Vinson & Elkins is on the verge of ending its Enron nightmare after the lead plaintiffs in the multi-billion dollar Enron Corporation securities litigation class action filed a motion seeking to dismiss the Texan firm as a defendant.
The move will be a huge relief to Vinson, which as chief corporate counsel to Enron had been embroiled in controversy surrounding Enron’s December 2001 collapse.
The plaintiffs – largely shareholders in Enron – had alleged that Vinson had assisted Enron to structure phony transactions to inflate the company’s revenue and hide debt.
The plaintiff’s motion to dismiss Vinson as a defendant did not cite reasons.
Vinson had already shelled out $30m to settle a separate lawsuit with Enron’s bankruptcy estate. The firm admitted no liability, but settled to stave off the threat of lengthy litigation from the estate.
Vinson partner Max Hendrick was a witness during the trial of Enron executives Kenneth Lay and Jeffrey Skilling, where he defended the firm’s cursory probe into concerns raised by whistleblower Sherron Watkins prior to the company’s collapse.
Enron general counsel Jim Derrick, himself a former V&E partner, was forced to defend his selection of the company’s chief corporate adviser to carry out the investigation into its financial structuring.
The securities class action, known as Newby v Enron Corp, is seeking more than $40bn from defendants in the case, primarily banks, including Merrill Lynch and Credit Suisse Group.
It has already yielded shareholders more than $7bn in settlements. Those settlements so far include $2.4bn from Canadian Imperial Bank of Commerce, $2.2bn from JP Morgan Chase and $2bn from Citigroup. Other financial institutions to settle include Lehman Brothers and Bank of America.
UK bank Barclays was reinstated as a defendant in the case last week (5 December), as the law governing bank liability in securities fraud cases had changed since the plaintiffs’ original arguments.
Houston-based Federal District Court Judge Melinda Harmon said the reinstatement would allow plaintiffs the opportunity to argue for Barclays to be kept in the case ahead of the expected April trial.
J Harmon is yet to rule on the plaintiffs’ motion to dismiss Vinson. The firm was unavailable for comment.