Contact Us

PW Case Review Form
*    Denotes required field.

   * First Name 

   * Last Name 

   * Email 


   * Please describe your case:

What injury have you suffered?

For verification purposes, please answer the below question:

No Yes, I agree to the Parker Waichman LLP disclaimers. Click here to review.

Yes, I would like to receive the Parker Waichman LLP monthly newsletter, InjuryAlert.

please do not fill out the field below.

Banks Pay $289M in SEC Charges

Officials say J.P. Morgan Chase, Citigroup knew Enron was trying to mislead investors

Jul 29, 2003 | AP Two of the nation's largest banks, J.P. Morgan Chase and Citigroup, agreed Monday to pay nearly $300 million to settle charges they helped Enron Corp. manipulate its financial statements and mislead investors.

The payments settle charges by the government that the banks helped Enron, a once high-flying energy trader that filed for bankruptcy in 2001, mislead investors by creating complex financial transactions designed to beef up reported cash flow and hide debt.

The Securities and Exchange Commission contends the banks knew Enron was seeking the transactions specifically to make its financial condition appear sound when it was actually drowning in debt.

"If you know or have reason to know that you are helping a company mislead its investors, you are in violation of the federal securities laws," SEC enforcement chief Stephen Cutler said.

The settlements come four months after another U.S. banking titan, Merrill Lynch & Co., agreed to pay $80 million to settle charges it helped Enron inflate profits and deceive investors.

Under Monday's deals, J.P. Morgan will pay $135 million to the SEC and Citigroup will pay $101 million. All of that money will eventually be used to pay back the victims of Enron's spectacular fraud, the agency said.

Cutler said the $236 million had already been wired from the banks to a court-supervised account. He gave no timetable for when the money would be doled out to investors.

The banks neither admit nor deny the SEC charges under the settlements. Cutler stressed the SEC had not closed its investigation into Enron and companies with which it did business.

The banks will also pay a total of $50 million to New York state and New York City to settle similar Enron charges, plus $3 million more to reimburse expenses by the office of Manhattan District Attorney Robert Morgenthau.

In exchange, Morgenthau said he would not pursue charges against the banks or their employees.

The SEC said J.P. Morgan and Citigroup helped Enron design transactions that were essentially loans, but were made extremely complex so they would appear to represent cash flow fromoperations.

Some of them were "prepay transactions," loans that were designed as commodity trades and provided Enron cash up front at no risk to the energy trader.

"We have made mistakes," J.P. Morgan vice chairman Marc Shapiro wrote in a letter to Morgenthau that was released by the district attorney. "We cannot undo what has been done, but we can express genuine regret and learn from the past." In addition to the Enron settlement, Citigroup agreed Monday to pay $19 million to settle allegations by the SEC that it helped Dynegy Inc., another energy trader, create false financial statements.

Last year, both banks instituted reforms designed to make sure they evaluate their transactions for possible ethics risks and to make sure the banks' clients disclose any potential for its investors to be misled.

Morgenthau said the banks' efforts at reform were just as important for investors as the payments.

"Our goal here is simplification," the district attorney said.

In a statement, Citigroup stressed its self-imposed reforms and said it was pleased the settlements would bring the investigations to a close.

"We are committed to assuring compliance and continually scrutinizing our practices in order to adhere to the highest standards as our business evolves," said Charles Prince, head of corporate and investment banking for Citigroup.

The collapse of Houston-based Enron destroyed the retirement savings of thousands of employees and damaged outside investors and pension funds across the nation.

Related articles
Parker Waichman Accolades And Reviews Best Lawyers Find Us On Avvo