SAN FRANCISCO — After bedeviling California with huge power bills in its heyday, Enron Corp. is causing the state more anguish as it crumbles.
Six of California’s largest public pension funds lost a combined $250 million when Enron’s once-soaring stock crashed and burned late last year.
After peaking at $90.75 at the outset of California’s energy crisis in 2000, Enron’s shares have plunged below 25 cents amid allegations of accounting fraud and insider dealing.
The University of California’s pension and endowment funds lost $145 million on its Enron stock holdings — the most in the state and the second largest setback reported so far by public investment funds across the country.
Only Florida’s state retirement system, with $325 million in losses on Enron stock, has been hurt more.
The losses of other major California public pension funds surveyed by The Associated Press ranged from $1.6 million to $49 million.
As big as they are, the Enron losses represent just a sliver of the pension funds’ total assets, and aren’t expected to affect their ability to pay retirement benefits.
The University of California’s funds, for instance, have total assets of $54 billion, meaning its Enron setback represented 0.3 percent of the total portfolio. The percentage loss was even smaller at the other large California funds.
The California public funds burned by Enron’s collapse are joining lawsuits accusing the company’s executives of covering up accounting shenanigans that devastated the stock.
The University of California is fighting with Florida’s state retirement system for the right to control a class-action shareholder suit accusing 29 Enron executives and its auditors, Arthur Andersen, of fraud.
Although the class-action suit will seek damages for thousands of investors, the lead shareholder will have the greatest influence on legal strategy. U.S. District Judge Melinda Harmon is expected to pick the lead representative in the shareholder suit within the next two weeks, said University of California attorney Christopher Patti.
Some investments in the Houston-based company paid off for California pension funds.
For instance, in 1997, the California Public Employees Retirement System, or Calpers, realized a $132.5 million profit on a $250 million investment in an Enron-led investment called Joint Energy Development Investments, or JEDI.
That investment’s success encouraged Calpers to pour an additional $175.5 million into another Enron partnership, called JEDI II. Calpers has received $171.7 million of that money back so far and eventually expects to break even on the deal, said fund spokeswoman Pat Macht.
The San Diego City Employees’ Retirement system pocketed a $328,000 profit during the last two years by shorting Enron’s stock, said Doug McCalla, the chief investment officer for the fund. Investors that short stocks are essentially betting that the share price will drop — a gamble that paid off when Enron imploded.
The Enron losses sustained by California’s large pension funds represent another unwelcome financial blow from a company that has tormented the state for years.
After using its political clout to help shape the 1996 law that deregulated California’s electricity market, Enron capitalized on soaring power prices in the second half of 2000 and the first half of 2001 to reap a windfall that left the state billions of dollars in debt and drove its largest utility into bankruptcy.
Gov. Gray Davis and a long line of other political leaders accused Enron — then the nation’s largest energy merchant — of orchestrating an illegal scheme to drive up wholesale power prices.
The prickly issue re-surfaced again Monday when both of California’s Democratic senators, Dianne Feinstein and Barbara Boxer, called for a Congressional investigation into the allegations. Enron has denied any wrongdoing.
On The Net:
University of California: http://www.ucop.edu
California State Teachers Retirement System: http://www.strs.ca.gov
California Public Employees Retirement System: http://www.calpers.ca.gov
Los Angeles County Employees Retirement Association: http://www.lacera.com