Florida Investigates Firm That Bought Enron Shares for Pension Fund After Trouble Surfaced

greenspun.com : LUSENET : Current News - Homefront Preparations : One Thread

fair use...

Link

Florida Investigates Firm That Bought Enron Shares for Pension Fund After Trouble Surfaced

MIAMI (AP) - Florida officials are investigating whether a firm hired to make investments for the state's pension fund acted improperly when it made poorly timed purchases of Enron stock.

The $94 billion pension fund lost more than $300 million after it was forced to dump 7.5 million Enron shares in the aftermath of the company's Dec. 2 bankruptcy. State officials say no one receiving a pension will be affected because the fund provides defined benefits guaranteed by the state.

The state Board of Administration fired Alliance Capital Management Corp. last month, saying it was troubled by the New York financial adviser's decision to continue buying Enron shares for the fund last fall even after indications of the company's financial problems became public.

One of Alliance's executives, Frank Savage, was also a board member of Enron and a major contributor to political campaigns, The Miami Herald reported Thursday.

"We've been investigating," said Coleman Stipanovich, deputy executive director of the State Board of Administration, which oversees the pension fund. "If Alliance did anything improper or was unduly influenced by Savage, we could sue Alliance, but we have made no decision on that."

Stipanovich said state officials did not learn until late last year of Savage's tie to Enron. Alliance officials have said Savage left their company in early August. They said Savage had no influence in purchasing the shares.

State records show that on Oct. 22, the day the U.S. Securities and Exchange Commission announced it would investigate Enron, Alliance purchased 311,000 shares for the state pension fund. Alliance bought an additional 2.4 million shares between Oct. 25 and Nov. 16. In all, between August and October, 4.9 million shares were bought for the fund.

Enron filed for Chapter 11 bankruptcy protection on Dec. 2. Around the same time, the state board terminated Alliance.

"It was a general performance issue. Enron was the straw that broke the camel's back," Stipanovich said.

In a Dec. 5 letter to the board, Alliance vice chairman Alfred Harrison said the company had considered Enron a good investment because it held a dominant, 45 percent position in the newly deregulated area of the wholesale gas and electricity trading market.

An Alliance spokesman did not immediately return a phone call Thursday seeking further comment.

Alliance was one of 70 money managers the state uses for the fund.

-- Anonymous, January 17, 2002


Moderation questions? read the FAQ