CIBC shares slip on $2.4B US Enron lawsuit settlement
Shares of Canadian Imperial Bank of Commerce slid on Wednesday, a day after the bank agreed to pay $2.4 billion US to settle an Enron lawsuit.
In afternoon trading, shares of CIBC were off 7.9 per cent or $6.30 at $74.34. The stock opened the day at $74.
The settlement, about $2.9 billion Canadian, is more than the company's $2.2 billion profit in 2004.
The lead plaintiff in the class-action suit said Tuesday's settlement is the single-biggest payment by a financial institution.
The University of California said Citigroup paid $2 billion US and JPMorgan Chase $2.2 billion US.
CIBC did not admit any wrongdoing. In a statement, it said it "agreed to the settlement solely to eliminate the uncertainties, burden and expense of further protracted litigation."
In May, the bank said it would vigorously defend the "purported class action" which it settled Tuesday.
The university heads a group of pension funds and investment managers which claim that "systematic fraud by Enron and its officers led to the loss of billions and the collapse of the company."
- FROM JULY 29, 2003: CIBC aided Enron on financial dealings: report
CIBC had earlier been accused of helping Enron to hide debt. "CIBC aided and abetted certain Enron officers in breaching their fiduciary duties," Enron's court-appointed examiner Neal Batson reported in 2003.
- FROM DEC. 22, 2003: CIBC agrees to $80 million US penalty over Enron accounting fraud
Later that year, the bank agreed to pay $80 million US to settle allegations it had helped Enron commit the accounting fraud.
At the time, then-president and CEO John Hunkin said the bank had "put a major portion of the Enron matter behind us," and while there were still lawsuits outstanding, it would fight them.
The bank said Tuesday that it will take a $2.5 billion after-tax charge against its profit in the third quarter ended July 31 to cover the payment and other Enron issues.
It took a $300 million charge to cover potential Enron costs last year, and said it also had insurance coverage.
CIBC said it will still have the minimum capital required by regulators after the Enron charge.
"By settling this case and maintaining what we believe are adequate reserves for our remaining Enron related legal issues, we can better focus our energies on our other priorities," Gerry McCaughey, president and CEO, said in a statement.
The university said that with the CIBC payment, the Enron case is now the largest class-action recovery in history. Other defendants are talking about settlements, it said.
- FROM MAY 25, 2005: CIBC profit drops 13% on market timing provision
CIBC has had other problems recently requiring it to make payments.
It took an additional $75-million charge in May relating to allegations it provided financing and brokerage services for hedge funds that were engaged in the market timing of mutual funds, which regulators forbid when it treats unit-holders differently.