| TheTip.org |
| Polls | Members | Refer | Forums | Write for TheTip! | Home | Impeach Bush |
Impeach George Bush
Chase - Who Wasn't Involved in Enron?
Chase paid off the SEC and the Insurers, but will the stock-holders ever get their turn in a fraud suit?
Source: TheTip, 2003-01-06
Candidate: Enron
NEW YORK - Last year, congressional inquiries and media reports unveiled uncomfortably close ties between bankrupt energy trader Enron and a slew of financiers. Apparently those ties weren't binding enough for insurance companies to wait out a jury verdict in the second major trial concerning Enron's collapse.
Today J.P. Morgan Chase (nyse: JPM - news - people ) said it would settle for almost $600 million in its lawsuit against 11 insurance companies that had backed questionable commodity transactions between the bank and Enron (otc: ENRNQ - news - people ). The settlement amounts to 60% of the $965 million that J.P. Morgan Chase sought in a civil complaint filed in December 2001.
The group of insurers, including Travelers Property Casualty (nyse: TAPb - news - people ), Chubb (nyse: CB - news - people ) and Hartford Financial Services (nyse: HIG - news - people ), sold surety bonds for roughly one-half of the $2 billion Enron-related transactions by a Chase special-purpose entity. The bonds were designed to protect Chase if Enron failed to deliver on energy and gas contracts. In the trial, the insurers contended that the so-called "prepaid transactions" were actually loans not covered by surety bonds. The bank said that the surety bonds were unconditional and that the insurers understood the financial structure at work.
But, given potentially damaging e-mail evidence by a Chase executive, the bank is fortunate to have had any take at all. Judging from today's conference call, the company is keenly aware that its Enron-related problems were hardly stemmed by this settlement.
The bank took a $400 million pretax charge for the remainder of the claim not picked up the insurance firms. Additionally, J.P. Morgan Chase used the positive settlement to announce that it is reserving $900 million to cover litigation and regulatory settlements related to Enron, WorldCom (otc: WCOEQ - news - people ) and its $80 million tab in the Wall Street research investigation, among other issues. Prior to today, only Citigroup (nyse: C - news - people ) had attempted to put a price tag on all of the litigation and fines with which it has been hit (see "A Tale Of Two Banks").
After taxes, the charge and reserves will result in an $860 million, or 43 cents per share, hit on J.P. Morgan's estimated fourth-quarter operating earnings of 36 cents per share. The company did not say when it would recognize the insurance settlement gain. Still, its shares jumped 6% to $25.44 today.
Speaking to the risk of having a jury decide the outcome, J.P. Morgan Chase Chairman and Chief Executive William Harrison Jr. said he felt it was "prudent to accept a reasonable settlement." The company would not elaborate to what extent the final figure differed from the original offer from the insurance companies. But bank executives this afternoon were delighted to frame the outcome as a victory.
"We feel this settlement represents a recognition that we were in the right," said Dina DuBlon, finance chief at J.P. Morgan Chase.
There's little question the company had been sweating it out following a late December decision by Judge Jed Rakoff, U.S. Southern District of New York, to allow jurors to peruse J.P. Morgan executive Donald Lyton's e-mails, which referred to commodity transactions as "disguised loans." In a ruling that probably diminished the influence of the e-mails, however, Rakoff dismissed a separate claim that Chase had aided a financial fraud against the insurance companies by Enron.
"It initially looked as if the defendants had a strong case," said Mike Paisan, an insurance analyst at Legg Mason. "The trump card was the e-mail." But Paisan contends that "jury verdict inflation" seen in some recent tobacco and asbestos claims were enough for the insurers to slough off a potential winner.
Add a comment to this Message in our Forums.
While you're at it, check out our forums too!
User Originated Comments:
From: Benedict
1999-11-30 00:00:00
you continue to make veiled references that bush
and cabinet are partially responsible for enron's
failure--you are a liar -- as it was f0rmer treas.
ruben that made the sly call to thebush to see if
they could help kill the investigations.
Related News
|
|
|
||||||
|
|
|
||||||
|
|
|
|
|
|
|
||
|
|
|
||||||
|
|
|
||||||
owned by TheTIP.
[ Skip Next | Next | Random Site | List Sites |Previous ]
NEWS | ACTION | RESULTS | POLLS | MEMBERS | SEARCH