UC NAMES TWO MORE BANKS AS DEFENDANTS IN ENRON FRAUD
The University of California today (Dec. 2) added Toronto-Dominion Bank and the Royal Bank of Scotland to the list of defendants in the securities class action lawsuit against the bankers, lawyers, auditors and company executives responsible for defrauding Enron Corp. shareholders of billions of dollars invested in the now-bankrupt energy firm. Today’s filing, in the U. S. District Court for the Southern District Court of Texas in Houston, follows in the wake of additional evidence detailed in the latest report by Enron bankruptcy examiner Neal Batson.
The final Batson report, released to the public on Nov. 24, found evidence that Toronto-Dominion Bank and the Royal Bank of Scotland knowingly assisted Enron’s officers in the falsification of Enron’s financial statements. In his report, Batson concluded that the Royal Bank of Scotland “had actual knowledge of the wrongful conduct” in Enron’s special purpose entities transactions which it participated.
The report found that the Royal Bank of Scotland “gave substantial assistance to [Enron’s officers] by participating in the transactions,” and that injury to Enron “was the direct or reasonably foreseeable result of such conduct.” “This evidence is sufficient for a fact-finder to conclude that the Royal Bank of Scotland aided and abetted certain [Enron’s officers] in breaching their fiduciary duties,” the report stated.
The Batson report also concluded that Toronto-Dominion Bank participated from Dec. 1998 through Dec. 2000 in six “prepay” (disguised loans) transactions with Enron with a total value of about $2 billion. The report found evidence that “Toronto-Dominion had actual knowledge of the wrongful conduct in connection with those transactions.”
“On behalf of the plaintiffs, the University of California is naming Toronto-Dominion Bank and the Royal Bank of Scotland as defendants in the case,” said James E. Holst, general counsel for the University, which serves as lead plaintiff in the shareholders’ suit. “The examiner’s fourth report further underscores the fundamental role of the professionals who enabled and perpetrated the Enron fraud. The Batson report is consistent with the claims that we are preparing for trial.”
Previously named in the shareholders’ lawsuit were the financial institutions of J. P. Morgan Chase, Citigroup, Merrill Lynch, Credit Suisse First Boston, Canadian Imperial Bank of Commerce (CIBC), Bank America, Barclays Bank, Deutsche Bank and Lehman Brothers, considered key players in a series of fraudulent transactions that ultimately cost Enron shareholders more than $25 billion. Other defendants include various of Enron’s former officers and directors, its accountants, Arthur Andersen, and its Houston-based corporate counsel Vinson & Elkins.
These banks set up false investments in clandestinely controlled Enron partnerships, used offshore companies to disguise loans, and facilitated the phony sale of phantom Enron assets. As a result, Enron executives were able to deceive investors by moving billions of dollars of debt off their balance sheets and artificially inflating stock values.
In February 2002, the University of California was named
lead plaintiff in the Enron shareholders’ class action
suit previously filed against 29 top executives of Enron Corp.
and its accounting firm, Arthur Andersen LLP. UC filed a consolidated
complaint on April 8, 2002, adding the nine banks and two
law firms as defendants in the case. In April 2003, U.S. District
Court Judge Melinda Harmon completed her rulings on the various
defendants’ motions to dismiss and lifted the stay on
discovery. Following those rulings, UC filed a second amended
complaint on May 14, 2003. According to the pretrial schedule,
depositions in the case may begin Jan. 10, 2004, with the
trial slated to begin on Oct. 17, 2005.
A copy of the 19-page complaint is available at http://www.universityofcalifornia.edu/news/enron/td_and_rbs.pdf.
More background on the Enron lawsuit is available online at http://www.universityofcalifornia.edu/news/enron/welcome.html.
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