CIBC Pays to Settle Enron Case 

JEFF BAILEY / New York Times 3aug2005

[more below]

Canadian Imperial Bank of Commerce agreed yesterday to pay $2.4 billion to settle claims that it helped hide losses at the Enron Corporation, raising to $7.1 billion the sum that banks and other defendants have thus far agreed to pay to compensate investors.

The agreement follows by weeks settlements by Citigroup of $2 billion and J. P. Morgan Chase of $2.2 billion, as part of a sprawling case in federal court in Houston that accuses financial institutions and others of helping Enron pull off accounting deceptions that preceded its bankruptcy filing in 2001.

The amount makes it the largest class-action securities settlement on record and puts pressure on the remaining defendants in the lawsuit to settle.

Canadian Imperial, known as CIBC, is a far smaller bank than Citigroup or Chase, and had previously set aside about $246 million for its Enron risk, a spokesman said. Yesterday the bank said it would record a pretax charge of about $2.3 billion in its third quarter ended July 31 to cover the settlement "and its remaining Enron-related legal matters."

For fiscal 2004, which ended Oct. 31, CIBC had net income of about $1.8 billion.

The latest settlement is a victory for plaintiffs, led by the University of California, which is represented by the law firm of William S. Lerach.

The Enron lawsuit accused CIBC and other firms of creating false investments in elaborate and complex Enron partnerships that had the effect of deceiving investors and moving billions of dollars of debt off the company's balance sheet.

Investors lost tens of billions of dollars on Enron, as the energy company collapsed. Under the settlement, investors who bought Enron's stock and bonds from September 1997 to December 2001 - institutions, individuals and Enron employees - are expected to receive pennies on every dollar of their losses.

Mr. Lerach, in comments in a conference call with reporters and in an interview, seemed to be trying to push the remaining defendants to settle. Those include Merrill Lynch, Deutsche Bank, Credit Suisse First Boston and Barclays.

"We said all along that those who settled earlier would do better," he said in the conference call.

A lawyer for one bank that has not settled, declining to be identified because of possible settlement negotiations and other litigation issues, said the CIBC agreement put the other institutions in a difficult position.

James E. Holst, the general counsel for the University of California, said, "It sets the stage for very important additional progress."

Mr. Lerach, said that settlement talks were continuing. "It's sort of up to whoever wants to settle for the next lowest price," he said.

An October 2006 trial is scheduled for defendants that do not settle.

As lead counsel, Mr. Lerach's firm will get the biggest piece of legal fees. In total, Mr. Lerach said that law firms would receive 8 percent of the first $1 billion, 9 percent of the second $1 billion and 10 percent of any recoveries after that, indicating that fees so far total about $680 million. The fees must be approved by the court when the case is completed.

Until CIBC's agreement, the biggest class-action securities settlement occurred in the WorldCom case, in which $6.2 billion was recovered for investors, Mr. Lerach said.

CIBC said a crucial measure of capital, its cushion against losses, would fall from 10.7 percent of assets to 7.5 percent, still above regulatory requirements, as a result of the big charge. It expects profits to rebuild its capital base to 8.5 percent of assets by mid-2006, the bank said in a statement. CIBC said it admitted no wrongdoing in the Enron matter, and that it had settled to avoid uncertainties of further litigation.

In a civil settlement in December 2003 with the Securities and Exchange Commission, CIBC agreed to pay $80 million. The S.E.C. said that from June 1998 to October 2001, CIBC engaged in 34 transactions with Enron that helped the energy concern hide the extent of its debt and increase its reported earnings and cash flow, deceiving investors.

"A key priority for us is to resolve this case and substantially reduce our litigation risk," Gerry McCaughey, the chief executive, said.

source: http://www.nytimes.com/2005/08/03/business/worldbusiness/03enron.html?pagewanted=print 2aug2005

CIBC to Pay $2.4 Billion Over Enron

Canadian Bank Is Settling Investors' Fraud Claims;
Spotlight on Merrill, CSFB 

RANDALL SMITH / Wall Street Journal 3aug2005

Canadian Imperial Bank of Commerce agreed to pay $2.4 billion, the largest amount to date, to settle fraud claims by investors who lost money in Enron Corp., lawyers for the plaintiffs announced.

William Lerach, who represents the University of California Board of Regents, said the proposed settlement with the Toronto-based bank brings to $7.12 billion the total recovered so far by the aggrieved investors.

That total recovery tops other settlements of $6.1 billion in litigation brought by investors in WorldCom Inc. and $3.5 billion by investors in Cendant Corp., Mr. Lerach said.

The Enron investors, who suffered damages that Mr. Lerach estimated at more than $46 billion, reached settlements in June of $2.2 billion with J.P. Morgan Chase & Co. and $2 billion with Citigroup Inc. Another group of defendants had already settled for a total of about $500 million.

The amount CIBC agreed to pay tops the yearly earnings that the bank reported of $2.2 billion in 2004 and $2.06 billion in 2003. The bank said it plans to take a pretax charge of 2.8 billion Canadian dollars (US$2.31 billion) to increase its reserves to cover the cost of Enron-related matters.

"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," CIBC Chief Executive Gerry McCaughey said in a statement.

Enron sought bankruptcy-law protection from creditors in December 2001, after the extent of its accounting maneuvers to hide debt and boost reported profit began to become apparent.

Mr. Lerach said the investors' goal is to have each settling financial institution pay more than previous settlements -- which could spell bad news for Merrill Lynch & Co. and the Credit Suisse First Boston unit of Credit Suisse Group, the most prominent of those that haven't yet settled. Representatives of Merrill and CSFB declined to comment.

In a conference call with reporters, Mr. Lerach explained that CIBC was paying more than other, far larger banks partly because "they waited for others to settle before them."

Other defendant banks that haven't settled with the Enron plaintiffs include Barclays PLC, Toronto Dominion Bank, Royal Bank of Canada, Royal Bank of Scotland and Deutsche Bank AG.

In a December 2003 settlement of civil charges that CIBC aided and abetted fraud at Enron, the Securities and Exchange Commission charged that CIBC structured 34 Enron financings as "asset sales" instead of loans between June 1998 and October 2001.

The transactions allowed Enron to boost earnings by more than $1 billion and avoid disclosure of more than $2.6 billon in debt, the SEC charged. At the time, a CIBC executive called the settlement "an unpleasant and painful chapter" in the bank's history, and CIBC agreed to pay $80 million to settle the SEC charges.

CIBC helped Enron in the transactions by holding a 3% equity stake in the financing vehicles, which enabled Enron to treat the entities as independent for accounting purposes, even though Enron assured CIBC that the money would be repaid, the SEC said.

Merrill also settled SEC charges in March 2003 that it abetted fraud at Enron in two year-end transactions in 1999. Merrill paid $80 million in penalties to settle the SEC charges without admitting or denying wrongdoing, and four of its former employees were convicted in a related criminal trial in Texas.

Despite the size of the CIBC settlement, Merrill may not face a comparable hit, said Wall Street analyst Brad Hintz of Sanford Bernstein, because of differences in the actions by the two financial institutions. Merrill's two transactions with Enron added only $60 million to Enron's reported net income for 1999, the SEC said -- far less than the $1 billion added by the 34 CIBC transactions.

Mr. Lerach estimated that legal fees would consume 8% to 10% of the recovery amounts, subject to review by the Houston federal court hearing the case, which is expected to go to trial in October 2006. The University of California was named lead plaintiff in February 2002.

In 4 p.m. New York Stock Exchange composite trading yesterday, before the settlement was announced, CIBC shares rose 24 cents to $66.36.

Settling for More

Enron class-action recoveries to date:

					Settlement 
Defendants		  Date		In Billions
Canadian Imperial	  Aug 2005	$2.40
Back of Commerce
JP Morgan Chase		  Jun 2005	 2.20
Citigroup		  Jun 2005	 2.00
Outside Directors	  Jan 2005	 0.17
Lehman Brothers		  Oct 2004	 0.22
Bank of America		  Jul 2004	 0.07
Anderson Worldwide SC	  2002		 0.03
LIM2 bankruptcy recovery  2004-05	 0.03
TOTAL as of Aug 2, 2005	  —		$7.12

Some remaining defendants:
Merrill Lynch & Credit Suisse First Boston

source: University of California, lead plaintiff

source: http://online.wsj.com/article/0,,SB112301368307202901,00.html?mod=home_whats_news_us 2aug2005

Super-Attorney Lerach Wins CIBC-Enron Suit 

LIZ MOYER / Forbes 2aug2005

NEW YORK - Bill Lerach, the intrepid plaintiff's attorney, has scored another multi-billion-dollar settlement for shareholders of bankrupt Enron. On Tuesday, Canadian Imperial Bank of Commerce settled its share of a class-action lawsuit, paying up $2.4 billion. That trumps earlier settlements by Citigroup—$2 billion—and JPMorgan Chase—$2.2 billion—and lends credence to the saying "pay later, pay more."

Lerach, who claims shareholders lost more than $40 billion when Enron collapsed in a massive financial fraud, is pushing seven other prominent investment banks to settle, and has pledged to get more out of each company. Remaining plaintiffs include Merrill Lynch, Credit Suisse, Barclays, Toronto Dominion, Royal Bank of Canada, Royal Bank of Scotland, and Deutsche Bank.

So far $7 billion has been collected from the banks Lerach has accused of helping Enron hide the fact that it was cooking its books.

source: http://www.forbes.com/2005/08/02/lerach-enron-cibc-cx_lm_0802autofacescan11.html 2aug2005

Canadian Bank to Pay $2.4 Bln to Enron Investors 

Xinhua News Agency (China) 3aug2005

BEIJING — Canadian Imperial Bank of Commerce agreed Tuesday to pay $2.4 billion to Enron investors who accused the banks of helping the energy firm to defraud shareholders.

The agreement is the largest single action so far on behalf of Enron stock and bond holders, and brings the total payments in the case to $7.1 billion, making this the biggest class-action recovery ever.

William Lerach, the securities lawyer representing the University of California Board of Regents — the lead plaintiff in the case — said settlements with other defendants are expected.

"This settlement demonstrates that the university's strategy of aggressively pursuing the defendants is working," Lerach said in a statement.

Citigroup and JPMorgan Chase both settled in the class-action suit in June, agreeing to pay $2 billion and $2.2 billion respectively to the plaintiffs.

Lehman Brothers and Bank of America agreed to smaller settlements, totaling nearly $300 million.

Other banks that are defendants in the Enron suit include Barclays, Credit Suisse's (Research) Credit Suisse First Boston, Deutsche Bank (Research), Merrill Lynch & Co. (Research), Toronto-Dominion Bank Royal Bank of Canada and Royal Bank of Scotland.

Enron filed for bankruptcy in 2001 after investors learned of its use of off-balance sheet deals to hide tens of billions of dollars debt. Its meltdown sparked a series of shareholder lawsuits and criminal charges against the company and management.

source: http://news.xinhuanet.com/english/2005-08/03/content_3302393.htm 2aug2005

CIBC Dinged For $2.4 Billion

MICHAEL J DesLAURIERS / Resource Investor 2aug2005

The Enron recriminations continue. In the latest twist the “Canadian Imperial Bank of Commerce has agreed to pay $2.4 billion to resolve investors' claims it helped hide losses at Enron Corp., marking the biggest individual settlement since the energy trader collapsed in a massive accounting fraud.”

Lets hope this cash finds its way to the old ladies and pensioners. The personal greed is tragic.

“A number of top executives at the Canadian bank also agreed to settle charges they were personally involved in helping to mislead investors through a series of complex structured finance transactions.”

source: http://www.resourceinvestor.com/pebble.asp?relid=11780 2aug2005

Canadian Bank to Pay $2.4 Billion in Enron Case 

DALE KASLER / Sacramento Bee 2aug2005

The University of California and other investors scored the biggest recovery yet in the Enron Corp. securities fraud case Tuesday, obtaining $2.4 billion from Canadian Imperial Bank of Commerce.

The deal means UC, negotiating on behalf of all Enron investors, has now obtained settlements totaling $7 billion. Most of it has come in the past two months.

UC's lawyers accused Toronto-based CIBC of helping Enron set up secretive partnerships that hid debt and puffed up Enron's reported earnings. In addition, CIBC's analysts issued glowing reports about Enron's future prospects.

"This settlement demonstrates that the university's strategy of aggressively pursuing the defendants is working," said William Lerach, UC's outside attorney.

UC says it lost $144.7 million investing in Enron. It says it won't know how much it's getting back until the lawsuit, pending in U.S. District Court in Houston, is completed.

source: http://www.sacbee.com/content/business/story/13340295p-14182226c.html 2aug2005