Enron settlement: $7.2 billion to shareholders, $688 million to lawyers

Houston Chronicle ^

[crusty old prospector]

Eligible shareholders whose Enron holdings became worthless when the company crumbled in scandal will receive $7.2 billion in settlements under a distribution plan approved in federal court. And the California-based law firm that ran massive Enron shareholder litigation for more than six years will get $688 million — plus interest — for its work, U.S. District Judge Melinda Harmon ruled late Monday. "We're pleased that the court recognizes the tremendous amount of work, skill and determination required to overcome significant obstacles in this complicated case and recover over $7 billion for defrauded investors," said Patrick Coughlin, chief trial counsel for the firm that ran the litigation, Coughlin Stoia Geller Rudman & Robbins. The $7.2 billion in settlements is the largest ever in U.S. securities litigation. The second-largest was WorldCom's $1.6 billion, according to the Securities Class Action Clearinghouse at Stanford University.

Shareholders eligible for a payout must have purchased Enron stock between Sept. 9, 1997 and Dec. 2, 2001, the day the company went bankrupt. Shareholders who bought stock before that time or after bankruptcy are not eligible. Firm spokesman Dan Newman said today that attorneys hope they can make a distribution by the end of the year, "and the order approving the plan of allocation is a big step toward that goal." The plan outlines procedures to distribute the settlement proceeds to about 1.5 million individuals and entities, such as pension funds. Investors who bought common stock during the span of eligibility stand to receive an average of $6.79 per share, while those who bought preferred shares stand to get an average of $168.50 per share.

[crusty old prospector]

As with previous stocks that I have had the privilege of owning that were subject to class action lawsuits, I will receive about $17.70 for the $2000 loss I took for buying Enron stock. In turn, they will give the Obambi's and John Edwards' of the world massive campaign contributions to keep the scam going.

[OldNavyVet]

Of interest is that Enron investors get 90% of what’s left while the lawyers plunk 10$ into their pockets.

Ordinarily, it turns out the other way around.

“A billion here, a billion there, and pretty soon you’re talking about real money.” — Everett Dirksen

[crusty old prospector]

In reading the article, it appears they got all of the settlement money out of the investment bankers that were “hawking” the stock. Enron was nothing but a few computers and some pipelines that were sold off a long time ago.

[caisson71]

This is peanuts compared to what the Fannie/Freddie bailout will be to us taxpayers. Yet, no one will be going to jail.

[crusty old prospector]

Yep, and I bet a lot of “special” people are going to get new, more affordable interest rates.

[jdub]

As with previous stocks that I have had the privilege of owning that were subject to class action lawsuits, I will receive about $17.70 for the $2000 loss I took for buying Enron stock. In turn, they will give the Obambi's and John Edwards' of the world massive campaign contributions to keep the scam going.

Did you only have 3 shares or stock, or did you just post a kneejerk reaction rather than reading even the posted blurb?

$688M is a lot of money. But there was a lot of work that went into a case like this. Investigators, court reporters,... probably thousands of people in all. If a lawyer billed 8 hours a day for a year at $250/hr, that comes out to just over $500,000. Remember he doesn't get all that. That is the firm's income. So if you put it in that context, 600 million for a case that took years to conclude isn't exactly unreasonable.

[crusty old prospector]

No, I had 500 shares. As with the Lucent and Xerox class actions that I have been fortunate enough to have been a part of, I lost $3500 on a $4000 investement in Lucent and got $35.00 and for a $1200 loss on a $2000 investment in Xerox, I got about $18.00. So, don’t preach to me about what is fair. The only people who have a pay day in these lawsuits are the ambulance chasers.

[masadaman]

There is pending civil litigation but the DOJ has looked the other way re the culprits including Franklin Raines and Jamie Gorelick on whose watch the books were cooked allowing the CEO, Raines, and Directors including Gorelick (she of 9/11 ‘phony intelligence fence and Obama’s likely Attorney General)to reap bizarre ‘bonuses’: tens of millions of dollars. Professional courtesy?

[purpleraine]

Anyone know if the employees every got any of the pension money?

[crusty old prospector]

17,000 Enron Pension Holders to Get Paid in Full Houston Chronicle September 14, 2004 Nearly 17,000 Enron pension plan holders will see their benefits paid, thanks to pressure from the federal government's Pension Benefit Guaranty Corporation. Enron agreed to use proceeds from the $4.45 billion sale of its pipeline business to place $321 million in an escrow account to fund the closeout of its pension plans. No new benefits will accrue for current employees, but retirees in four plans will receive the full amount originally expected. Previously Enron said it would only put about $200 million in the plan, but pension agency officials forced the issue during a bankruptcy court hearing last week where the company was seeking approval of the pipeline sale. Rather than see the closing of the sale delayed, Enron agreed to fully fund the pensions. Enron will now most likely arrange with an insurance company to take over the plans, which include the Enron Corp. Cash Balance Plan, Garden State Paper Pension Plan, Enron Financial Services Pension Plan and San Juan Gas Company Pension Plan. The method in which the pensioners receive their payments depends on the plans. They may receive a lump sum or over time as an annuity.

This was from 2004 so I don't know if it was ever carried to fruition. Most of the employees I know had most or much of their retirement in the company stock as they were encouraged to do so. That is one of the main reasons I do not invest heavily in my own company's stock.

[jdub]

While you are correct that most shareholder class actions are more about enriching the lawyer than the stockholder, without the lawsuit you would get nothing. Also, without the lawsuits, the ones who perpetuate frauds on their investors would have much reason not to do so. in this case, while 6 bucks a share is pennies on the dollar, its still 6 bucks. If the entire attorney’s fees were added to the pot you’d still only get $6.60.

[crusty old prospector]

I basically got nothing. $35 for a $2000 loss? I would consider “something” $200-300. I would prefer to receive nothing because I know where much of that money you say is going to the “firm” ends up. Democratic candidates campaign contributions. If they were just capitalist lawyers and lived the good life off of their efforts, that would be fine. But knowing that they aid and abet the enemy is more than I can swallow.