|  | | 2004 News and Press Releases | | |
SETTLEMENT NEWS:
Lehman May Be Close To Settling Enron Lawsuit; The Brokerage Firm, Which Underwrote The Energy Trader's Debt Offerings, Agrees To Pay $222.5 Million To Investors, Sources Say
Los Angeles Times
. September 24, 2004
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EXCERPT: In a potential milestone in the Enron Corp. scandal, brokerage firm Lehman Bros. Holdings Inc. has agreed to pay $222.5 million to resolve a lawsuit filed by investors over its role as an underwriter for the onetime energy giant, people familiar with the settlement said.
New York-based Lehman, accused of misleading investors in Enron debt offerings stretching back to 1998, wouldn't admit wrongdoing under the settlement, the sources said. Lehman's board and the University of California Board of Regents, the lead shareholder in the case, must approve the accord, which was negotiated by the brokerage's lawyers, the sources said. The UC system lost $145 million on investments in Enron, which filed for bankruptcy protection in 2001 after revealing serious accounting problems. "It's a pretty good-sized settlement that gives the investors a club for future negotiations," said James Cox, a securities law professor at Duke University. "It also provides the other big financial institutions who've been sued with a good idea of what the settlement threshold may be for this case." The settlement would be the largest so far stemming from the 2002 investor suit, which named Citigroup Inc., J.P. Morgan Chase & Co. and other Enron investment banks among the defendants. The settlement amount would be equal to about half of Lehman's net income in the quarter ended Aug. 31. Lehman, the fifth-largest U.S. securities firm, issued debt offerings that contained misleading financial statements about Enron, investors claim. Under U.S. law, the brokerage's potential liability is limited to the securities it underwrote, Cox said. Shareholders and bondholders, who are seeking $30 billion in damages, have accused other banks, such as Citigroup and J.P. Morgan, of helping Enron commit accounting fraud. The banks have denied wrongdoing in court papers. The settlement process has not been completed, Lehman spokeswoman Hannah Burns said. "The company believes that such a settlement, if it occurs, will have no impact on the company's results from operations," she said. Trey Davis, a spokesman for the California regents, declined to comment on negotiations. "The university has been involved in settlement talks, and the regents are considering the matter at their board meeting this week," Davis said. |
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