Barclays Denies Enron Fraud

The UK offices of Arthur Andersen and Barclays Bank were yesterday named in a $30bn (£21bn) class action lawsuit, which alleges corruption and fraud among banks, law firms and accountants that dealt with bankrupt US energy firm Enron.

Lawyers representing shareholders in Enron described an allegedly deliberate and systematic conspiracy to keep the company afloat and deceive investors. Nine investment banks and two law firms are named in the suit, as well as 24 individuals at Andersen.

Bill Lerach, with the law firm Milberg, Weiss, Bershad, Hynes & Lerach, said investors had suffered damages of between $25bn and $30bn, adding that events at Enron could not have been conducted by a few corporate executives "no matter how dishonest or energetic they may have been." It required "the knowing and active complicity of expert professionals, bankers, lawyers and accountants," he said.

"The banks got their billions of dollars, the lawyers got their hundreds of millions and Andersen, if it hadn't been caught shredding evidence, would have gone on its merry way," he added. Enron directors are also said to have cashed in $1.2bn of shares, $170m more than previously believed.

The nine banks named in the 485-page complaint are Barclays, JP Morgan Chase, Citigroup, Merrill Lynch, Credit Suisse First Boston, Canadian Imperial Bank of Commerce, Bank America, Deutsche Bank and Lehman Brothers.

Mr Lerach highlighted the role of Barclays which made loans to the offshore Enron venture Chewco in 1997. Barclays loaned $11.4m to two investors in Chewco to give the appearance of outside investment, but Enron secretly deposited $6.6m with Barclays, the suit claims. It describes the two investors as "straw men".

Barclays insiders maintain it was a straightforward loan and that the $6.6m was standard collateral. They add that there was no structuring of deals or personal investment by Barclays executives. A spokesman for the bank said: "We simply don't think there's any basis for a successful claim against us."

The London offices of Andersen have admitted to shredding Enron-related documents although the firm has claimed the destruction was undertaken only by employees on secondment from Andersen's Houston offices.

The new defendants named are in addition to 29 present and former Enron executives and Andersen in the US, which audited the energy group's accounts. The suit alleges that the investment banks helped to set up clandestine offshore companies to disguise loans and facilitate the phoney sale of Enron assets.

As a result, it claims, Enron executives were able to deceive investors by moving billions of dollars of debt off its balance sheet artificially to inflate the value of Enron stock.

The banks, it adds, made false "rosy" assessments of Enron to entice investors.

The complaint details transactions around another off-shore vehicle LJM2. It claims JP Morgan, CIBC, Deutsche Bank, CSFB, Lehman Brothers and Merrill Lynch provided $150m to the venture which they knew would provide a high return because of "self dealing" transactions with Enron.