NEW YORK (CNN/Money) -
Nine Wall Street banks, including J.P. Morgan Chase, Citigroup, Merrill Lynch and Credit Suisse First Boston, as well as two law firms were added Monday to the class-action lawsuit against Enron Corp., which accuses the firms of helping the energy trader defraud shareholders and creditors.
The University of California, the lead plaintiff in the Enron shareholders' class-action lawsuit, filed an amended complaint in federal court Monday. In addition to the already mentioned banks, the university named Canadian Imperial Bank of Commerce (CIBC), Bank of America, Barclays Bank, Deutsche Bank and Lehman Brothers. The complaint alleges that the banks helped set up many of Enron's off- the-book partnerships and used offshore companies to disguise loans to Enron.
The complaint also identifies two law firms: Houston-based Vinson & Elkins, which served as Enron's corporate counsel, and Chicago-based Kirkland & Ellis, which advised the energy trader on its many special partnerships. The law firms allegedly issued false legal opinions, helped structure Enron's transactions and prepared false submissions to the Securities and Exchange Commission.
"These prestigious banks and law firms used their skills and their professional reputation to help Enron executives shore up the company's stock price and create a false appearance of financial strength and profitability which fooled the public into investing billions of dollars," said James E. Holst, the university's general counsel. "In return, these firms received multimillion-dollar fees, and some of their top executives exploited the situation to cash in personally."
CNN/Money reported last week that the University of California would add several Wall Street firms to its lawsuit.
Enron allegedly used its main off-the-book partnerships, which number in the thousands, to hide nearly $1 billion in debt and inflate profits. The Houston-based energy trader filed the largest bankruptcy in U.S. history on Dec. 2.
The Regents of the University of California, which lost nearly $150 million from Enron, is the lead plaintiff in the lawsuit, which initially named Enron along with several executives and auditor Arthur Andersen LLP.
Andersen's liability
The amended complaint also attempted to extend Andersen's liability to cover Andersen Worldwide SC, the umbrella firm that controls Andersen and member firms in Brazil, the Cayman Islands, India, Puerto Rico and the United Kingdom. The lawsuit also named 24 Andersen executives.
Andersen Worldwide said Monday that the U.S. member firm is the proper defendant in the lawsuit and attempts by plaintiff's attorney to extend litigation overseas has no basis in law. Arthur Andersen, the U.S. accounting firm, contracted with Enron to perform the company's audits and signed off on Enron's financial statements, the Worldwide organization said.
But Arthur Andersen, Enron's auditor for 16 years, is now teetering on collapse as it fights a federal indictment for allegedly obstructing justice when it shredded Enron documents. Since the March 14 indictment, Andersen has lost more than 100 public audit clients and is in talks to sell its non-audit businesses in the United States. Chicago-based Andersen also announced Monday that it would cut 7,000 people as it scrambles to stay alive.
"Changes in Arthur Andersen LLP's situation cannot be used to justify baseless claims against Andersen Worldwide S.C. or individual member firms," the Worldwide organization said Monday in a statement.
Each member firm has its own legal structure and partners. "The member firms of Andersen Worldwide S.C. have no obligation to satisfy the legal liabilities of other member firms," Andersen Worldwide said.
The amended complaint Monday also claims that Enron senior executives took part in more insider trading than previously reported.
The lawsuit documents about $1.2 billion in insider trading by 28 Enron directors and officers, about $171 million more than previously disclosed. Two Enron insiders, including former CEO Kenneth Lay, together sold $144 million more than previously reported, the lawsuit alleges.
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