-Caveat Lector- Wednesday, 24 July, 2002, 06:34 GMT 07:34 UK
Bankers tried to explain their role in Enron's accounting Two of the world's largest banks stand accused by US congressional investigators of helping disgraced energy firm Enron, and at least ten other companies, hide billions in debt. The accusation saw shares in Citigroup and JP Morgan Chase slump almost a fifth, reinforcing the gloom shrouding US stock markets. Representatives of the two banks failed to convince a US Senate hearing convened on Monday that they had innocently entered into accounting schemes for the disgraced energy giant. Investors rushed to ditch their shares in the banks, with Citigroup closing 16% lower and JP Morgan down 18%, an immense fall for such high-profile companies. 'Accounting sham' The banks' troubles follow the collapse of the accountants Andersen, brought down by the accusation it had knowingly helping Enron to hide behind shady accounting practices. Enron was assisted by Citicorp and Chase, said Senator Levin Experts have now told investigators that Enron would not have been able to dupe investors without the assistance of its bankers. "Chase and Citicorp knew what Enron was doing, assisted Enron in the deceptions, and profited from their actions," said Senator Carl Levin, chairman of the sub-committee on investigations, calling the action an "accounting sham". During a 10-hour grilling, executives from both banks insisted their actions - which, the committee says, effectively disguised the debts that eventually brought Enron to its knees as trading revenues - were lawful and a legitimate "alternative form of financing". And the transactions are thought to be acceptable under US accountancy rules. But sub-committee chairman Senator Carl Levin lambasted executives for failing to recognise the transaction as problematic and potentially damaging to investors. Disguised trading The controversy centres on a total of $8bn of loans known as "pre-pay transactions". Senate hearings are set to continue The loans were disguised on Enron's accounts as future energy trades. If Enron had properly accounted for the loans, its total debt would have increased by about 40% and it would have suffered a credit downgrade, according to the chief investigator Robert Roach. That would almost certainly have killed off the company's hopes of avoiding bankruptcy a lot earlier. Credit ratings agencies were also defending their corner before the investigators on Tuesday, pleading ignorance. And the report from the investigators made it clear that Enron was not the only beneficiary of the banks' assistance. "Chase informed the subcommittee that it entered into Enron-style prepays with seven companies apart from Enron," the report said. "Citigroup indicated that it shopped the idea to 14 companies apart from Enron, successfully selling it to at least three." Multiple scandals The collapse of Enron in December triggered the current crisis in investor confidence. It admitted that it had inflated its profits, casting grave doubts over the accounting methods used by US firms. That prompted a series of investigations into other firms, including WorldCom which has also now admitted to overstating its profits and has since filed for bankruptcy. President George W Bush has vowed to weed out corporate wrongdoing in the US, and numerous investigations are underway. The Enron hearings will continue on Wednesday. <A HREF="http://www.ctrl.org/";>www.ctrl.org</A> DECLARATION & DISCLAIMER ========== CTRL is a discussion & informational exchange list. Proselytizing propagandic screeds are unwelcomed. Substance—not soap-boxing—please! These are sordid matters and 'conspiracy theory'—with its many half-truths, mis- directions and outright frauds—is used politically by different groups with major and minor effects spread throughout the spectrum of time and thought. That being said, CTRLgives no endorsement to the validity of posts, and always suggests to readers; be wary of what you read. CTRL gives no credence to Holocaust denial and nazi's need not apply. Let us please be civil and as always, Caveat Lector. ======================================================================== Archives Available at: http://peach.ease.lsoft.com/archives/ctrl.html <A HREF="http://peach.ease.lsoft.com/archives/ctrl.html";>Archives of [EMAIL PROTECTED]</A> http:[EMAIL PROTECTED]/ <A HREF="http:[EMAIL PROTECTED]/";>ctrl</A> ======================================================================== To subscribe to Conspiracy Theory Research List[CTRL] send email: SUBSCRIBE CTRL [to:] [EMAIL PROTECTED] To UNsubscribe to Conspiracy Theory Research List[CTRL] send email: SIGNOFF CTRL [to:] [EMAIL PROTECTED] Om
