Enron scandal takes Jersey twist
A NEW twist emerged in the Enron scandal involving an energy trading business in the Channel Islands. Jersey company Mahonia was set up by local law firm Mourant du Feu & Jeune as a charitable trust ten years ago, to carry out transactions between Enron and investment bank JP Morgan.
Mahonia specialised in forward commodity trades, where it would pay Enron for the future delivery of oil or gas.
But a group of US insurers who backed deals between the collapsed energy giant and the bank, now JP Morgan Chase, are refusing to pay out $1.1bn (£780m) insurance, claiming the deals were a sham intended to help secure loans from Mahonia to Enron. Morgan, which has a $2.6bn (£1.8bn) exposure to Enron, is suing the insurers for $965m on behalf of Mahonia.
Germany's Westdeutsche bank is also refusing to pay $165m under a letter of credit to Mahonia unless it can 'demonstrate that underlying transactions are legitimate in all respects'.
Morgan said: 'Many companies routinely raise funds using pre-paid commodity contracts.' The Mahonia arrangement is just one of a plethora of complicated ventures used by Enron.
It constructed hundreds of partnerships designed to keep debts off its books. The US Securities and Exchange Commission is investigating Morgan's relationships with Enron as part of a wider probe into the affair.
Enron scandal takes Jersey twist
Jersey company Mahonia was set up by local law firm Mourant du Feu & Jeune as a charitable trust ten years ago, to carry out transactions between Enron and investment bank JP Morgan.
Mahonia specialised in forward commodity trades, where it would pay Enron for the future delivery of oil or gas.
But a group of US insurers who backed deals between the collapsed energy giant and the bank, now JP Morgan Chase, are refusing to pay out $1.1bn (£780m) insurance, claiming the deals were a sham intended to help secure loans from Mahonia to Enron. Morgan, which has a $2.6bn (£1.8bn) exposure to Enron, is suing the insurers for $965m on behalf of Mahonia.
Germany's Westdeutsche bank is also refusing to pay $165m under a letter of credit to Mahonia unless it can 'demonstrate that underlying transactions are legitimate in all respects'.
Morgan said: 'Many companies routinely raise funds using pre-paid commodity contracts.' The Mahonia arrangement is just one of a plethora of complicated ventures used by Enron.
It constructed hundreds of partnerships designed to keep debts off its books. The US Securities and Exchange Commission is investigating Morgan's relationships with Enron as part of a wider probe into the affair.
