J.P. Morgan Chase & Co. last week agreed to pay $2.2 billion to settle a class action lawsuit filed by Enron Corp. investors, which tops the $2 billion settlement reached by Citigroup Inc. earlier this month (see NGI, June 13).
The agreement between J.P. Morgan and the lead plaintiff, the Board of Regents of the University of California, "represents an extremely important and very substantial recovery for Enron investors and sustains the course of highly favorable settlements," said James Holst, general counsel of the university.
J.P. Morgan CEO William Harrison said the company, which recently settled a $2 billion class action lawsuit related to bankrupt WorldCom, was "working hard to put the uncertainty of litigation risk behind us."
The lawsuit claims that J.P. Morgan helped Enron falsify its bank statements and hide debt, while J.P. Morgan analysts were issuing falsely positive and misleading reports. According to the lawsuit, J.P. Morgan underwrote Enron securities and lent it more than $1 billion, while it was also syndicating more than $4 billion of bank loans.
J.P. Morgan also said it would set aside $2 billion pretax to cover additional costs of litigation. Half of the amount will be set aside for the settlement and other pending Enron litigation. The remainder will be set aside for other legal actions not related to Enron.
Bank of America Corp., Lehman Brothers Holdings Inc. and several other financial firms already have settled Enron-related lawsuits for a combined $491 million. Still to be resolved are lawsuits against Merrill Lynch & Co., Credit Suisse First Boston, Barclays plc, Toronto-Dominion Bank, Royal Bank of Canada, Royal Bank of Scotland Group plc and Goldman Sachs Group Inc.
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