Investors who watched their shares of Enron disintegrate will receive $7.2 billion as part of a settlement approved by U.S. District Judge Melinda Harmon today.
The 1.5 million people eligible for the settlement—those that bought shares between 9/9/97 and 12/02/01—will get an average of $6.79 per share for common stock, while preferred stock holders will get an average of $168.50 per share. The lawyers who fought this battle for the past 6 years are being well compensated: $688 million in fees.
Both the lawyer’s fees and the settlement will be paid by a number of banks that were advisors for Enron. The large majority of the settlements, $6.6 billion, comes from JP Morgan Chase, Citigroup and the Canadian Imperial Bank of Commerce. The rest will be provided by a number of smaller banks, as well as $168 million from former Enron execs.
The lawyers are still pursuing three more banks:
Cron: Facing a bankrupt company when the litigation was filed weeks before Enron failed in 2001, the plaintiffs pursued deep-pocketed banks that did business with Enron. Specifically, plaintiffs said the banks played as major a role in fraud as Enron by crafting and financing dubious deals.
While some settled for $2 billion or more each, three others — Merrill Lynch & Co., Barclays and Credit Suisse First Boston — kept fighting. In March last year the 5th U.S. Circuit Court of Appeals rewarded their tenacity with a ruling that rejected the plaintiffs’ theory that the banks were primary players in fraud.
That ruling said that at best, the banks aided and abetted fraud as bit players, and as such could be pursued by the Securities and Exchange Commission, but not in private securities litigation.
The Supreme Court refused to review the case, so plaintiffs argued to Harmon that the three remaining banks are liable because they were so active in conducting deals with Enron and selling its securities that they had a duty to disclose what they knew about fraudulent practices.
Harmon has yet to rule on that argument.
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