Statement of Dary Ebright, Special Tester, Western Division, Portland General Electric, Portland, Oregon,
and Member, International Brotherhood of Electrical Workers Local 125, Portland, Oregon

Testimony Before the Subcommittee on Oversight
of the House Committee on Ways and Means

Hearing on Employee and Employer Views on Retirement Security

March 5, 2002

I. INTRODUCTION

A.  Personal Information

My name is Dary Ebright.  I am 54 years old.  I am an Enron worker; I work as a Special Tester for Portland General Electric’s (PGE) Western Division, a wholly owned subsidiary of Enron.  I am also a member of the International Brotherhood of Electrical Workers (IBEW) Local 125, where I have been a very active union member since I started with the company in 1967.  Most importantly, I was elected by my peers to serve on the collective bargaining agreement negotiating committee five times in my 34 years with PGE. 

The reason I am here today is to tell you how the Enron collapse has affected me personally and to talk about the importance of retirement security in America.  I want to tell you what my co-workers and I experienced at our company and why I believe the system is broken.

B.  Corporate Culture

First of all, you have to understand what type of company PGE was before Enron bought it in 1997.  PGE has been in business for over 100 years.  It was a very stable, local utility company that was run almost like a family business.  PGE was very active in the community, and was a model of corporate and civic responsibility.  Our stock price was steady, always within the $23 to $28 range.  Putting your money into PGE stock seemed almost like putting it in a savings account at the credit union.

When Enron came in, it was riding on the unprecedented growth of the 90s, and turned PGE’s culture upside down.  Employees, and all Oregonians, were very skeptical of this fast-talking, Texas Corporation. When the sale was finally approved in 1997, our PGE stock was automatically converted to Enron stock, one-for-one.  We did not have a choice.  When the conversion to Enron took place, none of the employees realized how different this corporation was and what kind of impact it would have on our investments.  We know now, that our stock went from being a stable, predictable asset to a volatile, high-risk gamble.

II.               PLAN ASSET DIVERSIFICATION & RESTRICTIONS ON SALE OF COMPANY STOCK

A.  How our Plan Worked

PGE was a trustworthy, solid company with which we had a good working relationship.  There is a long history of collective bargaining that involves the PGE retirement/savings plan that dates back to 1978.  This was the first year employees were allowed to contribute money from their paycheck to a company savings plan that was matched with PGE stock.  This savings plan was designed to supplement our members’ defined benefit pension plan and enhance their retirement accounts.  At this time, these funds were not pre-tax or 401(k) type accounts – strictly savings accounts.  In 1994, these savings accounts evolved into a 401(k) plan and became more sophisticated as the law allowed.  We continued to bargain improvements, and as the 401(k) did better and better, our members got swept up in the “Enron frenzy” as we contributed more and more to our 401(k)s. Unfortunately, I have to admit, I was involved in the negotiating committees to direct our emphasis less on improving our defined benefit plan.  In 1998, we even converted our defined benefit pension plan for our employees below the age of 42, to a defined contribution plan with Enron stock being a large part of the company contribution. What this amounts to is our employees below age 42 have lost the company contribution of Enron stock for their retirement for the last 3 years.  Our plan also prevented us from selling any of the company’s matching stock contributions until age 50, but even after that, I didn’t think much about trading because the company convinced us that Enron was the best investment we could possibly make with our money.  It was so good that in 2001, I converted my defined benefit plan from a guaranteed annuity to a $200,000 lump-sum investment that would draw 5.25 percent interest until I retired.  This looked real good, considering it was only one “leg” of my “three-legged stool” that PGE kept telling me that I had for a retirement plan (PGE pension, 401(k) and Social Security).

B.  Personal Losses

At the height of Enron’s stock success, My 401(k) plan was worth $968,000.  $495,000 of that value was in Enron stock.  I put 15 percent of my earnings into the 401(k) each pay period, and received a six percent matching contribution from the company in Enron stock.   I was approaching retirement, and felt it was important to put as much as possible into my 401(k) because it was important for my future retirement security. I finally gave up in February of 2002, when the PGE employees received an e-mail that our stock was worthless, so we should sell it for what we could get out of it.  I sold all of my interest in Enron for about $2,300.    I worked hard to save for my future and now it is gone.  I was going to retire in August 2002, now I am forced to work longer to try to make up for lost ground.  I will probably be working until I am 62, when I get another “leg” of my retirement available, Social Security.

C.  Stock Fluctuations

To summarize the wild ride we were on with stock prices from the height of the stock value in 2000 through the end of the lock down period:

D.  Examples of Devastation

There are many stories that are just as devastating as mine.  For example, Roy Rinard, age 53, has 22 years with PGE and had a $472,000 loss.  He was hoping to retire early after many years of physically demanding work, but now cannot.  Al Kaseweter, a special tester with PGE’s Gresham Division, is 43 years old, has 21 years with PGE and has lost $318,000. Tim Ramsey, age 55, a special tester in Wilsonville, lost $1,000,020 in Enron Stock.  He was going to retire last April but couldn’t afford it after his losses.  Dave Covington, age 42, has 22 years with PGE and lost $300,000.  I could go on and on with stories of folks who have delayed retirement or were going to finance their children’s education with these funds.

E.  How Could This Have Happened?

You may wonder why I chose to put such a large percentage of my assets in Enron.  Well, the answer is simple.  I did the research, talked to a lot of people and invested my money in a “winner” – or so I thought.  The stock was doing well, and all over the company, people said Enron was the best investment you could make.  Words like “concrete” and “bullet-proof” were drifting through the halls of the shop as many folks watched the stock price climb in the late 90s. 

As I mentioned earlier, in July of 1997, after the sale of PGE to Enron was complete, all PGE stock held by employees was converted to Enron stock automatically.  We were all heavily invested in PGE stock up to that point, because it was extremely stable, and we had accumulated a lot of shares through the company savings plan before it was converted into a 401(k).

Instead of selling shares after the age of 50 I listened to Mr. Lay, Mr. Skilling and all the analysts, saying the stock would go back up to $120 per share. So, on February 26, 2001, I bought another 2,126 shares of Enron at $70.56, giving me 6,300 shares in Enron.  At that point, my 401(k) went from 40 percent to 60 percent invested in Enron stock. I believed in the wrong people.  At this time, I still had $723,000 in my 401(k), which was looking pretty good. Now, I am down to less than $300,000 when I was supposed to be retiring.

III.  EFFECT OF LOCK DOWN

A.  Date and Duration of Lock Down Disputed

As you know, the company made a switch in 401(k) plan administrators in, depending on whom you talk to, September or October 2001.  This just happened to coincide with the company’s announcement of a revised accounting statement detailing additional losses in revenue, followed by the most dramatic decrease in Enron stock value we had seen.  In late September 2001, I, along with several other PGE employees, attempted to access my account to sell Enron stock and could not.  Our accounts seemed to be frozen before the official date Enron said the lock down period would start.   I, as did many others, tried to contact our plan administrator for help.  Usually, an employee would either be on hold indefinitely, or if they did get through, they were told the system was temporarily down and to try again later. I had decided to move some of my money from Enron, but when I couldn’t get in, I told myself that selling Enron wasn’t the right thing to do. My belief is – and I hope someone will investigate and verify my theory – that Enron froze out employees during this period to try to save the company. 

The suffering people went through as they watched their futures crumble each day the lock down dragged on was unimaginable.  The buildings were dead quiet.  People were walking around in a daze.  Everyone was in shock.  Each person was trying to catch a glimpse of news on television to see if the situation had miraculously turned around, or had dramatically gotten worse.  It was always worse.  Emotions ranged from profound anger to unbearable grief and sadness.  It was a brutal awakening.

IV.  LACK OF ACCURATE INFORMATION FROM HIGH LEVEL EXECUTIVES

A.  Misleading Information was Common

Many employees, including myself, followed the stock prices closely.  When the value of our shares started to go down in April of 2001, and Ken Lay sold off millions of dollars in his own Enron stock, officials at the company would make excuses and ease our fears by talking about how the company was strong and the price would go back up.  Our members were wondering why the CEO was selling so much stock if the company was doing well?  We were told that, by law, Mr. Lay had to exercise a certain amount of these options periodically, and it was routine for CEOs to do so.  Also in April 2001, Jeffery Skilling, then President and CEO of Enron, told employees that the stock was undervalued and would go up to $120 per share.  This was also reported in The Oregonian (Oregon’s statewide newspaper).  On August 14, 2001, Ken Lay sent an email to employees stating, “Enron is one of the finest organizations in business today.  Performance has never been stronger.”  On August 21, 2001, Ken Lay sent another email to employees expressing confidence that stock prices would continue to go up, which was also quoted in the Enron newsletter.  So, as you see, the company officials kept encouraging us to hold onto our stock and never let on that our company was in serious trouble.   We thought we were all working together, helping to build our company and make it strong.  Never did we think that this collapse could happen.

V.  ABSENCE OF SECURITY UNDER DEFINED CONTRIBUTION RETIREMENT PLANS

A.  What is Left? 

I feel lucky, compared to the thousands of Enron employees in Texas, who have no jobs and may be completely out of luck when it comes time to retire.  I may have lost nearly $600,000, but at least I have a modest income waiting for me when I retire.  I was planning on living relatively close to the standard of living I enjoy today, adding my Social Security benefits to my PGE pension and my 401(k) savings.  Now, I have to put off retirement until I can make up at least some of what I lost.  I can at least rest a little easier, however, knowing that my PGE pension gives me some real protection and is a foundation that I can add to as I start to rebuild my savings.  It is important to have that guarantee – at least if PGE were to go out of business with the rest of Enron, the federal government would ensure my defined benefit pension so I wouldn’t be left with absolutely nothing after all of my hard years of work for the company. 

VI.  CONCLUSION

A.  What Can Be Done?

In our case with Enron/PGE, thousands of employees trusted their employer to tell them the truth and the employer deceived them. The fall out from this debacle will affect our country for generations to come.  Our people played by the rules – they weren’t all sophisticated investors, just hard-working, honest folks who became victims of Enron’s lies.  Thousands of people have been deprived of their futures.  In our small part of the world, our best guess is that in excess of $800 million has been stolen by Enron, ruining nearly 3,100 lives and futures.   We had members, guided by their faith in a company and its promises, who, in a matter of months, lost everything they spent decades saving for retirement.

We hope Congress will make changes in the law so that, if a worker earns a company contribution to his or her retirement account and the company makes that contribution in company stock, a hard working person has a right to sell that stock when he or she chooses and is not forced to go down with the company. 

I also would like to see laws that deal with other things that went wrong at Enron.  First, something needs to be done about lock downs.  We were locked out of our accounts at a time when the price of Enron stock was falling sharply.  Even though many company executives probably knew ahead of time that the stock was going to continue to fall, they went ahead with the lock down anyway.  Congress should address the fact that company executives could do this, even though they, themselves, were still able to sell their own Enron stock. 

Second, Congress should look into the total control that the company had over the 401(k).  Even though these were the workers’ retirement accounts, Enron held all of the cards.  No one who was running the 401(k) seemed to have our interests at heart; at every turn, they seemed to be making decisions that were in the best interests of Enron, not the employees.  Also, the information we got about our 401(k)s and Enron stock came from the company executives.  We now know that we were being misled, but at the time, we trusted them.  If workers’ representatives had been in a management role in the plan, things might have turned out very differently.  If company executives had not been allowed to mislead us, and if we had been getting unbiased information about how best to protect our retirement money, fewer workers would have been hurt so badly.

In closing, I want to say, again, how lucky I feel that I still have Social Security and my defined benefit pension.  Together, they will give me real retirement security.  Congress should do what it takes to make sure that workers continue to get guaranteed benefits from Social Security and defined benefit pensions.

Thank you for the opportunity to speak before your committee today.