(U-WIRE) LOS ANGELES — In a unique situation, the University of California is hoping Enron can keep supplying its campuses with energy, while at the same time seeking money that, the UC claims, it unfairly lost to the former giant.
The UC entered into a lawsuit Dec. 21 against senior members of bankrupt Enron, claiming top-level employees released false financial statements and engaged in massive, illegal “insider trading” at the expense of its stockholders.
The UC was one of many groups to take legal action against the Texas-based energy-supplying firm. A U.S. District Court in Houston is currently “consolidating all of these lawsuits,” said UC spokesman Charles McFadden.
The total loss for all UC portfolios from Enron’s collapse measures $145 million, or 0.3 percent of the university’s investment funds, according to the UC Office of the President.
Despite the loss, UC officials say the UC’s pension plan recipients will not be hurt significantly.
“The alleged financial fraud losses from the (UC) retirement plan’s Enron position in no way affects the ability of the retirement plan … to meet its obligation to its beneficiaries,” said David Russ, treasurer to the UC Board of Regents.
The market value of the UC’s portfolios was $54 billion as of Nov. 30, according to UCOP.
But the lawsuit isn’t the UC’s only worry concerning Enron. Some believe the energy contract between the UC and Enron — which filed for bankruptcy, but is still operational — is on shaky ground after the company made massive cutbacks.
As of now, seven UC schools are still receiving energy from the company under a contract that requires Enron to supply the UC and California State University systems with energy through March 2004. UCLA and UC Riverside receive energy from local companies such as the Los Angeles Department of Water and Power.
Neither McFadden nor University Counsel Lloyd Lee were sure how long Enron would be able to supply the UC, but both said that right now, the contract benefits the UC greatly.
The UC is receiving energy at the rate of about 6.9 cents per hour — well below the ever-fluctuating market price — and a new contract could cost the university millions of dollars.
“Currently it’s a very advantageous contract,” Lee said.
After Enron filed for bankruptcy Dec. 2, a number of individuals and groups filed lawsuits. By Dec. 6, 60 complaints had been registered.
The lawsuit claims that people who purchased Enron securities between October 1998 and Nov. 27, 2001 were cheated out of their money, as Enron executives released false financial statements, artificially inflating the price of Enron securities. With inflated stocks, Enron executives sold their shares, yielding proceeds of $1.1 billion, before watching their company collapse, plaintiffs allege.
Enron spokespersons were unavailable for comment after calls to its Houston press office Friday, but Enron has repeatedly denied allegations.