BofA Settles Pension Fund’s Enron Lawsuit
Bank of America Corp. and other financial advisors agreed to pay $49 million to settle a suit brought by the Retirement System of Alabama stemming from the collapse of Enron Corp., it was announced Tuesday.
The $25-billion retirement system in 2001 sued Merrill Lynch, JPMorgan Chase & Co., Credit Suisse First Boston, Bank of America and Citigroup Inc., alleging fraud. The financial advisors knew Enron was more than $10 billion in debt and verging on collapse when they urged the pension fund to buy the company’s stock and bonds, the state’s lawyers said.
“We decided to settle because it’s in the best interest of the company to put this litigation behind us,” Bank of America spokeswoman Shirley Norton said.
“The RSA appreciates the financial institutions’ willingness to resolve this matter at an earlier stage before trial,” said Michael Rediker, an attorney for the Retirement System of Alabama. He said Citigroup and JPMorgan analyzed Enron’s books in 2001, concluded the company was near collapse and advised the fund to invest in it.
The parties agreed to settle as the case was headed for arguments in a federal appeals court about whether it would be tried in front of a local jury.
The amounts paid by the financial institutions weren’t disclosed publicly or to the state, said Thomas Krebs, another pension fund attorney. The settlement money arrived in a lump sum via wire last week, he said.
Citigroup spokeswoman Leah Johnson didn’t respond to a message seeking comment. Merrill Lynch spokesman Mark Herr and Credit Suisse First Boston spokesman John Gallagher declined to comment. JPMorgan spokeswoman Kristin Lemkau didn’t comment.
The pension fund filed suit in state court in Montgomery, Ala. It was moved to federal court. The state was going to argue to a federal appeals panel in New Orleans last week to send the case back to state court.
Enron investors have lost $30 billion related to the accounting fraud. Kenneth L. Lay, former chairman, and Jeffrey K. Skilling, former chief financial officer, are to be tried on fraud charges in January.
