Canadian Imperial Bank of Commerce (CIBC) said it will pay Enron Corp. $250 million to resolve claims the lender aided accounting fraud, bringing it closer to resolving a costly legal dispute with the energy trader.
CIBC, agreed on August 2 to pay Enron shareholders $2.4 billion, which is the third of 10 financial companies to settle the "MegaClaim" litigation. Royal Bank of Canada also agreed to pay Enron $25 million, while Royal Bank of Scotland Plc previously stated it would pay $41.9 million. CIBC will also pay $24 million in claims filed by Enron creditors.
Between CIBC's first accord and reserves for other Enron-related legal claims, CIBC said that fiscal third-quarter profit will drop by $197 billion which equals almost 17 percent of shareholder equity. CIBC originally set aside $300 million for Enron litigation in the fourth quarter of last year. CFO Tom Woods said that CIBC has not raised its Enron reserves since the fourth quarter as it has had no contact with the plaintiffs' attorneys until after JPMorgan Chase & Co.'s settlement on June 14. Until then, Canadian accounting rules limited the provision to CIBC's minimum estimate for the cost of the settlement agreement.
Enron shareholders have sued other financial institutions including Barclays Plc, Citigroup Inc., Credit Suisse First Boston Inc., Deutsche Bank AG, JPMorgan Chase & Co., Merrill Lynch & Co., and Toronto-Dominion Bank.
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