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JPMorgan Agrees to $2.2B Enron Settlement
By Joe Bel Bruno
The Associated Press
Tuesday June 14, 2005
http://biz.yahoo.com/ap/050614/enron_jpmorgan.html?.v=13
NEW YORK -- JPMorgan Chase & Co., the third-largest U.S. bank,
agreed Tuesday to pay $2.2 billion to settle a class-action lawsuit
over its role in helping Enron Corp. engineer an accounting fraud
that bilked investors out of billions of dollars.
The agreement represents the largest settlement deal in lawsuits
against banks, advisers, and Enron executives connected to the
energy trader's 2001 bankruptcy. It also comes just four days after
Citigroup Inc., the nation's largest financial services company,
agreed to pay investors $2 billion to settle the lawsuit. JPMorgan
is No. 3 in terms of its market capitalization.
Some 50,000 Enron stock and bond holders led by the University of
California's board of regents filed claims as part of the lawsuit.
The suit alleges that a number of banks and brokerages helped
Houston-based Enron continue to operate and raise money even as the
company was imploding.
The settlement marks the sixth in the long-running Enron debacle,
with some $491.5 million in deals being made with Lehman Brothers
Holdings Inc., Bank of America Corp., Andersen Worldwide, Enron's
outside directors and Enron's former vice chairman, Ken Harrison. An
attorney for the investors said the reason why JPMorgan is paying
$200 million more than Citigroup is because the University of
California has offered incentives for those that strike settlements
sooner rather than later.
"These were two giant steps on the road, but we have a long way to
go before the end of the road," said William Lerach, the lawyer
representing the University of California, which lost $144.7 million
when Enron declared bankruptcy. "There will be other large
settlements coming soon."
Lerach, and other attorneys for the university are still litigating
with Barclays PLC, Credit Suisse First Boston, Merrill Lynch & Co.,
Toronto Dominion Bank, Royal Bank of Canada, Deutsche Bank AG, and
the Royal Bank of Scotland.
Among the individuals named as defendants are Enron founder and ex-
CEO Kenneth Lay, former Chief Executive Jeffrey Skilling, and former
top accountant Richard Causey. All have pleaded not guilty to
charges of fraud and conspiracy in a case scheduled to go to trial
in January 2006.
All the settlements still must be approved by a federal judge in
Texas, who will determine a formula under which claimants would be
paid. No date for a hearing has been set, and investors might not
see any funds for more than a year.
The financial institutions allegedly helped Enron set up
partnerships that the company used to improperly boost profits while
moving billions of dollars of debt off its balance sheet. That
allowed Enron to report higher cash flow from operations and lower
debt, making its financial picture look better than it was and
artificially inflating the company's stock and bond prices,
according to the lawsuit.
JPMorgan Chase was accused of helping Enron engage in large prepaid
transactions in which debt was concealed from the balance sheet to
inflate the bottom line. In addition, the Wall Street giant was
accused of issuing bullish research reports that stressed Enron's
liquidity while the company was on the verge of collapse.
In the settlement, JPMorgan Chase denied breaking any laws. The bank
said in a statement that the deal was to "solely to eliminate the
uncertainties, burden, and expense of further protracted litigation."
"We are working hard to put the uncertainty of litigation risk
behind us," Chairman and CEO William B. Harrison said. "By settling
this case and increasing reserves for our remaining legal issues,
the firm can better focus its energies on building our great company
and serving our clients and shareholders."
Enron's collapse caused between $40 billion and $45 billion of
market losses, and investors can also seek tens of billions of
dollars more in damages under securities laws.
The settlement covers stock and bonds that were issued by Enron
between Sept. 9, 1997 and Dec 2, 2001, according to the plaintiffs.
JPMorgan Chase said it expects to take a $2 billion charge on its
earnings, or $1.25 billion after taxes, during the current quarter
to cover the settlement. The charge will also be used to cover
remaining legal matters the bank faces, but said it would still
remain well capitalized.
Analysts surveyed by Thomson Financial expect JPMorgan Chase to
report earnings of 66 cents per share during the second quarter on
revenue of $13.45 billion.
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http://www.goldismoney.info/index.html
http://www.minersmanual.com/minernews.html
http://www.a1-guide-to-gold-investments.com/euro-vs-dollar.html
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http://www.kereport.com
(Korelin Business Report -- audio)
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Ted Butler silver commentary archive:
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----------------------------------------------------
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