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Enron scandal hits Credit Suisse

Enron's headquarters in Houston

(Keystone Archive)

Credit Suisse First Boston has been named in a class action suit filed by clients who lost millions of dollars when Enron shares plummeted last year.

It is the second Swiss bank to be caught up in the fallout from the collapse of the energy giant. Last week, a similar suit was launched against UBS's American banking subsidiary, PaineWebber.

The latest suit also includes some of Wall Street's most famous and respected names: JP Morgan Chase, Citigroup, Merrill Lynch, Bank of America and Lehman Brothers.

Apart from CSFB, two other foreign banks are also named - one German and one Canadian. The University of California, which lost $140 million (SFr235 million) in the Enron affair, is known to be one of the plaintiffs.

The suit has been filed in the federal court in Houston, Texas - home of Enron. Lawyers for the complainants accuse the Swiss group's American subsidiary of having "played an indispensable role in inflating and supporting Enron's profile", helping the former energy giant to eliminate its debt by moving it into non-existent subsidiaries.

They maintain that CSFB, JP Morgan and Citigroup "concealed several million dollars worth of Enron's outstanding loans".

CSFB, along with six of the other banks, is also accused of investing $14 million dollars (SFr23.5 million) in LJM2, one of the many fictitious subsidiaries.

Lawyers claim these transactions allowed both the banks and certain employees in leading positions to make vast profits.

The plaintiffs also accuse CSFB and the other banks of having hidden the true financial state of Enron from their clients and misleading the public by helping to manipulate its financial results.

Pen Pendleton, a spokesman for CSFB in the United States, told swissinfo that the "bank did not think that the judicial investigation had any basis".

Last week UBS banking subsidiary, PaineWebber, was accused of recommending Enron shares at a time when it was clear that the energy giant was facing financial difficulties.

swissinfo/Marie-Christine Bonzom in Washington


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