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April 08, 2005

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Palo Alto Online

Publication Date: Friday, April 08, 2005

City reaches apparent settlement with Enron City reaches apparent settlement with Enron (April 08, 2005)

The City of Palo Alto has negotiated an apparent settlement in a $48 million legal dispute with Enron, but a judge in a U.S. bankruptcy court still needs to rule on the terms.

According to the proposed settlement, the city has apparently agreed to pay an undefined sum -- in two installments -- to Enron. Both sides also have agreed to release their legal claims, which would end the nearly 4-year-old legal saga, according to court documents.

Enron sued the city in 2001 seeking $48 million related to the city's termination of gas and electricity contracts.

Court documents explaining the proposed settlement appeared on a legal Web site dedicated to the trial, The documents were filed on Wednesday, April 5 in United States Bankruptcy Court in the Southern District of New York, according to the Web site.

The documents show that a hearing will be held on the proposed settlement on April 21. Judge Arthur Gonzalez will hear the proposal at 10 a.m. Objections can be sent to the judge until April 18 at 4 p.m.

Lawyers for Enron and the city did not return calls for comment by the Weekly's press time. Councilman Bern Beecham said all sides were prohibited from talking about the case until the judge takes action.

The lawsuit stems from energy contracts the city signed with Enron in May 2001. The city terminated those agreements on Nov. 30, 2001, when city officials said they believed the failing company would be unable to fulfill its contracts. Enron filed for bankruptcy protection three days later.

Other cities' utilities are also involved in similar disputes with Enron. The company claims Santa Clara's Silicon Valley Power owes it $147 million and Snohomish County owes $122 million.

In March, the Federal Energy Commission ruled that Enron engaged in illegal activity when it signed the large power contracts.

-- Bill D'Agostino

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