CIBC shares fall on lawsuit reportCIBC shares fall on lawsuit report
Tue Aug 16, 4:52 PM ET
TORONTO (Reuters) - Canadian Imperial Bank of Commerce shares fell to a five-month low on Tuesday after a report emerged that the bank could face a multibillion-dollar class-action lawsuit related to its recent settlement with Enron Corp investors.
Just before midday, the stock of Canada's fifth-largest bank was down C$1.05, or 1.5 percent, at C$70.05 on the Toronto Stock Exchange. Earlier, it dropped as low as C$69.81, its weakest level since early March.
Citing sources, the Globe and Mail newspaper said a Toronto law firm is readying a lawsuit on behalf of the bank's shareholders. The source told the paper the firm has lined up a CIBC investor as the lead plaintiff, but is also trying to secure a major shareholder.
The bank's stock has fallen about 13 percent since CIBC announced earlier this month that it would pay $2.4 billion to settle a class action lawsuit filed by investors of Enron, which collapsed in 2001 amid an accounting scandal. CIBC took a C$2.5 billion charge to help pay for the settlement.
The Globe said one of the key questions in the planned suit will be when the bank's directors realized that the cost of the settlement would exceed the C$300 million that the bank set aside late last year to guard against such costs.
In addition to the class action settlement, CIBC agreed two weeks ago to pay $250 million to Enron itself to settle its part of the "Megaclaims" lawsuit filed by the energy trader against 10 banks.
Two years ago, the bank paid $80 million to settle U.S. regulatory allegations that it aided and abetted the accounting scandal at Enron.
CIBC officials could not be reached for comment.