An eight-year-old lawsuit by Enron Corp. shareholders and investors who had accused various financial institutions of participating in the accounting fraud that led to the once mighty energy giant's downfall ended Wednesday after the remaining defendants in the case were dismissed.
Attorneys for the lead plaintiffs, the regents of the University of California, asked U.S. District Judge Melinda Harmon on Wednesday to drop claims against several banks and individuals, including former Enron CEO Jeff Skilling, because court rulings and the financial conditions of individual defendants have ended any chances of recovering additional monies.
"It's no longer in the interests of the (plaintiffs) to pursue the case," Patrick Coughlin, attorney for the regents, told Harmon.
But Coughlin said the decision to end the lawsuit won't affect the more than $7.2 billion settlement that has already been obtained in the case and was approved by Harmon last year.
The settlement is the largest ever in a U.S. securities fraud case.
"I can't say it's been fun," Harmon joked, in reference to the complex nature of the case, before signing the order to dismiss the remaining defendants.
Richard Clary, an attorney for Credit Suisse Securities LLC, told Harmon that speaking on behalf of all the defendants that remained in the case, "we're very happy" with the decision to end the lawsuit.
The financial institutions dismissed from the case on Wednesday were: Royal Bank of Canada, Royal Bank of Scotland, Toronto Dominion Bank, Merrill Lynch & Co., Barclays Bank PLC and Credit Suisse.
In March, Harmon had granted requests made by Merrill Lynch, Barclays and Credit Suisse for summary judgment in the case. Wednesday's ruling ensured that earlier decision could not be appealed.
Besides Skilling, the two other individual defendants dismissed were Richard Causey, former Enron chief accounting officer, and Mark Koenig, ex-Enron executive vice president of investor relations. All three were convicted of crimes related to the fraud at Enron.
Skilling and Causey are currently in prison. Koenig served a 16-month sentence.
Even before Wednesday's action, the lawsuit had been on hold since an appeals court in 2007 ruled shareholders and investors could not sue as a class, which would have allowed them to sue as a group and have more leverage to settle the case out of court.
The U.S. Supreme Court later refused to hear arguments in the lawsuit. The high court in a similar case gave a measure of protection from securities lawsuits to suppliers, banks, accountants and law firms that do business with corporations engaging in securities fraud.
The $7.2 billion settlement in the case was part of a $40 billion lawsuit filed by shareholders and investors, who claimed that Bank of America, JPMorgan Chase & Co., Citigroup and others participated in the accounting fraud that led to Enron's downfall.
Coughlin said despite the setbacks in the lawsuit, he is pleased with the results.
"It's a pretty good recovery in light of the hurdles we faced," he said.
About $4.6 billion of the settlement has already been distributed. Another $1 billion is set to be allocated before the end of the year, with the rest to be distributed by next spring or summer, Coughlin said.
About 1.5 million individuals and entities were eligible to share in the distribution under the settlement plan.
Besides the University of California, other plaintiffs who shared in the proceeds include pension plans from New York City and Hawaii and various investment firms.
At its height, Enron's common stock sold for as much as $90 per share, before plummeting to as low as $1 right before the company declared bankruptcy.
To be eligible for the settlement, investors and shareholders needed to have bought Enron or Enron-related securities between Sept. 9, 1997, and Dec. 2, 2001.
Enron, once the nation's seventh-largest company, filed for bankruptcy in December 2001 after years of accounting tricks could no longer hide billions in debt or make failing ventures appear profitable.
The collapse wiped out thousands of jobs, more than $60 billion in market value and more than $2 billion in pension plans.
Enron founder Kenneth Lay and Skilling were convicted in 2006 for their roles in the company's collapse. Lay's convictions for conspiracy, fraud and other charges were wiped out after he died of heart disease in 2006.