True, $4.2 billion is a lot of money - just shy of the gross domestic product of Barbados. But to Enron shareholders, it might as well be confetti.
As often happens in class-action lawsuits, the amount of money they have begun to receive in damages comes nowhere near the amount they lost.
So last week's news that two banks had reached substantial settlements in the Enron securities fraud class-action lawsuit did not leave former employees celebrating in the streets.
"We didn't win anything," says Debbie Perrotta, a former senior administrative assistant at Enron who had $40,000 squirreled away in a 401(k) retirement plan based mostly on company stock. "I'll be lucky if I get a couple hundred dollars."
Citigroup and JPMorgan Chase agreed to pay shareholders $2 billion and $2.2 billion respectively to exit a lawsuit that claims they helped Enron defraud its shareholders out of tens of billions of dollars.
These are the largest settlements in the Enron case so far, with a total of $4.7 billion recovered from six entities. Experts believe the numbers will soon surpass the record $6.1 billion recovered in the WorldCom bankruptcy.
Both financial institutions deny any wrongdoing, adding that they agreed to the settlements "solely to eliminate the uncertainties, burden and expense of further protracted litigation," according to a Citigroup statement.
Whether that is true or not, say experts, it seems likely that the remaining eight financial institutions named in the class-action lawsuit are considering settling as well - especially now that the focus has shifted to them.
To some, the recent settlements are no mystery. "Despite statements to the contrary, these banks are not forking out this kind of money in order to eliminate the distraction of litigation," says Christopher Bebel, a former SEC enforcement lawyer and securities-fraud expert. "They have concluded that they have extensive exposure to a much larger jury award."
He says while the settlements look large, the numbers are deceptive: "They will not translate into much of a recovery for the average former shareholder."
Indeed, a typical class-action lawsuit recovers 10 cents on the dollar of what was lost. Some believe as much as 20 percent could be recovered in the Enron case when all is said and done.
According to plaintiffs' attorneys, Enron investors lost $74 billion in the four years prior to the company's collapse, of which $40 to $45 billion was due to fraud.
For her part, Ms. Perrotta has been told to expect to see six cents of every dollar she had invested.
"But first the lawyers get their cut," says Rod Jordan, chairman of the Severed Enron Employees Coalition, a group of about 1,200 former employees. That amounts to between 8 to 10 percent of the settlement. "A lot of former employees are trying not to think about Enron these days. They don't even want to hear the name anymore," he says. "But I suspect a lot of them will feel happy about it once the checks start to clear their banks."
They are getting money from other sources as well. Last month, a US District Court judge in Houston approved an $85 million settlement with insurance companies that will amount to about $3,500 for each of the 20,000 current and former Enron employees.
"The real value of these settlements is more in deterrence than in compensation," says Henry T.C. Hu, a corporate and securities law professor at the University of Texas at Austin. "If I were a former Enron employee, I would continue eating at McDonalds."
From the banks' point of view, there is good reason to settle, even beyond trying to cut down the damages a jury might award: They're interested in shielding their names from bad publicity. Indeed, Citigroup's reputation has suffered tremendously in recent years.
Last year, the bank agreed to pay WorldCom investors $2.65 billion - the largest single settlement ever in such a suit. It also agreed to pay $75 million to shareholders after Global Crossing's bankruptcy in 2002. "Citigroup ... cannot make a major acquisition right now without the approval of the Federal Reserve," says Professor Hu.
One ex-Enron employee who wanted to remain anonymous says the paltry sum of money he will probably receive from these settlements is of no consequence to him. The only thing that would make him happy is if these financial institutions were to apologize, and "tell the world they helped Enron do this stuff and that they understand that this is not the right way to do business."
But some see the blame going well beyond the financial partners in the case. "If people at Enron are unhappy, they should write to their congressmen," says Thomas Ajamie, a Houston securities lawyer.
That's because in 1995, Congress passed regulatory relief that made it much more difficult "to go after banks, accounting firms, and law firms. The fact is, there is a much higher burden for investors to overcome these days."