Investigators for the Senate Permanent Subcommittee on Investigations said Enron, bankrupt since December, obtained $8.5 billion in financing from 1992 to 2001 from Citigroup Inc. and J.P. Morgan Chase & Co. Inc., which collected hefty fees and interest payments.
The subcommittee, chaired by Democratic Sen. Carl Levin of Michigan, said it would provide extensive details at Capitol Hill hearings scheduled to be held on Tuesday and next week, promising to shed more light on the flood of corporate scandal inundating Wall Street.
"The maze of financial transactions that Enron constructed to make its financial statements look good makes Rube Goldberg look like a slacker," Michigan's Levin said in a statement.
The commodity trades were known as "prepay" transactions. Enron booked proceeds from them as cash flow from operations, but should have booked it as debt, the committee said.
"Certain financial institutions knowingly participated in, and indeed facilitated, transactions that Enron officials used to hide debt and, thereby, make the company's financial position appear stronger than it actually was," Sen. Susan Collins, of Maine, the committee's ranking Republican.
Besides Citigroup and JP Morgan Chase, subcommittee staffers said smaller deals worth $1 billion in total involved Credit Suisse Group Inc., Barclays Plc, FleetBoston Financial Corp., Royal Bank of Scotland Group Plc and Toronto-Dominion Bank.
Shares in all seven financial institutions fell on Monday on stock exchanges in New York, London, Zurich and Toronto, as markets swooned again amid widening investor mistrust.
Since the collapse of Enron, mounting scandals have hammered corporate America, including Sunday's record-setting bankruptcy filing of WorldCom Inc., the long-distance telephone and Internet traffic carrier.
Citigroup and JP Morgan were not immediately available for comment. A J.P. Morgan spokeswoman told The Washington Post the Enron prepays were commonplace and met accounting rules. A Citigroup spokesman told The New York Times the deals were "entirely appropriate" based on the bank's knowledge then of Enron.
Robert Bennett, a lawyer for Enron, was quoted by The Post as saying the company would continue to cooperate with various investigations and people should not "rush to judgement."
The subcommittee said it found that in 2000 Enron's total debt would have been 40 percent higher, and its funds from operations 50 percent lower, if not for the prepay deals, which helped to support its credit rating and its stock price.
The banks knew about this, and helped Enron hide its debt by letting it do complex, prepay trades through offshore, bank-controlled special-purpose entities, investigators said.
Massive class-action lawsuits filed this spring by Enron investors and former employees have named as defendants Citigroup, JP Morgan, Credit Suisse, Barclays and other leading banks, alleging they schemed with former Enron executives to bilk investors out of tens of billions of dollars.