Posted on 10/23/2006 1:11:20 PM PDT by Lunatic Fringe
Breaking
"As is also the case in many company 401K programs, until recently, stock holdings from the company match could not be transferred into other investment options until the employee reached age 50."
Plus once we come to a solution on what is the appropriate punishment for each, I'd add a couple of years to Stewart's sentence just for that smug smirk she always seems to wear.
That's precisely what I said.
You can transfer your own contributions whenever you wish - the free matching stock the company can give you if it wants to give you free stock cannot be transferred until it vests.
If your retirement plan is based not on your own investment but on the hope that your employer will give you enough free shares to enable you to retire, then you don't actually have a retirement plan.
I haven't seen a breakdown of the market value of Enron's plans, contributions vs. match, but I suspect the latter was a significant percentage of the total.
Sadly, in America, crimes against money draw longer sentences than crimes against people. Oh, yes, I've already heard the long sad story of all of those unfortunate folks who thought they could be millionairs on their pension stocks. Catch a clue. Life is hard. Ordinary people never get anything for nothing! And the more they think they can, the more they will be taken for the suckers they are.
You have a choice in investing your contribution between a handful of approved mutual funds and company stock.
Your company can choose to match those funds.
Your company, if it chooses to match, can match them with cash investments into your chosen mutual fund or it can opt to pay you in stock.
Either way, the matching funds are gravy and the company gives them because it is advantageous to the company from a tax point of view.
What we have in Enron is people who worked for Enron, used their 401(k) contribution to buy Enron stock and also got Enron stock to match.
Basically, they tripled down on Enron.
Because Enron stock ballooned, people who normally would have had 300-400 thousand saved had 2 million in the kitty - all in Enron stock.
These people were taking a gamble on outsized returns.
A rational person would have taken the free Enron stock, but used their own contribution on more conservative investments.
I would rather have my retirement money invested in a diversified portfolio of blue-chip equities than have one giant bet on a single, highly volatile stock in a company that I work for.
Don't get me wrong, real harm was done. But they can't fairly complain about the total amount they lost from Enron's peak, when it would never have reached a fraction of that peak without the fraud.
A rational person would have taken the free Enron stock, but used their own contribution on more conservative investments.
A false moral equivalence and a poor analogy.
You can diversify your stockholdings - you can't diversify your body so that you have three fingers going to 7/11 at one in the morning, two legs safely at home, a torso staying at a friend's house, and your arms and head in a secure warehouse facility.
..you can't diversify your body so that you have three fingers going to 7/11 at one in the morning, two legs safely at home, a torso staying at a friend's house, and your arms and head in a secure warehouse facility.
It isn't speculative at all.
A match is a match - the same nominal dollar amount of equity for every dollar of cash contributed by the plan owner.
Everyone knows that a single stock is riskier and more volatile than a diversified portfolio of similar stocks. Everyone also knows that a value stock is less volatile than a growth stock.
Therefore it is not speculative to say that if your motivation is preservation of your investment over a short time horizon, it is a financially sound decision to invest in a diversified portfolio of value stocks as opposed to putting all your money in a single growth stock.
The sentence will be appealed ... he'll probably end up serving 12 to 15.
Show me where they 'tripled down', wa. The only way you could know that was if you'd seen a breakdown of what parts of the funds held Enron stock.
It will be appealed, but to the 5th Circuit, which is highly unlikely to overturn Judge Lake.
Skilling is toast.
There are two possibilities:
Either an Enron employee put all or most of their contributions into Enron stock, or they put only some or none into Enron stock and put it in mutual funds instead.
People who (1) were employed at Enron, (2) took Enron matching shares and (3) spent all their discretionary contributions on Enron shares tripled down.
Those who declined to invest their voluntary contributions in Enron shares did not put all their eggs in one basket.
No "breakdown" is necessary.
If someone used their contributions over the life of their employment to invest in mutual funds, they did not lose all their money.
If someone used their contributions to buy Enron stock they did lose all their money.
The people who are complaining about losing their lifesavings are by defintion the people who put all or the lion's share into Enron stock.
OK, so you're just speculating. Thank you.
Skilling would loved to had you on the jury.
Good grief. Nearly all the people at Enron worked 80-hour work-weeks, generating all that pie-in-the-sky stuff they generated.
No one had time to even do lunch with a friend, much less juggle a bunch of diversified investments, trying to corner the best deal and lowest vig, to make a good impression on an overly critical FR poster later when it was all analyzed.
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