Canadian Imperial Bank of Commerce (CIBC) has agreed to pay $2.4 billion to settle investors' claims it helped hide losses at the fallen...
NEW YORK — Canadian Imperial Bank of Commerce (CIBC) has agreed to pay $2.4 billion to settle investors’ claims it helped hide losses at the fallen energy trader Enron through a massive accounting fraud.
The settlement announced yesterday with the Toronto-based bank — Canada’s fifth-largest financial institution and the operator of the securities firm CIBC World Markets — was the biggest individual payout so far in the long-running debacle.
Combined with similar agreements with Citigroup and JPMorgan Chase and others, the settlements have reached more than $7 billion, said lawyers for the investors, who lost tens of billions in Enron’s 2001 collapse.
The financial institutions allegedly helped Enron set up partnerships that the company used to improperly boost profits while moving billions of dollars of debt off its balance sheet. That allowed Enron to report higher cash flow from operations and lower debt, making its financial picture look better than it was and artificially inflating the company’s stock and bond prices, according to the lawsuit.
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Some 50,000 Enron stock and bond holders led by the University of California’s board of regents filed claims as part of the lawsuit. Investors claim a number of global banks and brokerages helped Houston-based Enron continue to operate and raise money even as the company was imploding.
The settlements require approval by a Texas federal judge, who will determine a formula under which claimants would be paid.
No date for a hearing has been set, and investors might not see any money for more than a year.
In June, Citigroup agreed to pay $2 billion, followed days later by JPMorgan’s agreement to forfeit $2.2 billion. Those deals put pressure on remaining defendants such as CIBC to settle.
Enron investors still are seeking to hammer out agreements with a number of financial institutions, including heavy-hitters such as Barclays, Credit Suisse First Boston, Merrill Lynch, Toronto Dominion Bank, Royal Bank of Canada, Deutsche Bank and the Royal Bank of Scotland. Goldman Sachs also is named as a defendant for its role as an underwriter of Enron securities, as are a number of law firms and accountants.
Former Enron Chief Executive Officer Jeffrey Skilling is scheduled for trial in January with former Enron Chairman Kenneth Lay and former chief accounting officer Richard Causey. All pleaded not guilty.