Enron woes make dent in permanent fund

Posted: Thursday, December 06, 2001

The collapse of Enron Corp. will have a modest impact on next year's permanent fund dividend, according to the head of the Alaska Permanent Fund Corp.

The $25 billion fund lost about $12 million this year from stock investments in Enron, a major energy trader that filed for bankruptcy this week after the company admitted it overstated profits.

The $12 million loss "will have some modest impact on the dividend, but we may well take a lot of profits over the rest of the year in other areas," said Bob Storer, executive director of the fund.

Enron stock was valuable a year ago, trading at nearly $85 a share. But the stock plunged after revelations in October that Enron's former chief financial officer was running partnerships that allowed the company to keep half a billion dollars in debt off its books.

Enron shares dipped to a low of 26 cents Friday, and were at 87 cents on the New York Stock Exchange on Tuesday after investors learned the company had secured $1.5 billion in short-term financing from two banks.

Although the permanent fund will not spearhead litigation against Enron, the state corporation will participate in a class action lawsuit if one is filed, Storer said.

"It's reasonable to assume there will be class action litigation," said Storer, noting he already has fielded phone calls from several law firms in the Lower 48.

The attorneys wanted to know how many Enron shares the permanent fund had purchased since 1998, said Storer. Enron reportedly overstated its earnings for several years, and based on the attorneys' inquiries, Storer speculated class action litigation would seek restitution for damages since 1998.

Storer said any money gleaned from a lawsuit would be distributed to injured parties based on the number of shares owned during a period of time, not on actual losses. The corporation has not calculated the total number of shares it bought from 1998 to 2001, he said.

The actual losses to the fund appear significantly lower when tallied over that time frame because the permanent fund made money on the troubled company from 1998-2000. The fund realized profits of $4.4 million in 1998 from Enron stocks, $1.8 million in 1999 and $5 million in 2000, Storer said.

The fund lost a total of $843,000 through Enron stocks from 1998-2001, he said, noting that figure includes the profits plus the $12 million loss this year.

The annual dividend is based on a five-year average of investment income from the fund. The state won't know until next year to what extent Enron's woes affected the 2002 dividend.

Kathy Dye can be reached at kdye@juneauempire.com.

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