Enron Corp. shareholders and investors will split about $7 billion from financial institutions accused of participating in the fraud that caused the once-mighty energy company to collapse.
The settlement amount was listed at $7.2 billion, a sum that has been accruing interest since 2002 and includes $688 million plus interest in attorneys fees.
The deal, approved late Monday by U.S. District Judge Melinda Harmon, and the attorneys fees are the largest in history in a U.S. securities fraud case.
“We’re pleased that the court recognizes the tremendous amount of work, skill and determination required to overcome significant obstacles in this complicated case,” said Patrick Coughlin, attorney for the regents of the University of California, the lead plaintiffs.
About 1.5 million individuals and entities will be eligible to share in the distribution under the settlement plan. The attorneys fees will go to San Diego-based Coughlin Stoia Geller Rudman & Robbins LLP, the law firm representing the university.
Besides the University of California, other plaintiffs who will share in the proceeds include pension plans from New York City and Hawaii, various investment firms and the Archdiocese of Milwaukee.
The distribution plan was part of a $40 billion lawsuit filed by shareholders and investors, who claim Bank of America, JPMorgan Chase & Co., Citigroup and others participated in the accounting fraud that led to Enron’s downfall.
Calculating shares of the $7.2 billion will be determined by a formula that factors in such things as the stock’s purchase price and the type of stock bought.
At its height, Enron’s common stock sold for as much as $90 per share, before plummeting to as low as $1 right before the company declared bankruptcy.
Under the plan, investors will get an average of $6.79 per share of common stock and an average of $168.50 per share of preferred stock.
To be eligible for the settlement, investors and shareholders needed to have bought Enron or Enron-related securities between Sept. 9, 1997 and Dec. 2, 2001.
Attorneys for several investors objected to the distribution plan and the attorneys fees.
Texas Attorney General Greg Abbott, who had previously filed court briefs in support of plaintiffs’ claims, also objected to the attorneys fees.
“General Abbott continues to object to giving millions of dollars to plaintiff lawyers when that money should go to the hardworking men and women who suffered from Enron’s demise,” said Jerry Strickland, a spokesman for Abbott’s office.
“This court reiterates that there is no way to allocate these proceeds that would not in some way favor or disfavor to some degree some of the class members,” Harmon wrote in her order. “On the whole, the court finds that ... the chosen method is fair, adequate and reasonable.”
Harmon also said the attorneys fees, which are 9.5 percent of the settlement, are “fair and reasonable.”
Several financial institutions have not settled and remain as defendants in the Enron case, including Merrill Lynch & Co., Credit Suisse First Boston and Barclays Bank PLC. Several former Enron officers also remain as defendants, including former chief executive Jeffrey Skilling, now serving a criminal sentence of more than 24 years in federal prison in Minnesota.
But the lawsuit has been on hold since an appeals court last year ruled shareholders and investors could not sue as a class, which would have allowed them to sue as a group and have more leverage to settle the case out of court.
The U.S. Supreme Court in January refused to hear arguments in the lawsuit. The high court in a similar case gave a measure of protection from securities lawsuits to suppliers, banks, accountants and law firms that do business with corporations engaging in securities fraud.
Because of that ruling, Harmon is still deciding whether the financial institutions that remain as defendants will be dismissed from the lawsuit.
Enron, once the nation’s seventh-largest company, entered bankruptcy proceedings in December 2001 after years of accounting tricks could no longer hide billions in debt or make failing ventures appear profitable.
The collapse wiped out thousands of jobs, more than $60 billion in market value and more than $2 billion in pension plans.
Enron founder Kenneth Lay and Skilling were convicted in 2006 for their roles in the company’s collapse. Lay’s convictions for conspiracy, fraud and other charges were wiped out after he died of heart disease in 2006.