P Morgan to Pay $2.2B to settle Enron Lawsuit

J.P. Morgan has agreed to pay $ 2.2 billion to settle a class-action lawsuit by investors of the defunct Enron Corp.

The company also said it will take a $ 2 billion pre-tax charge in the current quarter to cover the settlement and increase its litigation reserve. After taxes, the charge should trim second quarter earnings by 35 cents a share.

JPMorgan Chase was accused of helping Enron engage in large prepaid transactions in which debt was concealed from the balance sheet to inflate the bottom line. In addition, the Wall Street giant was accused of issuing bullish research reports that stressed Enron’s liquidity while the company was on the verge of collapse.

In the settlement, JPMorgan Chase denied breaking any laws. The bank said in a statement that the deal was to "solely to eliminate the uncertainties, burden and expense of further protracted litigation."

JP Morgan, the No 3 US bank, announced its settlement just four days after Citigroup, America’s biggest bank, said it would pay $ 2bn to Enron investors who accused the banks of helping the company in a huge accounting fraud.

Both Citgroup and JP Morgan denied breaking any laws and said they wanted to put outstanding litigation behind them.

Led by the University of California, which lost $ 144.7m of its investments in Enron, the lawsuit alleges that a number of banks and brokerages helped the company to continue to operate and raise money even as the company was unravelling.