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Enron plantiffs seen set to sue big investment banks

Enron Corp shareholders are expected in early April to sue big investment banks and possibly others with ties to the bankrupt energy trader, threatening a legal battle with potentially devastating consequences for Wall Street, legal sources said on Tuesday.

Frustrated by the dwindling resources of Enron and its former auditor Andersen, plaintiffs' lawyers were set to lay claim to the deep pockets of merchant banks by alleging they helped Enron to deceive investors, lawyers said.

If it can be proved in court that giants such as J P Morgan Chase, Credit Suisse First Boston and others were in cahoots with Enron, plaintiffs' lawyers stand to win settlements big enough to rock the industry, lawyers said.

"The potential claims dwarf even the enormous resources of the investment banks," said Chris Bebel, a partner at the Houston securities law firm of Shepherd Smith & Bebel.

"If the plaintiff firms prevail, they're probably going to extract a handsome settlement. That could force a couple of these investment banks into merger negotiations."

Spokespersons for JP Morgan, Credit Suisse, and other banks declined to comment. Bankers have privately scoffed at the plaintiffs' attorneys, who have also threatened Enron-linked law firms, accountants and even public relations firms.

Corporate defense lawyers have said it will be difficult for plaintiffs' attorneys to prove merchant banks knew about and participated with Enron in a scheme to defraud investors.

The Houston-based company's collapse last fall promises to keep legions of lawyers busy for years. Once ranked as the seventh-largest US company, Enron imploded in a flurry of lawsuits, debt downgrades and a plunging share price.

It filed the largest bankruptcy in US history on December 2, shaking investor confidence and triggering investigations by the Department of Justice, the Securities and Exchange Commission and 10 congressional committees.

COMPLAINT TO BE FILED

Trey Davis, spokesman for the University of California, said a complaint will be filed on April 8 consolidating dozens of Enron lawsuits with the university as lead plaintiff. "We definitely will be filing it on the 8th," he said.

The complaint will be filed by the law firm of Milberg Weiss Bershad Hynes & Lerach, counsel for the university, which lost $145 million in the Enron debacle, Davis said.

Legal sources said the filing would name as defendants investment banks such as JP Morgan, Credit Suisse, Merrill Lynch, Deutsche Bank and possibly others, including the Texas law firm of Vinson & Elkins.

The university and many other Enron investors have already sued dozens of senior Enron executives and Andersen.

As it has become clear that bankrupt Enron and struggling Andersen may have little to offer legal claimants, plaintiffs' attorneys have been exploring ways to tap others' riches.

"Plaintiffs are getting very interested in theories of secondary liability," said Bill Lerach, partner at shareholder class actions kingpin Milberg Weiss, at a conference here.

Enron's collapse wiped out billions of dollars in investor equity.

Andersen, the Chicago-based Big Five accounting firm, was indicted by federal authorities on March 14 on a charge of obstruction of justice linked to the destruction of Enron-related records by Andersen employees.

The indictment accelerated a client exodus and raised doubts about the firm's future.

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