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Banks Knew of Enron Fraud, Examiner Says
NEW YORK (Reuters) - Bank of America Corp. <BAC.N> and
Royal Bank of Canada <RY.TO>, but not UBS AG <UBSZn.VX>,
knew of fraud in transactions they helped now-failed energy company
Enron Corp. <ENRNQ.PK> set up, a bankruptcy examiner concluded
on Thursday.
The report by Harrison Goldin, which addressed transactions
involving so-called special-purpose entities, also found that
auditor KPMG LLP committed "negligence" in work it did for
Enron.
Goldin concluded that the banks and KPMG, because of their
actions, should have their claims against Enron subordinated to
those of other creditors. Subordination means other creditors get
paid first.
In contrast, he said UBS was unaware of fraud in various SPE
transactions, and thus should not have its claims subordinated.
Separately, Goldin said auditor PricewaterhouseCoopers LLP, was
"grossly negligent" in preparing for Enron two fairness opinions
concerning SPEs in 1999 and 2000.
Goldin reviewed these banks' and auditors' roles because another
Enron examiner, Neal Batson, works for a law firm, Alston
& Bird LLP, whose clients have included these companies.
Batson previously concluded that several banks that worked with
Enron, including Citigroup Inc. <C.N>, J.P. Morgan Chase &
Co. <JPM.N> and Toronto-Dominion Bank <TD.TO>, should
also have their claims subordinated to those of other creditors.
Enron sought Chapter 11 bankruptcy protection on Dec. 2, 2001.
Its bankruptcy is the second largest in U.S. history.
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