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From FT.Com
Fastow accuses Enron bankers
By Ben White in New York and Sheila McNulty in Houston
Published: September 26 2006 18:41 Last updated: September 26 2006 21:48


Andrew Fastow, the former chief financial officer of Enron, has accused 10 leading investment banks of helping the now-bankrupt energy group falsify its books in return for big advisory fees.

The accusations came in a 24-page legal declaration filed by Mr Fastow in support of a class action lawsuit against the banks brought on behalf of Enron’s shareholders.

The declaration from Mr Fastow, who was sentenced on Tuesday to six years in prison for his role in Enron’s collapse, could put new pressure on banks that have not yet settled in the class-action case.
In his statement, Mr Fastow said he viewed Enron’s bankers as well-paid “problem-solvers” who knowingly helped Enron created financial structures that made the energy trading company seem more profitable than it really was.
Mr Fastow singled out Merrill Lynch, Credit Suisse, RBS and Barclays as especially involved with creating what he described as deceptive structures.
Attorneys for Enron shareholders, led by Lerach Coughlin, have already won $8bn in settlements from a group of banks including Citigroup, Bank of America and JP Morgan Chase.
A federal judge has previously dismissed Deutsche Bank and Barclays from the class action suit. But William Lerach, the lead attorney in the case, plans to ask that the two banks be reinstated in light of the declaration.
G. Paul Howes, an attorney for the Enron plaintiffs, spoke on Mr Fastow’s behalf at the sentencing hearing in Houston on Thursday, asking for leniency to reflect his co-operation with the shareholders’ suit.
Legal experts noted that Mr Fastow’s statements were tainted by his desire for leniency and his admission of falsifying financial statements.
However, experts also said that Mr Fastow was well positioned to describe Enron’s dealings. Mr Fastow was deeply involved in creating the off-balance-sheet partnerships that helped cloak Enron’s mounting debt.
“He is in the best position to know exactly what was said or not said and what kinds of winks and nods were going on,” said Henry Hu, professor of law and business at the University of Texas.
Mr Hu added that Mr Fastow’s co-operation with the shareholders’ suit would increase pressure on the remaining banks to settle.
Mr Lerach defended Mr Fastow’s credibility: “Everything Fastow will say is documented by the damning and incredible e-mails these bankers wrote to each other when these schemes were going on,” Mr Lerach said.
Mr Fastow, 44, broke down repeatedly when addressing the federal court, saying: “I wish I could undo what I did at Enron, but I can’t.”
Copyright The Financial Times Limited 2006