| Litigation Overview |
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Enron Creditors Recovery Corp. ("ECRC") continues to pursue litigation seeking the return of billions of dollars from institutions that are alleged to have participated in, and profited from, conduct underlying Enron's collapse in 2001. The diligent efforts of ECRC have resulted in settlements of many of these cases, recovering billions of dollars for Enron's creditors. Click here to view a list of the settlements. The litigation falls into three main categories: MegaClaims LitigationAs part of its mission to liquidate remaining operations and distribute assets to its creditors, ECRC filed its "MegaClaims" complaints against 11 major banks and financial institutions that it believes contributed to the collapse of Enron. The MegaClaims complaint specifically details, consistent with the findings of the court-appointed Examiner, the alleged involvement of those banks in the fraud, breaches of fiduciary duties, and civil conspiracy that created losses in the tens of billions of dollars. At its heart, the MegaClaims suit is about ensuring that culpable financial institutions are not only held accountable for their actions, but also that innocent creditors are made whole for the billions they lost. Thus far, ten of the eleven banks named in the MegaClaims action have settled with ECRC, without admitting any wrongdoing. ECRC has received nearly $1.76 billion in cash from these MegaClaims settlements to distribute to creditors and other innocent parties who allegedly suffered financial losses as a result of the Banks' actions and ultimate collapse of Enron. In addition, the settlements included agreements that ECRC would not pay creditor claims in the amount of nearly $1.4 billion (these claims were subordinated or disallowed). As a result, ECRC was able to distribute to innocent parties money that otherwise would have been used to pay those claims.* Click here for further information about MegaClaims settlements. Citigroup is the last remaining defendant in the MegaClaims litigation. ECRC contends that Citigroup played a central role in the collapse of Enron, so ECRC is seeking to recover approximately $3 billion in funds that it alleges were transferred fraudulently by Enron to Citigroup, plus billions more in further damages. In addition, Citigroup has – itself or through transferees – $5 billion in face value of claims pending against ECRC. ECRC is seeking to subordinate those claims to enable ECRC to pay the money instead to innocent creditors. The Enron MegaClaims trial against Citigroup is scheduled to commence in April 2008. Click here for further information about the Citigroup Litigation. *Deutsche Bank settlement remains subject to court approval. Commercial Paper LitigationAs part of its mission to liquidate remaining operations and distribute assets to its creditors, ECRC has filed suit against approximately 180 defendants, including Goldman, Sachs & Co., Lehman Commercial Paper, Inc., JPMorgan Securities and MassMutual. This suit seeks to recover commercial paper debt prepayments, which were made in the months just before Enron filed for bankruptcy. ECRC believes these payments were preferential or fraudulent, and is seeking recovery of the funds to ensure these institutions do not retain money that should be distributed to Enron's innocent creditors instead. To date, cash settlements have been reached totaling more than $172 million, including a settlement of nearly $150 million with Lehman and its customers. Not included in this total is a settlement made with JPMorgan Chase as part of its MegaClaims settlement. At this time, approximately $418 million in face value transfers are outstanding against defendants, including MassMutual, Goldman, Sachs & Co. and certain of its customers, and certain JPMorgan Chase customers. ECRC continues to pursue these claims. Click here to view relevant case documents. Equity Transactions LitigationAs part of its mission to liquidate remaining operations and distribute assets to its creditors, ECRC filed suit against Lehman Brothers Holdings, Inc., UBS AG, Credit Suisse and Bear Stearns in what is known as the Equity Transactions litigation. This litigation stemmed from a series of payments made to the four banks on transactions involving Enron's stock in the months leading up to Enron's bankruptcy. These payments concerned a series of equity transactions known as swaps, forwards and derivatives. The purpose of the lawsuit was to ensure that institutions did not retain fraudulent transfers, received pursuant to transactions that ECRC believed were entered into to help Enron present a misleading picture of the Company's financial health. Under the U.S. Bankruptcy Code, a Company may be required to return a payment made by an entity (here Enron) that subsequently goes bankrupt if the company making the payment was insolvent or inadequately capitalized at the time the payment was made, or if it made the payment with the intent to hinder, delay or defraud its creditors. All four of these claims have been settled favorably, without any of the parties admitting any wrongdoing. These settlements resulted in the return of more than $248 million to ECRC for distribution to Enron's innocent creditors. The settlements have been as follows:
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