Canadian Imperial Bank of Commerce (CIBC) will pay $80 million to settle charges it helped Enron perpetrate an accounting fraud, US regulators announced yesterday. The settlement is one of the largest regulatory penalties ever levied against a Canadian bank. The Securities and Exchange Commission (SEC) also said it sued three current or former CIBC executives in the case. Two of them have settled and will pay a total of more than $600,000. The SEC said it charged CIBC and the three executives with “having helped Enron to mislead its investors through a series of complex structured finance transactions over a period of several years.”
While CIBC neither admitted nor denied the allegations, it has agreed to make the payment, and to change its policies and procedures to ensure the problem doe not recur. A number of other major banks have also settled charges related to complex deals that the SEC claims allowed Enron to hide debt and inflate revenue. In July, Citigroup and J.P. Morgan Chase agreed to pay more than $300 million between them to settle charges related to Enron. Merrill Lynch settled with the SEC in March for $80 million. In a separate action, Canada’s bank regulator and the US Federal Reserve said they have also settled with CIBC over Enron dealings. The Fed and Canada’s Office of the Superintendent of Financial Institutions said CIBC must adopt remedial policies. CIBC says the settlement also resolved an investigation by the US Justice Department, but the bank still faces various Enron-related civil suits.
The $80 million payment to the SEC consists of $37.5 million in repayment of profits from the deals, a $37.5 million penalty, and $5 million in interest.
Named as a defendant in the SEC’s CIBC action is Ian Schottlaender, a former managing director in CIBC’s corporate leveraged finance group in New York. The SEC said Schottlaender was contesting the charges. CIBC Executive Vice President Daniel Ferguson and former CIBC Executive Director Mark Wolf agreed to settle with the SEC without admitting or denying wrongdoing. Ferguson will pay $563,000 in restitution, penalties and interest, while Wolf will pay $60,000.