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American Morning

Many Enron Employees Lost Life Savings When Company Filed for Bankruptcy

Aired January 15, 2002 - 08:37   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.
JACK CAFFERTY, CNN ANCHOR: More now about the fallout from the collapse of Enron and how it could affect you. Sadly, many Enron employees not only lost their jobs, but they lost their life savings when the company filed for bankruptcy. Many of their 401ks were invested in Enron stock. Many Americans no doubt are now wondering if the same thing can happen to them.

Here with some tips on how to safeguard you 401k and IRA savings, Terry Savage, "Chicago Sun-Times" financial columnist and author of a book entitled "The Savage Truth About Money."

Nice to have you with us. Welcome.

TERRY SAVAGE, "CHICAGO SUN-TIMES": Good morning, Jack.

CAFFERTY: We were having a discussion here on the set a minute ago, Anderson, and Paula and me, about whether or not these people deserve the amount of sympathy they're getting. They could have sold their stock prior to the complete collapse of Enron, and the point was being made, look, you've got to watch out for yourself in this world.

Talk to me a little bit about your view about what happened to those people that worked at Enron.

SAVAGE: Well, you make a good point, you do have to work out for yourself, but for many people, they were not educated. We took 42 million American workers and made them pension fund managers, and they never learned the rule of things like diversification, don't put more than 3-5 percent of your assets in one stock. They grew up in a bull market. The last 20 years have been an incredible bull market, so -- and they worked for this company, and they were told by management that it was growing, and the stock kept going up.

So they didn't have the background and perspective to make smart decisions. They could have gotten out, absolutely.

Actually, many companies require you to keep the matching part, the part they put in, in company stock. We'll see if that changes. But it was very sad.

CAFFERTY: Is there any chance these people will get any of this money back, do you think? Should the government step in, perhaps, if they can prove some sort of wrongdoing and offer to reimburse, or are they just out of luck here?

SAVAGE: You know, the stock market is a risk place. It's something that's, again, one of those savage truths that people are only learning a little bit later. There's no way. You know, we're talking about $60 billion in market value that just went down the drain. As a matter of fact, take a look at the whole broad bear market, from the top to the bottom; $6 trillion just sort of melted away. People say to me, where did that money go? I tell them, you know, it went to money heaven.

CAFFERTY: To say the stock market is a risky place is one thing. To say that you're investing under the guise that it's a fair game, and in fact the deck is stacked against you because of alleged criminal misdeeds of the company you're investing in. If it's a crooked game, do you still have to play by the house rules?

SAVAGE: I couldn't agree more. And If it's proved it's a criminal conspiracy, I suppose RICO would apply with treble damages. You'd be able to recoup from the people who sold maybe from the accounting firm damages. Whether those should go first to the employees and their retirement plan, that might be a question that, to my knowledge, never happened before, the repayment to employees. But still, I don't think anybody has deep enough pockets to come up with $60 billion to make shareholders even.

CAFFERTY: What do I do to protect myself?

SAVAGE: Right now, you do two things. First of all, if your company matches in stock, and they say to you, you have to hold that stock until you're 50 years old, even though right away, you're unbalanced. First, go to the company and say, given Enron, we know that's not right. And as I say, I sit on the board of directors of two New York Stock Exchange companies that do not require you to hold in the match for that very purpose. So go to the H.R. department, go to the board of directors, and say, quit requiring us to keep the match, and with the money you put in, especially if you're matched in company stock, diversify and take some more conservative choices.

There are several Web sites -- in fact, I have an article right up at terrysavage.com which will gives you links to Web sites like financial engines, and MSN Money, the empower service, where you can actually do it yourself, to check out if you're diversified, if you're investing to meet your goals, because these are professional advice models, and they'll let you know what you don't know, because you can't possibly know how to manage a portfolio the way professionals do.

CAFFERTY: All right, Terry, we've got to leave it there. I appreciate you being with us this morning. Thank you, Terry Savage, author of "The Savage Truth on Money." And she writes a financial column for the "Chicago Sun-Times" as well.

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