A group of Wall Street banks and brokerages got some bad news a few days ago when a federal judge ruled that the firms could be on the hook for billions of dollars in damages to Enron's shareholders. But the ruling by U.S. District Judge Melinda Harmon also could prove embarrassing for dozens of Wall Street executives who are believed to have been investors in a partnership that played a key role in Enron's off balance sheet shenanigans. Lawyers for Enron's shareholders intend to explore which Wall Street power brokers sank money into LJM2, the $390 million partnership that Enron used to remove billions of dollars in ailing assets from its balance sheet. It's no secret that several Wall Street firms that did investment banking for Enron -- Merrill Lynch ( MER), Citigroup ( C), J.P. Morgan Chase ( JPM), Credit Suisse First Boston and CIBC -- were also investors in LJM2. The identity of most of the Wall Street executives who individually invested in LJM2 has, however, been cloaked behind private funds and partnerships that are the actual named investors, or limited partners, in LJM2.
To date, the only Wall Street executives publicly identified as having invested their own money in LJM2 are 100 executives from Merrill Lynch -- the firm retained by Andrew Fastow, Enron's former chief financial officer, to market the fund to institutional investors. The Merrill investors sank a combined $16 million into LJM2. A handful of executives at Germany's Dresdner Bank also are known to have put $1 million of their own money into the partnership. The veil of secrecy could lift now that the plaintiffs in the shareholder suit can begin seeking documentary evidence and testimony from Enron's bankers about all of their dealings with the fallen energy-trading firm. William Lerach, the lead lawyer for Enron's shareholders, said he suspects that the list of Wall Street executives investing in LJM2 could include top-level people at the banks and brokerages Enron turned to for financing.