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Three Banks to Pay $6.6B to Settle Enron Shareholder Lawsuits

A U.S. district judge in Houston last week approved a $6.6 billion civil settlement by three banks that Enron Corp. shareholders had accused of helping to conceal the company's financial problems. To date, financial institutions involved in deals with Enron before it collapsed have agreed to pay more than $7 billion to resolve shareholder lawsuits.

Judge Melinda Harmon had given preliminary approval to the latest settlement in February (see NGI, Feb. 27). Final approval was given to settle with the Canadian Imperial Bank of Commerce (CIBC), JP Morgan Chase & Co. and Citigroup Inc., according to William Lerach, who represents the University of California, the lead shareholder of about 50,000 Enron stockholders who filed claims in the actions against the banks.

Not including interest, CIBC in 2005 agreed to pay $2.4 billion, Chase agreed to pay $2.2 billion, and Citigroup agreed to pay $2 billion. Another $500 million in settlements already had been completed with Lehman Brothers Holdings Inc., Bank of America Corp., Andersen Worldwide and 18 former outside Enron directors, including 10 who paid $13 million from their personal accounts after selling stock. The amounts accrued interest of about $550,000 a day.

The civil lawsuit, filed by shareholders against Enron, several banks and several former top executives including founder Kenneth Lay, ex-CEO Jeffrey Skilling and ex-CFO Andrew Fastow, is scheduled to begin in October, according to Lerach.

Lerach said there is no indication whether other banks named in the lawsuit will settle claims before the scheduled trial. Financial institutions that have not settled include Merrill Lynch & Co., Credit Suisse First Boston, Barclays plc, Toronto-Dominion Bank, Royal Bank of Canada, Deutsche Bank AG and the Royal Bank of Scotland Group plc. Lerach also did not know when the settlement proceeds would be paid to shareholders, but he expected it to be "as soon as possible."

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