Canadian Imperial Bank of Commerce said that it will pay $2.4 billion to settle its part of a class-action lawsuit stemming from the collapse of energy trader Enron Corp.
The settlement does not include any admission of wrongdoing by CIBC, and the bank said that it agreed to the settlement to eliminate the uncertainties and expense of further litigation. The lawsuit is pending in the U.S. District Court in Houston, and the settlement must be approved by the University of California, the lead plaintiff in the case.
"A key priority for us is to resolve this case and substantially reduce our litigation risk," said CIBC president and chief executive Gerry McCaughey. "By settling this case and maintaining what we believe are adequate reserves for our remaining Enron-related legal issues, we can better focus our energies on our other priorities."
The settlement is significantly larger than the $300 million CIBC had originally put aside to settle its alleged role in helping the bankrupt energy giant hide accounting frauds.
CIBC, Canada's No. 5 bank, will become the third financial institution to settle as part of the lawsuit. Remaining defendants include Merrill Lynch, Credit Suisse First Boston, Barclays Bank, Deutsche Bank, the Royal Bank of Scotland, Toronto-Dominion Bank and the Royal Bank of Canada.Investors have now won $7 billion in settlements, including $223 million from Lehman Brothers, $69 million from Bank of America, $168 million from Enron's outside directors, and $32 million from accountant Andersen Worldwide. The total makes the Enron class action the largest securities fraud lawsuit in history, taking the distinction back from the $6.1 billion settlement reached for the Worldcom accounting scandal.
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