Enron Bondholders To Get $8 MillionOct 10, 2002 | AP
Enron Corp. bondholders will receive $8 million that was turned over to the Securities and Exchange Commission by former company executive Michael Kopper under an agreement between the agency and company's creditors.
The compromise, which awaits approval next week by U.S. Bankruptcy Judge Arthur Gonzalez, ends a conflict between creditors and the SEC over who should get the money.
Kopper, an aide to former Enron chief financial officer Andrew Fastow, pleaded guilty Aug. 21 to money laundering and conspiracy to commit wire fraud. He admitted creating and running partnerships designed to funnel millions of dollars to him, Fastow and others at the expense of Enron shareholders.
As part of the plea, he surrendered $12 million to the federal government, $8 million to the SEC and $4 million to the Justice Department that he pocketed illegally from the schemes.
SEC officials promised the money would be distributed to shareholders, but the creditors committee said they should have first crack at the forfeited funds.
After wrangling in the New York bankruptcy court over the last several weeks, the SEC and creditors agreed the $8 million would be distributed to investors who hold nearly $6 billion in unsubordinated Enron debt securities in order of the seniority of their notes, according to court documents filed Wednesday.
Creditors withdrew their claims to the other $4 million, but reserved the right to sue Kopper.
Anthony Sabino, a professor at St. John's University who specializes in bankruptcy and energy law, said Thursday the agreement represents a compromise between senior creditors who have a right to be paid first and the SEC's desire to repay shareholders.
Sabino said a bankruptcy's largest creditors, such as investment banks in Enron's case, are at the top of the list for repayment, while shareholders always bring up the rear. Bondholders are behind creditors that collateralized loans, but ahead of common stockholders.
"But we're only talking a few million bucks from Kopper, and that won't go very far," Sabino said. "It's far more symbolic than anything. The bottom line for all these folks is, better it go to somebody who is owed money than sit there in Michael Kopper's pocket."