Enron's Enablers

The Finance Firms That 'Drove the Getaway Car'

By Harold Meyerson
Washington Post

"We recognize," federal appellate Judge Jerry Smith wrote in a March opinion tossing out a lawsuit by Enron shareholders against the banks that helped the company cook its books, "that our ruling on legal merit may not coincide, particularly in the minds of aggrieved former Enron shareholders who have lost billions of dollars in a fraud they allege was aided and abetted by the defendants at bar, with notions of justice and fair play."

Nothing like a judicial edict that acknowledges it violates common decency.

Smith and Judge Grady Jolly had just decreed that banks that had aided Enron in concealing its liabilities and inflating its assets were not themselves liable for these acts because it was Enron, not they, that had made the misleading statements.

Smith looked at a prime example of such Enron-enabling: a scheme in which Enron wanted to sell some electricity-generating barges off the coast of Nigeria so it could book the revenue and meet analysts' 1999 year-end projections. Alas, nobody was buying, so Enron contacted Merrill Lynch, which agreed to "purchase" the barges with the understanding that Enron would buy them back with interest within six months. Six months later, one of Enron's shadow companies designed to conceal the company's worthless properties bought the barges back. In short, a high-interest loan was deliberately misrepresented as a sale to boost revenue and trigger executive bonuses. But since the misrepresentations were Enron's, Smith wrote, Merrill Lynch and other financial institutions helping Enron in kindred schemes were not liable.

(Continued here.)