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News > Companies
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Wall Street's Enron ties
graphic January 14, 2002: 11:29 a.m. ET

The Street's biggest firms pocketed millions from relationships with Enron.
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  • Rubin made call for Enron - Jan. 11, 2002
  • Who audits whom? - Jan. 11, 2002
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  • Enron
  • J.P.Morgan Chase
  • CNN.com - Report: Auditor told employees to destroy Enron documents - January 14, 2002
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    NEW YORK (CNN/Money) - Some of the biggest firms on Wall Street earned hundreds of millions of dollars helping Enron weave the intricate partnerships that helped the energy trading firm grow but ultimately led to its bankruptcy, a published report said Monday.

    In underwriting fees alone, the Wall Street firms earned $214 million and several million more in lending, derivatives trading, and consulting fees from Enron, the Wall Street Journal reported.

    The banks that worked as underwriters of stock or debt for Enron and that helped arrange loans or advised it on merger deals reads like a who's who of big-name firms on Wall Street: Citibank and its Salomon Smith Barney unit, Credit Suisse First Boston, Merrill Lynch, Goldman Sachs, J.P. Morgan Chase and Lehman Bros., the report said.

    Click here for an Enron timeline

    In 1995, for example, Enron's former chief financial officer, Andrew Fastow, looked to Donaldson Lufkin & Jenrette, now a unit of Credit Suisse First Boston, to find financing for a partnership called LJM2 Co-Investment LP, according to the report.

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    Fastow explained to a DLJ official that the partnership would help Enron by buying assets from the company and keeping the assets off its balance sheet, thus improving Enron's debt position and making it easier for the company to borrow more money, the paper reported.

    After DLJ initially refused, saying there were too many conflicts within the partnership, Fastow turned to other names on Wall Street, and J.P. Morgan Chase, Merrill and Citigroup, among others, each kicked in $10 million to $25 million in financing for LJM2, according to the Journal. A DLJ limited partnership eventually invested $5 million, the paper reported.

    J.P Morgan Chase exemplifies the complicated relationships between Wall Street firms and Enron. J.P Morgan said by underwriting bonds and providing loans to Enron, it was left with a $2.6 billion exposure once the company collapsed.

    The securities firm also had an analyst covering Enron, who advised clients to buy Enron stock as recently as last fall, according to the paper.

    J.P. Morgan said it has "Chinese walls" in place to separate investment banking and research activities. But "it's very difficult to keep the Chinese walls in place, David Hendler, an analyst at CreditSights, a debt market research firm, told the newspaper.

    In other developments, Enron's accounting firm, Arthur Andersen, sent a memo telling employees to destroy material relating to Enron just days before the energy trading company filed for bankruptcy, Time magazine reported.

    Click here to check other financial stocks

    The filing on Dec. 2 - the biggest bankruptcy ever in the United States - came after Enron stock lost nearly all its value. Thousands of Enron employees lost their jobs and many others who had Enron stock in their 401(k) accounts lost much of their life savings.

    Company executives and directors, meanwhile, were selling stock worth about $1.1 billion last year.

    The company's rise - and fall - are being investigated by the Justice Department, the Securities and Exchange Commission, the Treasury Department and several panels in Congress. graphic

      RELATED STORIES

    Who audits whom? - Jan. 11, 2002

      RELATED LINKS

    Enron

    J.P.Morgan Chase

    CNN.com - Report: Auditor told employees to destroy Enron documents - January 14, 2002





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    Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.

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