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HOUSTON – UC, which is the lead plaintiff in the shareholder class action lawsuit against the Enron Corp. and Arthur Andersen, announced Tuesday that it has reached a tentative agreement with the international division of the accounting firm. 

The $40 million settlement – which still has to be approved by a number of principals and the courts – would drop Andersen Worldwide SC and all of its non-American members from the lawsuit and find them not liable of the allegations. 

The American-based portion of the accounting firm, Arthur Andersen LLP, and its subsidiaries would still remain in the suit, as would Enron. 

James E. Holt, an attorney for the University of California, said that the settlement represents one of the largest securities recoveries from an accounting firm. 

“This substantial settlement is a favorable result for the class in light of the limited role of the non-U.S. Andersen entities,” Holt said.  

“We regard this settlement as only a first step in obtaining recovery for the class, and will continue to pursue damages from the remaining defendants, most of whom had far deeper involvement in the Enron debacle than the overseas Andersen firms.” 

In February, a federal judge in Texas named the university system – whose pension fund took a $144.9 million hit from the collapse of the energy company – as the lead plaintiff in the suit filed by Enron shareholders against some of the company's executives and their accountants at Arthur Andersen. 

In an amended complaint filed in April, the university system named Andersen Worldwide and other international firms associated with the accounting firm as defendants in the lawsuit. Only the domestic Andersen LLP was Enron's auditor and signatory of financial statements. 

Andersen Worldwide denies any wrongdoing or liability in the Enron debacle. 

The settlement money will eventually be split among the members of the class, which is extensive and represents an estimated Enron loss of $25 billion. Of the money, $15 million would go to pay for the cost of the lawsuit, but not attorney's costs.