BBC NEWS Americas Africa Europe Middle East South Asia Asia Pacific Arabic Spanish Russian Chinese Welsh

 You are in:  Business
Front Page 
UK Politics 
Market Data 
Your Money 
Business Basics 
Talking Point 
In Depth 

Commonwealth Games 2002

BBC Sport

BBC Weather

Monday, 8 April, 2002, 08:50 GMT 09:50 UK
Enron victims prepare legal action
Anti-Enron protestor
Enron's former investors say they have been defrauded
Lawyers are preparing to file a $25bn (17.5bn) lawsuit against a raft of executives, accountants and banks, accusing them of fraudulent involvement in the collapse of energy trader Enron.

Possible defendants
30-45 Enron ex-officials
Deutsche Bank
JP Morgan
Merrill Lynch
Lehman Brothers
Bank of America
Vinson & Elkins
Kirkland & Ellis
The class-action lawsuit, led by the University of California and prepared by law firm Milberg, Weiss, Bershad, Hynes & Lerach, is on behalf of dozens of investors who collectively lost billions of dollars in Enron shares last year.

The suit accuses Enron executives and advisors of a long list of offences, centring around the off-balance-sheet partnerships that were used to conceal the firm's finances from investors.

And while early versions of the lawsuit named only 29 former Enron executives and Andersen, the accounting firm that audited its books, media reports suggest that the list of defendants has been widened.

Nine investment banks, over a dozen more Enron ex-officials, two law firms and possibly consulting firm McKinsey could be added to the list when the suit is filed later on Monday.

Wall Street targeted

The addition of banks to the defendants' list dramatically widens the scope of the lawsuit.

The banks involved are Britain's Barclays, Canadian Imperial Bank of Commerce, Germany's Deutsche Bank and six US finance houses - JP Morgan, Citigroup, Bank of America, Merrill Lynch, CSFB and Lehman Brothers.

The lawsuit has hit upon these firms since they helped Enron construct offshore partnerships, and traded with it in the derivatives and energy markets.

Also implicated in the partnerships are law firms Vinson & Elkins and Kirkland & Ellis, and even McKinsey - although it is still unclear whether the consulting firm will be among the accused.

Money matters

Part of the reason for the inclusion of new defendants is that Andersen may prove unable to come anywhere near meeting the plaintiffs' demands for compensation.

When the lawsuit was first prepared last autumn, it seemed feasible to extract hundreds of millions of dollars in compensation from Andersen - the world's number-five accounting firm - and former top Enron officials.

But the scale of the class-action suit has ballooned to $25bn, and Andersen has more or less disintegrated in the meantime, with many of its constituent parts signing merger deals with the other four audit giants.

The BBC's Malcolm Sergeant
"The consequences for the financial world could be huge"
See also:

01 Mar 02 | Business
CSFB in Enron probe
26 Feb 02 | Business
Bitter row dominates Enron hearing
Internet links:

The BBC is not responsible for the content of external internet sites

Links to more Business stories are at the foot of the page.

E-mail this story to a friend

Links to more Business stories