Jim Cole, File, Associated Press
ATLANTA — Republican Herman Cain served on the board of a Midwest utility company that paid $10.5 million to settle claims it failed to protect the retirement savings of its employees and paid another $26.5 million over claims it manipulated gas prices, potentially embarrassing episodes for a candidate running for president on his business experience.
Cain sat on the board of directors for Aquila Inc., a Kansas City-based utility, from 1992 until it was acquired in 2008 by Great Plains Energy Inc. Employees alleged in a class-action lawsuit that they were pressured into investing their retirement funds and other savings into company stock. Cain has been forced to answer questions on the campaign trail about the lawsuit, which was reported by Mother Jones magazine in May.
Those employees said Cain and other company officials should have warned their employees that the stock was becoming increasingly risky as the firm floundered financially. The workers said the company's stock should have been eliminated as an investment option in the retirement fund. While Cain sat on the board, Aquila's stock price dropped from roughly $37.50 in 2001 to less than $5 before the company was acquired seven years later.
Cain denies any wrongdoing and takes credit for helping stave off a corporate bankruptcy.
"There's a degree of risk in all investments in all companies," Cain spokesman J.D. Gordon said. "The actions that the board took saved the company."
Cain shared responsibility for the company's overall direction as a member of the board. But attorney Fred Isquith, who represented eight workers who started the class-action lawsuit over the employees' retirement fund, said he was unaware of any evidence showing Cain was more culpable than others on the board. He said the utility was effectively run by members of the Green family, which founded it.
"Could the board have done something? Sure," Isquith said. "Was it run on a day-to-day basis by the Green family? Absolutely. It was the board's responsibility collectively, and Mr. Cain was a member of the board."
Federal records show Isquith has made thousands of dollars in political donations, predominantly to the Democratic Party and its candidates. He said he does not have a preference for a candidate in the Republican presidential primary.
Lawyers for the workers said Aquila started out as a relatively conservative investment. As a traditional utility, the company produced predictable — though not necessarily large — returns and offered a dependable dividend payment.
And the company encouraged its employees to invest. Workers enrolled in the company's investment plan could buy Aquila stock, among other options. It matched employee contributions into the plan fund with company stock. It granted stock options to nearly all its employees and allowed them to purchase up to $10,000 monthly in stock at advantageous prices. Workers could also use their dividend payments to buy even more Aquila stock at a discount.
The lawsuit alleged that the company sent internal publications and set up meetings where employees were encouraged to invest even more. Starting in 1994, the company's annual report listed workers whose stock in the firm was worth at least twice their annual pay.
By the middle of 2001, Aquila stock accounted for two-thirds of the retirement plan's value, lawyers said.
The root of the company's trouble came when it decided to expand into the energy trading business. The utility, then called UtiliCorp United Inc., started the process of spinning off its trading arm, called Aquila, into a separately traded stock. The timing couldn't have been worse.
A major blow came with the 2001 collapse of Enron, a major energy trader, in one of the biggest corporate scandals in U.S. history. It led to investigations of shady energy trading practices that, according to federal authorities, included parts of Aquila.
- Georgia girl struck by plane on Florida beach...
- Comic-Con's dark side: Harassment amid the...
- Trial begins for Salt Lake attorney seeking...
- The Great War: 100 photos marking 100 years...
- Ground Zero cross can stay at 9/11 museum,...
- US Court: Virginia marriage is for all lovers
- Be ready for 'prolonged' Gaza war, Netanyahu...
- NCAA settles head injury suit, will change rules
- US Court: Virginia marriage is for all... 43
- Federal land managers criticized over... 26
- Feds cap fines for not buying health... 22
- Obama maintains busy fundraising... 22
- After government topples crosses in... 19
- Fast food workers vow civil disobedience 15
- Gaza sides agree to lull but truce... 13
- Sarah Palin launches online... 10