Federal prosecutors in the Enron investigation may be close to filing a new round of criminal charges stemming from a series of off balance sheet transactions that Citigroup ( C) had a role in arranging, according to a recent court filing. The new charges, which prosecutors reportedly said they are contemplating filing within the next several weeks, involve a deal called Yosemite, which involved a series of controversial prepaid oil-and-gas trades between Enron and Citigroup. The Yosemite transactions, which were the subject of a high-profile congressional hearing last summer, have stirred controversy because critics contend the deals were really "disguised loans" to Enron. The Yosemite deals helped provide nearly $3.8 billion in financing for Enron, yet they never appeared as a debt on the energy trading firm's books. Lawyers for former Enron treasurer Ben Glisan raised the possibility of the new charges being filed in a motion to the judge overseeing the Enron prosecution. Earlier this month, Glisan was indicted on fraud charges, along with Enron's former chief financial officer Andrew Fastow, over his alleged involvement in other questionable Enron transactions. A Citigroup spokeswoman declined to comment on the Glisan filing. A Justice Department spokesman could not be reached for comment. The Glisan filing makes no specific mention to Citigroup or whether charges are being contemplated against any parties. But last month, in a conference call with reporters, Citigroup officials said they were close to reaching a settlement with the Securities and Exchange Commission, which has been investigating the bank's role in the Yosemite deals and other Enron matters. Citigroup, meanwhile, is being sued by a number of mutual funds that purchased bonds that were used to help fund the Yosemite transactions. Citigroup, however, is not the only Wall Street firm that has run into problems over its dealings with Enron.
Several weeks ago, the SEC notified J.P. Morgan Chase ( JPM) that it may face civil charges over its involvement in similar series of prepaid transactions involving an off balance sheet entity known as Mahonia. J.P. Morgan, like Citigroup, has said it is in discussions with the SEC to resolve the regulatory investigation. Earlier this year, Merrill Lynch ( MER) paid an $80 million fine to settle an SEC investigation into its role in helping to arrange a transaction for Enron, which involved the sale of several Nigerian barges. Federal authorities have charged that transaction, which also involved Fastow's LJM2 partnership, was a "sham" deal. The barge deal is a main focus of the indictment against Glisan and Fastow. The SEC also has filed civil charges against three former Merrill investment bankers stemming from their role in the barge transaction. The bankers are fighting those charges. But the civil case against them has been put on hold at the request of federal prosecutors, who are continuing to investigate the matter. Meanwhile, the Glisan filing also suggests that prosecutors may bring charges stemming from another Enron off balance sheet venture, this one called Whitewing. Set up by Enron in 1997, Whitewing was one of the Enron's biggest off balance sheet partnerships and was used by the company to move billions of dollars in ailing assets off the company's books. Working in tandem with the Osprey Trust, another Enron creation, Whitewing and Osprey sold more than $1.4 billion in now worthless bonds to investors. The proceeds from those bonds were used by Whitewing to buy several ailing power plants and other utilities from Enron. Investment bankers at Credit Suisse First Boston played a leading role in arranging the sale of the Osprey bonds.