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FW: Citigroup agrees to pay $1.66 billion to settle Enron lawsuit

Settlement raises rate of recovery for Enron creditors to about 37 cents on the dollar

By Frank Byrt
March 26, 2008

The long legal battle over the liability for the collapse of Enron may finally be over.

Citigroup today agreed to pay $1.66 billion and give up an estimated $4.25 billion in claims to settle a creditor lawsuit over its alleged role in the former energy trader’s collapse.

Enron filed for bankruptcy in 2001 and its creditors, who were seeking as much as $20 billion, filed two years later, Bloomberg reported.

Citgroup is the last of 11 banks to settle with Enron creditors in the so-called “megaclaims” litigation. Its payment is by far the largest.

Enron was the biggest bankruptcy in U.S. history. Investors in the Houston-based company lost as much as $40 billion.

Citigroup, which didn’t admit or deny wrongdoing in today’s accord, said it has set aside sufficient funds to cover the settlement, including a $4.95 billion after-tax charge in 2004 related to the cases.

The nation’s largest bank also reported it had about $2.8 billion of reserves for litigation related to Enron and other claims, according to its year-end report.

Enron Creditors Recovery, which represented creditors’ claims, said today that the Citigroup settlement will raise the recovery for creditors to about 37.4 cents on the dollar. It expects to distribute over $5 billion to Enron creditors, much of which was held in reserve due to the litigation.

Enron’s collapse wiped out more than 5,000 jobs and at least $1 billion in retirement funds. The Justice Department has prosecuted 33 individuals and one business, Arthur Andersen. That mainstay in the accounting world was eventually forced to shut down due to its role as Enron’s independent auditor


http://www.financialweek.com/apps/pbcs.dll/article?AID=/20080326/REG/194597864/1028/FRONTPAGE