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Wednesday, August 03, 2005

CIBC Settles Enron Suit for $2.4 Billion: It Is Still Just Pennies on the Dollar for Investors

Canadian Imperial Bank of Commerce (CIBC) agreed to pay $2.4 billion to Enron investors who claimed the financial services company took part in a massive securities fraud and accounting fraud that led to the collapse of the energy giant. Total settlements in the Enron securities fraud class action case total more than $7 billion.

While these settlements seem like a lot of money, unfortunately the ordinary investor will receive only approximately 8 to 15 cents on the dollar for their losses. Thus, if a securities investor or Enron employee had $100,000 in Enron stock in his or her retirement account, receiving $8,000 to $15,000 back hardly compensates these victims for the largest securities fraud in corporate history.

I believe that the investment banks should be contributing substantially more money towards the settlement to make their victims whole. Only by assessing substantial liability to investment fraud will the banks change their ways and abandon the "structured finance" practices which have led to major securities fraud and accounting fraud.

Many Enron investors have chosen to forgo receiving class action "pennies" and pursue their claims in securities arbitration against their brokerage firms who had involvement in Enron. These investors if they prevail in their securities arbitration cases are likely to receive a larger payout than they would from the "trickle down" class action settlement.

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