Wall Street's Involvement with Enron
From NPR's Weekend Edition,
August 17, 2002
Investment firm giants Merrill
Lynch, JP Morgan Chase and Citigroup have been accused of helping Enron inflate profits and conceal debt.
In December of 1999, Enron's
African division sold three Nigerian power barges, essentially floating
power plants, to Merrill Lynch. Six months later, Enron bought them
back at a loss through one of Enron's so-called special-purpose entities.
However, this transaction allowed Enron's African division to record
a temporary $12 million gain, thus exceeding quarterly earnings expectations
and boosting bonuses for the division's executives.
Senator Carl Levin from Michigan,
the chairman of the subcommittee which has been investigating Wall Street's
involvement with Enron, says Merrill Lynch was not alone. Levin believes
Citibank and Chase were also involved in fraudulent practices through
the use of phony trades, which made it possible for these transactions
to look as though money was coming into Enron from business deals when,
in fact, it was really loans from the banks.
Although Chase and Citigroup
set up these special purpose entities, the investment firms deny that
they, in fact, controlled them. Still, the structure of these deals
had some executives worried. One internal e-mail from a senior Citigroup
loan executive said, quote, "The paperwork cannot reflect their
agreement, as it would unfavorably alter the accounting." Senator
Levin believes Chase, Citigroup and Merrill Lynch are guilty of fraud.
Citigroup has announced it
will no longer provide financing to companies that plan to use the money
to conceal debt. But in the case of Enron, the horse is already out
of the barn, because while the banking side of Merrill Lynch, Chase
and Citigroup were allegedly helping Enron conceal its true financial
condition, research analysts at these same firms were advising that
Enron was a great place to invest.
If you have suffered financial
losses due to your broker's advice to invest in failing stocks, contact
the Consumer Justice Group immediately for an evaluation of your
The Investment & Stock Fraud News is a service of the Consumer Justice Group.