Another Memo from Whistle Blower Sherron Watkins Has Been Uncovered
THIS IS A RUSH TRANSCRIPT.  THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED. JACK CAFFERTY, CNN ANCHOR: "The New York Times" is reporting this morning Enron avoided paying incomes taxes for four of the last five years, in part by using hundreds of subsidiaries in tax haven countries. Yesterday, the recently fired Arthur Andersen partner, David Duncan, spoke with congressional investigators about what he knows. Republicans say he was most cooperative; Democratic staffers less enthusiastic about Duncan's appearance. Another memo from the whistle blower, Sherron Watkins, an executive at Enron, has been uncovered. This one outlining her concerns about the company to a friend at Arthur Andersen. And while the Justice Department and numerous congressional committees continue all of their investigations, Americans perhaps should do a little digging of their own. If you're counting on retiring with earnings from your 401K, consider the hard lessons that are being learned by Enron employees right now, and they're not alone. CNN's Brooks Jackson in Washington has more.</s>BROOKS JACKSON, CNN CORRESPONDENT (voice-over): Meet Frank Cisternino of Shreveport, Louisiana. If you thought Enron employees had a sad story about their retirement plan, listen to what happened at Lucent Technologies.</s>FRANK CISTERNINO, FORMER LUCENT EMPLOYEE: The highest my 401K value was approximately 1.3 million, 1.4 million, and right now, we're about at $100,000.</s>JACKSON: Cisternino had 100 percent of his retirement money in Lucent stock, and look what happened. Like Enron stock, Lucent soared in the late '90s, then suddenly crashed and kept on sliding. Could this happen elsewhere? You bet. Lots of big companies allow, even encourage their employees, to concentrate retirement money in their own stock. Tax laws encourage it. But investment advisers say the practice is worse than ill advised.</s>RIC EDELMAN, EDELMAN FINANCIAL SERVICES: It's incredibly dumb. It's without question one of the worst things that a U.S. worker or employee can do.</s>JACKSON: Even Ronald's retirement could be at risk; 74 percent of McDonald employees' retirement plan assets are invested in McDonald's stock, according to the authoritative newsletter, "DC Plan Investing." Where is Mickey's retirement money? The Walt Disney Company has 45 percent of retirement plan assets in Disney stock. And the highest of all, the makers of Crest toothpaste, Procter & Gamble, 95 percent of employees' retirement funds in P&G; stock. Critics say it's bad enough to be too heavily into any one stock, but doubly risky if it's your own company.</s>MARK IWRY, RETIREMENT PLAN ATTORNEY: If a company goes under, you are at risk of not only losing your job, but losing your retirement savings at the same time.</s>JACKSON: Just what happened at Enron? (on camera): For some, not diversifying has worked out OK, so far. Procter & Gamble stock has gone up 49 percent in the past five years, exactly the same as the Standard & Poor's 500 stock index. And look at Pfizer. Its retirement fund is 86 percent invested in Pfizer stock, and that stock has nearly tripled since five years ago. But others have done poorly, even disastrously. Owens Corning has lost 95 percent of its value since five years ago, and at last report, that retirement plan was still 44 percent invested in its own sickly stock. (voice-over): McDonald's is up, but only 19 percent in five years, severely underperforming the market. And Disney stock is actually down three percent from five years ago. During the bull market of the '90s, companies and many employees resisted change.</s>IWRY: People were not as interested in fixing the hole in the roof while the sun was shining. Now, that companies are experiencing a little bit of precipitation, there is a heightened interest in fixing the roof.</s>JACKSON: Maybe so, but Frank Cisternino is still declining to diversify, clinging to his 15,000 Lucent shares, hoping they'll head up again.</s>CISTERNINO: I have always had that feeling, and now I still have to this day maybe as wishful thinking on my part, but that's the way I feel.</s>JACKSON (on camera): So even now, Enron's bitter lesson may prove a hard one for the country to accept. Brooks Jackson, CNN, Washington.</s>CAFFERTY: And Brooks Jackson joins us now live from Washington. Brooks, how many companies are we talking about? Is this a widespread phenomenon where the employees have heavy concentrations of their own company stock in their 401Ks?</s>JACKSON: Jack, it is across all retirement plans of this sort; 19 percent of all of the assets in them are invested in their own company stock. Now, most 401K type investments don't even allow investment in own company stock, but many do. They encourage it. Some even require a certain percentage of it. There are, at latest count, 25 U.S. corporations that have 60 percent or more of their employees' retirement assets in their own stock. And it's Coca Cola, it's GE, it's some of the biggest and best known names in American business.</s>CAFFERTY: There has been a suggestion on the part of some that the government, perhaps, needs to do something to protect us all from ourselves. Senator John Corzine of New Jersey is proposing some sort of regulations that would limit the amount of your own company stock that you'd be allowed to put into your 401K. What are the chances that Congress may act on something like that?</s>JACKSON: Well, the chances have certainly gotten better, since Enron focused attention on this. But it's important, I think, for employees who are in this situation to realize that they have typically a lot more flexibility than they're using. The gentlemen you just saw, Frank Cisternino of Lucent, in that plan, he tells us he could have diversified 100 percent. He didn't have to have a nickel in Lucent stock. That was his choice. In the case of Enron, 89 percent of the money that was tied up in Enron stock was money that had been put there voluntarily by employees. And for the most part, they could have sold it at much higher than they did, long before this lock up period we've been hearing about. So employees need to take a look at their own investment practices. They can diversify more than they do. Congress, on the other hand, is going to look at the extent to which employees are required, in some cases, to invest in company stock, or strongly encouraged to invest in company stock, and perhaps loosen up the rules and allow even more diversification that is not allowed in many cases. We'll see how that debate comes out.</s>CAFFERTY: Well, it looks like some good may eventually come out of this Enron. Brooks, thanks very much -- Brooks Jackson live in Washington. TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com.