CIBC says class action settled

…suit claims that the bank and several affiliated companies, most of which were owned by former CIBC employees, made approximately $2-billion selling shares in Global Crossing. Five of these former employees also sat on Global Crossing's board of directors, and the suit alleges they "knew of the misstatements of Global's revenues, assets and obligations."

The Globe and Mail
June 22, 2006

CIBC says class action settled
Sinclair Stewart

Canadian Imperial Bank of Commerce, which is facing a $2-billion (U.S.) insider trading lawsuit from the trustee for Global Crossing Ltd., has agreed to settle a separate class-action lawsuit filed by the telecommunication company's investors.

CIBC confirmed yesterday that it struck the agreement during the second quarter, but declined to provide financial terms, other than to say the amount would not have a material impact on the bank.

Based on CIBC's size, and the threshold for disclosing material deals, the settlement is thought to be in the range of $20-million, sources said.

That is a far cry from the massive sum being sought by Global Crossing's trustee, which filed its suit against the bank and dozens of related companies late Tuesday, and is trying to recoup money for creditors who got burned when Global Crossing lurched into bankruptcy protection in 2002.

The trustee alleges CIBC and others knew the fibre-optics company was in trouble when they sold billions of dollars worth of its stock.

In a statement yesterday, CIBC flatly denied the allegations, and said the action was almost identical to a claim filed by the trustee against the bank two years ago. CIBC sought to have these prior claims dismissed in January, and the motion is pending.

"CIBC vigorously denies these allegations and continues to believe it has strong legal and factual defences against these claims," the statement said.

Andrew Entwhistle, the lawyer representing the Global Crossing estate, did not return calls seeking comment.

CIBC, through its merchant bank, was an early-stage investor in Global Crossing. It acquired a 38-per-cent stake in the company in 1996 for $38-million, a stake which was worth almost $1-billion when the company launched a public offering a year and a half later.

The creditor-related suit claims that the bank and several affiliated companies, most of which were owned by former CIBC employees, made approximately $2-billion selling shares in Global Crossing. Five of these former employees also sat on Global Crossing's board of directors, and the suit alleges they "knew of the misstatements of Global's revenues, assets and obligations."

If recent history is any precedent, CIBC investors may find some solace in the fact the bank has agreed to settle the Global Crossing class-action suit. CIBC's well-documented entanglements with Enron Corp. cost the bank $2.65-billion (U.S.) in settlements last summer — more than 10 per cent of its current market value — and dealt a nasty blow to the bank's reputation.

But with Enron, it was the class-action litigation that inflicted by far the most pain: a record $2.4-billion settlement to resolve allegations CIBC abetted the pervasive accounting scandal at the energy trader. The bank's settlement with Enron itself was just $250-million.

CIBC shares fell on the Toronto Stock Exchange yesterday, dropping 96 cents to close at $75.09.


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