Citigroup executives named in
Enron-linked class action
David Teather
Wednesday August 7, 2002
The Guardian
A class action lawsuit has been filed against Citigroup alleging
that the investment bank and its senior executives misled
shareholders about a 1999 transaction with collapsed US energy
trader Enron.
The action, filed in New
York, adds to the growing
list of actions arising from
Wall Street scandals.
Disgruntled investors have
prompted a feeding frenzy
among lawyers, who sense
that public opinion has
shifted against once
high-flying investment
banks.
The suit refers to a
transaction structured as a commodity trade that it claims was
a disguised loan devised to keep $125m (£80m) of debt off
Enron's balance sheet; it names chairman and chief executive
Sandford Weill and chief financial officer Todd Thomson.
Last month, congressional investigators grilled Citigroup and
another leading Wall Street bank, JP Morgan Chase, about their
relationships with Enron. They alleged that both had helped
Enron to conceal its debts through complicated commodity
trades.
Shares in both firms have been hammered by the Washington
hearings, which JP Morgan described as a "highly politicised
media event". Both banks have counter-attacked, arguing that
what they did was consistent with years of industry practice and
had been vetted by lawyers and auditors.
The suit, filed by lawyers Schiffrin & Barroway, also accuses
Citigroup of "misrepresenting Citigroup's potential Enron-related
exposure in its 2001 annual report and elsewhere". The law firm
last year tried to sue former star internet analyst Mary Meeker,
but had the case thrown out of court.
In a letter to Citigroup's 270,000 employees, Mr Weill apologised
for the pain caused by the bank's relationship with Enron -
although he again insisted that nothing improper had been done.
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