RE: Just don't get it...Wawa:
'This statement is in the July 28th NR
"RBC did not admit any wrongdoing or liability in connection with the agreement."
Yet they agreed to pay $25,000,000.
If they didn't do anything wrong ,why are they paying $25,000,000?
Are they just being nice guys?
What am I not understanding here?
Help;somebody.'
RY is covering it's butt. Eric Reguly writes in G&M about CIBC:
"We didn't realize it back then, but now it's obvious. CIBC's Enron settlement on Dec. 22, 2003, was not the end of a dubious era in the bank's history and a new lease on life. It was just the start of a chain of events that would clobber the bank fewer than two years later and which may forever change the shape of the Canadian financial services industry. This story is far from over.
On that date, CIBC agreed to pay $80-million (U.S.) to get the U.S. Department of Justice and various regulators off its back in the gruesome Enron affair. The settlement included CIBC's agreement to overhaul its compliance practices and exit certain businesses in the United States, including most structured finance transactions. In announcing the deal, Justice said CIBC "has accepted responsibility for the criminal conduct of its employees" in connection with Enron.
It wasn't pleasant for CIBC, but it wasn't the Apocalypse either. Fines were paid, humble pie was eaten and life went on, minus a few CIBC executives with Enron poison on their hands. CIBC retreated from the United States. The shares soared. John Hunkin kept his job as CEO (he retired last month).
But buried in the settlement's fine print were a series of time bombs. Paragraph 8 in the Justice Department letter outlining CIBC's Enron settlement is a beaut: "CIBC further agrees that it will not, through its attorneys, board of directors, agents, officers or employees, make any public statement, in litigation or otherwise, contradicting any of the facts set forth in Appendix A." The appendix provides the background of CIBC's notorious relationship with Enron.
It appears that CIBC forfeited its ability to defend itself in any future criminal, civil or regulatory case arising from the Enron affair. At that point, CIBC was like a fog-bound freighter with its radar out and a soused captain at the helm. It was only a matter of time before it hit the rocks. That happened two weeks ago, when the bank announced a $2.4-billion settlement to end a U.S. class-action suit.
CIBC's desire to settle at any price -- the amount is bigger than the Enron settlements paid by Citigroup and J.P. Morgan Chase -- was doubtless further motivated by another bit of Justice fine print, in which Justice reserved the right to prosecute CIBC if Justice determined "in its sole discretion" that the bank had given "deliberately false, incomplete, or misleading information under this Agreement." In other words, it seems CIBC was not willing to risk new evidence emerging in a trial. A criminal indictment could destroy the bank.
The settlement is a stunning number. It is greater than CIBC's last annual profit. It reduces the bank's excess common equity from about $1.7-billion (Canadian) to negative $400-million. Analysts expect share buybacks and dividend increases to cease. CIBC is a weakened business. Its ability to sustain a financial shock, such as a stock market collapse or the sudden appearance of impaired loans of any size, is greatly diminished.
CIBC would never admit this, but with its image and finances tarnished, it would probably welcome a sale to another bank or to one of the life insurers -- Manulife, Sun Life and Great-West Life. In fact, the scenario was on its mind as far back as 2002, well before the details of CIBC's role in Enron's downfall were known. That's when CIBC and Manulife secretly went to Ottawa to seek permission to merge. The two were told to go away.
If CIBC was motivated then you could assume it is doubly motivated now. The problem is that the feds are sending out mixed signals about bank mergers and "cross-pillar" mergers -- mergers between banks and insurers (both are taboo). What better way to get the feds to drop the barriers than present yourself as a bank in need of a saviour?
This is where things could get interesting. CIBC's plight could break the no-merger policy. CIBC, with Ottawa's blessing, might go to Manulife or Great-West, which is controlled by Power Corp.'s impeccably well-connected Desmarais family, or to Bank of Nova Scotia, which is obsessed with completing a domestic merger of some sort. If CIBC were to be delivered to an insurer, the cross-pillar ban would be officially dead. That would free Royal Bank to buy Sun Life; it's an open secret that RBC CEO Gordon Nixon covets Sun, just as it's an open secret that Sun CEO Don Stewart, who rather fancies his job, dreads the idea.
RBC and Scotiabank might be able to speed up the process by cutting their fees. That would put more financial pressure on CIBC, the equivalent of kicking a man when he's down. It's a nasty idea, but a potentially effective strategy.
There is little doubt CIBC will become the first bank to go into "play," to use Bay Street argot. Who would have thought the process could have been triggered by a seemingly inconsequential settlement of $80-million (U.S.) in another country in 2003?"