BBC NEWS Americas Africa Europe Middle East South Asia Asia Pacific
BBCi NEWS   SPORT   WEATHER   WORLD SERVICE   A-Z INDEX     

BBC News World Edition
 You are in: Business  
News Front Page
Africa
Americas
Asia-Pacific
Europe
Middle East
South Asia
UK
Business
E-Commerce
Economy
Market Data
Entertainment
Science/Nature
Technology
Health
-------------
Talking Point
-------------
Country Profiles
In Depth
-------------
Programmes
-------------
BBC Sport
BBC Weather
SERVICES
-------------
EDITIONS
Wednesday, 24 July, 2002, 12:45 GMT 13:45 UK
Bank faces investors over Enron deals
Enron and JP Morgan Chase logos
Will the banks escape the Enron shadow?
JP Morgan Chase will put its case to investors, one day after a dramatic fall in its share price that began when US politicians accused the banking giant of helping failed energy trader Enron to hide its debts.

Both JP Morgan and its co-accusee Citigroup saw their shares fall more than 15% on Tuesday, as their executives sat in a US Congressional committee listening to investigators outline their firms' alleged wrongdoing.

A conference call scheduled for 1300 GMT would allow it to discuss the decline in its share price, JP Morgan said, although it would not give further details of what it was prepared to talk about.

Investors will want to know whether there are any more skeletons in the closet, given investigators' assertions that the bank has made a number of similar deals with other companies.

Clean hands

Both banks deny they did anything wrong when they paid Enron billions in the form of "prepay" energy deals.

Maureen Hendricks of Citigroup/Salomon Smith Barney
Senate hearings are set to continue
The money was channelled to the now-bankrupt energy firm through offshore companies, often in the UK's Channel Islands, and in theory amounted to advance payments for future energy trades.

But the investigators say that they were in reality little more than loans, designed in such a way as to avoid having to report them as such to investors.

Had they been correctly reported, the investigators believe, Enron's debts would have been 40% higher, hastening its descent into bankruptcy.

'Accounting sham'

The banks' troubles follow the collapse of the accountants Andersen, brought down by the accusation it had knowingly helped Enron to hide behind shady accounting practices.

Experts have now told investigators that Enron would not have been able to dupe investors without the assistance of its bankers.

"Chase and Citicorp knew what Enron was doing, assisted Enron in the deceptions, and profited from their actions," said Senator Carl Levin, chairman of the sub-committee on investigations, calling the action an "accounting sham".

And the report from the investigators made it clear that Enron was not the only beneficiary of the banks' assistance.

"Chase informed the subcommittee that it entered into Enron-style prepays with seven companies apart from Enron," the report said.

"Citigroup indicated that it shopped the idea to 14 companies apart from Enron, successfully selling it to at least three."


Latest news

Background

UK fallout

CLICKABLE FACT FILES

TALKING POINT

AUDIO VIDEO
See also:

24 Jul 02 | Business
26 Jun 02 | Business
15 Jun 02 | Business
18 Jun 02 | Business
22 Feb 02 | Business
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

© BBC ^^ Back to top

News Front Page | Africa | Americas | Asia-Pacific | Europe | Middle East |
South Asia | UK | Business | Entertainment | Science/Nature |
Technology | Health | Talking Point | Country Profiles | In Depth |
Programmes