The University of California, as lead plaintiff in the Dynegy securities fraud class action suit, announced today (Apr. 15) a settlement on behalf of Dynegy investors with the company and certain former executive officers and directors for $468 million. The University has also reached a settlement with Citigroup in the case for an additional $5 million. As part of the settlement, Dynegy has also agreed to appoint two directors nominated by plaintiffs to help monitor corporate governance reforms that the company has put in place.

“The settlement is extremely favorable for the defrauded investors,” said James E. Holst, the university’s general counsel. “It maximizes recovery to the class while permitting Dynegy to continue its financial comeback.”

“The settlement represents a very substantial financial recovery for members of the class,” said William Lerach, of Lerach, Coughlin, Stoia, Geller, Rudman & Robbins, lead counsel for the plaintiff class. “By adding two class-nominated directors to Dynegy’s board, we believe it will also solidify corporate governance reforms that have been put in place by Dynegy’s current management.”

In March, the University reached a $1.05 million settlement with Arthur Andersen, LLP, Dynegy’s auditor at the time. The current settlements, which resolve the case against all remaining defendants, bring the total settlements achieved in the case to more than $474 million.

The case is pending in the U.S. District Court for the Southern District of Texas, with a trial date scheduled for May 2005. The lawsuit claimed fraudulent conduct by Dynegy and its certain former executives under Section 10(b) of the 1934 Securities Act. The company and its directors also faced liability for a public stock offering under Section 11 of the 1933 Securities Act.

The settlements are subject to court approval.

Dynegy settlement

Dynegy investors suffered losses when the company’s stock price crashed after it was disclosed that Dynegy engaged in a questionable set of transactions that allowed it to misrepresent its financial results. The transactions were known as Project Alpha, through which Dynegy mischaracterized the proceeds of borrowing as operational revenues and manipulated its reported tax liability. Several former Dynegy employees have pled guilty to or been convicted of criminal fraud in connection with the transaction.

The plaintiffs agreed to take $68 million of the overall settlement in the form of Dynegy common stock. Approximately $150 million of the $400 million in cash will come from Dynegy’s insurers, the rest directly from the company.

Citigroup settlement

Citigroup was originally also named as a defendant in the case because of its participation in the Alpha transactions. Last year, Judge Sim Lake granted Citigroup’s motion to dismiss. Under the settlement, Citigroup will pay $5 million in exchange for plaintiffs waiving their appeal rights.

UC was named lead plaintiff in October 2002. It purchased 4.16 million shares of Dynegy stock between November 2, 2000 and May 7, 2002. The current value of UC's diversified portfolio, which includes both pension and endowment funds, stands at approximately $62 billion.

# # #

For shareholders with questions: please email wsl@lerachlaw.com or call (800) 449 4900 and ask for shareholder relations.