Enron Creditors Get 53 Percent Payout, Aided by Lawsuit Accords

Defunct Enron Corp.’s creditors have received $21.8 billion in cash and stock so far, with money from lawsuits and settlements helping to give general unsecured creditors a payback three times higher than the estate had projected, a report shows.

Once the biggest U.S. energy trader, Houston-based Enron filed for bankruptcy in 2001 and won approval of a liquidation plan in 2004. The 53 percent payback to general unsecured creditors was triple the 17 percent recovery estimated in the plan, according to a report by Enron Creditors Recovery Corp., set up to liquidate the company’s remaining operations and assets.

Enron investors in December 2008 began receiving their share of $7.2 billion from settlements with the failed energy trader’s lenders, auditors and directors.

A judge that year approved a $1.7 billion settlement with Citigroup Inc., sued by investors as part of a move to hold lenders liable for the fraud that destroyed the company. Citigroup also agreed to give up an estimated $4.3 billion in claims against Enron to settle the allegations about its role in the company’s collapse. JPMorgan Chase & Co., another former Enron lender, said in 2005 it would pay $2.2 billion to resolve litigation.

The creditors’ payout includes $267 million of interest, capital gains and dividends, according to yesterday’s report.

Lay is Dead

Enron, then run by Chief Executive Officer Jeffrey Skilling and Chairman Kenneth Lay, filed for bankruptcy after restating $586 million in earnings. Its shares lost $68 billion in value from their peak in 2000 to its bankruptcy filing. More than 5,000 Enron employees were fired and about $1 billion in retirement money was lost. Skilling is in prison and Lay is dead.

More than $780 million in total fees were approved in 2004 for advisers in the three-year Enron bankruptcy, at the time the second-largest in U.S. history after WorldCom Inc. Lehman Brothers Holdings Inc., which collapsed in 2008, set the record as America’s most costly bankruptcy in 2010, and now has paid managers and advisers about $1.5 billion.

Lehman is embarking on a $65 billion liquidation plan and has estimated it will pay the average creditor less than 18 cents on the dollar.

The Enron recovery corporation has stored 2,600 boxes of documents and destroyed at least 43,000 boxes in accordance with court orders, according to the report. Litigation documents are stored on electronic tape media.

The Citigroup suit is Enron Creditors Recovery Corp. v. Citigroup Inc., 03-9266, and the bankruptcy case is In re Enron Corp., 01-16034, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Before it's here, it's on the Bloomberg Terminal. LEARN MORE