A Federal judge has approved the distribution of $7.2 billion in settlements to former Enron shareholders who lost money when the one-time energy giant went bankrupt almost seven years ago, the Houston Chronicle reported.
U.S. District Judge Melinda Harmon also approved the payment of $688 million plus interest to Coughlin Stoia Geller Rudman & Robbins, the law firm that headed up the shareholder litigation for more than six years, according to the report.
The $7.2 billion is the largest settlement ever in U.S. securities litigation, eclipsing the $6.1 billion recovered by WorldCom shareholders, according to the paper, which cited the Securities Class Action Clearinghouse at Stanford University.
“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,” Patrick Coughlin, chief trial counsel for Coughlin Stoia, told the Chronicle.
To receive some of this cash shareholders must have purchased Enron stock between Sept. 9, 1997 and Dec. 2, 2001, the day the company went bankrupt, the Chronicle noted. The distribution is expected to be completed by year-end.
Roughly 1.5 million individual investors and others are expected to receive an average of $6.79 per share. Those who bought preferred shares figure to receive an average of $168.50 per share.
About $6.6 billion of the $7.2 billion came from JP Morgan Chase, Citigroup, and the Canadian Imperial Bank of Commerce, which previously agreed to the settlements. The lawsuit claimed that the financial institutions participated in the accounting fraud that led to Enron’s downfall.
Smaller amounts came from Bank of America; Lehman Brothers; former Big Five auditing firm Arthur Andersen and its defunct global umbrella organization, Andersen Worldwide; LJM2, a former partnership once run by former Enron chief financial officer Andrew Fastow to do deals with Enron; and law firm Kirkland & Ellis.
In addition, former Enron directors settled for a total of $168 million.
Not all bank defendants agreed to settle, however. Merrill Lynch, Barclays, and Credit Suisse First Boston held out and were rewarded for their stubbornness. Last year, the 5th U.S. Circuit Court of Appeals ruled that plaintiffs can’t bring private litigation against banks for aiding and abetting securities violations; only the Securities and Exchange Commission can.