Reporting: See-Through Finance

Accounting issues aside, the banks' own deal books should have been enough to raise red flags. Using its inside knowledge of Enron's prepaid swaps with Citigroup, Salomon Smith Barney concluded in November 1999 that Enron's financial statements underreported its debt by 38 percent. By April 2001, Salomon estimated Enron's debt to be 57 percent to 92 percent higher than reported. Nonetheless, Citigroup sold bonds based on Enron's reported debt to the public in 2000 and 2001.

Indeed, Enron's allure seems to have overpowered red flags. Internal E-mails suggest JPMorgan Chase officials were shocked to learn in October 2001 just how much Enron had outstanding. "$5B in prepays!!!!!!!!!" wrote one employee. The response was: "shutup and delete this email." —T.R.

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