Blaming Banks For Enron

Attorneys for Enron Corp.'s workers are widening the blame for the bankrupt energy company's downward spiral.

Seattle attorney Steve Berman is naming several investment banks and a law firm that advised Enron to its list of defendants in an amended complaint to be filed Monday.

"There were certainly rotten apples at Enron, but they couldn't have done it without the active participation of professionals — lawyers, accountants and Wall Street," Berman said.

He called the banks, which invested in partnerships later credited with fueling Enron's downfall, "the brains behind the structuring."

Berman and other attorneys representing employees filed numerous lawsuits against Enron, its officials, and Arthur Andersen LLP before and after the energy trader filed for bankruptcy Dec. 2. Monday's amended complaint will consolidate most of them.

Andersen Worldwide, as well as Andersen partners worldwide, are also being added as defendants in the amended complaint.

Andersen Worldwide spokesman Charlie Leonard said the global organizations "continue to believe that they do not have liability with respect to the claims against the U.S. member firm, particularly those in Enron matter."

The investor case focuses on losses sustained by large institutions, such as the University of California and several state pension funds.

But the employee case is seeking compensation for thousands of Enron employees and retirees left with depleted retirement nest eggs in the wake of the collapse. It also targets Enron officials and outside companies that administered those plans.

Those plaintiffs include Charles Prestwood, a pipeline operator for 33 years, first with Houston Natural Gas and then Enron. As he approached retirement in 2000, he watched Enron's stock price rise and exuded pride in his employer.

When Enron shares reached $90 in August of 2000, Prestwood's stock-loaded retirement fund was worth about $1.3 million. That dropped to a few thousand dollars when Enron crashed.

Banks named as defendants in the 294-page amended complaint include Merrill Lynch & Co., J.P. Morgan Chase & Co., Credit Suisse First Boston; and Citigroup Inc.

"Because of their expertise in investment banking and underwriting, the defendant banks became aware of, and in some cases, sponsored and/or were partners, in the formation and financing of partnerships, which were intended to conceal debt from Enron's financial statements," the lawsuit said.

Citigroup spokesman Dan Noonan and Credit Suisse spokesman Pen Pendleton declined comment Sunday night, and the other banks didn't return calls for comment.

Vinson & Elkins, the Houston law firm that advised Enron on the partnerships and other financial vehicles supposedly used to hide debt and inflate profits, is also being named in the amended complaint.

The lawsuit claims that the firm's lawyers helped create financial vehicles used to distort financial statements and approved false or misleading disclosures about some transactions.

Vinson & Elkins declined comment, but said that the firm is confident it will be clear it performed its duties properly when the facts are out.

By Kristen Hays