In re Enron Corporation Securities, Derivative & ERISA Litigation
U.S. District Court, Southern District of Texas
235 F.Supp. 549 (2002)
Enron securities purchasers (plaintiffs) sued Citigroup, law firm Vinson & Elkins, accounting firm Arthur Andersen, and others (defendants), alleging they participated in an elaborate scheme using Enron-controlled entities to disguise debt and manufacture sham profits: Citigroup allegedly disguised $2.4 billion in loans to Enron at double the normal interest rate in exchange for $70 million yearly; Vinson & Elkins allegedly wrote and approved Enron's SEC filings and public statements and helped create the sham entities for lucrative fees; and Arthur Andersen allegedly conducted a pattern of fraudulent audits, giving Enron clean opinions despite intimate knowledge of the fraud. The defendants moved to dismiss, and the case turned on whether these "secondary actors" (lawyers, accountants, bankers) could be held liable as primary violators of securities law.
Whether secondary actors such as lawyers, accountants, and banks may be held liable as primary violators of Rule 10b-5 and §10(b) of the Securities Exchange Act for creating misrepresentations on which investors relied, rather than merely aiding another party's violation.