A lawsuit over Enrons accounting fraud may have finally come to an end after eight years, mainly because there seems to be little prospect of collecting more damages.
The lead plaintiffs, the Regents of the University of California, asked the judge to drop their claims against several banks, including Merrill Lynch (now owned by Bank of America), Credit Suisse, Barclays, and the Royal Bank of Scotland, as well as individuals including former Enron CEO Jeffrey Skilling, according to the Associated Press. The prospects for the lawsuit were apparently dimming. Three of the banks had already been granted a request for summary judgment in the case, and an appeals court had not allowed the investors to sue as a class, which would have provided them with greater leverage.
Nevertheless, the Enron investors had earlier won a $7.2 billion settlement in the case, which is still in the process of being distributed. Skilling now sits in jail, along with Enrons former chief accounting officer, Richard Causey.
The Enron case, and others like it, led to a number of accounting and financial reforms, primarily the Sarbanes-Oxley Act. The success of those reforms is debatable, considering the financial crisis that erupted last year. Now, as Congress considers various pieces of financial regulatory reform legislation, including the systemic risk bill approved yesterday by the House Financial Services Committee, the example of Enron still provides a powerful cautionary tale. The company used a series of accounting tricks to pump up its revenue figures for investors, including off-balance-sheet entities with colorful names like Raptor.
The financial industry is fighting the reforms on Capitol Hill and pushing for the loosening of accounting standards. But with the economy still limping along after the initial crisis died down, the need for financial regulation and better accounting standards to prevent future Enrons hasnt changed much in eight years.