Merrill Lynch & Co. Inc. on Thursday agreed to pay Enron Corp.’s estate $29.5 million to settle its portion of a so-called “MegaClaims” lawsuit filed against 10 investment firms accused of failing to prevent the energy company’s bankruptcy.
<>The settlement includes about $73.7 million in subordinated claims against the Enron estate, and about $10 million in transferred claims that will be allowed. The agreement requires approval by the U.S. Bankruptcy Court for the Southern District of New York. Merrill did not admit or deny wrongdoing. It said the two parties agreed to settle the lawsuit “to avoid the costs and uncertainties of further proceedings.”
“This settlement is a further proactive step in our efforts to settle the Enron Estate,” said John J. Ray III, Enron’s president. Ray, who also serves as Enron’s board chairman, said Enron was “gratified with the progress we have made to bring the MegaClaims litigation with Merrill Lynch to a close and remains optimistic that the remaining financial institutions will put their Enron issues to rest.”
Following its bankruptcy, Enron had alleged Merrill and other financial institutions were partly responsible for bringing about the downfall of he company by helping it commit financial fraud. The lawsuits generate money that Enron’s estate may use to pay the company’s creditors.
The original MegaClaims complaint claimed that banks aided and abetted breaches of fiduciary duties; aided and abetted fraud; and engaged in civil conspiracy. The lawsuit also included bankruptcy-based claims relating to equitable subordination; preferential and/or fraudulent transfers; and the recharacterization of certain transactions.
Settlements announced to date provide for more than $800 million of cash payments and the subordination or cash in lieu of subordination of more than $3 billion in claims (see Daily GPI, May 11).
Remaining MegaClaim cases include Citigroup Inc., Deutsche Bank AG, Barclays plc and Fleet National Bank.
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