Banks to pay $10b for Enron 'misdeeds'

An American judge has given preliminary approval to a US$6.7 billion ($10.1 billion) civil settlement by three banks accused by Enron shareholders of helping the company to hide financial misdeeds that led to its ruin.

Lead shareholder lawyer William Lerach said the settlement approved by United States District Court Judge Melinda Harmon was the largest of its kind and that more would follow.

"It is the largest recovery for fraud in history and, believe me, we are not done. There's more to come," he said.

The agreement, which still must receive final approval from Harmon, included settlements of US$2.4 billion from Canadian Imperial Bank of Commerce, US$2.2 billion from JP Morgan Chase and US$2 billion from Citigroup.

The US$6.7 billion amount includes interest accrued since those proposed settlements were announced last year.

Lerach spoke outside the federal courthouse in Houston where former Enron chief executives Ken Lay and Jeffrey Skilling are on trial on fraud and conspiracy charges for their part in the spectacular collapse of the energy trading giant.

Enron, once a high-flying company loved by Wall St and lenders, declared bankruptcy in December 2001 amid disclosures it had used side deals to hide debt and inflate profits.

Numerous shareholder lawsuits were filed, with the University of California being named lead plaintiff to represent the defendants.

Including earlier settlements with firms such as Lehman Brothers and Bank of America, shareholders are now due to receive US$7.2 billion of the US$40 billion plaintiffs in the cases have claimed they lost in Enron's collapse.

Lerach said that payout amount would grow as more defendants settled, which he said was inevitable.

"These banks participated in a scheme to defraud the Enron investors for their own financial gain. They got caught, the evidence is overwhelming," he said.

"Those that haven't settled are going to go to trial and be held liable, and that's why they're paying these huge amounts of money to settle."

The banks include Merrill Lynch, Barclays, Credit Suisse First Boston, Toronto Dominion Bank, Royal Bank of Canada and Royal Bank of Scotland.

* In a separate case in Washington, four former and present partners of Big Four accounting firm KPMG have agreed to pay record-setting fines to settle charges stemming from a 1997-2000 earnings manipulation scheme at copier-maker Xerox.

The Securities and Exchange Commission said three of the executives agreed to pay civil penalties and to be suspended from practice before the SEC, with rights to reapply in one to three years, while a fourth partner agreed to be censured.

KPMG itself in April agreed to pay US$22 million ($33.8 million) - one of the largest accounting firm payouts ever - to settle the case, in which the SEC said KPMG let Xerox manipulate its accounting to close a US$3 billion gap between actual and reported results.

- REUTERS