Aquila to pay $10.5 million to settle suit over employee retirement

Daily Record and the Kansas City Daily News-Press, Jul 27, 2007 by Trish Mehaffey

Aquila will pay $10.5 million to settle a class action lawsuit that alleges current and former employees lost $150 million in retirement funds because the company violated its fiduciary duty, according to the preliminary settlement.

The settlement was made Monday but still has to be approved by the court. A final hearing on the approval will be 9 a.m. Nov. 13 before U.S. District Senior Judge Dean Whipple.

Bruce Keplinger, of Norris & Keplinger in Overland Park, representing the plaintiffs, and Aquila spokesman Al Butkus didn't return phone messages left Thursday.

More than 7,000 employees participated in the gas and energy provider's retirement plan during the class action period of Jan. 1, 1999, to May 5, 2004, according to the lawsuit filed in 2004.

During this period, Aquila was responsible for determining investment options for the plan employees, according to the lawsuit. The investment options included mutual funds and Aquila common stock or Aquila stock option, which included Enron Corp. stocks.

A significant portion of the plan participants selected the Aquila stock option as the primary investment option, according to the lawsuit. By 2000, about 85 percent of employees owned shares in the company's common stock, and about 59 percent of the employees' combined employer-provided benefit, savings and retirement investment plans were in the company's common stock.

The lawsuit claims before and during the class period, employees thought the company was making conservative and safe investments, and the employees were encouraged to buy common stock.

Employee retirement accounts at one time had company stock worth $200 million, but that dropped to $17.4 million in 2002 with the fall of Enron Corp., according to the lawsuit. The company then began to dump its energy trading and wholesale businesses.

Employees couldn't sell the stock because company policy prevented it, and the company didn't give the employees complete and accurate investment information, according the lawsuit.

The lawsuit contended Aquila didn't independently investigate and continually monitor the merits of the each investment in the plan to eliminate inappropriate options. Company officials should have been aware of the risks involved in the energy trading market and of the widespread improprieties occurring in the market.