Enron Investors Ask U.S. Supreme Court to Review Class-Action

April 9, 2007

Enron shareholders and investors on April 5 asked the U.S. Supreme Court for help in their effort to recoup billions of dollars they lost in the once-mighty energy company’s collapse.

Shareholders and investors filed a motion asking the court to review an appeals court ruling that halted their class-action lawsuit against investment banks and firms.

The $40 billion (euro29.9 billion) suit alleges that Merrill Lynch & Co., Credit Suisse First Boston and Barclays PLC played roles in the accounting fraud that led to Enron’s collapse.

The Supreme Court has no timetable to decide whether to consider the motion.

Enron Corp., once the United States’ seventh-largest company, crumbled into bankruptcy in December 2001 after years of accounting tricks could no longer hide billions in debt. The collapse wiped out thousands of jobs, more than $60 billion in market value and more than $2 billion in pension plans.

Last month, the 5th U.S. Circuit Court of Appeals reversed a ruling by U.S. District Judge Melinda Harmon in Houston, who had said shareholders could sue as a class.

The appeals court decision meant that shareholders and investors could not pool their resources to sue as a group. Attorneys general from 30 states have sided with Enron shareholders in their bid for a class action.

“The banks should be held accountable,” said William Lerach, who represents the Regents of the University of California, the lead plaintiffs. “Beyond shielding them from redress in the Enron case, the 5th Circuit’s decision gives other corporations the green light to commit fraud without consequence in the future, threatens the credibility of the securities markets and leaves investors without any legal recourse.”

A spokesman for Credit Suisse and an attorney for Barclays both declined to comment Thursday, and a spokesman for Merrill Lynch did not immediately return a call seeking comment.

So far, plaintiffs have recouped $7.3 billion (euro5.5 billion), mostly from such financial institutions as Bank of America, JPMorgan Chase & Co., Citigroup and Canadian Imperial Bank of Commerce.

The appeals court decision put the case on hold, which was set to go to trial April 16.

Besides Merrill Lynch, Credit Suisse and Barclays, the remaining defendants include several former Enron officers: Jeff Skilling, the chief executive; Richard Causey, chief accounting officer; Richard Buy, chief risk officer; Jeff McMahon, treasurer; and Mark Koenig, executive vice president of investor relations.

The cases against Royal Bank of Canada, Royal Bank of Scotland and Toronto Dominion Bank have not been set for trial and were stayed pending the appeal of the 5th Circuit’s ruling.

Was this article valuable?

Here are more articles you may enjoy.