Risk & Compliance

UBS Settles with Enron Creditors

The Swiss bank will pay $115 million over claims that it aided Enron Corp. in misreprenting its finances.
Stephen TaubJune 7, 2007

UBS AG agreed to pay $115 million to settle legal claims by Enron Creditors Recovery Corp., formerly Enron Corp., stemming from equity derivative contract payments that Enron Creditors sought to recover from the investment bank.

The Swiss bank said in its own press release that it is settling the litigation without any admission of liability. It also will waive the case that it had filed, seeking $5.5 million in the Enron bankruptcy litigation.

The settlement is subject to the approval of the U.S. Bankruptcy Court for the Southern District of New York.

“We are pleased with this settlement, the third we have reached in Enron’s equity transactions litigation,” John J. Ray III, chairman of Enron Creditors, said in a statement. He noted out that an equity transaction case against Bear, Stearns Cos. is the only one still pending.

Earlier this month, Enron Creditors settled a similar suit with Credit Suisse International and Credit Suisse Securities (USA) LLC, in which Credit Suisse will pay $61.5 million in cash. Credit Suisse also denied any liability.

The Enron Creditors’ complaint against UBS had included claims asserting fraudulent transfers that were designed to assist Enron in presenting a false financial picture of the company. The UBS press release said the bank had valid defenses to all the Enron Creditors’ claims, but that it chose eliminate the uncertainty by settling.

The Enron group launched the case in November 2003 to recover payments of $418.3 million that were made during 2001 under swap agreements indexed to the former Enron Corp.’s common stock and forward contracts in which UBS had agreed to sell and Enron had agreed to buy Enron stock.

During fiscal 2006, UBS said, it set aside funds for an eventual resolution of the case.