(Adds UBS comment)
By Jonathan Stempel
March 1 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
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 that
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 defrauding 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.
The plaintiffs chose to sue independently of other Enron
investors who pursued similar claims in nationwide litigation.
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.
Harmon had dismissed claims against UBS by another group of
Enron investors on Aug. 2. Tuesday's decision ends all
Enron-related litigation for UBS, pending any appeals.
"UBS is gratified by the court's dismissal of this case,"
spokeswoman Erica Chase said.
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
Several executives went to prison, including former Enron
Chief Executive Officer Jeffrey Skilling for fraud and other
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 CEO,
was also convicted of fraud but died in 2006 before he could be
The case is Lampkin et al v UBS PaineWebber Inc et al, U.S.
District Court, Southern District of Texas, No. 02-00851.
(Reporting by Jonathan Stempel in New York; Editing by Phil
Berlowitz and Lisa Von Ahn)