JP Morgan to pay Enron backers

INVESTMENT bank JP Morgan Chase has agreed to pay $2.2bn (£1.2bn) to investors of collapsed energy firm Enron.

The move, which follows a cave-in by Citigroup, puts intense pressure on other banks including Barclays and Royal Bank of Scotland to pay up in the case, which could become the largest-ever US securities settlement.

'The noose is tightening around the necks of the other defendants. Stay tuned,' said William Lerach, the lawyer representing the University of California, lead plaintiff in the class action.

In its settlement this week, Citigroup said it would pay $2bn to Enron stock and bond investors who accuse the banks of helping Enron defraud investors.

There are still 10 other financial institutions involved in the case over the December 2001 collapse of Enron. Lerach believes the final payout will top the combined $6.1bn that Wall Street banks agreed to pay to settle allegations they didn't examine WorldCom adequately before selling securities in the telecoms company.

JP Morgan Chase, as with Citigroup earlier this week, refused to admit wrongdoing, saying it simply wanted to move on.

The pre-tax charge of $2bn will be booked against JP Morgan's second-quarter earnings. The bank has already had to boost litigation reserves to pay for its $2bn WorldCom settlement.

But the settlement eliminated the 'uncertainties, burden and expense of further protracted litigation', president and chief operating officer Jamie Dimon said, adding that the move is in line with his policy of resolving outstanding litigation issues quickly.

The settlement must be approved by the University of California and the JP Morgan board.

So far, banks have agreed to cough up $4.7bn in the Enron action, with Bank of America to pay $69m and Lehman Brothers $222.5m.

Barclays, Royal Bank of Scotland, Deutsche Bank, Credit Suisse First Boston, Merrill Lynch, Canadian Imperial Bank of Commerce, Toronto Dominion Bank and Royal Bank of Canada are all named in the action but Lerach would not discuss any talks that may be going on with those banks.

'I don't think there is any question the final amount will be in excess of the $6.1bn (for WorldCom) and the largest securities settlement ever,' he said.

Former Enron chairman Kenneth Lay and former chief executive Jeffrey Skilling face trial in January 2006 for their part in the company's collapse.

Enron has emerged from bankruptcy proceedings as a private company and is liquidating its remaining assets to pay off part of its debts.