Candian bank follows others and reaches record payout deal to resolve legal action over Enron
The Canadian Imperial Bank of Commerce (CIBC) has announced that it has reached an agreement in principle to settle the Enron class action litigation brought on behalf of Enron shareholders related to alleged securities fraud.
Under the terms of the settlement, CIBC will pay $2.4 billion, including legal fees, but the settlement does not include any admission of wrongdoing by CIBC. Instead the bank stated that it agreed to the settlement solely to eliminate the uncertainties, burden and expense of further protracted litigation.
The bank also announced that it expects to take a charge to earnings of approximately C$2.8 billion ($2.31 billion) in the quarter ended 31 July to increase its litigation reserves in order to cover this settlement and its remaining Enron-related legal matters.
Gerry McCaughey, president and chief executive, said: “A key priority for us is to resolve this case and substantially reduce our litigation risk. By settling this case and maintaining what we believe are adequate reserves for our remaining Enron related legal issues, we can better focus our energies on our other priorities.”
The settlement must be approved by the Board of Regents of the University of California, the lead plaintiff in the case, before it is submitted to the United States District Court for the Southern District of Texas.
A number of other banks are still facing legal action over the collapse of the energy trading giant.