The government settled with J.P. Morgan Chase and Citigroup yesterday:
The settlements, with J. P. Morgan Chase and Citigroup, are the broadest to date reached with advisers that played roles in the financing and structuring of the off-the-books partnerships and transactions that contributed significantly to the collapse of Enron in December 2001.
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But the bank settlements — reached with the Securities and Exchange Commission and the Manhattan district attorney's office — have a significance far beyond the issues in the Enron case. That is because, for the most part, the transactions between Enron and the banks met legal and accounting requirements but still led to what regulators said was misleading information in the company's financial reports.
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Under their settlements, the banks neither admitted nor denied any wrongdoing.
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Legal experts said the banks could hardly have refused the settlement offer because both still face lawsuits from Enron shareholders who lost money in the collapse. Under the securities laws adopted in the wake of the corporate scandals since 2001, settlement money that goes to investors through the government can be counted against any final settlement of class-action suits.
Robert Musil sums up the case against Enron:
To date:
No member of the Enron board has been charged with any crime, not even Ken Lay or Jeff Skilling.
No Enron officer has agreed to plead guilty - not even Mr. Fastow, who has been indicted on charges only marginally related to the alleged central "fraud" he perpetrated at Enron.
Enron's main bankers who created, marketed and financed the very structured finance transactions that were supposedly so openly and obviously fraudulent are essentially off the hook for a pittance. Citigroup, with about One Trillion Dollars in assets, will pay $135 million - far less than what it earned from facilitating Enron's actions. Morgan will pay about $100 million.
Enron's accounting firm has been "convicted" only through a bizarre and exceedingly dangerous misreading of the law which will be eventually overturned, by a jury which refused to accept the confession of the Andersen partner and rejected as a joke the governments assertion that the Enron paper shredding was an obstruction of justice.
And, by the way, if Citigroup had all that copious "knowledge" of how bad they and Enron had been, and how hopeless the Enron financial situation was - what does that say about Robert Rubin when he called his former Treasury subordinate to ask for federal intervention to save Enron? Did he share all that "knowledge" when he attempted to induce highly material actions on the part of that government operative - as Mr. Rubin was required by federal law to do? And is it really true, as the Journal says, that Sandy Weill's recently announced decision to retire as CEO also removes the issue of responsibility at the top - even setting aside the fact that Mr. Weill will remain Citigroup's Chairman of the Board for at least two years?
