In another early settlement, Citigroup, Inc. (NYSE: C) has announced a preliminary settlement of the claims brought against it as part of the Enron securities class action pending in the S.D. of Texas. The settlement is for $2 billion and will be covered by the company’s existing litigation reserves. Bloomberg has this report.
Category Archives: Enron
More on the Dura decision:
(1) The Legal Times has an article (via law.com – free regist. req’d) discussing the reaction of the parties to the decision.
(2) Forbes has a column stating that the decision was a “no-brainer” and providing some academic commentary.
(3) The Wall Street Journal has an editorial (subscrip. req’d) citing the decision as another reason why criminal sentencing in the Enron “barge” case should not be based on the alleged inflation of the company’s stock price.
Eighteen former Enron directors have entered into a preliminary settlement of the securities class action claims against them for $168 million. As in the similar WorldCom settlement, Bloomberg reports that a portion of the funds ($13 million) will be paid by ten of the directors personally. The amount of the personal payments is apparently “tied to allegations of insider trading.”
Quote of note: “In addition to the $168 million settlement amount, the directors agreed to pay $32 million to Enron creditors, the investors said. That money will also be paid out of the insurance policies, which total $200 million of coverage. Another $13 million of insurance proceeds will be reserved for the legal fees of directors who didn’t settle, including former Enron Chairman Kenneth Lay and ex-Chief Executive Jeffrey Skilling.”
According to a feature article (free regist. req’d) in the Atlanta Journal-Constitution, the legal bills related to Enron’s bankruptcy are close to $1 billion.
Quote of note: “When Enron Corp. emerges from bankruptcy by year’s end, there won’t be much wealth left for those who invested in the once high-flying company. By most estimates, Enron’s creditors will likely receive 20 cents on the dollar, while shareholders probably won’t get a cent. But don’t worry about the lawyers, accountants and other advisers who’ve feasted on Enron’s Chapter 11 case. Their court-approved fees are expected to reach $995 million.”
In a week filled with large settlements, Lehman Brothers Holdings, Inc. (NYSE: LEH) has announced the preliminary settlement of the ’33 Act claims (misrepresentations in a registration statement) brought against it as part of the Enron securities class action in the S.D. of Tex. The settlement is for $222.5 million and follows on the heels of a similar, albeit smaller, settlement by Bank of America.
Bank of America Corporation (NYSE:BAC) announced on Friday the preliminary settlement of the claims brought against the company as part of the Enron securities class action pending in the S.D. of Texas. Bank of America has agreed to pay $69 million. It is the second settlement in the Enron case, following the July 2002 settlement by Arthur Andersen’s international entities.
Bank of America was sued under the Securities Act based on its role as an underwriter for certain Enron and Enron-related debt offerings. According to a press release from the University of California, the lead plaintiff in the case, Bank of America’s payment will be more than 50% of its potential damage exposure.
News coverage of the settlement includes articles from the Associated Press, Bloomberg, and Reuters.
The 10b-5 Daily continues to avidly follow the district court split over whether the extended statute of limitations for securities fraud in the Sarbanes-Oxley Act of 2002 revives time-barred claims. District courts have gone both ways on this question and the issue is currently before the U.S. Court of Appeals for the 11th Circuit.
Buried in a large Enron decision from last month is a new ruling on the issue. In Newby v. Enron Corp., 2004 WL 405886 (S.D. Tex. Feb. 25, 2004) , the court addressed a motion to intervene by the Imperial County Employees Retirement System. One issue was whether the proposed intervenor’s claims would be time-barred. The decision has an extensive discussion of relevant case law and, on the revival of time-barred claims, holds:
“With regard to claims that were time-barred by the shorter one-year statute of limitations under Lampf prior to the enactment of the Sarbanes-Oxley Act, this court agrees with [the decision in Glaser v. Enzo Biochem, Inc., 2003 WL 21960613 (E.D. Va. July 16, 2003] that in what this Court finds is an absence of any expression of specific intent that Sarbanes-Oxley should apply retroactively, either in the Act or the legislative history, the Sarbanes-Oxley Act’s extended limitations period cannot revive stale claims.”
One of the issues in the Enron securities class action has been whether the bankruptcy examiner, who prepared a report that was strongly critical of the role of Enron’s banks and auditors in the collapse of the company, would be required to produce documents or testify in the case.
According to a report in the Houson Chronicle, Judge Melinda Harmon (S.D. of Tx.) has ordered “not that [the bankruptcy examiner] provide evidence to those suing in the civil lawsuits before her, but that the financial institutions themselves turn over copies of all deposition transcripts or sworn statements relating to the Enron bankruptcy.” The production must be completed by March 29.
Quote of note: “[T]he statements have already been given to Enron, its debtors and its creditors committee, and they are referenced at length in the public examiner’s report. [Judge Harmon] said fairness dictates that all parties in the would-be class-action suits before her have the information. ‘The parties seeking the statements could, they acknowledge, retake depositions of the individuals whose statements and depositions were taken by the examiner, but the costs would be enormous,’ Harmon noted.”
The trial in the Enron securities class action has been postponed another year, until October 16, 2006, to accomodate the massive discovery in the case. (Last July, the court had set an October 17, 2005 trial date.) According to an article in today’s Houston Chronicle, Judge Melinda Harmon of the S.D. of Tex. has scheduled 18 months for factual discovery.
Quote of note: “Harmon and Enron’s bankruptcy judge even tried to force a settlement by ordering the deep-pocketed financial institutions to mediation with the representatives of shareholders and employees. But the parties were too far apart and, as in most litigation, the case needs to get further down the evidentiary road so both sides can better see exactly what can be proved in court before there may be a meeting of minds on settlement.”
The Wall Street Journal (subscrip. required) reports that Enron has filed a complaint against six of its former bankers in bankruptcy court. According to the article, “the complaint alleges that the banks ‘bear substantial responsibility’ for Enron’s downfall because they participated ‘with a small group of senior officers and managers of Enron in a mulityear scheme to manipulate and misstate Enron’s financial difficulties.'”
The filing comes just days before the company is scheduled to participate in court-ordered mediation for the suits brought by its shareholders and financial institutions and appears designed to spur a more favorable settlement.