Tuesday, December 26, 2006

Judge Dismisses Enron Investors' Claims Against Alliance

A federal judge has dismissed claims by Enron investors against Alliance Capital Management that arose from the service of Alliance executive Frank Savage on the energy company's board.
The investors argued that Alliance should be held liable because Savage signed a registration statement for a $1 billion Enron bond offering that incorporated the company's false financial statements for 1998 to 2000. Alliance, a New York-based money manager, is now known as AllianceBernstein.
U.S. District Judge Melinda Harmon in Houston rejected that argument after concluding that there was "no evidence that Alliance had any authority to influence, supervise, or determine Savage's actions at Enron," The Wall Street Journal reported. She also said there was no evidence that Savage knew or should have known that he had signed a false registration statement.
Jim Hamilton, an analyst at Wolters Kluwer Law & Business, noted the significance of the ruling in a posting on his Web log. Had the judge held Alliance liable based on Savage's service on Enron's board, "the effect would be to chill the willingness of qualified individuals to serve on boards of public companies as independent directors," Hamilton wrote.

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