Revised Lawsuit Blames Top Wall Street Firms In Enron Collapse

By Agence France-Presse Some of Wall Street's most prominent banking and investment firms were accused of participating in schemes that defrauded investors of billions of dollars in the collapse of Houston-based Enron Corp., according to an amended lawsuit filed April 8. A total of nine major banks and two law firms were added to the class-action lawsuit against Enron filed in Houston, alleging fraudulent transactions that ultimately cost shareholders more than $25 billion. The 485-page amended complaint adds as defendants JP Morgan Chase, Citigroup, Merrill Lynch, Credit Suisse First Boston, Canadian Imperial Bank of Commerce (CIBC), Bank America, Barclays Bank PLC, Deutsche Bank AG and Lehman Brothers as key players in the fraud. Two law firms added to the list of Enron defendants -- Houston-based Vinson and Elkins, as well as Chicago-based Kirkland and Ellis -- were accused of helping Enron structure fraudulent "special purpose entities" to hide debt and liabilities. "This fraud could not have been accomplished by a few corporate executives," said William Lerach, lead lawyer for the class-action lawsuit headed by the University of California, a major investor in the energy firm through its pension funds, which lost some $145 million in Enron. According to the suit, the financial institutions helped to set up clandestinely controlled Enron partnerships, used offshore companies to disguise loans and facilitated the phony sale of overvalued Enron assets. As a result, Enron executives were able to deceive investors by moving billions of dollars of debt off its balance sheet and artificially inflating the value of Enron stock, the complaint said. The law firms allegedly issued false legal opinions, helped structure transactions, and helped prepare false submissions to the U.S. Securities and Exchange Commission. The complaint said bank executives were helping conceal the true state of Enron's precarious financial condition, while securities analysts at the same banks were making false, rosy assessments of Enron to entice investors. The amended complaint also documents a total of about $1.2 billion in insider trading by 28 Enron directors and officers, approximately $171 million more than previously disclosed. The original lawsuit filed in October named Enron's former outside auditor, Arthur Andersen LLP, as well as several former and current company executives alleged to have carried out a scheme to defraud investors. Enron filed for Chapter 11 bankruptcy protection in December. Copyright Agence France-Presse, 2002