In an intensified effort to recoup billions of dollars for investors in bankrupt Enron Corp., an amended class-action lawsuit to be filed Monday alleges that nine major banks and securities firms and two national law firms participated in a scheme with Enron’s top executives to defraud shareholders and creditors, The Wall Street Journal is reporting today.
The lawsuit originally filed in October has been amended to include more than three dozen new defendants. “The roster of new defendants includes some of Wall Street’s most reputable and financially sound institutions. By targeting these players, plaintiffs are apparently hoping to increase their chances of recovering some of their huge investment losses as a result of Enron’s collapse amid scandal last fall,” the WSJ is reporting.
The University of California, which lost nearly $150 million from Enron, is the lead plaintiff in the lawsuit, being filed in federal district court in Houston.
Lawyers for the university’s board of regents allege in their 502-page complaint that some of the country’s top banks and securities firms participated in a scheme with Enron to deceive shareholders and other investors by helping Enron with phony deals to inflate the energy company’s earnings. “The lawsuit claims the financial institutions propped up Enron with loans to maintain the so-called Ponzi scheme and protect their own transactions with the company. As a reward, the lawsuit contends, some of the institutions’ top executives were invited to invest in the Enron-related partnerships that reaped huge returns from sweetheart deals with the company. Those partnerships helped lead to Enron’s collapse in the fall, the lawsuit alleges,” the WSJ reports.
“This fraudulent scheme could not have been and was not perpetrated only by Enron and its insiders,” reads the statement of claim. “It was designed and/or perpetrated only via the active and knowing involvement of” Enron’s law firms, banks and accounting firm.
The complaint names the following institutions: Merrill Lynch & Co.; Credit Suisse First Boston, a unit of Credit Suisse Group; Citigroup Inc.; Deutsche Bank AG; J.P. Morgan Chase & Co.; Canadian Imperial Bank of Commerce; Bank of America Corp.; Barclays Bank PLC; and Lehman Brothers Holdings Inc.
Representatives for the Bank of America, Citigroup, Deutsche, Merrill, Lehman and Credit Suisse declined to comment. Barclays and CIBC couldn’t be reached for comment, says the WSJ.