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It has been a big week for Eli Gottesdiener. The D.C. lawyer has been interviewed on CBS and CNN. He has been quoted in Newsweek and Financial Times. That’s not your average weekly media diet for an employee benefits litigator. But these aren’t ordinary times. The thunderous and very public collapse of the Enron Corp. is the scandal that has suddenly made pension plan losses sexy. Gottesdiener is one of a legion of plaintiffs’ lawyers nationwide descending upon the fallen energy giant. He has filed a lawsuit to recover an estimated $1 billion in losses suffered when the bottom fell out of Enron’s employee 401(k) plan. “This thing is unprecedented,” he says. Last week, while the Bush administration was defending its contacts with Enron senior officers, the Justice Department investigation into Enron’s collapse was cranking up, and Arthur Andersen accountants were testifying before Congress, plaintiffs’ lawyers like Gottesdiener were doing what they have been doing for months: getting ready for the largest case of its kind in American history. Even though the dust from the toppled Enron has yet to settle, the advance work is crucial. Already, dozens of class actions alleging securities fraud and related claims have been filed in federal court in Houston. Lawyers across the country are battling to represent Enron employees who lost their life savings, Enron shareholders who bought stock based on the company’s inflated earnings, and state governments that watched their public employee pension plans lose hundreds of millions of dollars. “It’s such a massive fraud,” says Seattle lawyer Steve Berman, who has filed his own class action. Next month, the plaintiffs will appear before a Houston federal judge to try and get things sorted out. At that time, the court is likely to select a lead plaintiff, a party that has allegedly suffered the most damaging losses as a result of Enron’s actions. That lead plaintiff, and the law firm that represents it, will then play a commanding role in directing the coordinated litigation and hiring the necessary legal counsel. “The lead plaintiff gives one a little more control of the case,” says Joe Case, a spokesman for the Ohio Attorney General’s Office, one of the states that suffered devastating pension fund losses. “He is a major player in the disposition of the case.” Not to mention that the lead plaintiff — and the law firm that represents it — will also likely see the largest payday. LAWYERS, FUNDS AND MONEY Essentially, there are two kinds of cases before the federal court in Houston. The ones brought by lawyers such as Gottesdiener and Berman involve Enron employee benefit plans. The second set alleges massive securities fraud on behalf of outside investors who bought artificially inflated Enron stock. Both groups of cases, however, arise out of the same primary allegations: that officers of Enron — with the cooperation of auditor Arthur Andersen — disguised the financial condition of the energy giant, knew the company’s stock was wildly overvalued, and then dumped the stock before the company’s true finances came to light. Because of that, large chunks of the cases are likely to be consolidated in order to avoid a plague of document requests and deposition notices raining upon Enron, Andersen and their officers and directors. Multiple groups are vying for lead plaintiff in the securities suits, including the state of Florida and a consortium of states including Georgia, Ohio and Washington. Battling the states for control of the securities litigation is the New York-based law firm of Milberg Weiss Bershad Hynes & Lerach, the 800-pound gorilla of securities class action firms. Milberg Weiss represents Amalgamated Bank, a New York trustee of multiple investment funds and purchaser of more than 13,000 shares of Enron stock. The firm also represents the University of California’s employee retirement plan. Milberg Weiss lawyer Patrick Daniels maintains his client is in the best position to be lead plaintiff, as it is already waist-deep in probing Enron’s byzantine finances. Daniels says the firm has conducted more than 75 interviews and has had teams of people relocated to Houston. He says Milberg is sinking $350,000 a day into the case. “On behalf of Amalgamated Bank, we’ve devoted enormous resources to this case and we’re prepared to continue for the next three to five years to devote enormous resources,” Daniels says. “We’re really the most aggressive firm investigating the case.” He estimates that legal expenses over that span could run as high as $10 million — and that doesn’t include attorney time. Milberg Weiss last month attempted to convince the Texas federal judge then hearing the securities case, U.S. District Judge Lee Rosenthal, to temporarily freeze $1.1 billion in proceeds from the sale of Enron stock by Enron’s officers. Typically, courts do not secure a defendant’s assets at the onset of litigation. If the court doesn’t freeze the proceeds, Daniels says, “They’d either be spent or secreted away in Cayman or Swiss bank accounts.” Judge Rosenthal recused herself from the case on Jan. 11. The firm also wants an emergency order to prevent Arthur Andersen from destroying further documents relating to Enron. That request will be heard by the court this week. BUSH-WHACKED Public employee pension funds that lost millions of dollars because of Enron’s collapse will also make compelling cases to be lead plaintiff. The states of Georgia, Ohio and Washington banded together in order to make their combined losses — $282 million — appear more substantial to the court. They’ve hired law firms in Atlanta and Wilmington, Del., to represent them. The state of Florida lost more than any other state — some $320 million. It, too, has sought an ally before the Houston federal court. Earlier this month, it joined with New York City’s pension fund, which says it lost $109 million. Much of Florida’s losses resulted from the actions of the pension fund’s investment manager, Alliance Capital Management, which bought 7.6 million shares of Enron stock after the Securities and Exchange Commission announced in October it was investigating the company. Florida’s presence is noteworthy because of its Republican governor, Jeb Bush. Under Florida law, the governor is one of three trustees of the state pension funds. But the president’s brother also received more than $6,000 in campaign contributions from Enron, part of a huge campaign giveaway from Enron that has primarily benefitted the GOP. Florida’s rivals in the Enron litigation are expected to argue that Bush’s involvement makes Florida a poor choice as lead plaintiff. A spokeswoman for the Florida State Bureau of Administration, which oversees the pension plan, dismisses that argument. “The governor is not involved in the litigation,” says Lee Baldwin. “The litigation will be handled by outside counsel.” The state has retained law firms in New York and West Palm Beach, Fla., to pursue the case. Florida’s Democratic attorney general, Robert Butterworth, has been anything but reticent concerning Enron. Last week, his office issued subpoenas to Enron and Arthur Andersen in advance of pursuing a civil racketeering action against the companies. “We can hit them in the pocketbook if we can’t put them in jail,” says Mary Leontakianakos, who heads the AG’s economic crimes section. The parties seeking to make their case to be lead plaintiff will appear before the court on Feb. 6. As for the employee benefit lawyers, they may work together to develop their own lead counsel for their claims. “We should be reserving our fighting for going after the bad guys,” says Seattle’s Berman. Gottesdiener, for one, seems determined to be in that mix. Earlier this month, he turned over e-mails he obtained from a high-level source at Enron to congressional investigators. The e-mails were sent by Chief Executive Officer Kenneth Lay to Enron employees in August, less than two months before, the company announced its restated earnings, telling them “our performance has never been stronger.” Last week, Gottesdiener released two more Enron e-mails that detailed the company’s attempts in October to restrain its employees from selling off their downward-spiraling Enron stock. ROADBLOCKS AHEAD Perversely, for such a seemingly tangled set of circumstances, litigating the Enron cases could be easier than most cases of such scale. Information about alleged fraudulent transactions on the part of Enron officers is coming to light regularly, thanks to intensive media and government scrutiny. But for both the plaintiffs pursuing securities fraud claims and those suing over their devalued benefit plans, several hurdles stand in their way. Enron has declared bankruptcy, which usually stops any litigation against a corporation dead in its tracks. That is why most plaintiffs have avoided suing the corporation directly and instead are focusing on the actions of its officers, directors and Arthur Andersen. However, lawyers for Enron are expected to argue that the bankruptcy stay should extend to those related parties as well. “There’s an argument there,” says Stephen Susman of the Houston firm Susman Godfrey, which represents Enron. “They’re going to point their finger back at Enron. A lot of this litigation is going to be stayed in the near future.” Similarly, the company and its related defendants are expected to ask the court to delay the civil cases until the investigations undertaken by the Justice Department and the SEC are completed. The largest problem, however, may be a lack of gold at the end of the rainbow. Enron itself is bankrupt. Its officers and directors have limited assets. Their actions are covered by insurance, but that is something that is likely to be the subject of extensive litigation. Andersen, and its insurers, too, are under siege. There may not be enough to go around. “The lawyers are not going to make a lot in the case,” Gottesdiener says. “We’re gonna be lucky to get our fees.”

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