On the heels of the news of Citigroup’s WorldCom settlement and increase in litigation reserves for other (i.e., Enron) investor litigation, this Wall Street Journal ($) article reports on the pressure that other financial services firms are facing to increase the amount of their reserves because of the darkening litigation environment.
Believe me, “dark” does not begin to describe the litigation environment surrounding the Enron litigation. “Black hole” would be more appropriate.
At any rate, the WSJ article notes that several other financial institutions are assessing what to do in light of the Citigroup action:

Because Citigroup also raised its reserves for liability associated with Enron Corp. — another company that like WorldCom hit the rocks after overstating its earnings during the market bubble of 1999 and 2000 — some legal and stock-market experts said the action put pressure on J.P. Morgan Chase & Co. to consider boosting its reserves for Enron as well.
“Citi’s move would appear to put pressure on [J.P. Morgan] to do something similar, given that JPM and Citi had business relationships with Enron that appear, in our view, to have been broadly similar in exposure,” Guy Moszkowski, who follows banks and securities firms at Merrill Lynch & Co., said in a note to clients late yesterday.

Funny that the WSJ article would quote a Merrill analyst:

Another firm with significant exposure to Enron-related liabilities is Merrill Lynch, which like Citigroup and J.P. Morgan settled regulatory charges, without admitting or denying wrongdoing, that it aided Enron in overstating earnings. . .
Citigroup yesterday added $3.3 billion, after taxes, to its litigation reserves, bringing the current total to $6.7 billion — which Chief Executive Charles Prince said was for “Enron, research and IPO litigations,” including some remaining WorldCom exposure. Mr. Moszkowski, the Merrill Lynch analyst, estimated the biggest chunk of that was about $2 billion for Enron.
As of year-end 2003, J.P. Morgan had $745 million in reserves for litigation, including $524 million for Enron. Bank analyst Susan Roth of Credit Suisse First Boston said that if J.P. Morgan brought its Enron reserves up to the Citigroup level, that could result in a charge of $2.5 billion, or $1.19 a share. Accordingly she reduced her price target for J.P. Morgan stock to $45 from a range of $45 to $50 a share.
. . . Last July, J.P. Morgan Chase agreed to pay $135 million to settle charges by the Securities and Exchange Commission that it helped Enron defraud investors. Citigroup also agreed to pay $120 million to settle charges that it helped Enron and Dynegy Corp. defraud investors.
Without admitting or denying wrongdoing, both institutions settled charges that they helped the companies mislead investors by characterizing loan proceeds as cash from operations. Merrill paid $80 million to settle SEC charges that it aided and abetted Enron’s fraud with two deals in late 1999, also without admitting or denying wrongdoing.
Citigroup’s WorldCom settlement “probably re-prices the cost of Enron- and WorldCom-” related liability, said Brad Hintz, who follows securities firms at Sanford C. Bernstein & Co.

“Re-pricing” the cost of Enron-related liability? I can already hear the plaintiffs’ lawyers using that term.