Wall Street Banks Hekped Enron Fraud

Enron lied to investors about its financial condition, but it could not have done so without active help from its friendly bankers. And that help constituted fraud.

"If you know," said Stephen Cutler, the S.E.C.'s enforcement director, that "you are helping a company mislead its investors, then you are in violation of securities laws."

That is not the way financial institutions have seen it in the past. "Our view historically," wrote Marc J. Shapiro, vice chairman of J. P. Morgan Chase in a letter to Robert M. Morgenthau, the Manhattan district attorney, "was that our clients and their accountants were responsible for the clients' proper accounting and disclosure of the transactions." Now, he said, his bank will "hold ourselves to a higher standard."

The settlements do not create precedents to the extent they would had the cases been litigated, but they serve notice on banks and other financial institutions that they will face major legal difficulties if they are caught engaging in transactions similar to the ones that Citigroup and J. P. Morgan did with Enron before that company went broke.