Risk Management

Merrill Lynch Settles with Enron

The "MegaClaims" complaint involves claims that banks aided and abetted breaches of fiduciary duties by the ill-fated energy company.
Stephen TaubJuly 6, 2006

Merrill Lynch & Co. has agreed to pay $29.5 million to settle its portion of the claims litigation against a number of banks in the Enron bankruptcy case.

Under the deal, Merrill agreed not to seek $73.7 million in claims against the Enron Estate. However, the investment banking giant could receive about $10 million in other claims that were outside the settlement, according to the Associated Press.

Enron noted in its announcement that the settlement reflects that Merrill Lynch was involved in fewer transactions with Enron than certain of the other defendants in the “MegaClaims” litigation. Under its arrangement, Merrill did not admit liability or wrongdoing.

The Enron MegaClaims complaint involves claims that the banks aided and abetted breaches of fiduciary duties; aided and abetted fraud; and engaged in civil conspiracy. The suit also includes bankruptcy-based claims linked to equitable subordination; preferential and/or fraudulent transfers and the re-characterization of certain transactions.

“We are gratified with the progress we have made to bring the MegaClaims litigation with Merrill Lynch to a close and remain optimistic that the remaining financial institutions will put their Enron issues to rest,” said John J. Ray III, Enron’s president and board chairman.

The banks accused of failing to prevent the energy company’s collapse that still have active MegaClaims cases include Citigroup Inc., Deutsche Bank AG, Barclays PLC, and Fleet National Bank, Enron reported.

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; according to the wire service. In May, Credit Suisse Securities LLC agreed to pay $90 million.

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