Enron Questions For Two Banks

(REUTERS) Congressional investigators reportedly say Enron raised billions of dollars in cash from major banks in what amounted to loans that it concealed as it struggled to survive.

That's according to the Washington Post, which quotes sources as saying that in the final year before its bankruptcy protection filing, J.P. Morgan Chase & Co., Citigroup Inc. and other banks transferred more than $5 billion to Enron using complex transactions that were labeled as energy trades.

According to the report, the transactions, known as prepays, hid part of Enron's mounting debt burden during the last months before it filed for bankruptcy protection in December.

The prepay arrangements will be the focus of a Senate governmental affairs subcommittee hearing Monday.

According to the newspaper, investigators found that J.P. Morgan and Citigroup were Enron's main source of prepay funding between 1992 and 2001, sending more than $8.5 billion to the company.

The newspaper said the Houston energy trader received large advance payments from the banks for supplies of natural gas or other commodities for which it had contracts for delivery over a number of years. Enron used the payments to improve its cash flow on its financial statements, rather than booking them as debt, according to the report.

"It has become common knowledge that Enron engaged in accounting deceptions to convince lenders, investors and analysts that the company was in better financial shape than it was," Sen. Carl Levin, a Michigan Democrat and chairman of a Senate Governmental Affairs subcommittee on investigations said in a statement.

"The question the subcommittee will examine is the extent to which major financial institutions like J.P. Morgan and Citicorp knew of and aided Enron's accounting deceptions," Levin said.