Settling times

New York, June 15 (Reuters): JP Morgan Chase & Company said on Tuesday it had agreed to pay $2.2 billion to investors of collapsed energy firm Enron Corp in what lawyers said could end up being the largest-ever US securities settlement.

JP Morgan Chase, the No 3 US bank, announced its settlement just four days after Citigroup Inc said it would pay $2 billion to Enron stock and bond investors who accused the banks of helping Enron in a huge accounting fraud.

The Citigroup settlement with lead plaintiff, the Board of Regents of the University of California, had been expected to trigger settlements from some of the other 11 financial firms involved with Enron, which collapsed in 2001.

“The noose is tightening around the necks of the other defendants. Stay tuned,” William Lerach, the lawyer representing the University of California, told Reuters.

He expected the final figure to exceed the $6.1 billion that over a dozen Wall Street banks agreed to pay to settle allegations they didn’t adequately examine WorldCom Inc’s financial health when they sold securities in 2000 and 2001.

Neither Citigroup, the world’s largest financial services company, nor JP Morgan Chase admitted any wrongdoing in agreeing to settle the Enron suit but both said they wanted to put outstanding litigation behind them.

JP Morgan Chase said it will take a pretax charge of $2 billion against its second-quarter earnings to pay the settlement and increase its litigation reserves.

The bank has already warned its trading results in the quarter may be the weakest reported in some time, hurt by bets made with its own cash and dismal markets.

It said it settled to eliminate the “uncertainties, burden and expense of further protracted litigation”.

President and chief operating officer Jamie Dimon is known to want to resolve outstanding litigation issues quickly so the New York firm can move forward without legal uncertainties.

Largest settlement

The class-action settlement must be approved by the Board of Regents of the University of California and JP Morgan board. So far FIs have agreed to pay Enron shareholders $4.7 billion. As well as the Citigroup and JP Morgan settlements, Bank of America has agreed to pay $69 million and Lehman Brothers $222.5 million.

Other institutions involved include Barclays Plc, Credit Suisse First Boston, Merrill Lynch, Canadian Imperial Bank of Commerce, Toronto Dominion Bank, Royal Bank of Canada, Deutsche Bank AG and the Royal Bank of Scotland.