After 15 years, lawsuit against UBS over Enron collapse is dismissed

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By Jonathan Stempel

<span class="articleLocation”>A federal judge in Houston has thrown out a
lawsuit accusing UBS Group AG of hiding fraud by its
client Enron Corp from retail customers, a decision that may end
a 15-year legal battle stemming from the energy company’s
December 2001 bankruptcy.

In a 228-page decision on Tuesday, U.S. District Judge
Melinda Harmon said UBS PaineWebber brokerage customers failed
to show that the Swiss bank intended to defraud them into buying
Enron securities.

The customers accused UBS of trying to generate more fees by
taking part in five transactions with Enron, such as loans and
note offerings, that had no legitimate business purpose, and
which were designed to create a facade that Enron was healthy.

But the judge said “it was Enron (and its accountants and
lawyers) … that was responsible for using these transactions
to ‘cook its books,’ creating its allegedly fraudulent financial
statements,” and ultimately defraud the investing public.

The plaintiffs failed to specify “exactly what nonpublic,
material information the UBS entities knew about Enron, who
discovered it, when, how, and under what circumstances and why
it was fraudulent,” Harmon wrote.

Lawyers for the plaintiffs did not immediately respond on
Wednesday to requests for comment. UBS did not immediately
respond to similar requests.

The plaintiffs chose to sue independently of other Enron
investors who pursued similar claims in nationwide litigation.

Harmon dismissed claims against UBS by another group of
Enron investors last Aug. 2.

A $7.2 billion securities class-action settlement in 2006
with several banks and other defendants over Enron’s collapse
remains the largest on record.

Once ranked seventh on the Fortune 500 list of large U.S.
companies, Enron went bankrupt on Dec. 2, 2001.

Its demise led to reforms including the federal
Sarbanes-Oxley Act of 2002, and was the basis for the
Oscar-nominated 2005 documentary “Enron: The Smartest Guys in
the Room.”

Several executives went to prison, including former Enron
Chief Executive Jeffrey Skilling for fraud and other offenses.

He is eligible for release in February 2019, federal prison
records show, after having his sentence shortened to 14 years
from 24 years in 2013.

Kenneth Lay, Skilling’s predecessor and successor as chief
executive, was also convicted of fraud, but died in 2006 before
he could be sentenced.

The case is Lampkin et al v. UBS PaineWebber Inc et al, U.S.
District Court, Southern District of Texas, No. 02-00851.

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