UC, Brokerage Firm Settle Suit Over Losses From Enron Collapse

The University of California said Friday that brokerage firm Lehman Bros. Holdings Inc. has agreed to pay $222.5 million to settle a lawsuit by the university and other investors over the firm’s role as an underwriter for Enron Corp., the onetime energy giant.

UC lost $145 million on investments in Enron, which filed for bankruptcy protection in 2001 after a collapse that cost investors billions of dollars. The university’s Board of Regents is the lead plaintiff in the class-action lawsuit filed by Enron investors against numerous banks, brokerages, former Enron executives and the company itself.

UC spokesman Trey Davis said the settlement amount, which is subject to court approval, would be allocated proportionately to Enron shareholders included in the class action. The university’s share of that is not yet known, he said.

When the money is allocated, it will help make up the Enron-related losses in UC’s investment portfolio, including its pension fund, and will have no effect on the university’s operating budget, Davis said.

“This won’t have anything to do with things like student fees or research labs,” he said.

The agreement announced Friday was the third settlement in the case. In July, Bank of America Corp. agreed to pay $69 million to the university and other investors.

In 2002, UC reached a $40-million settlement with the international arm of accounting firm Arthur Andersen. Lehman was accused in the case of misleading investors in Enron debt offerings dating to 1998. The company was not charged with fraud.