Posted on 02/26/2002 5:04:31 PM PST by jpthomas
WASHINGTON -- A Wall Street money-management firm was busy buying millions in plummeting Enron stock on behalf of Florida's pension fund last year at about the same time it was advising the state of New York to sell its shares.
U.S. Sen. Bill Nelson, D-Fla., said Monday that he wants to know why Alliance Capital Management had such bad advice for Florida's pension fund for teachers, state and local workers while recommending the opposite for New York's.
Florida lost more than $300 million on its Enron investments -- more than any other state.
Nelson plans a hearing next month to grill Alliance Capital and the pension funds of Florida, New York and California.
But he will seek some answers today when former Enron CEO Jeffrey Skilling faces off with whistle-blower Sherron Watkins before the Senate Commerce Committee, of which Nelson is a member.
Skilling left the company last summer and has testified that he had no idea that questionable accounting practices were hiding massive losses at Enron.
But Watkins has testified that Skilling was well-aware of the problems.
The stock price dropped dramatically after investors discovered Enron had been hiding more than $1 billion in losses in secret partnerships.
Among the many victims were state pension funds throughout the country that lost hundreds of millions of dollars.
Nelson wants to know why Alliance Capital gave the New York and Florida pension funds such different advice as Enron was collapsing.
"I want to find out . . . was there somebody sending signals from Enron as its stock was dropping like a rock -- sending signals out to their buddies to buy the stock to try to prop the price up?" Nelson said.
Alliance Capital has come under fire because one of its executives, Frank Savage, also sat on the board of directors of Enron.
Critics say that presented a conflict of interest and that Savage should have warned Alliance Capital's investors when he discovered the precarious state of Enron's finances.
Florida has since fired Alliance Capital and is considering suing the company.
"Why would somebody buy almost 3 million shares when the stock is dropping?" Nelson asked.
John Meyers, a spokesman for Alliance, said he could not comment immediately on Nelson's questions but would look into the issue.
Alliance Capital bought stock for Florida in late October and early November despite a stream of bad news coming out of Enron, which eventually led to a filing for protection under bankruptcy laws.
But Alliance sold all of New York's Enron stock in August, helping that state avoid larger losses such as those experienced in Florida when the stock dropped to just pennies a share in December, Nelson said.
Even with the August stock sale, though, New York still lost about $50 million.
Nelson said Florida's State Board of Administration, which oversees the pension fund, had a duty not to take big risks with retirees' money.
Nelson said the board of administration, headed by Gov. Jeb Bush, had ample warning of Alliance's poor performance.
Today's Senate hearing is the first time Skilling and Watkins will appear before the same committee with their wildly different views about what caused the seventh-largest U.S. company to fall apart.
U.S. Rep. Henry Waxman, D-Calif., on Thursday released a transcript from an Oct. 3, 2000, employee meeting that raises questions about how much Skilling knew.
At the employee meeting, Skilling was questioned about the company's accounting practices.
The Wall Street Journal had written a story questioning Enron's financial underpinnings because the company was using an accounting technique that allowed it to count profits that might never materialize.
At the employee meeting, Skilling dismissed the story and said Enron's accounting was "conservative."
Waxman told Skilling in a letter Monday that he either must have been lying or missed the fundamental problems in the company's financing through a "staggering level of negligence and incompetence." Tamara Lytle can be reached at tlytle@tribune.com or 202-824-8255. Copyright © 2002, Orlando Sentinel
I wonder if our dimwit Senator Nelson of Florida would be so anxious to go after Alliance and Mr. Savage if he knew of the man's political contribution history?
From the website www.opensecrets.org, a search of the history of Mr. Savage's political contributions uncovered the following:
Name: SAVAGE, FRANK, Address: STAMFORD, CT Occupation: ALLIANCE CAPITAL MANAGEMENT
Donations (Date/Recipient)
6/17/1999 $5,000 Democratic Congressional Campaign Cmte
4/11/2000 $250 Waters, Maxine
10/18/2000 $20,000 Democratic National Cmte
4/18/2000 $20,000 Democratic National Cmte
6/19/2000 $25,000 DNC/Non-Federal Individual
10/26/2000 $12,000 DNC/Non-Federal Unincorporated Assn
3/11/1999 $1,000 Gore, Al
1/22/2000 $10,000 New York Senate 2000
11/22/2000 $1,000 Schumer, Charles E
11/22/2000 $1,000 Schumer, Charles E
7/27/1999 $1,000 Rangel, Charles B
10/28/1999 $10,000 Democratic Congressional Campaign Cmte
2/3/1999 $250 Kennedy, Edward M
7/15/1999 $1,000 Clinton, Hillary Rodham
10/18/1999 $1,000 Clinton, Hillary Rodham
12/30/1999 $1,000 Corzine, Jon
12/30/1999 $1,000 Corzine, Jon
2/2/1999 $1,000 Gore, Al
3/11/1999 $1,000 Gore, Al
4/18/2000 $5,000 DNC/Non-Federal Individual
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