Summary
JPMorgan Chase & Co. (JPM) announced on June 14, 2005, that it has reached an agreement in principle to settle the Enron class action litigation. This significant development, concerning the Newby v. Enron Corp. lawsuit, will require JPM to pay $2.2 billion to resolve claims brought on behalf of Enron security holders. The settlement, pending in the U.S. District Court for the Southern District of Texas, does not involve any admission of wrongdoing by the company. To cover the settlement and bolster its reserves for other legal matters, JPMorgan Chase expects to record a pre-tax charge of approximately $2.0 billion, translating to an after-tax charge of roughly $1.25 billion in the current quarter. Investors should note that while this settlement addresses a major legal overhang, the financial impact on earnings will be material. The company has attached its press release dated June 14, 2005, as an exhibit to this filing.
Key Highlights
- 1JPMorgan Chase (JPM) reached an agreement in principle to settle the Enron class action litigation (Newby v. Enron Corp.).
- 2The settlement amount totals $2.2 billion.
- 3The lawsuit was brought on behalf of Enron security holders and is pending in the U.S. District Court for the Southern District of Texas.
- 4JPMorgan Chase will not admit any wrongdoing as part of the settlement.
- 5The company anticipates a pre-tax charge of approximately $2.0 billion for the settlement and increased litigation reserves.
- 6The estimated after-tax impact of the charge is approximately $1.25 billion.
- 7The charge will be recognized in the current quarter.