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CNN Live At Daybreak

Enron Employees Bought Company Stock Even as the Company Crumbled

Aired February 06, 2002 - 06:38   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAROL COSTELLO, CNN ANCHOR: There seems to be no end to the problems the Enron bankruptcy has created. CNN's Brooks Jackson tells us that even as things were going bad, many of Enron's employees were still buying stock through their 401 (k) program.

(BEGIN VIDEOTAPE)

BROOKS JACKSON, CNN CORRESPONDENT (voice-over): It's a sad story. By now, a familiar tragedy.

UNIDENTIFIED FEMALE: I'm not alone in my pain.

JACKSON: But there's more to the story of how Enron employees lost their savings. CNN has learned that in the days before they were locked out of their 401(k) retirement accounts and prevented from selling their Enron shares, they were actually buying more stock. Even as many of Enron's problems were becoming painfully public. Daily records of the Enron corporation savings plan show that between October 16, when Enron shocked Wall Street by announcing an unexpected $1 billion quarterly loss, and October 26, the last trading day before that controversial lockdown, employees were moving a total of $3.8 million into Enron stock and out of safer, diversified mutual funds.

During those days Enron's stock was plunging as the bad news poured out: a "Wall Street Journal" expose, a shareholder suit, an inquiry from the Securities and Exchange Commission. Chief Financial Officer Andrew Fastow, out, replaced. Wall Street investors dumped Enron, the stock lost half its value, but the records show Enron employees treated that as a buying opportunity.

The full story is still emerging, and management has much to answer for. An Enron human resources executive responsible for 401(k) plans told Senate hearings Tuesday that she sold $6 million of her own Enron stock, but did not advise employees to diversify their accounts.

SEN. JOSEPH LIEBERMAN (D), CONNECTICUT: But you knew that the 401(k)s were not diversified.

OLSON: True.

JACKSON: And Olson was warned something was wrong. She said her colleague, Sharon Watkins, told her of a possible accounting scandal. Even before Watkins warned Chief Executive Ken Lay. So why didn't she advise employees to sell then back in August?

OLSON: It was in the hand of Mr. Lay and Vincent and Elkins, and I felt like it was in good hands and all of us would know if it really was an issue.

JACKSON: Employees complain now they were prevented from selling during the lockdown period, and it's true, the stock price did sink further as more bad news came out. But a far bigger drop came while employees were still free to sell, and the real tragedy is they were buying instead.

Brooks Jackson, CNN, Washington.

(END VIDEOTAPE)

COSTELLO: So the business climate is bad because of Enron.

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