Amalgamated Bank slaps suit on Enron top brass

New York, Dec 6: Amalgamated Bank, which manages worker retirement funds, on Wednesday sought to freeze the bank accounts of senior executives at Enron Corp, alleging they reaped huge profits by artificially inflating the stock price of the once-mighty energy trader. In a lawsuit filed in US district court in Houston, the bank called Enron a "grotesque fraud," and said insiders gained about $1.1 billion from the sale of more than 17.3 million shares of stock over the past three years. Enron’s market value peaked at almost $80 billion in August 2000, and has plunged to less than $1 billion after the Houston company said it misstated earnings by about $600 million and US regulators began a probe of off-balance sheet dealings.

"Based on our own ongoing investigation, we believe the chicanery and financial manipulations at Enron were far more widespread than the company has admitted," said Bill Lerach, lead attorney for the case at law firm Milberg Weiss Bershad Hynes & Lerach LLP. "This appears to be one of the worst instances of illegal insider trading we’ve ever encountered." The lawsuit seeks an immediate injunction to freeze the accounts of 29 Enron officers and directors, including chairman and chief executive Kenneth Lay and other senior officials. Board member Wendy Gramm, a former chairman of the Commodity Futures Trading Commission and wife of Texas Republican Sen. Phil Gramm, was named a defendant for the first time. The probe by the US Securities and Exchange Commission is looking into partnerships often run by Enron executives that kept the company’s debt off its balance sheet.

Investors found it difficult to understand how leveraged Enron was. Enron filed for Chapter 11 bankruptcy over the weekend and obtained $1.5 billion in debtor-in-possession financing on Monday after it collapsed when rival energy trader Dynegy Inc pulled out of a proposed takeover last week.

Lerach said at a press conference that far more partnerships exist than has come to light, and that there were more links with other Enron insiders than previously reported.

"The fraud thus disclosed is truly the tip of the iceberg," he said. Lead plaintiff Amalgamated said its lawsuit could lead to other pension funds joining the legal fray. The bank, owned by the Union of Needle Trades Industrial and Textile Employees, the largest US clothing and textile union, lost about $10.4 million on behalf of about 150 clients. "We feel that our case is the strongest," said Ron Luraschi, group manager of Amalgamated’s $22 billion trust and investment management business. "We are in discussions now with other investors and hope to have more information soon."

The lawsuit said Lou Pai, chairman and chief executive of Enron unit Enron Accelerator, allegedly gained the most from insider trading of Enron shares, reaping $353.7 million.

— Reuters