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The spotlight on Enron has shifted to Kirkland & Ellis, Vinson & Elkins and Andrews & Kurth – all of which face the threat of litigation from a group of the disgraced energy trader’s unsecured creditors.
In a request filed on 26 November, the unsecured creditors of Enron sought permission from New York bankruptcy judge Arthur Gonzalez to sue the three law firms. A hearing on the request will take place on 1 December.
Vinson & Elkins, says the filing, was primary legal counsel to Enron on many transactions that allowed the company to soup-up profits and disguise its losses, while Andrews & Kurth is accused of malpractice and malfeasance.
Kirkland & Ellis is singled out for its role advising Andrew Fastow, chief financial officer and former senior vice president at Enron, on structuring a number of the infamous off-balance-sheet special purpose entities (SPE).
It is understood that the SPEs on which Kirkland & Ellis advised include LJM and LJM2, named after the initials of Fastow’s wife Lea and his two children.
The three firms are among a number of potential defendants targeted by the unsecured creditors, represented by Milbank Tweed Hadley & McCloy, including collapsed accountant Arthur Andersen.
While Kirkland & Ellis may be hit with litigation by the unsecured creditors, the firm is not mentioned in last week’s report submitted by Neal Batson, a bankruptcy partner at Atlanta’s Alston & Bird and the court-appointed investigator on Enron.
Released on 24 November, the startling report states that Vinson & Elkins represented Enron in relation to 66 SPE transactions.
It also states there is “sufficient evidence” to conclude that the firm committed malpractice in aiding and abetting breaches of fiduciary duty by Enron officers.
Batson also points out that from 1997 until 2001, when Enron filed for bankruptcy, Vinson & Elkins earned $162.2m (£94.3) in legal fees. Andrews & Kurth reaped a relatively minute $29.1m (£17m) over a five-year period.