Kate Richardson, OR State Treasurer, (503) 378-4329