It wasn't so long ago that JP Morgan announced its $2 billion Worldcom settlement. not comes word that the bank has now come to terms on Enron claims to the tune of $1billion. The following story from The Guardian, in addition to providing details about JP Morgan's woes, also provides an interesting accross the pond perspective on the Enron embroglio.

Via The Guardian:

JP Morgan pays $1bn to settle Enron claim

David Teather in New York
Wednesday August 17, 2005
The Guardian

JP Morgan Chase agreed yesterday to pay $1bn (£550m) to settle claims brought against it by Enron, bringing the total cost of the Wall Street bank's brush with the notorious energy firm to $3.2bn. The latest settlement will put further pressure on those banks that Enron has an outstanding claim against, including Barclays.

Enron filed suit against 10 banks, accusing them of helping the energy company's former management to commit fraud. Enron filed for bankruptcy in December 2001 amid allegations that it routinely hid debts and inflated revenues and earnings through a series of complex off-balance sheet deals. Almost four years later, the scandal continues to cast a long shadow over both the finances and the reputation of Wall Street.

JP Morgan agreed to pay $350m in cash and to forgo certain claims in Enron's bankruptcy proceedings, bringing the settlement to about $1bn. "We have put behind us another significant piece of our Enron exposure," said the bank's chief executive, William Harrison. The firm agreed in June to pay $2.2bn to settle a class-action lawsuit filed by former investors in Enron.

The Toronto Dominion Bank also announced a settlement with Enron yesterday and said that it would pay $70m to resolve the allegations that it helped the company commit fraud. Enron has now recovered about $735m in cash in what the company calls its "mega-claims" litigation. In earlier settlements, Royal Bank of Scotland agreed to pay $41.8m; Canadian Imperial Bank of Commerce will pay $250m, and Royal Bank of Canada will pay $25m.

"These are tremendous results for creditors and they will certainly add to their distributions," said John Ray, Enron's board chairman. He said talks were continuing with the remaining five banks that had not settled and that the latest agreements "give us momentum". The company emerged from bankruptcy late last year and now exists to liquidate assets and pay debts. Before its collapse, Enron was once the seventh-largest company in the United States.

The Enron scandal rewrote corporate law in the US and the government has worked aggressively to pursue its former executives. Convictions have been secured against a handful of former Enron employees with the biggest catch yet being the former chief financial officer Andrew Fastow, who is facing 10 years in prison after pleading guilty to fraud. The most eagerly anticipated trial - of the former chief executive Jeffrey Skilling and the former chairman Ken Lay, who was once a friend of President George Bush - is scheduled to begin early next year.

The shareholder lawsuits against Enron's former advisers have accused the banks of helping the energy firm to mask its true financial state and to continue selling equities and bonds to investors even as it headed towards bankruptcy. In August, the Canadian Imperial Bank of Commerce agreed to pay investors $2.4bn, bringing the total amount recovered from banks on shareholders' behalf to $7bn. In the investor lawsuit, Citigroup has paid $2bn.

A number of banks holding out against the suit brought by Enron - Barclays, Credit Suisse First Boston, Merrill Lynch and Deutsche Bank - have also yet to settle the class-action suit that was brought by shareholders. The other firm that has yet to settle the Enron suit is Citigroup, while Royal Bank of Scotland is among the banks that have not yet settled the shareholder lawsuit. William Lerach, the lawyer representing the former Enron shareholders, has warned that the longer the banks hold out against reaching a settlement, the more they will be forced to pay eventually.

The original article appears here.

-- MDT

Labels: Andy Fastow, Enron