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Citibank massive deception hid enron debt { August 27 2004 } Original Source Link: (May no longer be active)
http://www.rockymountainnews.com/drmn/business/article/0,1299,DRMN_4_3140849,00.htmlhttp://www.rockymountainnews.com/drmn/business/article/0,1299,DRMN_4_3140849,00.html
Citibank hid Enron debt, lawsuit says
'Massive deception' alleged; investors seek billions back
By Associated Press
August 27, 2004
NEW YORK - The Bank of New York has filed a lawsuit accusing Citibank and its parent company of a "massive scheme of deception" designed to hide the failing finances of the bankrupt energy giant Enron Corp. while making billions of dollars for itself.
The lawsuit, filed in Manhattan's state Supreme Court, does not specify how much the plaintiffs seek, but it states that the investors want to at least recoup their investments, which would be as much as $2.4 billion.
Court papers say Citibank knew that the Houston-based energy giant's growth in the 1990s was "largely fictional" and that its cash flow was much less - and its debt much larger - than what was publicly reported.
The Bank of New York, which represents several investment trusts in the lawsuit, says reports from the U.S. Senate, the Securities and Exchange Commission, the Manhattan district attorney's office and other agencies show that Citibank, while knowing the "false and misleading nature" of Enron's finances, induced investments in the company.
Since 1994, the lawsuit says, Citibank loaned Enron money and helped the company hide large amounts of debt. "By the late 1990s," court papers say, Citibank found itself in a dilemma, having loaned money to a company it knew was on the brink.
"Citibank wanted to keep Enron afloat to help conceal its prior involvement in Enron's fraud, but it also wanted to limit its Enron credit exposure in the likely event that Enron could not be kept afloat," court papers say.
Two years before Enron's 2001 collapse, Citibank loaned the company another $2.4 billion, according to the suit, which was filed Monday.
"Citibank found itself in a bind," court papers say. "It knew that Enron was not loan-worthy, yet if it failed to find Enron new sources of financing, it ran the significant risk that Enron would collapse before Citigroup could recover the billions of dollars Enron owed it."
The lawsuit says Citibank knew the investors were getting less than they bargained for because of the likelihood of an Enron bankruptcy.
Copyright 2004, Rocky Mountain News. All Rights Reserved.
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