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Monday, 8 April, 2002, 21:49 GMT 22:49 UK
Enron suit implicates nine US banks
The regents of the University of California
University of California regents are the lead plaintiffs
The University of California has filed an amended complaint in its lawsuit against Enron, alleging nearly a dozen investment banks and law firms colluded to defraud investors.

The university filed the revised class-action lawsuit on Monday in US District Court in Houston on behalf of thousands of other stockholders, who lost at least $25bn (17.4bn) by investing in failed energy-trader Enron.

The wrongful conduct which underlies this case was not limited to Houston, but also took place on Wall Street

William Lerach
plaintiff attorney

The revised lawsuit, 500 pages in length, accuses the firms not only of participating in deception but of profiting from it, too.

"This fraud was worldwide in its scope, years long in its duration, unprecedented in its size," said William Lerach, the lead attorney representing the plaintiffs.

Looking beyond Enron

The scheme's sheer immensity meant it could not have been accomplished by Enron executives alone, "no matter how dishonest or energetic they may have been", Mr Lerach told reporters during a press conference on Monday in San Francisco.

University of California officials said the educational system lost $145m attributable to the collapse of Enron's stock price.

The original class-action lawsuit filed last October named 29 top Enron officials and its embattled auditor Arthur Andersen and has been frozen ever since Enron filed for bankruptcy last December.

Among those named in that lawsuit were former chairman and chief executive Kenneth Lay and another former chief executive Jeffrey Skilling.

'Pyramid' scheme

The amended shareholder suit was accompanied by a similar complaint filed by former Enron employees who lost their pension funds as a result of the bankrupt firms' now worthless stock.

Arthur Andersen
29 Enron ex-officials
Deutsche Bank
JP Morgan
Merrill Lynch
Lehman Brothers
Bank of America
Canadian Imperial Bank
Vinson & Elkins
Kirkland & Ellis

Both complaints named the same nine Wall Street investment banks, accusing them of acting to defraud investors.

In mounting their latest legal manoeuvre, the plaintiffs have implicated some of Wall Street's most prestigious investment banks with the hopes of recouping some of the billions of dollars they have lost.

The named banks include Barclays, Deutsche Bank, Citigroup, Merrill Lynch, CSFB, Lehman Brothers, Bank of America, JP Morgan and Canadian Imperial Bank.

"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," the employee complaint read.

'No alternative'

Analysts on Monday said the plaintiffs face an uphill battle in getting a court to agree the banks and law firms are liable for shareholder losses.

"They clearly have a large challenge before them," said Christopher Bebel, a Houston lawyer. "However, they have no alternative. They have to pursue this course of action to have a chance of locating sufficient funds."

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 fifth largest accounting firm - and former top Enron officials.

But the scale of the class-action suit has ballooned to $25bn, and Arthur Andersen's further existence has been called into question, as company after company has fired or failed to renew contracts with the firm.

Defending against charges

Two of the newly named banks denied the latest charges.

"We believe there is no basis for this claim, and we intend to vigorously defend against it," a spokesman for Merrill Lynch said.

London-based Barclays Capital told Dow Jones news agency the bank "does not believe there is a basis for a successful claim to be brought against it".

Citigroup and JP Morgan declined to comment, while Bank of America, CIBC, Deutsche Bank and Lehman were not reachable.

For its part, CSFB has previously defended its role in advising Enron, saying its work "was reviewed by the ratings agencies, outside counsels, and the accounting firms".

Also implicated in the partnerships are the law firms Vinson & Elkins and Kirkland & Ellis, who helped shepherd the deals through. Both firms have said they would challenge the charges

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

Enron shareholder Charles Prestwood
"Anybody that was involved... should be held liable"

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