The University of California and Lehman Brothers have agreed on a $222.5 million settlement in a class action suit that accuses the bank of misrepresentations while selling Enron stocks and bonds.
The university, which is the lead plaintiff in the class action, lost $150 million when the company collapsed into bankruptcy three years ago. The Lehman Brothers settlement is the largest so far, Reuters reported.
"I'm happy they settled but it's larger than I expected," said Wayne Bopp, a financial services analyst with Ohio-based Fifth Third Investment Advisors.
The university has also reached settlements with Bank of America and the international arm of the once-mighty accounting firm Arthur Andersen, for $69 million and $40 million, respectively.
Lehman was not charged with fraud, but with violations of the 1933 Securities Act. The law requires underwriters to be held responsible for misstatements in a security registration, according to the university. The settlement must be approved by the court.
Other banks named in the class action include J.P. Morgan Chase & Co., Citigroup, Merrill Lynch, Credit Suisse First Boston, Canadian Imperial Bank of Commerce, Barclays Bank, Deutsche Bank, Toronto-Dominion Bank and the Royal Bank of Scotland.
Lawyers say they expect various corporate defendants to settle throughout the next few months.
"I'm sure the amount in the Lehman settlement will be of great interest to the other banks. The plaintiffs remain open to settlements with other defendants that reflect the serious level of their liability in the fraud," Trey Davis, UC director of special projects, told the Houston Chronicle.
Reuters quoted William Lerach, the attorney who brought the suit as saying, "We continue to pursue those defendants, including banks, that, unlike Lehman and Bank of America, have been charged with knowingly participating in the scheme to defraud Enron investors."
In a statement, Lerach said he expects "even larger settlements or judgments from those defendants whose potential liability is much greater."