The University of California reached two major settlements in
its ongoing class action lawsuit against Enron Corp. earlier this
month, the largest monetary payments yet in the legal proceedings
surrounding the energy giant’s bankruptcy.
An agreement for a payout of $2.2 billion from JPMorgan Chase
& Co. was reached on June 14, just four days after a $2 billion
settlement between the UC and Citigroup Inc.
Litigation between investors led by the UC and by a number of
other banks, including Merrill Lynch & Co., Royal Bank of
Canada and Deutsche Bank AG, is still pending.
The UC is representing a large group of individuals and
institutions who invested in Enron and subsequently lost billions
of dollars when the energy company’s fraudulent activities
were exposed almost four years ago.
The JP Morgan settlement was the sixth in a series of payouts
from various banks to shareholders. It brings the total amount of
money recovered from the proceedings to $4.7 billion.
But attorney William S. Lerach, who represents the UC, said in a
statement that there remains much more to be won.
“We are very proud of the University of California’s
achievement,” Lerach said in a statement. “We continue
to pursue other defendants, including other banks that have been
charged with knowingly participating in the scheme to defraud Enron
investors. Beyond today’s agreement, the lawsuit continues to
proceed very satisfactorily and further large recoveries are
anticipated.”
In a statement, JP Morgan said it did not admit any wrongdoings
in the settlement of the case, and instead settled “solely to
eliminate the uncertainties, burden and expense of further
protracted litigation.”
It is estimated that Enron investors lost a combined total of
$40 billion to $45 billion because of the energy company’s
fraudulent acts.
But neither the total amount that will be recovered nor the
percentage of this amount that will be distributed to each
plaintiff are known.
The UC is estimated to have lost approximately $145 million as a
result of Enron’s collapse, or approximately 0.2 percent of
the UC’s total assets, which amount to over $63 billion.
These assets, among other things, include the endowments of the
10 UC campuses and fund the UC’s retirement benefits
programs, according to a report published by the UC Office of the
President.
UC officials have assured employees that these losses will not
affect their benefits or pensions. In fact, the UC’s total
portfolio actually grew significantly during the time when news of
Enron’s collapse became public, according to the UC Office of
the President.
The California Public Employees’ Retirement System is an
agency that manages the retirement benefits of UC employees. Like
the UC, CalPERS also manages its own investment portfolios. Under
the terms of the Enron settlement, all plaintiffs in the lawsuit,
including CalPERS, will receive a portion of the money
recovered.
Bruce Willison, dean of the UCLA Anderson School of Management,
said that in any event, the amounts potentially recovered by
CalPERS will be small compared to the size of the portfolios they
manage.
“(CalPERS) makes or loses more each day in the markets
than they will receive in the settlement,” he said, adding
that neither the money lost because of Enron’s collapse nor
the money recovered in the settlement will significantly affect UC
employees.
With reports from Bruin wire services.