Merrill Settles Suit With Enron
Merrill Lynch & Co. on Thursday agreed to pay Enron Corp. $29.5 million to settle its portion of a lawsuit filed against 10 banks accused of failing to prevent the energy company’s collapse.
The New York-based securities firm, which did not admit or deny wrongdoing, said it settled the so-called MegaClaims lawsuit to avoid more litigation.
Merrill Lynch also agreed to give up collection of $73.7 million in claims against what’s left of Enron but could receive about $10 million in other claims that were outside the settlement, an Enron spokeswoman said.
The settlement is smaller than the $80 million that Merrill Lynch paid the Securities and Exchange Commission in 2003 to settle civil charges that the firm participated in Enron’s sham sale of floating power plants, which made it appear that Enron had met earnings targets in 1999.
Also in 2003, Merrill Lynch avoided criminal prosecution by admitting that some employees may have broken the law with questionable year-end deals. Four former Merrill executives were convicted of conspiracy and fraud in 2004 for their roles in the power plant deal and were sentenced to prison terms of as many as four years. Three of those four have since been released on bond pending appeals.
A U.S. Bankruptcy Court in New York must approve Thursday’s settlement, and the payment would go to creditors of Enron, which is liquidating its operations. Enron filed for bankruptcy in December 2001 amid questions about its accounting and financial state, triggering a flurry of lawsuits by the company and its shareholders against a number of banks.
Last year, JPMorgan Chase & Co. agreed to pay Enron $350 million, Canadian Imperial Bank of Commerce agreed to pay $250 million and Toronto-Dominion Bank agreed to pay $70 million in MegaClaims cases. In May, Credit Suisse Securities agreed to pay $90 million.
Enron said remaining cases in the litigation involve Citigroup Inc., Deutsche Bank, Barclays and Fleet National Bank.
In a class-action lawsuit filed by Enron investors, JPMorgan agreed last year to pay $2.2 billion, Canadian Imperial agreed to a $2.4-billion settlement and Citigroup reached a $2-billion settlement.
