Enron Investors Obtain Record-Breaking $7+ Billion Recovery
A third large recovery in the last quarter was obtained in the Enron Corp. securities fraud class action with the announcement August 2 of a $2.4 billion agreement with Canadian Imperial Bank of Commerce (CIBC).
With this latest recovery, lead plaintiff, The Regents of the University of California (University), has now obtained more than $7 billion for Enron investors, including $2.2 billion from JPMorganChase, $2 billion from Citigroup, $222.5 million from Lehman Brothers, $69 million from Bank of America, $168 million from Enron’s outside directors and $32 million from Andersen Worldwide SC. The University will also secure a distribution of approximately $32 million for investors through the bankruptcy proceeding for the LJM2 partnership involved in the Enron scheme.
“UC has now recovered more than $7 billion for investors – more than any other securities case in history,” said James E. Holst, the University’s general counsel. “We are especially pleased with the amount of this latest settlement, which exceeds both the Citigroup and JPMorganChase settlements.”
“The CIBC recovery demonstrates that the University’s strategy of aggressively pursuing the defendants is working,” said William S. Lerach, lead counsel for the University in the litigation. “We continue to pursue other defendants, including other banks that have been charged with knowingly participating in the scheme to defraud Enron investors. Beyond today’s agreement, the lawsuit continues to proceed very satisfactorily and further large recoveries are anticipated.”
Retired federal judge Honorable J. Lawrence Irving, who is serving as an advisor to the University in the Enron litigation, said, “I unqualifiedly endorse this additional settlement and hope it helps lead to further substantial recoveries for Enron investors.”
This settlement has been approved by the CIBC board of directors and is subject to approval by the University and the court.
“The University is grateful for the tireless and mighty effort by mediator Eric Green in helping us reach this resolution,” Holst said of the Boston University law professor who has been involved in several settlement negotiations in the Enron case.
Remaining defendants in the investors’ lawsuit include the financial institutions of Merrill Lynch, Credit Suisse First Boston, Barclays Bank, Deutsche Bank, Toronto-Dominion Bank, Royal Bank of Canada and the Royal Bank of Scotland, all alleged to be key players in a series of fraudulent transactions that ultimately cost Enron investors an estimated $40 - $45 billion in market losses.
These banks allegedly set up false investments in clandestinely controlled Enron partnerships, used offshore companies to disguise loans and facilitated phony sales of phantom Enron assets. As a result, Enron executives were able to deceive investors by reporting increased cash flow from operations and by moving billions of dollars of debt off Enron’s balance sheet, thereby artificially inflating securities prices.
Additional remaining defendants include Goldman Sachs, because of its role as an underwriter of Enron securities, as well as former officers of Enron, its accountants, Arthur Andersen and certain law firms.
In February 2002, the University was named lead plaintiff in the Enron shareholders’ class action suit. Other institutional investors acting as representative plaintiffs on behalf of Enron investors include: Washington State Investment Board, the Amalgamated Bank and its LongView Funds, Illinois State Board of Investment, San Francisco City and County Employees’ Retirement System, Employer-Teamsters Local Nos. 175 & 505 Pension Trust Fund, Hawaii Laborers Pension Plan, Greenville Plumbers Pension Plan, Archdiocese of Milwaukee and Staro Asset Management.
Depositions in the case began in June 2004, with the trial slated to begin on Oct. 16, 2006.