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Date Posted: 20:39:32 03/26/08 Wed
Author: Bob O. Link
Subject:

CITIGROUP TO PAY $1.6BN FOR ENRON CLAIMS

Citigroup to pay $1.66bn Enron claims

By Ben White in New York

Published: March 27 2008 02:00

Citigroup has agreed to pay $1.66bn to Enron creditors to settle two of the biggest remaining claims over its role in the Houston energy trader's spectacular collapse in 2001.

The agreement will bring Citi much closer to ending its long exposure to the ills of Enron, although the bank still faces several smaller claims. Mounting credit crunch woes also confront Citi.

Meredith Whitney, Oppenheimer analyst, yesterday said Citi might take another $13.1bn writedown in the first quarter on its leveraged loan commitments and holdings of collateralised debt obligations, complex securities backed by pools of credits.

The bank faces new lawsuits over its underwriting of securities tied to subprime home mortgages. Citigroup shares were off nearly 1.4 per cent at $22.05 by the close of trade.

The latest settlement allows Vikram Pandit, who took over as Citi chief executive in December, to focus on his comprehensive review of the bank's businesses. It could also allow him to release some of the bank's big litigation reserves.

At the end of December, Citi had $2.8bn remaining in its reserve to settle claims arising from the Enron collapse, as well as that of WorldCom and certain initial public offerings. It took a charge of nearly $5bn in 2004 to build its litigation reserves to cover the cases. Citi paid $2.6bn to settle WorldCom claims.

The $1.66bn settlement payments resolve claims by the Enron bankruptcy estate against Citi as well as a lawsuit by holders of Enron credit-linked notes tied to the bank. As part of the agreement, Citi agreed to give up certain claims in the Enron bankruptcy proceeding. As is customary in such settlements, Citi neither admitted nor denied wrongdoing.

The latest settlement comes after Citi agreed in 2005 to pay $2bn to settle a class action lawsuit brought by Enron shareholders against a group of banks over their alleged role in fraudulent deals at the energy group. Citi's payment was among the largest in a shareholder action.

The shareholder suit against Enron's banks has since been derailed by US Supreme Court rulings shielding outside advisers in corporate fraud cases.

Citi, JPMorgan Chase and other banks earned lucrative fees advising Enron on deals and underwriting its securities in the late 1990s. But big settlements and longrunning litigation costs associated with the energy trader's collapse have far outstripped any money the banks ever made from Enron

Citi's settlement came just before the case was to go to trial.

http://www.ft.com/cms/s/0/0ebf5f80-fba0-11dc-8c3e-000077b07658.html

Copyright The Financial Times Limited 2008

See also:

http://www.kycbs.net/CITIGROUP.htm
http://www.kycbs.net/ENRON.htm
http://www.kycbs.net/AlohaHarken.htm
http://www.kycbs.net/MM-Mercer.htm
http://www.kycbs.net/Power.htm
http://www.kycbs.net/CV05-00030-Witness-Bush-George.htm
http://www.kycbs.net/CV05-00030-Witness-Cheney-Dick.htm

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