- The Washington Times - Thursday, February 14, 2002

Labor Secretary Elaine Chao, a tough cookie who wants answers, is clearly running the most politically important investigation into the Enron scandal.

Besides the multiple criminal investigations into who was responsible for Enron's bankruptcy, Mrs. Chao is digging deeply into something millions of ordinary American workers want to know more than anything else: Who and what was responsible for the losses suffered by workers in their 401(k) pension plans? And what can be done to prevent the same thing from happening to other company pension plans?

Mrs. Chao is rapidly emerging as one of the smartest and most politically adept officials in President Bush's Cabinet. She has proved it in the past month by acting quickly in the wake of the scandal to keep Democratic lawmakers from politically outflanking the administration on the perilous pension issue.

She put together a wisely balanced package of reforms to give workers increased control over their retirement accounts liberalizing the time in which workers can sell their company stocks and move their assets, as they choose, into other investments.

The Labor Department is still trying to find out how many Enron workers lost all or most of their retirement savings. Many invested in other kinds of accounts that did not include Enron stock, or a minimal amount. Some, who took advantage of stock options and bought Enron stock directly, sold it before the stock's complete collapse.

Tragically, there were also many workers whose contributions to their 401(k) plans were matched by Enron with company stock under rules that forbid them from selling the stock before age 50. Because of the age-related rule, workers who had company-matched Enron stock in their portfolio could only watch helplessly as the price of the stock plummeted and became virtually worthless. Mrs. Chao wants to make sure that can't happen again and hopes her department will be able to recover all or some of the retirement funds these people lost.

"I'm very concerned about these workers. I will drive this investigation to wherever it goes, and I will do everything I can to help make these employees whole," Mrs. Chao told me in a recent interview after completing two days of testimony before Congress.

"I don't want to raise people's hopes, but our whole team here is committed to doing everything we can to recover their savings," she said.

This is not an idle hope. The Labor Department has a long record of recovering worker pension losses when company officials have misappropriated fund assets or otherwise abused their fiduciary responsibilities.

In the past year alone, department officials have recovered nearly $700 million that was returned to workers, while obtaining 76 indictments and 49 convictions against guilty parties.

What has not come out very clearly in the Enron pension fund story is that workers really had a lot of freedom to invest their retirement savings in any way they chose. The options included stock mutual funds, self-directed stock investment purchases through a brokerage account, money market or bond funds.

Indeed, many workers invested in Enron's once-high-flying stock on their own. It has been reported that as much as 89 percent of the Enron stock in the company's 401(k) plan was there because workers voluntarily purchased it.

Mrs. Chao's recommendations to Congress include changing the rules so workers are not trapped into holding a losing company stock. They would be able to sell it off after a minimum of three years. And top executives would be forbidden from selling their stock during "blackout" or "lockdown" periods when lower employees are prevented from trading stock in their 401(k) plans.

The new rules would require frequent statements about each plan's assets, and companies would have to provide professional, outside investment advice to each of their workers.

What Mrs. Chao and the administration oppose is the draconian regulatory rule being pushed by two Democratic senators, Barbara Boxer of California and Jon Corzine of New Jersey, that would impose a 20 percent cap on the amount that a worker's 401(k) plan could own in a company's stock.

Americans have a fundamental freedom to take risks with their money, even if they wish to invest their entire pension in their company's stock. Millions of Americans do so and have profited handsomely from their decisions. People who bought stock in the large capital, blue chip companies they worked for, like Procter & Gamble, General Electric, Coca-Cola or Microsoft, have become millionaires.

"Under 401(k) plans, workers are given control over their own funds. This is their money. They direct the funds in that account. They invest it as they see fit. We do not want to take those rights away. We want to preserve that right," Mrs. Chao told me.

If anything good comes out of Enron's pension catastrophe, she says, it will be an increased understanding that "it is important for people to diversify their retirement savings."

Government can set some common-sense fiduciary rules and encourage people to get the best financial advice available to make safe, sound investments for their retirement. But it is equally important that we guard against going too far and do not take away the constitutional freedom to invest our money as we see fit, free from undue government interference and control.


Donald Lambro, chief political correspondent of The Washington Times, is a nationally syndicated columnist.


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