CITIGROUP WILL PAY $2 BILLION TO SETTLE CLASS-ACTION LAWSUIT REGARDING ITS INVOLVEMENT IN THE PRE-COLLAPSE SALE OF ENRON STOCK AND BONDSJun 11, 2005 | www.Newsinferno.com Citigroup, Inc. has agreed to settle a class-action lawsuit arising out of its involvement in the sale of Enron stock and bonds for $2 billion. The money will be distributed to investors who purchased publicly traded equity and debt securities issued by Enron and its related units between September 9, 1997, and December 2, 2001, the date Enron sought bankruptcy protection. It is estimated that claims will be made by at least 50,000 shareholders.
Since March 2005, Citigroup has now settled three major class-actions for a total of $4.675 billion. The other two settlements involved $2.6 billion (out of $6.13 billion) in the class-action arising from the 2002 WorldCom collapse and $75 million in the Global Crossing action.
These settlements are viewed as part of an effort by the world’s largest financial company to clean up its global image and quiet concerns by its own investors. A major unresolved legal battle remains with respect to the investigation and lawsuits arising out of Europe’s largest corporate scandal involving dairy giant, Parmalat SpA.
The $2 billion settlement is the most so far involving the Enron debacle. Lehman Brothers Holdings Inc., Bank of America Corp., Andersen Worldwide, and former Enron officials have already settled for a combined figure of $491.5 million. The remainder of the case is scheduled to go to trial in October 2006 against several other defendants including J.P. Morgan Chase Co. and Merrill Lynch & Co.
As reported earlier this week, Citigroup’s image took another blow when it announced that United Parcel Service had "misplaced" a box of computer tapes containing personal data on approximately 3.9 million of its customers. Citigroup released a statement that it would soon start to send data electronically in an encrypted form and that it had "no reason to believe this information has been used inappropriately." However, there is still great concern that, in the wrong hands, some of the millions of missing Social Security numbers will be used to fraudulently obtain credit cards, loans, and other indebtedness in the names of Citigroup’s customers.
The Enron settlement must still be approved by lead plaintiff (the Board of Regents of the University of California), the United States District Court for the Southern District of Texas, and Citigroup’s board of directors. Although the class-action accused Citigroup and the other investment-company defendants of helping Enron continue to raise money even as it was collapsing, Citigroup denied violating any laws and termed the settlement a way "to eliminate the uncertainties, burden and expense of further protracted litigation.