Merrill Lynch & Co. and Credit Suisse Group lost their bid to delay the trial of a $40 bln investor lawsuit accusing the banks of helping Enron Corp. artificially inflate earnings.
US District Judge Melinda Harmon in Houston ruled today there „should be no postponement” of the April 9 trial while an appeals court decides whether shareholders can continue to pursue as a group their claims against ex-Enron lenders Merrill Lynch & Co., Credit Suisse Group and Barclays Plc. „We are pleased by the judge's ruling and can't wait to get to trial and begin the process of recovering the billions owed to the victims of the massive Enron Corp. fraud,” William Lerach, the investors' lead lawyer, said in an interview today.
Enron was the world's largest energy-trading firm with a market value of as much as $68 billion before it collapsed in December 2001. The bankruptcy, the second-largest in US history after WorldCom Inc., wiped out more than 5,000 jobs and at least $1 billion in retirement funds. Enron's investors accuse the Houston-based company's banks of helping former Chairman Kenneth Lay and ex-CEO Jeffrey Skilling manipulate company finances by disguising debt as loans, financing sham energy trades and using off-the-books partnerships to hide losses and inflate revenue.
New York-based Merrill, Zurich-based Credit Suisse and London-based Barclays have denied they played any role in Enron's meltdown. Merrill and Credit Suisse told a US appeals court in New Orleans February 5 that shareholders shouldn't be able to press their suit as a group because they can't prove that the firms directly participated in Enron's accounting fraud.
Mark Herr, a Merrill spokesman, said he had no comment on today's ruling. Pen Pendleton, a Credit Suisse spokesman, also declined comment. David Braff, a New York-based lawyer for Barclays, wasn't immediately available for comment. Harmon ruled in August that thousands of Enron investors could sue the banks as a group.
Plaintiffs in such class-action cases can pool their resources and claims, gaining more leverage to achieve bigger settlements, or a favorable verdict at trial. The banks appealed Harmon's ruling, urging the 5th US Circuit Court of Appeals in New Orleans to force shareholders to sue individually. That court hasn't ruled yet. Lawyers for Merrill and Credit Suisse asked Harmon to delay the trial until the appeals court hands down the decision. Merrill is a passive minority investor in Bloomberg LP, the parent of Bloomberg News.
Lerach and other plaintiffs' lawyers countered that investors have waited as long as five years to have their claims heard and there was no reason to delay the case for an appellate ruling that may take years to arrive. Jurors are expected to hear at least three months of testimony about the banks' roles in deals that Enron executives used to bolster earnings.
A federal jury in Houston convicted Lay and Skilling in May of fraud and conspiracy charges after a four-month trial. Lay died of a heart attack at age 64 in July. His conviction was thrown out because he didn't have an opportunity to appeal. Skilling was sentenced to more than 24 years in prison and is serving his term at a federal prison in Minnesota. (Bloomberg)