Determined to find targets with deeper pockets, lawyers for a class action on behalf of Enron workers and shareholders have now amended and expanded their suit to include some of Wall Street's biggest banking names and two law firms.
The suit, which was re-filed yesterday, names J.P. Morgan Chase, Citigroup, Credit Suisse First Boston, Canadian Imperial Bank of Commerce, Merrill Lynch, Bank of America, Barclays Bank, Deutsche Bank and Lehman Bros as parties to the alleged Enron scheme that cost investors $25 billion (€28.6 billion).
Legal experts warn, however, that establishing direct responsibility will prove difficult.
"There were certainly rotten apples at Enron, but they couldn't have done it without the active participation of professionals - lawyers, accountants and Wall Street," said one of the litigant's lawyers, Mr Steve Berman. He called the banks, which invested in partnerships which brought about Enron's downfall, "the brains behind the structuring".
The original suit was filed late last year in federal court in Houston by Milberg Weiss Bershad Hynes & Lerach on behalf of the University of California, which lost $140 million, and other Enron shareholders. Many other suits against Enron, its officials and Arthur Andersen followed before and after the energy trader filed for bankruptcy, and yesterday's re-filing consolidates the claims.
Andersen Worldwide, as well as Andersen partners worldwide, are also being added as defendants, as is Vinson & Elkins, the Houston law firm that advised Enron on the partnerships and other financial vehicles. Sixty Enron and Arthur Andersen executives, directors and partners also are named.
Among the plaintiffs' claims are allegations that J.P. Morgan Chase and Citigroup loaned Enron $5.3 billion but attempted to disguise the loans as commodities transactions and derivative swaps. The idea, the lawsuit says, was to allow Enron access to huge capital without word spreading through the investment community that the company needed so much cash.
The suit alleges executives from seven of the nine banks - J.P. Morgan Chase, Citigroup, CSFB, CIBC, Merrill Lynch, Deutsche Bank and Lehman Bros - invested $14 million in LJM2, an Enron financing vehicle, in December 1999. They were guaranteed huge rates of return, says the complaint.
And it alleges the former Enron chief executive, Mr Ken Lay, and 27 other Enron executives and directors gained $1.2 billion, $171 million more than previously known, from insider trading.
UP to 7,000 jobs may be cut from the 26,000-strong workforce at Arthur Andersen in the US, the firm said last night. Asked about implications for Andersen staff in Ireland, a spokesman in London said no announcement was expected in the near future. With the firm's standing severely damaged by allegations of malpractice at Enron, the spokesman said attention in Europe was fixed on a possible link-up with rival firm KPMG. - (AFP)
