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At first, Richard Rathvon and about 20 other former Enron Corp. employees were simply interested in finding a way to circumvent the bankruptcy process to collect between $2 million and $3 million in earned but unpaid incentive compensation. Rathvon and his friends — some are friends of friends — formed an ad hoc group. They were all laid off after Houston-based Enron filed for Chapter 11 on Dec. 2 in bankruptcy court in New York. They banded together, chipped in some seed money and held a beauty contest to find a lawyer. They thought they would hire a lawyer to file a suit to help them collect their money, Rathvon says. But after interviewing a labor-and-employment lawyer at one firm, and a team of labor-and-employment and bankruptcy lawyers at another firm, they interviewed bankruptcy specialist David McClain, a partner in Houston’s McClain & Siegel, and decided to hire him. With McClain in their corner, the members of Rathvon’s ad hoc group have bigger plans. They are asking the U.S. trustee in New York to approve an Official Committee of Former Employees of Enron Corp. Rathvon and McClain say a different group, the Official Committee of Unsecured Creditors of Enron Corp., cannot adequately represent the interests of former Enron employees who saw their retirement savings dwindle along with the price of Enron stock and may be owed hefty sums of money for work they did while employed. “This is a poster child for the need of creation of a committee,” McClain says. “The existing committee is dominated by the banks, but those banks would participate whether there is a committee or not,” he says. “Ironically, the debtor is paying for the bankers to be represented, although they would be represented anyway.” The unsecured creditor’s committee does include one former Enron employee, Michael P. Moran, who retired as general counsel of Enron Gas Pipeline Group in August. The committee’s 15 members also include energy companies Duke Energy Trading and Marketing of Houston, the Williams Companies Inc. of Tulsa, Okla., and National Energy Group Inc. of Dallas, but most of the members are financial institutions. McClain says the employees’ interests in the bankruptcy are widely divergent from the interests of the banks. For instance, the employees are interested in ensuring continuation of employee benefits, an item that wouldn’t concern the banks. An Official Committee of Former Employees is vitally important, McClain suggests, because the bankruptcy is pending in New York and most of the former employees live in Houston and can’t afford to travel to New York for hearings. On Jan. 11, U.S. Bankruptcy Judge Arthur J. Gonzalez turned down motions to change the venue to Houston from New York. McClain isn’t alone in asking Carolyn S. Schwartz, the U.S. trustee in New York, to establish an official committee for the ex-employees of Enron. Texas Attorney General John Cornyn made a similar request in early January. Cornyn says he is alarmed by sad stories of former Enron employees who lost their life savings in 401(k) plans. “I strongly believe these hardworking men and women need and deserve a resounding voice in Enron’s reorganization,” Cornyn said in a letter he wrote to Schwartz on Jan. 7. Cornyn has since removed himself from the state’s Enron investigation. Schwartz met with McClain and Rathvon on Jan. 14 to discuss their request for an official committee for employees. Others at that meeting include Moran and Jeffrey Boyd, a deputy Texas attorney general for litigation. McClain, Rathvon, Moran and Boyd all say Schwartz was attentive, but didn’t indicate if she is inclined to grant their request. If Schwartz decides against setting up the committee, McClain and Boyd say they could ask Gonzalez, the bankruptcy judge, to do it. He may be receptive to that idea. He hinted broadly in a memorandum opinion on his decision denying the change of venue request that an official employee committee might be the best way to address issues of concern to the employees, including their concerns involving the company’s 401(k) plan. “This would generally not require the claimants to actually appear in court to have their rights protected and concerns raised,” Gonzalez wrote. Boyd, who is supervising the Enron Task Force for Cornyn, says that while Schwartz was sympathetic to the concerns of the people who want a special committee for employees, she also expressed concern about the administrative and financial costs of an additional committee. Enron, the debtor, would be responsible for paying the fees of lawyers representing the committee. McClain says he would be interested in representing the committee. Moran says the Official Committee of Unsecured Creditors’ has taken a position on establishing an official committee for employees, but he says that stance hasn’t been made public. Luc Despins, a partner in Milbank, Tweed, Hadley & McCloy who is an attorney for the official creditor’s committee, did not return a telephone message by press time. And because of his position on the committee, Moran says he cannot say if he believes an official committee for employees is necessary. Like Rathvon, Moran is a member of an informal group of former Enron employees who came together because of friendship and/or mutual interest. Moran’s group, the Enron Deferred Compensation Group, includes about 100 ex-employees who are owed collectively about $50 million in deferred compensation. Moran says he retired early at age 52 in August 2001, and expected to receive his first deferred compensation payment during the first quarter of 2002. He joined Northern Natural Gas Co., an Enron predecessor, in 1974 after graduating from law school. While about 100 ex-employees are in Moran’s group, he says more like 400 former employees are owed up to $400 million in deferred compensation. Moran says he ended up on the Official Committee of Unsecured Creditors because he had been talking to Schwartz’s office. He says a couple of friends who know he is a lawyer contacted him the day after the bankruptcy with some questions about deferred compensation, and his e-mail responses were subsequently forwarded to a large group of retirees. After they formed their ad hoc committee, Moran says he ended up on the group’s steering committee and was asked, because he was a lawyer, to see about getting on the Official Committee of Unsecured Creditors. “The trustee saw it as a substantial creditor group,” Moran says. Meanwhile, with the meeting with Schwartz behind them, Rathvon says he and other members of his group are trying to expand their ad hoc group to include a broader cross-spectrum of former Enron employees. They hope to inform other former Enron employees that they don’t necessarily need to hire a lawyer simply to file a claim in bankruptcy court, Rathvon says. He and McClain say they’ve heard of some other informal groups of employees who are organizing and looking into hiring lawyers for that reason. “We recognize there are probably a lot of little groups out there, all spinning out there, flailing if you will,” Rathvon says. “It would be better to have a committee be the focal point.”

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