Thursday, August 10, 2006

Enron Investors' Fraud Trial Postponed to 2007

Bloomberg, 1 August 2006

Enron Corp. investors seeking to recover $40 billion in losses tied to the energy trader's collapse won a delay in the trial of their fraud claims against the company's former bankers until April 2007.

William Lerach, the lead investor lawyer, had urged U.S. District Judge Melinda Harmon to postpone the Oct. 16 trial to allow investors time to combine claims against investment firms and lenders, including Merrill Lynch & Co. and Toronto-Dominion Bank. Harmon granted the request Aug. 8 after a telephone conference with investor and bank lawyers, according to a note on the court docket of the case. The new trial date is April 9.

The request for a delay came two weeks after Harmon threw out investor fraud claims against Barclays Plc, Britain's third- largest bank, over its role in Enron's 2001 collapse. Merrill Lynch and Toronto-Dominion are seeking to have the judge dismiss the claims against them on similar grounds.

``Given that our motion to dismiss has not yet been heard, it would not be appropriate to comment at this time,'' said Simon Townsend, a spokesman for Toronto-Dominion. Mark Herr, a Merrill Lynch spokesman, had no comment.

Enron, once the world's largest energy-trading firm, had more than $68 billion in market value before its December 2001 bankruptcy filing wiped out thousands of jobs and at least $1 billion in retirement funds virtually overnight.

Investors contend the banks helped former Enron Chairman Kenneth Lay and Chief Executive Officer Jeffrey Skilling use off- the-book partnerships to manipulate the company's finances. Both men were convicted of fraud and conspiracy charges in May.

Skilling, 52, faces at least 25 years in prison when he is sentenced in October. Lay died of a heart attack on July 5 at the age of 64.

Both men were named as defendants in the investors' class action, which seeks to recoup losses from the collapse in the value of Enron's shares. Shareholders' lawyers already have recovered $7.3 billion from settlements with lenders such as Citigroup Inc., JPMorgan Chase & Co. and Canadian Imperial Bank of Commerce.

Lerach, a partner in the San Diego-based law firm Lerach Coughlin Stoia Geller Rudman & Robbins, said procedural snags in the case would have forced investors' lawyers to try claims against some defendants in October and then hold another trial for remaining banks. Lerach didn't immediately return a call seeking comment placed today before regular business hours.

Investors contend the banks and investment firms actively participated in Enron's fraud by providing funding for off-the- books partnerships used to inflate the energy trader's earnings, and engaging in sham asset purchases and other questionable deals. Harmon found Barclays adviser role was insufficient to trigger liability under U.S. securities laws.

Merrill is a passive, minority investor in Bloomberg LP, the parent of Bloomberg News.

The case is Newby v. Enron Corp., No. 01-cv-3624, U.S. District Court, Southern District of Texas (Houston).