Enron suit targets Wall St. firms, Andersen
HOUSTON/SAN FRANCISCO, April 8 (Reuters) - Some of Wall Street's biggest firms and others helped Enron Corp.'s top executives create a fraud scheme that made them rich but cost shareholders at least $25 billion, according to new court papers filed on Monday.
The allegations are contained in an amended class-action lawsuit filed by the board of regents of the University of California, a major shareholder, on behalf of thousands of other stockholders of Enron <ENRNQ.PK>, the energy trader whose name has become synonymous with financial chicanery.
"Instead of protecting the public from the Enron fraud, the bankers knowingly chose to become partners in deceit," said William Lerach, the lead lawyer for the plaintiffs. "They were not only willing participants but profiteers."
In a 500-page amended lawsuit, shareholders alleged that 9 Wall Street firms helped orchestrate and profited from the financial fraud that led the giant energy trader to file the largest-ever U.S. bankruptcy on Dec. 2.
A second class-action amended complaint was also filed on Monday on behalf of Enron employees who lost their retirement savings. The new complaint contained many similar allegations.
"The wrongful conduct which underlies this case was not limited to Houston, but also took place on Wall Street, where Enron's investment banks and lawyers helped create, structure and sell securities which propped up the Enron pyramid," according to the employee suit, filed in U.S. District Court in Houston.
ALLEGATIONS BASELESS
The shareholder complaint, also filed in U.S. District Court in Houston, named investment banks Merrill Lynch & Co. Inc. <MER.N>, Deutsche Bank AG <DBKGn.DE>, J.P. Morgan Chase & Co. Inc. <JPM.N>, Credit Suisse First Boston <CSGZn.VX>, Citigroup Inc. <C.N>, Barclays Bank Plc <BARC.L>, Canadian Imperial Bank of Commerce <CM.TO>, Bank of America Corp. <BAC.N> and Lehman Bros. Holdings Inc. <LEH.N>.
"We believe there is no basis for this claim, and we intend to vigorously defend against it," a Merrill spokesman said. Citigroup and J.P. Morgan declined to comment.
CIBC, Lehman, Bank of America, Deutsche Bank, Barclays, and CSFB were not immediately available to comment.
Also named were Enron's chief outside counsel, legal powerhouse Vinson & Elkins of Houston, and Chicago-based law firm Kirkland & Ellis, which represented some off-balance sheet partnerships that led to Enron's demise. The two law firms have also said they would fight the charges.
Already named were 29 top Enron officers and directors and accountant Andersen <ANDR.UL>, itself severely weakened because of its work with Enron.
The suit could seriously damage the Wall Street firms, if they are found liable for creating sham transactions designed to deceive investors.
NEW INSIDER TRADING ACCUSATIONS
Enron at its height was the seventh-biggest company in the United States before seeking bankruptcy protection.
The California university system, which held a press conference to discuss the suit in San Francisco, said its Enron stock lost $144.9 million in value.
The complaint, which added more Enron executives and other individuals, initially named only Andersen LLC and 29 top Enron insiders because the bankruptcy filing automatically froze all litigation against the corporate entity itself.
Andersen has become a less attractive target for plaintiffs looking to recover more than $1 billion as its prestige and coffers have dwindled. The accounting firm faces an indictment, alleging criminal obstruction of justice for destroying Enron documents.
Enron officers named in the suit include former Chairman Kenneth Lay, Jeffrey Skilling, the former chief executive who stepped down abruptly in August, and Andrew Fastow, the chief financial officer ousted last fall after the secret partnerships he allegedly engineered and managed from both sides of the table became public.
The former executives have all denied wrongdoing. Andersen's ex-CEO, Joseph Berardino, was also named. He could not be reached for comment.
The complaint alleged that Lay made about $184 million, nearly twice the money previously thought, from insider stock sales. The proceeds are the focus of an investigation by the FBI and the U.S. Securities & Exchange Commission, as Reuters first reported last week.
The class-action trial is set to start on Dec. 1, 2003.
(Additional reporting by Bill Rigby in New York and Kevin Drawbaugh in Washington)
04/08/02 13:36 ET |
