Enron fallout spills on Canadian bank

NEW YORK — Canadian Imperial Bank of Commerce has agreed to pay $2.4 billion to resolve investors' claims it helped hide losses at Enron Corp., marking the biggest individual settlement since the energy trader collapsed in a massive accounting fraud.

The settlement announced Tuesday with the Toronto-based bank — Canada's fifth-largest financial institution and the operator of the securities firm CIBC World Markets — could help compensate investors who lost tens of billions of dollars when Enron failed in 2001.

Combined with similar agreements with Citigroup Inc. and JPMorgan Chase & Co. and others, the settlements have now reached more than $7 billion, said lawyers for the wronged investors.

Some 50,000 Enron stock and bond holders, led by the University of California Board of Regents, filed claims as part of the lawsuit. Investors claim a number of global banks and brokerages helped Houston-based Enron continue to operate and raise money even as the company was imploding.

"The settlement reflects the level of involvement from CIBC, and reflects the fact they waited for others to settle before them, and that reflects the settlement amount," said William Lerach, the lawyer representing the UC Board of Regents, which lost $144.7 million when Enron declared bankruptcy. "We can't predict the future, but we've said all along that those that settle earlier will do better than those that didn't come to the table at the appropriate time."

The approximate damages subject to proof at trial are up to $47 billion but Lerach has said the actual awards will be pennies on the dollar. A federal judge in Texas will determine a formula under which claimants would be paid. But investors might not see any funds for more than a year.

The CIBC settlement marks the seventh since investors filed numerous lawsuits over Enron's collapse. Enron spokeswoman Jennifer Lowney declined to comment on the settlement, noting that the company is a party to the litigation.

Enron investors are still seeking to hammer out agreements with a number of financial institutions.

In June, Citigroup agreed to pay $2.2 billion followed days later by JPMorgan's agreement to forfeit $2 billion. Those deals put pressure on remaining defendants such as CIBC to settle.

Before those agreements, there had been some $500 million of settlements reached with Lehman Brothers Holdings Inc., Bank of America Corp., Andersen Worldwide, Enron's outside directors and Enron's former vice chairman, Ken Harrison.

CIBC to pay $2.4 billion in Enron case
Investors Business Daily, 8/3/2005 6:30:51 PM
NEW YORK (MarketWatch) - Investors, disappointed with Canadian Imperial Bank of Commerce's hefty $2.4 billion settlement, sent shares of the bank down more than 7% in trading Wednesday.
CIBC agreed Tuesday to pay $2.4 billion to Enron investors who claimed the financial services company took part in a massive accounting fraud that led to the collapse of the energy giant.
The settlement with the Toronto company (BCM)(CM) is the largest single action so far on behalf of Enron stock and bond holders, and brings the total payments in the case to $7.1 billion, making this the biggest class-action recovery.
(snip)
Analysts were shocked that the company--which had only set aside C$300 million in legal reserves--could have underestimated the final settlement by so much. One analyst accused CIBC of writing off "a quarter of your book value in six days."
McCaughey defended the move, saying the bank's board discussed the reserve each quarter. "The situation did change during negotiations," he said declining to elaborate. "We thought it was important to settle this case."
The class-action suit covers about 50,000 investors who owned Enron securities between September 1997 and December 2001. With the CIBC settlement, the amount of money available to Enron investors now exceeds the $6.1 billion that Wall Street forked over to WorldCom investors in similar litigation.
William Lerach, the securities lawyer representing the University of California Board of Regents -- the lead plaintiff in the case -- said settlements with other defendants are expected.
"This settlement demonstrates that the university's strategy of aggressively pursuing the defendants is working," Lerach said in a statement.
"We continue to pursue other defendants, including other banks that have been charged with knowingly participating in the scheme to defraud Enron investors," he added. "Beyond today's agreement, the lawsuit continues to proceed very satisfactorily and further large recoveries are anticipated."
As is customary in such cases, CIBC did not admit nor deny wrongdoing. The company, Canada's fifth-largest banking firm and the parent of investment banker CIBC World Markets, said it agreed to the civil settlement to eliminate the uncertainties of a trial.

What ever happened to "Caveatt Emptor?" Investments are risky and one of the biggest and most basic risks that everyone should be aware of is human nature!!!

There is a little larceny in every heart and a whole lot of it in some heartless individuals. Expecting events like ENRON to never happen, or expecting government to "prevent" it, or depending on lawyers to get justice for thoughtless, naive investors is a complete surrender to Socialism!!! IMHO

I do not have a problem with government punishing the fraudulent and corrupt that poison the system, of course. But I do have a problem with expectations as outlined in the previous paragraph. That level of expectation is a reckless and feckless speculation that gives the "investor" exactly the well deserved "victimhood" and a well deserved total loss of their "investment!" IMHO

Let the buyer beware, at least to a reasonable extent!!!

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