- The Washington Times - Tuesday, December 10, 2002

Senate investigators examining a series of complex, multimillion-dollar transactions involving Enron's pulp and paper business said yesterday that financial giants Citigroup and J.P. Morgan Chase knowingly helped Enron deceive the investing public.
The two investment banks rejected the assertions by Sen. Carl Levin, Michigan Democrat, and his staff investigators and insisted that their executives believed they were engaging in lawful deals with Enron. However, Citibank and J.P. Morgan said they would not engage in the same sort of transactions today.
The bipartisan investigative panel of the Senate Governmental Affairs Committee has been examining the four related transactions, which investigators say helped the now-bankrupt energy company disguise its financial condition in 2000 and 2001. Enron reported transactions that were really loans as revenue-generating sales, the investigators say. They have previously claimed that the two big investment banks aided Enron in its deceptive accounting in return for big fees and favors in other deals.
In some cases, internal Citigroup memos appear to indicate that the bank's investment was protected from risk in the deals, which would mean that Enron would have been required to report the transaction in its financial statements.
The panel's new report on the transactions purportedly designed to inflate Enron's cash flow and, in one case, evade Canadian taxes, is being provided to the Justice Department and the Securities and Exchange Commission which have been investigating Enron's collapse. But it was not immediately clear whether the law-enforcement agencies were looking into the four transactions.
Executives of the banks and federal agency officials are scheduled to testify on the issue tomorrow at a hearing by the panel.
"By concocting elaborate schemes with no legitimate business purpose other than tax and accounting manipulation, Citigroup and J.P. Morgan Chase helped Enron deceive the investing public, as well as Enron employees and stockholders," Mr. Levin said in a statement.
The investigators said Citigroup allowed one of the deals to go forward over the objections of some bank officials who warned that it was too risky.
He said the transaction aimed at avoiding millions of dollars in Canadian taxes, called "Slapshot" by bank officials, was "designed and peddled by Chase to Enron and other companies."
Said Kristin Lemkau, a spokeswoman in New York for J.P. Morgan Chase: "Each country has its own tax laws. We were advised by two Canadian law firms that this transaction was legal and appropriate under Canadian tax laws.
"While we don't think we did anything illegal or unethical, from the standpoint of reputation risk, we would not do this transaction today," she said.
New York-based Citigroup, the nation's largest financial institution, said its executives "acted at all times in the good-faith belief that these transactions complied with existing law and standards. Any suggestion to the contrary is unfair and unfounded."
Nonetheless, Citigroup said, it would not approve such deals today because it tightened its policy in August the month after the subcommittee held hearings on the investment banks' transactions with Enron.

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