Enron, WorldCom Recoveries Continue
Two settlements totaling $86 million were announced in the Enron securities litigation by the University of California legal team, acting as lead plaintiffs for a class of former Enron investors.
The September settlements were $72.5 million from the accounting firm Arthur Andersen LLP, and $13.5 million from the law firm of Kirkland & Ellis. Andersen was Enron’s auditor and signed off on many of the company’s allegedly false and misleading financial reports. Kirkland & Ellis served as legal counsel for a number of the off-book entities through which Enron manipulated financial statements.
In a separate, and independent, legal action UC also recently said that it will receive a $13.25 million settlement from Citigroup and its former Salomon Smith Barney subsidiary (now known as Citigroup Global Markets) in a lawsuit arising from the WorldCom Inc. securities fraud.
In a complaint filed Feb. 13, 2003 under California securities fraud law against Salomon Smith Barney, Citigroup Inc., and Arthur Andersen LLP, UC alleged that WorldCom, with the complicity of the defendants, engaged in a massive accounting fraud that inflated the price of its stock. Arthur Andersen remains a defendant in this case.
“All net recovery goes back into UC pension and endowment funds,” said UC spokesman Trey Davis, adding “the largest portion goes to UCRP.” UC’s portfolio of retirement and endowment funds currently total more than $64 billion.
UC had purchased 10.2 million shares of WorldCom and related securities between 1998 and early 2000. It sold all of its WorldCom holdings in June-July 2002.
WorldCom announced in 2002, that it had improperly accounted for nearly $10 billion, thereby boosting reported cash flow and profits. The announcement resulted in a collapse of its stock price and eventual bankruptcy, the largest in U.S. history.