The University of California joined a federal class-action lawsuit last month against 29 senior executives of the Enron Corporation and the national accounting firm of Arthur Andersen, LLP. The suit is pending in the U.S. District Court for the Southern District of Texas in Houston.

It alleges that those who purchased Enron securities between Oct. 19, 1998 and Nov. 27, 2001 were the victims of a fraudulent scheme whereby the defendants disseminated false financial statements that artificially inflated the price of Enron securities and allowed the defendants to engage in $1.1 billion of illegal insider trading.

As a result of these false statements, the suit alleges, Enron stock traded as high as $90.75, allowing defendants to dump 17.3 million of their own Enron shares for proceeds of $1.1 billion, according to the complaint. The federal government has launched an investigation of the Enron collapse.

The aggregate total loss across all UC portfolios is $145 million, representing approximately three-tenths of 1% (0.30%) of the university's total investment funds. Of that $145-million total loss, the loss to the UC Retirement Plan (UCRP) is approximately $94 million. The market value of the UC portfolios was $54 billion as of Nov. 30, 2001.

"Even with the demise of Enron occurring in November, the UCRP equity portfolio recorded a return of 7.7%, which was within 0.08% of its performance benchmark," explained David H. Russ, treasurer to the UC Regents.

"The alleged financial fraud losses from the retirement plan's Enron position in no way affects the ability of the retirement plan, which is in a strong overfunded position, to meet its obligations to the beneficiaries," Russ added. In fact, the total retirement fund portfolio has grown by more than 3% since Sept. 30.

Among other things, the lawsuit asks for "disgorgement" (refund) of the defendants' $1.1 billion or more of insider-trading proceeds as well as compensatory damages.