Enron Shareholders Gain Big Victory

The heat from the collapse of Enron just got turned up a notch for some of its Wall Street bankers.

A federal judge in Houston on Friday gave a big victory to Enron's beleaguered shareholders by refusing to dismiss several banks from a pending class-action lawsuit. The ruling by Judge Melinda Harmon gives the lawyers for the shareholders the right to begin seeking documents from the banks and press ahead with a lawsuit that seeks some $29 billion in damages.

The judge's 300-page ruling is a blow to J.P. Morgan Chase ( JPM), Citigroup ( C), Credit Suisse First Boston and Merrill Lynch ( MER) -- four Wall Street firms that did major lending and underwriting work for Enron.

In shareholder suits, a motion to dismiss is a pivotal point. A defendant that loses on a motion to be dismissed from a lawsuit is then subject to a process known as discovery, in which documents must be turned over to the plaintiffs and testimony can be taken from witnesses.

William Lerach, the well-known trial lawyer who represents the plaintiffs in the Enron case, has indicated that he intends to focus his inquiry on the role the Wall Street firms may have played in assisting Enron with its shady accounting deals.

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