As lead plaintiff for investors in the Enron securities fraud
litigation, the University of California announced an agreement for
a $168 million settlement with 18 former directors of Enron Corp.
late last Friday. The settlement, which awaits court approval,
includes over $13 million in funds procured by the directors
through insider trading.
The agreement was reached on Oct. 6, and was mediated by Boston
University law professor Eric D. Green, who also helped bring the
Microsoft antitrust case to settlement.
Following the agreement, $200 million ““ the remaining
balance of Enron’s director’s insurance policy ““
was directed to the registry of the court. Thirteen million dollars
of the policy will be set aside for the continued defense of the
insured Enron directors and officers who were not included in the
settlement, who in turn have agreed to not oppose the settlement.
Of the $187 million left in the policy, $155 million will go to
investors who received damages as a result of Enron’s fraud.
With the separate $13 million paid by the settling directors with
their profits from insider trading, a total of $168 million will be
awarded to the investor class under the current terms of the
settlement.
The $32 million of Enron’s insurance policy that did not
go to the investors will be transferred to Enron’s bankruptcy
estate, to be distributed to creditors of the corporation.
Several defendants, however, are not included in the settlement.
Among them are Enron’s former chief executives, Jeff Skilling
and Ken Lay, who will face criminal charges that cannot be placated
through the settlement. The charges arose as a result of the
duo’s alleged actions prior to the company’s
failure.
The directors are not admitting wrongdoing through the
settlement, but rather, avoiding lengthy litigation that would be
onerous for both parties, amassing large legal fees.
The UC’s general counsel, James Holst, noted the
significance of the directors’ payment, in that they will be
losing some of their gains made through insider trading. He
hopefully added that it will send a message to boardrooms across
the nation.
While this represents the fourth major settlement resulting from
the class action lawsuit against Enron, the UC will continue to
bring charges against those not involved in the settlement.
“No one gets all their money back in a case like
this,” said Trey Davis, a spokesman for the UC, in reference
to the limited justice for investors who placed billions of dollars
in Enron.