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Similar case might affect shareholders going after banks accused of aiding company in fraud
By Pete Yost Associated Press
Published on Sunday, Oct 07, 2007
WASHINGTON: The hopes of Enron investors are riding on a U.S. Supreme Court case that may be the last chance at compensation for their losses when the scandal-ridden energy company collapsed.
Much of corporate America has jumped into the court fight, arguing that shareholders in companies that commit securities fraud should not be allowed to sue banks, accountants, law firms and suppliers accused of participating in the fraud.
Allowing investors to file class-action lawsuits in such cases would ''threaten the safety and soundness of individual financial institutions and the nation's banking system,'' a coalition of business groups, including the American Bankers Association, said in court papers.
Firms and corporations that enabled companies such as Enron to defraud stockholders should now have to pay, lawyers for the investors say.
''The banks orchestrated the fraud; they weren't sideline viewers,'' said Patrick Coughlin, the lead lawyer for Enron shareholders. ''So when the question comes up about who should be on the hook for Enron, it's the banks.''
Meir Feder, a New York lawyer who defends companies in securities cases, said ''everybody understands that the Enron shareholders are victims here, but there's a reason that Congress and the Supreme Court haven't allowed people to sue third parties.''
He added, ''In the real world, for every third party who actually had a role in a fraud, you're going to get lots of suits against other third parties who really didn't.''
When the Supreme Court hears arguments on the issue Tuesday, Enron investors will be on the sidelines. The court is dealing with a suit by Stoneridge Investment Partners against Motorola Inc. and Scientific-Atlanta Inc., which Cisco Systems Inc. now owns.
Only eight of the nine justices will participate. Justice Stephen Breyer has withdrawn from the case; he gave no reason, but financial disclosure documents state he owned Cisco stock.
The Stoneridge case has strong parallels to the one pursued by Enron shareholders, which the high court has left alone.
The Enron suit was up for consideration June 21 at one of the justices' regularly scheduled private conferences, but the court has neither accepted nor rejected it.
''It's easier to decide a legal issue in a noncharged atmosphere, which may have been what the justices had in mind by not taking on Enron,'' Coughlin said.
At stake in the Enron case is more than $30 billion sought by hundreds of thousands of investors from banks accused of helping the company once the nation's seventh-largest hide billions in debt and make failing ventures appear profitable.
WASHINGTON: The hopes of Enron investors are riding on a U.S. Supreme Court case that may be the last chance at compensation for their losses when the scandal-ridden energy company collapsed.
Get the full article here.
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