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LJM2 Fund Looks to Sue Merrill

The investment fund, which played a central role in Enron's collapse, considers suing firms it used as advisers.

An investment fund that played a central role in


collapse is considering suing

Merrill Lynch


and other professional services firms it had used as advisers.

The LJM2 limited partnership last month hired a law firm to investigate the possibility of pursuing litigation against Merrill Lynch, the accounting firm


and two leading law firms --

Kirkland & Ellis


Dechert Price & Rhodes


LJM2 is the $390 million partnership set up in 1999 by Andrew Fastow to help Enron move ailing assets off its balance sheet and inflate the company's revenue. A number of transactions involving LJM2 are the subject of the pending criminal case against Fastow and other former Enron officials.

Last summer LJM2 filed for bankruptcy and is in the process of distributing its remaining assets to some of the fund's 52 investors, which include


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, the Arkansas Teacher Retirement System and the MacArthur Foundation. A lawsuit against Merrill Lynch and the other firms would seek to recoup more money for LJM2's investors.

Merrill Lynch served as the placement agent for LJM2 and helped pitch the fund to a wide range of financial institutions and wealthy investors. Earlier this year, the nation's biggest brokerage paid an $80 million fine to settle a

Securities and Exchange Commission

investigation into the firm's part in Enron's shady financial transactions.

"We are fulfilling our fiduciary role to help us determine whether we have any valid legal claims," said Bettina Whyte, a principal in Alix Partners, a corporate restructuring firm that assumed management control of LJM2 in the aftermath of the Enron scandal.

Additionally, LJM2 has authorized its lawyers to consider whether it has any pending claims against

Credit Suisse First Boston

, the investment-banking arm of

Credit Suisse Group


. A group of CSFB investment bankers helped structure many of the Enron-related deals LJM2 was an investor in

Both Merrill Lynch and CSFB were original investors in the LJM2 fund.