SEC Is Urged To Pursue Banks In Enron Fraud
Thursday, May 10, 2007
A coalition of consumer groups and union leaders yesterday urged securities regulators to throw their weight behind investors suing major banks for their role in the devastating Enron fraud.
Activists and former shareholders in the Houston energy trading company implored the Securities and Exchange Commission to file court briefs supporting their legal position in an effort to revive a case against such banks as Merrill Lynch, Credit Suisse First Boston and Barclays.
"They conspired together to steal the money just like a thief breaking into my house," said Buddy Schwartz, a retired maintenance worker who said he lost thousands of dollars when Enron plummeted into bankruptcy 5 1/2 years ago.
William S. Lerach, a plaintiffs lawyer in California, has collected more than $7.3 billion from financial institutions and others on behalf of investors whose life savings and retirement funds were depleted. But his effort to proceed against nearly a half-dozen remaining banks was thwarted on the eve of trial by a federal appeals court. The panel ruled in March that the banks could not be held liable for standing by silently as Enron executives reported phony profit and concealed mounting debts.
That big-dollar legal question is among the most pressing in securities law, experts say. The Supreme Court recently agreed to hear a similar case involving Charter Communications, touching off a campaign by industry lobbyists and labor groups to persuade the Justice Department and the SEC to support their interests. Friend-of-the-court briefs in the Charter case are due next month.
The SEC has supported investors in the past, filing a 2004 amicus brief on behalf of investors in Homestore.com, a Los Angeles area company that entered into questionable revenue-sharing deals with Dulles-based AOL.
But officials at the Consumer Federation of America and the North American Securities Administrators Association, among others, recently expressed worry that the SEC would remain on the sidelines under new leadership and rising pressure from business interests. Several of those advocates appeared beside former Enron employees and shareholders at a Washington news conference yesterday.
"There's serious concern that the SEC may remain silent in this case," Andy Stern, president of the Service Employees International Union, said at the news conference. "The SEC's silence would be both deafening and dangerous."
SEC Chairman Christopher Cox told reporters after a speech yesterday that "the SEC's role is seeing to it that Enron victims are able to recover their losses to the maximum extent possible under the judicial process."