ASSOCIATED PRESS
The Supreme Court yesterday put off deciding on the Enron scandal, taking no action in a securities-fraud case with billions of dollars at stake for victimized investors.
The case asks whether Enron shareholders can pursue a lawsuit against Wall Street investment banks that did business with the Texas energy company.
The justices already agreed to consider a similar suit accusing two equipment manufacturers, Motorola Inc. and a unit of Cisco Systems Inc., of colluding with cable TV provider Charter Communications Inc. to deceive investors.
At issue in both cases is whether shareholders can collect damages from investment banks, lawyers and other parties that aided fraud committed by their corporate clients.
Dan Newman, a spokesman for the Enron plaintiffs’ law firm Lerach Coughlin, said the justices likely deferred action on the Enron case partly because they already agreed to hear the Charter Communications dispute.
The Charter case attracted significant attention because the Bush administration recently decided against filing a brief on behalf of the investors, even though the Securities and Exchange Commission recommended doing so.
Both President Bush and Treasury Secretary Henry M. Paulson Jr. weighed in on the side of the investment banks.
Members of the House Financial Services Committee likely will press the five SEC commissioners on their views regarding the two cases during a hearing set for today.
Three months ago, a federal appeals court blocked the $40 billion Enron investors’ suit against Merrill Lynch & Co., Credit Suisse First Boston and Barclays Bank PLC.
The suit asserted that the banks played roles in the accounting fraud that led to Enron’s collapse.
Shareholders and investors in the class-action lawsuit asked the Supreme Court to review the ruling by the 5th U.S. Circuit Court of Appeals. That court reversed a decision by U.S. District Judge Melinda Harmon in Houston, who said shareholders could sue as a class.
Attorneys general of 30 states have sided with Enron shareholders in their bid for class action.
The appeals court decision put the case on hold, which was set to go to trial April 16.
“The banks should be held accountable,” said William Lerach, who represents the Regents of the University of California, the lead plaintiffs in the litigation. “Beyond shielding them from redress in the Enron case, the Fifth Circuit’s decision gives other corporations the green light to commit fraud without consequence in the future, threatens the credibility of the securities markets and leaves investors without any legal recourse.”
So far Enron plaintiffs have recouped $7.3 billion, mostly from financial institutions including Bank of America, JPMorgan Chase & Co., Citigroup and Canadian Imperial Bank of Commerce.
Besides Merrill Lynch, Credit Suisse and Barclays, the remaining defendants include several former Enron officers: Jeffrey Skilling, the chief executive; Richard Causey, chief accounting officer; Richard Buy, chief risk officer; Jeff McMahon, treasurer; and Mark Koenig, executive vice president of investor relations.
Enron Corp., once the nation’s seventh-largest company, crumbled into bankruptcy in December 2001 after years of accounting tricks could no longer hide billions in debt or make failing ventures appear profitable. The collapse wiped out thousands of jobs, more than $60 billion in market value and more than $2 billion in pension plans.
Please read our comment policy before commenting.