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Only The Beginning?
-- November 29, 2001
Enron's downward spiral has left many shareholders seething in anger or just downright depressed, but none more so than Enron's own employees. Not only do they face losing their jobs as the company heads toward bankruptcy, they have also lost about $1 billion in 401(k) assets and watched all of their stock options become virtually worthless.
But this may not be the last time something like this happens. The popularity of offering employees stock options or company stock in 401(k) plans has risen dramatically over the past decade. In fact, tech companies practically made the practice an art form. And when the dot-coms went belly-up during the tech wreck, everybody said they learned their lesson about the risk of relying too much on a company's stock for their income or their retirement nest eggs. Obviously, however, some didn't learn that lesson well enough.
But even employees of a blue-chip company like Enron are vulnerable, especially if the company is manipulating its earnings. This type of trickery is universal. More than 1,500 companies now publish and publicize "pro-forma" or hypothetical earnings reports, while burying their GAAP (generally-accepted accounting principles) earnings reports in the labyrinth of the SEC's Edgar database. There could be hundreds of companies -- and thousands of employees like those at Enron -- facing similar devastation.
This time, we hope all investors will learn the lesson: Don't rely too heavily on any one investment -- even if the company you work for or the investment analyst you trust says that it's a great deal.
Employees' Retirement Plan Is a Victim as Enron Tumbles
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