US financial service group Citigroup is being dragged deeper into the Enron scandal as US media reports claim the bank helped Enron to hide its financial condition.
The reports cite internal bank documents and US government investigators as sources.
According to today's New York Times, Citigroup officials intentionally manipulated the written record of their dealings with Enron to allow the company to break accounting rules, thus keeping $125 million in debt off its books.
The paper claims the bank reached an oral agreement with Enron for transactions to be changed, omitting the full terms of the deal from the paperwork. That meant anyone reviewing it would have no idea that the accounting treatment being used by Enron was improper.
Citigroup and JP Morgan Chase have been repeatedly criticised for structuring billions of dollars of transactions for Enron involving entities with names such as Mahonia, Yosemite, Deltaand Stoneville Aegean.
The banks have responded that those transactions — which critics say allowed Enron to disguise loans as trading liabilities — properly followed accounting rules and were the workaday product of a widely used business known as structured finance.
But the latest transaction — a previously undisclosed deal called Roosevelt— is different.
In this case, the determination of the proper way to account for the deal is not coming from outside critics but from internal Citigroup e-mail messages among bankers expressing deep concern about revealing the oral agreement with Enron in the written record of the transaction.
The Roosevelttransaction and other deals between Enron and the banks are expected to be examined today at a hearing before the Senate Permanent Subcommittee on Investigations.