Citigroup Settles In Enron Class Action

by Glen Shapiro, LawAndTax-News.com, New York

14 June 2005

Citigroup announced on Friday that it would pay $2 billion to settle a class-action suit over its role in the sale of Enron securities; the money will go to investors who bought publicly traded equity and debt securities issued by Enron and its related units between Sept. 9, 1997, and Dec. 2, 2001, when Enron sought bankruptcy protection.

The class action against Citigroup, Newby, et al. v. Enron Corp., et al., was brought in the United States District Court for the Southern District of Texas, Houston Division. Citigroup's payment is the largest settlement so far in the case; $491.5 million had previously been received from settlements with Lehman Brothers, Bank of America, Andersen Worldwide, and former Enron officials. Other financial institutions including J P Morgan Chase and Merrill Lynch remain defendants in the case, which is scheduled to go to trial in October 2006.

The company said that the settlement is fully covered by its existing litigation reserves. The company does not plan to adjust its remaining reserves, which it considers adequate to meet all of the company's remaining exposure to the additional pending Enron and research-related cases.

Charles Prince, Chief Executive Officer of Citigroup, said: "We have an ambitious agenda for Citigroup's future growth as we continue toward our goal to be the most respected global financial services company. It is a key priority for Citigroup to resolve major cases like this one and to put a difficult chapter in our history behind us. By doing so, we will be better positioned to realize our goals. We acknowledge and appreciate the determined and professional efforts of the Regents of the University of California and its advisors in working with us to achieve a settlement that meets the goals of all parties."

The class action settlement must be approved by the Board of Regents of the University of California, the lead plaintiff in the case, and the Board of Directors of Citigroup. It is also subject to the approval of the United States District Court for the Southern District of Texas.

The settlement amount includes plaintiffs' attorneys' fees, which will be determined by the Court at a later date. The settlement provides that Citigroup denies committing any violation of law and has agreed to the settlement solely to eliminate the uncertainties, burden and expense of further protracted litigation.

In May 2004, Citigroup agreed to pay nearly $2.6 billion as its part of the WorldCom class action settlement, and in March this year Citigroup agreed to pay $75 million to settle class-action claims brought on behalf of Global Crossing shareholders.

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