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Quick Hits: Bank of America, JPMorgan, Others to Pay $7.2 Billion for Enron Fraud


Brief scrutiny of today's headlines.

In a new settlement, Enron investors will receive $7.2 billion in damages, part of which will be shelled out by banks that allegedly participated in the accounting fraud that led to the energy company's collapse.

The settlement has accrued interest since 2002, and includes $688 million in attorneys fees.

Under the terms of the deal, investors will receive an average of $6.79 per share of common stock and an average of $168.50 per share of preferred stock. To receive part of the settlement, investors must have bought Enron shares between September 9, 1997 and December 2, 2001. About 1.5 million individuals and funds will be eligible to share in the settlement.

The distribution is part of a $40 billion lawsuit filed by shareholders and investors that alleged that Bank of America (BAC), JPMorgan Chase (JPM), Citigroup (C) and other banks were complicit in fraud.

Enron was once the nation's seventh-largest company. It entered bankruptcy in December 2001 after accounting fraud could no longer hide billions in debt and make the company appear profitable. Enron's collapse killed thousands of jobs and wiped about $60 billion in marked value and $2 billion in pension plans.

San Diego law firm Coughlin Stoia Geller Rudman & Robbins, representing the Regents of the University of California, will receive the legal fees. The university was lead plaintiff in the case.

In January, the US Supreme Court refused to hear arguments in the case. However, the court previously gave a measure of protection from securities lawsuits to suppliers, banks, accountants and law firms that deal with companies committing securities fraud.
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