Enron Partner, UC Reach Settlement

UC, the lead plaintiff in a securities fraud case against Enron Corp. and its financial service providers, sealed a $2.2 billion settlement with JPMorgan Chase Tuesday, just days after securing $2 billion in a settlement with banking firm Citigroup.

The two settlements are the largest in a string of awards UC and other plaintiffs in the suit have obtained since the case was filed in 2001. The previous agreements, reached with financial firms and Enron's outside directors, have raked in almost $500 million for all plaintiffs since 2002.

"We are very proud of the University of California's achievement," William Lerach, the university's lead counsel in the lawsuit, said in a statement Tuesday. "Beyond today's agreement, the lawsuit continues to proceed very satisfactorily and further large recoveries are anticipated."

UC and thousands of other Enron investors are seeking to recover the more than $30 billion in total lost in investments from the energy company's collapse in November 2001.

UC alone lost some $145 million, 90 percent of which was pulled from the UC retirement plan.

Holst said the bulk of the award will be sent back to the retirement program. However, UC officials said the plaintiffs have not yet developed a way to distribute the settlement money.

In light of how much the plaintiffs lost, the settlements are not surprising, said UC general counsel James Holst.

"The large amounts reflect the magnitude of the claims," he said.

The 2003 complaint that led to Tuesday's announcement alleged that JPMorgan Chase had an "extensive and extremely close relationship with Enron," helping the energy giant falsify its financial statements and hide billions of dollars in debt through complex financial procedures.

JPMorgan Chase did not admit to any wrongdoing in the settlement, which it reached in order to avoid appearing in court, UC officials said.

"We are working hard to put the uncertainty of litigation risk behind us," JPMorgan Chase Chairman and Chief Executive Officer William Harrison, Jr. said in a statement Tuesday.

Both parties have signed the settlement agreement, but it has not yet been sent to court for final approval, said UC spokesperson Trey Davis.

The settlement must be approved in court and the case finalized before the money can be distributed.

Holst said he hopes UC can settle with all the defendants before the trial for the case is set to begin in October 2006.

Dozens of defendants still remain in litigation, including financial firms, law firms and former Enron officers, such as former Chairman and Chief Executive Officer Kenneth Lay.

The size of the two latest settlements and the speed with which they were reached might push the remaining defendants to settle as well, Holst said.

"(The settlements) showed these banks how much the loss was and how important it is that their bank respond to these responsibilities," Holst said. "I think it will be an incentive to the other banks."

The case is just one of several lawsuits UC has joined in recent years alleging corporate financial mismanagement.

UC and other litigants in a class action suit against energy company Dynegy Inc. won more than $450 million in a settlement with the firm in April after alleging that Dynegy misled investors about its financial problems. UC lost almost $120 million in pension program funds invested in Dynegy stock.

UC also filed suit in 2003 against communications company WorldCom for UC's more than $350 million loss in the company's stock.

Recent Settlements in Enron Fraud Case:

June 14, 2005: $2.2 billion

with JPMorgan Chase

June 10, 2005: $2 billion

with Citigroup

Jan. 7, 2005: $168 million

with Enron directors

Oct. 29, 2004: $222.5 million

with Lehman Brothers

July 2, 2004: $69 million

with Bank of America

Source: UC Office of the President

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