Citi settles with Enron creditors
Citigroup Inc. agreed Wednesday to pay $1.66 billion to creditors of Enron Corp. who lost money when the energy trading firm collapsed in 2001.
Citigroup was the last remaining defendant in what was known as the Mega Claims lawsuit, filed in 2003 against 11 banks and brokerages. The filer, called Enron Creditors Recovery Corp., alleges that with the help of banks including Citigroup, Enron kept creditors in the dark about the company’s financial troubles by using shady accounting.
Wednesday’s settlement -- plus previous bank settlements and Enron’s subsequent release of $1.7 billion held in reserves -- gives those creditors more than $5 billion, Enron said. That amounts to 37.4 cents on each dollar the creditors had tied up in Enron, according to Enron.
Citi, which denies any wrongdoing, had been trying to get the Enron suit tossed out. Enron’s creditors -- which include individual employees and small companies that lent Enron money -- had filed claims against Citi that could have potentially totaled about $21 billion.
Now, a month before the scheduled April trial, Wednesday’s settlement has resolved the two largest remaining claims against Citi, the bank said.
Still, the $1.66-billion settlement wipes out more than half of the $2.8 billion in litigation reserves Citi held as of Dec. 31, according to a regulatory filing. Citi said this year that those reserves were sufficient to cover all pending suits.
Several years after the Enron collapse, Citi is struggling with its own financial problems. A plunge in demand for assets backed by mortgages caused the bank to suffer a nearly $10-billion loss in the fourth quarter of 2007, its biggest loss ever.
Citigroup shares fell $1.37, or 5.9%, to $22.05 on Wednesday.
In addition to paying Enron $1.66 billion, Citi is waiving about $4 billion in claims it made against Enron. Citi said it agreed to a separate settlement resolving all disputes with the holders of Enron credit-linked notes. It declined to disclose the amount of the separate settlement.
