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Georgia’s state employee retirement plans took a $127 million hit in the collapse of Enron Corp. Now Attorney General Thurbert E. Baker has teamed up with three other states that want to control shareholder litigation against the company. The group has chosen an Atlanta lawyer as co-lead counsel. Baker and his counterparts from Ohio, Washington and Alabama have formed a group vying for lead plaintiff status. A Baker spokesman says the states teamed up to pursue their similar claims — hundreds of millions of dollars in lost value to their state employee retirement plans. Appointed by the federal judge overseeing the case, lead plaintiffs in a federal class action generally get to control the litigation and direct any settlement discussions, although the precise arrangement is decided by the judge. Lead counsel for lead plaintiffs also get an opportunity for lucrative work, although the judge must approve plaintiffs’ attorney fees as well. The four-state group has tapped Martin D. Chitwood of Atlanta’s Chitwood & Harley and Jay W. Eisenhofer of Wilmington, Del.’s Grant & Eisenhofer, as co-lead counsel. THREE OTHER GROUPS COMPETE However, there are at least three other groups trying to get Judge Lee H. Rosenthal of the U.S. District Court for the Southern District of Texas to appoint them lead plaintiffs. They are: the state of Florida, a group of California retirement plans combined with a New York bank, and a group of New York City pension funds. Rosenthal is bound by the 1995 Private Securities Litigation Reform Act, which was passed over then-President Bill Clinton’s veto. The law directs judges to pick as the most adequate representative of the class the plaintiff who “has the largest financial interest in the relief sought by the class.” Led by Georgia’s $127 million, the state group claims $331.5 million in losses, according to a motion filed by Georgia in December. A spokeswoman for the Florida Board of Administration, which manages the state’s retirement funds, says its losses total about $300 million. The state is represented by Berman DeValerio Pease Tabacco Burt & Pucillo of West Palm Beach, Fla., and Entwistle & Capucci of New York. According to a recent article in the San Diego Union-Tribune, New York’s Amalgamated Bank and several California employee funds lost $249 million. Lawyers with Milberg Weiss Bershad Hynes & Lerach, which represents the group, could not be reached to discuss the case. The article states that the New York pension fund group claims losses of $109 million. Those totals seem to put the Georgia group in the best position to become lead plaintiff. But Atlanta securities litigator W. Pitts Carr, of Carr, Tabb, Pope & Freeman, says it’s not that simple. “Most of the courts have ruled out the group approach,” says Carr, noting that the 1995 statute “doesn’t say anything about groups” but refers to individual plaintiffs who have the largest financial stake in the case. That means Florida could get the nod, but Carr says it’s hard to tell: “It’s highly variable.” But in its motion to be appointed lead plaintiff, the Georgia group argues that courts “have noted that that the ‘largest financial interest’ standard should be viewed broadly” in terms of the numbers of shares purchased. The motion adds that the legislative history of the reform act demonstrates that it was intended to encourage institutional investors like the Georgia group. Carr, who has battled Chitwood in the past for lead counsel status in class action cases, says he was not interested in getting involved in the Enron case. “There’s probably thousands of law firms involved, it’s going to go on for years and years, and in the end, no one will be happy.” CHANCES OF RECOVERY? Asked about the chances of recovery from the bankrupt company, Carr points out that the officers and directors usually are covered by insurance policies, and the recent claims of document destruction by accounting giant Arthur Andersen (now Andersen) could open more deep pockets, should any liability be established. Chitwood’s office referred calls to Russell D. Willard, a spokesman for Baker. Willard says Chitwood was known to the Law Department and the retirement plan boards because Chitwood in years past has given presentations to them on how states can pursue class action securities claims. An Andersen press release announcing the firing of the partner in charge of the Enron relationship states that the firm continues to explore the matter but has concluded that its “policies and reasonable good judgment were violated” when Enron documents were destroyed. Georgia’s motion states the class action was filed against Enron after it announced in November that it was revising financial statements from the past four years to correct misstatements that grossly underreported the company’s debt. Mark Newby et al v. Enron Corp., No. H-01-3624 (S.D. Texas, Dec. 21, 2001). Enron’s stock price subsequently fell to below $1, from a high of nearly $90 in 2000, and the company was delisted from the New York Stock Exchange on Tuesday. The price at the delisting was 67 cents a share. Georgia officials say the $127 million in losses represents less than 1 percent of the entire retirement funds for state employees and teachers.

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