Abbey National sues investment banks over Enron losses

Abbey National bank, which lost more than €79m by investing in US energy giant Enron, is suing a host of investment banks, claiming they must have known Enron’s finances were fatally flawed when the deal was made.

Abbey National Treasury Services filed a suit in Manhattan federal court over its disastrous purchase of Enron-issued Marlin Water notes just months before the company collapsed into bankruptcy.

The lawsuit says the investment banks, including Credit Suisse First Boston, JP Morgan Chase, CIBC and Bank of America, must have known about Enron’s troubled finances but failed to tell Abbey National.

“The defendants intentionally or recklessly omitted to disclose these material facts known to them as a result of their due diligence work associated with underwriting or auditing Enron,” the suit says.

Enron defaulted on the Marlin Water notes when the company filed for bankruptcy last autumn.

“As a result of defendants’ fraudulent misrepresentations, Abbey National lost virtually its entire investment in the Marlin II Notes,” the suit says.

Representatives for JP Morgan Chase and CSFB said they would not comment because their companies had not yet seen the lawsuit. CIBC and Bank of America did not immeditely return calls for comment.