Canadian Imperial Bank of Commerce on Tuesday said it had agreed to pay $2.4bn to settle a securities fraud case related to Enron, pushing the total amount of money to be recovered for investors to a record.
The University of California, the lead plantiff in the class action suit, has now reached agreements to recover $7bn for investors, which exceeds the amount recovered in the WorldCom case. In settling allegations that it had participated in a scheme to defraud investors, CIBC neither confirmed nor denied wrongdoing.
William Lerach, of Lerach Coughlin Stoia Geller Rudman & Robbins LLP, lead counsel for the university in the litigation, said "We're going to insist that any bank that settles after this pay more."
CIBC paid $200m more than JPMorgan Chase, which agreed to settle in June and was the last bank to settle. Mr Lerach said he intended to have the next bank to settle pay much more than a $200m increase. CIBC's settlement, he said, "reflects an ability to pay that these other banks don't have." CIBC is much smaller than JPMorgan Chase and Citigroup, which agreed to pay $2bn, also in June. CIBC's settlement exceeeds its net income for 2004.
Remaining defendants in the investors' lawsuit include Merrill Lynch, Credit Suisse First Boston, Barclays Bank, Deutsche Bank, Toronto-Dominion Bank, Royal Bank of Canada and the Royal Bank of Scotland. A trial is scheduled for October 2006.
In addition to JPMorgan Chase and Citigroup, Lehman Brothers has agreed to pay $222.5m, Bank of America $69m, Enron's outside directors $168m and Andersen Worldwide $32m. The University of California will also secure a distribution of about $32m due to a bankruptcy proceeding related to an Enron partnership.
"This proves the strategy of pursuing escalating settlements is succeeding," said Mr Lerach. "It behooves people to settle early before it gets more expensive." Mr Lerach said he had been approached by banks who want to settle but added that they have “to get more realistic." He said: "I hope this will give them a further dose of realty. What really drives this is that as each bank settles the banks that are left face increasing liability exposure."
The seven remaining banks either declined to comment or could not immediately be reached. But some insiders said that while Mr Lerach was saying he would not settle for less than CIBC, he must weigh whether that is best for his clients as the remaining plaintiffs can go to court. Some of the banks have been reluctant to settle because they feel others bear more responsibility than they do.
CLASS RECOVERIES TO DATE
