Barclays facing $5bn Enron blow

13 April 2012

BARCLAYS Bank has been identified by Enron's bankruptcy examiner as one of half a dozen international banks which allegedly knew of 'wrongful conduct' at the collapsed energy trader.

If the assertion is upheld by the courts, the six may receive nothing for their combined claims against the Houston company, which total more than $5bn (£3.07bn).

The latest twist in the saga of Enron, which sought US bankruptcy protection in December 2001 after a prolonged accounting scandal, came in a 92-page report filed with the American courts yesterday by bankruptcy examiner Neal Batson.

Two of the six - Citigroup and JP Morgan Chase - separately agreed with US regulators to pay a combined $305 million for their role in the affair. The Securities and Exchange Commission said Citigroup and JP Morgan had 'helped Enron mislead investors'.

In his filing Batson said there was evidence that the six - which also included Merrill Lynch, Deutsche Bank, and Canadian Imperial Bank of Commerce - all knew of Enron's accounting tricks and 'aided and abetted' its officers in breaching their fiduciary duties.

Batson argued that his conclusion may lead a court 'to determine that the claims of such financial institutions, totalling in excess of $5bn, may be equitably subordinated to the claims of other creditors'.

That could leave the six banks with nothing to show for their $5bn. At present, Enron's planned revamp has indicated that its army of creditors - owed about $65bn in total - are in line for repayments of about 20 cents on each $1 of their exposure. Officials from Barclays were not available for comment today, but CIBC told US-based reporters that it disagreed with Batson's findings. There was no comment from the remaining four banks.

It was unclear how much each of the six was owed by Enron. Batson's broadside alleged that they all helped Enron's disgraced staffers with the financial engineering that masked the state of the company's finances.

The six banks 'had actual knowledge of the wrongful conduct [at Enron]' and 'gave substantial assistance...by participating in the structuring and closing of the SPE [special purpose entities] transactions', he said.

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