Enron Investors Petition Justices
Friday, January 18, 2008
Enron investors suing the company's former lenders for $40 billion asked the Supreme Court to clarify a decision limiting the ability of shareholders to sue banks and advisers for securities fraud.
The investors, the Regents of the University of California, questioned whether the high court's Tuesday decision in StoneRidge v. Scientific-Atlanta bars their claims against Enron even though the justices' ruling limited shareholder lawsuits. The regents urged the high court to review an appeals court ruling throwing out suits against the banks, which include Merrill Lynch, Credit Suisse Group and Barclays.
The investors said the justices should hear Enron's appeal or send the case back to the lower court to reconsider its decision blocking the claims. The Supreme Court is scheduled to consider the request today and announce a decision as early as next week.
"Enron is, at its core, a case about financial fraud, executed by financial professionals targeting investors," the investors argued in a brief filed yesterday. The court should "clarify when financial professionals may be liable for deliberately misleading investors."
The investors' request follows a brief by the banks urging the court to reject the Enron appeal. The banks claimed there is no reason to send the case back to the federal appeals court in New Orleans. A decision in favor of the banks would end the claims against them.
In StoneRidge, the justices, by a 5 to 3 vote, dismissed a suit by Charter Communications investors against two of the company's suppliers. The court ruled that shareholders failed to show that their investment decisions were based on any deceptive statements by the suppliers. Congress gave the Securities and Exchange Commission, not investors, the authority to sue business partners accused of helping defraud a company's investors, the court said.
Lawyers have said they expect other banks and outside advisers to use the ruling to try to block shareholder suits against them. Citigroup lawyers yesterday said StoneRidge may be grounds to dismiss claims against it by investors in Parmalat Finanziaria, the dairy company that filed Italy's largest bankruptcy.
Enron was the world's biggest energy-trading company, with a market value of as much as $68 billion, before it collapsed in December 2001.
Enron's investors accuse the Houston company's banks of helping it disguise debt, finance sham energy trades and use off-the-books partnerships to hide losses and inflate revenue.
Investors have recovered more than $7.3 billion in settlements with other former Enron lenders. That includes a $2.2 billion accord with J.P. Morgan Chase, a $2 billion settlement with Citigroup and a $2.4 billion settlement with Canadian Imperial Bank of Commerce.