- The Washington Times - Friday, January 3, 2003

NEW YORK (AP) J.P. Morgan Chase & Co. announced yesterday that it has reached an agreement with 11 insurance companies in a $1 billion legal dispute over failed financial pacts with bankrupt Enron Corp.
The New York bank said that under the agreement, "the insurance companies will pay approximately 60 percent of the amount of the surety bonds they wrote."
As a result, the companies are expected to pay about $655 million toward losses that J.P. Morgan Chase incurred in complex commodity contracts that failed.
The actual amount could be reduced by some $85 million, however, if the insurance companies assign to the bank some of their claims against Enron, company officials said in a conference call with Wall Street analysts.
The deal reached in negotiations that began New Year's Day and continued into yesterday morning settled a case that had been ongoing since early December in the U.S. District Court in Manhattan.
J.P. Morgan Chase Chairman and Chief Executive Officer William B. Harrison Jr. said at the analysts' conference that "we believe our company acted appropriately" in its dealings with Enron.
He said the bank chose to settle and avoid a prolonged legal contest.
"Given the uncertainty of jury verdicts in complex matters, we believe it was prudent to accept this settlement," he said.
Alan Levine, an attorney for the insurance companies, earlier told reporters that the insurers were "very satisfied with the results." He declined to discuss specifics, saying: "The settlement speaks for itself."
J.P. Morgan Chase's share price has been battered by investors in recent months because of uncertainty over the Enron dispute as well as state and federal investigations into the lack of objectivity by analysts.
Late last month, J.P. Morgan Chase agreed to pay $80 million as its share in a $1.43 billion settlement to resolve regulators' charges that Wall Street analysts gave biased ratings on stocks to help win investment-banking business.
J.P. Morgan Chase filed suit against the 11 insurance companies after they refused to pay more than $1 billion for guarantees on failed oil and gas trades arranged between Enron and a Chase-affiliated offshore company called Mahonia Ltd. Enron collapsed in December 2001.
The Chase affiliate made six deals with Enron beginning in 1998, in which Enron was paid in advance for oil and natural gas to be delivered months or years later.
The insurance companies countered that the trades were really disguised loans financial shams designed to pump more cash into Enron.
According to the settlement papers, Travelers Casualty & Surety Co. and the Travelers Indemnity Co. agreed to pay $159.6 million; St. Paul Fire and Marine Insurance Co., $80.4 million; Continental Casualty Co. and National Fire Insurance Co. of Hartford (both part of the CNA Financial Corp.) $46.7 million; Fireman's Fund Insurance Co., $92.3 million; Safeco Insurance Co. of America, $33.2 million; Federal Insurance Co., $110.16 million; Hartford Fire Insurance Co., $24.5 million, and Lumbermens Mutual Casualty Co., $93.7 million.
Liberty Mutual, which initially held out from the collective deal, agreed yesterday to pay $13.4 million, lawyers involved in the case said.
J.P. Morgan Chase has operations in more than 50 countries and assets of $742 billion.

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