Enron plantiffs seen set to sue big investment banks
By Kevin Drawbaugh
WASHINGTON, March 26 (Reuters) - Enron Corp. (Other OTC:ENRNQ.PK - news) shareholders are expected to unveil a lawsuit next week against big investment banks with ties to the bankrupt energy trader, threatening a legal battle with potentially devastating consequences for Wall Street, lawyers said on Tuesday.
Frustrated at the dwindling resources of Enron and its former auditor Andersen, plaintiffs' lawyers were on the verge of making claims to the deep pockets of merchant banks by alleging they actively helped Enron to deceive investors, legal sources said.
If it can be proved in court that giants such as J.P. Morgan Chase (NYSE:JPM - news), Credit Suisse First Boston and others were in cahoots with Enron, plaintiffs' lawyers stand to win settlements big enough to rock the industry, lawyers said.
``The potential claims dwarf even the enormous resources of the investment banks,'' said Chris Bebel, a partner at the Houston securities law firm of Shepherd Smith & Bebel.
``If the plaintiff firms prevail, they're probably going to extract a handsome settlement. That could force a couple of these investment banks into merger negotiations.''
Legal sources said the law firm of Milberg Weiss Bershad Hynes & Lerach was expected to annouce a massive lawsuit against the banks next week on behalf of the University of California Regents.
Milberg Weiss is already lead plaintiff in litigation against Enron. The suit itself was expected to be filed in early April, the sources said.
Spokespersons for JP Morgan, Credit Suisse and other banks declined to comment. Privately, bankers have scoffed at the plaintiffs' attorneys, who also have threatened Enron-linked law firms, accounting firms and even public relations firms.
As it has become clear that bankrupt Enron and struggling Andersen may have little to offer legal claimants, plaintiffs' attorneys have been sizing up ways to tap others' riches.
``Plaintiffs are getting very interested in theories of secondary liability,'' said Bill Lerach, partner at Milberg.
Speaking at a legal conference here, Lerach said the Enron action was becoming difficult for plaintiffs because of the dwindling resources of Enron and Andersen.
Dozens of shareholder lawsuits were filed against Houston-based Enron after its stunning collapse last fall, which wiped out billions of dollars in investor equity. Andersen, the Chicago-based Big Five accounting firm, has also been sued by shareholders alleging they were duped.
Enron filed the largest bankruptcy in U.S. history on Dec. 2, putting legal claims against the company on the back-burner. Andersen was indicted by federal authorities on March 14 on a charge of obstruction of justice, accelerating a client exodus and raising doubts about the firm's future.
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