The leading creditors of Enron, the failed U.S. energy company, are strongly opposing financial payments to laid-off Enron workers. A hearing on the issue began Wednesday in a New York bankruptcy court. The fate of thousands of former Enron workers is in the hands of a U.S. judge and a committee of Enron creditors. On that committee sit some of the world's most powerful financial institutions, including J.P. Morgan Chase, Wells Fargo and Citigroup.
The hearing in New York will lead to a decision on whether the laid-off Enron workers are entitled to severance pay, something that would amount to about $20,000 or $30,000 per worker. Enron employees not only lost their jobs when Enron filed for bankruptcy in December. Most of them also lost their part or all of their retirement savings, which were tied up in Enron stock.
Lowell Peterson, the chief attorney for the Enron workers, says he anticipates a fight. The banks, he says, have argued that Enron has no obligation at this point to compensate its laid off workers.
"They are saying, 'no, don't pay these workers a penny.' It's wrong," he said. "It's not supported by the bankruptcy code. And we will sit down and negotiate with them as much as we can. But they are going to have to change their orientation and admit that in fact we have legitimate claims, and the workers are going to have to get paid."
Supporters of the Enron workers argue Enron is not broke. It still has and makes a great deal of money through its various businesses. Attorney Peterson says severance pay to the thousands of now-unemployed Enron workers would make virtually no difference to Enron's creditors.
"You would think we were depriving them of any possibility of a distribution themselves," he said. "That's just nonsense. The amount of money available so dwarfs the amount of money we're looking at, that it will have no impact, no significant impact, on what the other creditors get. We've got people, and you've heard their stories, with really compelling immediate needs."
The weight of legal judgments may be against the laid-off workers. Normally, in a bankruptcy proceeding, the first to get their money are the lawyers, followed by the creditors, and only then the workers.
But Mr. Peterson is holding out for the exception. He notes it may be unusual but not unprecedented for a court to rule in favor of paying the workers first, if a compelling need can be proven.
A decision could come down before the end of this week.