Investors Recoup $222.5 Million From Lehman Bros. Alone for Its Role in Historic Fraud

October 29, 2004

Lead plaintiff in Enron, the Regents of the University of California, obtained another partial settlement in the Enron securities class action – this one for $222.5 million from defendant Lehman Brothers.

“This agreement continues a pattern of highly favorable settlements with underwriter defendants and provides a substantial recovery to the purchasers of the Enron debt securities that Lehman Brothers participated in underwriting,” said James E. Holst, the Regents' general counsel.

As one of the underwriters on millions of dollars of Enron notes, Lehman Brothers was charged with violations of the Securities Act of 1933, which makes underwriters liable for misstatements in a security registration statement. Under the 1933 Act, Lehman's potential liability was limited to the loss of value of the securities it sold in the offerings it underwrote. Lehman was not charged with fraud.

In July, the Regents settled similar claims against the Bank of America for $69 million. Bank of America's potential exposure was less than Lehman's because it was sued in connection with fewer Enron securities offerings than Lehman.

“Like Bank of America, Lehman has agreed to pay more than 50 percent of its potential exposure for the debt offerings sued for in this case,” said Lerach Coughlin Chairman William S. Lerach, lead counsel. “We continue to vigorously pursue those defendants, including banks, that, unlike Lehman and Bank of America, have been charged with knowingly participating in the scheme to defraud Enron investors. We expect that we will achieve even larger settlements or judgments from those defendants whose potential liability is much greater.”

The agreement marks the third settlement in the case. In addition to the Bank of America settlement, the Regents reached a $40 million settlement in July 2002 with Arthur Andersen's international umbrella organization that released Andersen Worldwide SC and its non-U.S. member firms from liability and dismissed them from the suit. Arthur Andersen's U.S. arm, which served as Enron's auditor prior to its bankruptcy, remains a defendant in the case.

In re Enron Corp. Sec Litig., Civ. No. H-01-3624 (S.D. Tex.).