New York It wasn't just Enron employees and individual investors who bet heavily and lost big on the company's stock last fall. Some of the nation's largest money management firms and pension funds also got shellacked when they kept buying even as evidence of Enron's troubles mounted, often investing money set aside as retirement nest eggs.
But some industry insiders are reluctant to second-guess firms like Alliance Capital Management, which kept pouring money into Enron. From a money manager's perspective, the energy giant of last fall with its seemingly bargain prices still looked like a worthwhile gamble despite enormous problems.
"Over the past few months, even as the share price declined, the basic business appeared to be unaffected and standing alone could more than justify the lower price of the stock," Alliance executive Alfred Harrison wrote in a Dec. 5 letter to Florida pension officials, explaining his firm's repeated purchases of Enron stock through mid-November.
Three days before, the Houston-based company had slid into the biggest bankruptcy in U.S. history after thousands of employees and big and small investors around the country lost fortunes in the company's plunging stock.
Investments in Enron gone awry cost the Florida State Board of Public Administration $306 million, more than $280 million of that in money handled by Alliance. Such losses raise the question of whether investment managers should have seen Enron's collapse coming.
Some say maybe not.
"We've been in a market where there have been a significant number of stocks that have fallen from $70 or $80 to $20," said Andrew Silton, deputy treasurer of North Carolina, whose pension fund lost $15 million on Enron.
"Certainly at the time, it didn't look like a questionable thing to be taking a look at a firm that had fallen sharply and saying 'Is there value there?'," Silton said.
Others are less understanding. Florida is suing Enron and has fired the New York-based Alliance.
But as dissatisfied as they are with Alliance's performance, Florida officials note that the firm appears to have been operating on the same assumptions and making decisions similar to those at least some of its competitors were making.
"Like a lot of people out on Wall Street, they (Alliance executives) seem to have believed in this company," said Michael Pucillo, a West Palm Beach, Fla., attorney.