Firms Accused Of Advancing Deception

Bloomberg reports that US lawmakers are turning up the heat on Citigroup and JP Morgan and have accused both firms of helping Enron use 'deceptive accounting strategies' to hide debts.

Senator Carl Levin, chairman of the Senate Governmental Affairs Permanent Subcommittee on Investigations, said earlier this week that 'as disturbing as Enron's own misconduct is the growing evidence that leading US financial institutions not only took part in Enron's deceptive practices, but at times designed, advanced and profited from them'.

US Congressional investigators continue to examine a number of undisclosed deals between Enron and Citigroup which are believed to have allowed the failed energy giant to sidestep accounting requirements. A JP Morgan deal known as Slapshot is also thought to be under the microscope. Shares in both firms were down amid the probes.

In a related story, JP Morgan is currently in court suing 11 insurance companies for $1bn to recover losses the firm sustained in connection with trades it entered into with Enron. The insurers have refused to pay up as they claim that the transactions were really 'loans', which were not covered under the policy. E-mail evidence will soon be introduced at the trial in the form of a message from a JP Morgan vice chairman, Donald Layton, which is alleged to describe the transactions as 'disguised loans.' On this basis, the jig may soon be up for the bank and Chief Executive Bill Harrison may soon be falling on his sword.

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