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Royal Bank of Canada Pays $25M to Settle Enron Claims

Enron Corp. said Thursday that it will receive $25 million from the The Royal Bank of Canada (RBC) through a settlement agreement covering RBC's portion of what it called the "MegaClaims" litigation against the major banks for allegedly aiding and abetting the company in breaches of fiduciary duties, fraud and civil conspiracy.

The agreement with RBC, which follows two much larger settlements last month with Citigroup and J.P. Morgan Chase, remains subject to the approval of the U.S. Bankruptcy Court for the Southern District of New York.

"This settlement reflects our assessment that RBC played the smallest role of any of the financial institutions involved in this case," said Enron interim CEO Stephen Cooper. "This is the second settlement in the MegaClaims litigation in recent weeks and we are pleased that we were once again able to achieve a meaningful cash recovery for the estate."

The remaining financial institutions involved in the MegaClaims litigation include Barclays PLC, Canadian Imperial Bank of Commerce, Citigroup, Credit Suisse First Boston Inc., Deutsche Bank AG, J.P. Morgan Chase, Merrill Lynch & Co. Inc., and The Toronto-Dominion Bank. Enron's lawsuit also includes bankruptcy-based claims relating to equitable subordination, preferential and/or fraudulent transfers, and the recharacterization of certain transactions, the company said.

The RBC agreement includes an arrangement between RBC and Enron to resolve claims in Enron's bankruptcy case and litigation related to those claims. Specifically, RBC will pay Enron $24 million in cash in order for Enron to allow $114 million in claims held by RBC or transferred by RBC to third parties.

Last month, J.P. Morgan Chase & Co. agreed to pay $2.2 billion to settle a class action lawsuit filed by Enron Corp. investors. That deal topped a $2 billion settlement reached between Citigroup Inc. and a group of Enron shareholders earlier in the month of a lawsuit that had accused Citigroup and the other investment firms of helping Enron continue to raise money even as it was imploding (see Daily GPI, June 16, June 13).

Two weeks ago, Enron agreed to pay $1.52 billion to California's utilities and state agencies to resolve market manipulation and price-gouging claims stemming from the sale of natural gas and electricity during the 2000-2001 energy crisis on the West Coast. And earlier this month, Enron agreed to a $356.25 million payment to settle litigation against the company regarding its bankrupt retirement plans that were brought by the Department of Labor (DOL) and former and current employees.

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