Senator asks heads of Citigroup, J.P. Morgan Chase to answer questions on offshore deals with Enron
Friday, July 26th 2002, 12:00 am
By: News On 6
WASHINGTON (AP) _ A senator leading an investigation into big investment banks' ties with now-bankrupt Enron Corp. has asked the heads of Citigroup Inc. and J.P. Morgan Chase & Co. to answer questions on their use of offshore companies in deals with Enron.
Sen. Carl Levin, D-Mich., sent letters Thursday to Citigroup chairman and chief executive officer Sanford Weill and J.P. Morgan Chase president and CEO William Harrison, setting a Monday deadline for them to personally provide the information.
Levin heads the investigative panel of the Senate Governmental Affairs Committee. At a hearing of the panel Tuesday, a committee investigator testified that the Wall Street investment banks, including Citigroup and J.P. Morgan Chase, gave Enron multimillion-dollar loans that helped the company disguise its true financial condition. In some cases, the investigator said, the banks knew Enron was using deceptive accounting for the loans.
Officials of Citigroup and J.P. Morgan Chase denied any wrongdoing in testimony at the hearing.
The letters to the bank executives from Levin, also signed by Sen. Susan Collins of Maine, the subcommittee's senior Republican, cited ``troubling factual issues'' that emerged at the hearing.
Spokesmen for the two financial companies couldn't be reached for comment Thursday night.
In a memo sent to Citigroup employees, Weill said Citigroup's transactions with Enron were legal, met accounting standards and reflected industry practices.
``And our people, relying on the advice of independent legal and accounting experts, believe they were doing the right thing,'' Weill said.
Harrison delivered a similar message to the investment community Wednesday, saying that the J.P. Morgan Chase acted ``properly and with integrity'' in all of its dealings with Enron, while also assuring investors that the bank itself was financially sound.
The bipartisan investigative subcommittee also found that some banks actively aided Enron in its deceptive accounting in return for big fees and favors in other deals.
Enron made a secret oral agreement in 1999 with Citigroup, the nation's largest financial institution, that disguised the company's improper accounting for a $125 million loan known as Roosevelt, according to committee investigators.
The banks used complex financial transactions to boost Enron's anemic cash flow to match its profit growth on paper, according to the investigators. Enron, an energy-trading company, recorded the money from the bank loans _ said to total $8 billion _ as prepaid trades of natural gas and other commodities with an entity based in the Channel Islands off Britain.