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Court Rejects Suit Against Enron Banks

NYTimes: A federal appeals panel ruled yesterday that a class-action lawsuit against investment banks over their role as advisers to Enron cannot go

NYTimes:

A federal appeals panel ruled yesterday that a class-action lawsuit against investment banks over their role as advisers to Enron cannot go ahead, dealing a blow to shareholders who lost billions of dollars after the company collapsed in 2001.

While shareholders can still pursue individual claims against the banks, the decision stymies any mass effort by shareholders to recoup $40 billion in losses from the Wall Street banks that had earned millions of dollars in banking fees from Enron.

"This is a devastating ruling for shareholders," said Thomas R. Ajamie, a Houston securities lawyer. "It's hard to believe that shareholders won't recovery money from an admitted fraud, but this U.S. Court of Appeals circuit has been more hostile to investors than other circuits have been."

In its opinion, a three-judge panel of the United States Court of Appeals for the Fifth Circuit in New Orleans, said: "Presuming plaintiffs' allegations to be true, Enron committed fraud by misstating its accounts, but the banks only aided and abetted that fraud by engaging in transactions to make it more plausible; they owed no duty to Enron's shareholders."

So they aided and abetted fraud, but owe no duty to the victims of that fraud? You have to twist your mind into a pretzel to wrap around that logic.

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