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Former Enron Investors Want Ruling on Merrill Lynch Role

Investors who lost money when Enron Corp. declared bankruptcy in late 2001 have filed a petition asking the judge overseeing some of the bankruptcy proceedings to rule whether Merrill Lynch & Co. was a knowing participant in the former energy trader's attempt to hide huge losses.

The motion was filed with Judge Melinda Harmon of the U.S. District Court for the Southern District of Texas on Aug. 5. According to court documents, the plaintiffs noted that "the case against Merrill Lynch is exceptionally strong."

William Lerach, whose law firm represents the lead plaintiff, the University of California, said of Merrill Lynch, "This might help focus their attention. We want the judge to rule that there is no genuine issue with the fact as to Merrill's liability, and the amount of damages would be determined by the jury." The University of California lost nearly $145 million following Enron's collapse.

Bankers that have so far settled with the plaintiffs include JP Morgan Chase & Co., Citigroup Inc. and the Canadian Imperial Bank of Commerce (CIBC) for a total of $7.12 billion to be divided up by investors.

Merrill Lynch has so far not settled, and the plaintiffs also are negotiating with several other banks and financial institutions such as Barclays plc, Toronto Dominion Bank, Royal Bank of Canada, Deutsche Bank AG and the Royal Bank of Scotland.

Merrill Lynch paid $80 million to the Securities and Exchange Commission to settle civil allegations related to a 1999 sale of interest in floating power plant barges so that Enron could appear to have met earnings targets (see NGI, March 24, 2003). The brokerage neither admitted or denied wrongdoing. Four former executives also were convicted for their part in the sales.

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