[Congressional Record Volume 148, Number 1 (Wednesday, January 23, 2002)]
[House]
[Pages H19-H20]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                             ENRON DEBACLE

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from California (Mr. George Miller) is recognized for 5 
minutes.
  Mr. GEORGE MILLER of California. Mr. Speaker, the Congress and the 
public have been struggling with the issues surrounding the Enron 
debacle, the meltdown of this company and its impact on employees and 
on pension plans of people who were locked into their plans and could 
not escape at the time that insiders within the company were selling 
stock.
  A whole range of reasons have been given as to why this was the rule; 
but in point of fact, a corporation simply made a decision that workers 
were going to be treated differently than management; that while the 
management could sell stock at any time, somehow the employee who chose 
to sell his or her stock would disrupt the market. The fact is probably 
that management sold much more stock than the employees hold, and it 
never disrupted the market. The reason for the disruption of the market 
around Enron is different than the sale of those stocks.
  Today, we learned that Kmart employees suffer from the same handicap. 
While Kmart has been heading toward Chapter 11 bankruptcy for the last 
month or so, we find out that Kmart again has a provision very much 
like Enron, and that is that employees cannot sell their stock. In 
Enron, you could not sell the stock until you were 50. At Kmart, you 
could not sell it until you were 55. But if you chose to sell it, you 
would have to pay a very substantial, a very substantial penalty for 
the withdrawal of the employee contributions. This is even for vested 
individuals.

                              {time}  1445

  In spite of that, thousands of individuals are cashing in. They are 
paying a penalty when they sell their stock. Management is not paying a 
penalty when they sell their stock.
  It is clear that we need for vested employees in a pension plan to 
have complete control over their assets. The idea of management 
contributing corporate stock is not a bad idea. The idea of 
corporations matching is not a bad idea. But for the vested employees, 
the bad idea is that they cannot control their holdings.

[[Page H20]]

  Mr. Speaker, I have introduced legislation that will provide employee 
control over their assets of their pension plans once they are vested. 
It is important that this happen. As we see again today with the Kmart 
employees, had they had control over their plans, if they were not 
required to pay a penalty, they could have exercised the independent 
judgment that so many people say retirees must be able to exercise. One 
of the reasons we say we want Americans to have 401(k) plans, the 
supporters do, as opposed to Social Security, is they can exercise 
their judgment. But if these plans are prohibited, if pension plans are 
out of the control of workers, and they have no way of knowing what is 
happening within the corporation, then they really do not have the 
exercise of power over the assets that have been put away for them.
  In the situation of Enron, not only do we have a corporation engaging 
in fraud and inside dealing, but the entity that was supposed to 
certify it to employees and other investors was engaging in the same 
fraud, the deceptions and the criminal behavior, I believe. So where 
does the employee go? Yet those employees were trapped in that pension 
system.
  The same is true in Kmart. Kmart looks more like a classic bankruptcy 
case. They made a series of bad business judgments, lost market share, 
their competitors outfoxed them, and now they are having trouble and 
seeking protection of the bankruptcy courts. Yet they locked their 
employees in, or at least locked them in where the employee would have 
to consider, because once the employee in Kmart exercised their 
judgment to sell the stock that was contributed by the employer, they 
would pay a very hefty penalty, and then they would be prohibited from 
having any further contributions by the employer. That is not a system 
which puts value on the ability of the employee in a vested plan to 
make these decisions.
  Mr. Speaker, it is also reported today that Sears requires their 
employees to hold on to their stock, although apparently not 100 
percent of the stock, but to hold on to the stock. We see now that they 
are impacted in the same way in terms of their ability. What we are 
talking about here is the ability of individuals to rescue their 
retirement. As we saw in Enron, we have seen families and individuals 
and couples who have had their retirement destroyed by the criminal 
behavior of Enron and Arthur Andersen. They should not have that 
retirement destroyed by the bad business decisions of Kmart when they 
are in a vested plan.
  Mr. Speaker, I urge support of our legislation to make sure that 
Americans have control over their pension plans and they cannot be 
locked down by their employer.

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