Royal Bank of Canada has issued a statement after learning it is being sued by Dutch bank, Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., better-known as Rabobank, over a case involving Enron Corp.

RBC says on June 21 it learned Rabobank initiated legal proceedings against it in New York state court. The complaint refers to a total return swap transaction from January 2001.

“Under the total return swap, Rabobank in effect assumed responsibility for making all payments owed to RBC by Heracles Trust under a US$517 million loan agreement. Heracles Trust owns an interest in Aeneas LLC, a company affiliated with Enron Corporation. Rabobank was actively involved in the negotiation and structuring of the transaction,” it says.

“Until last Friday, Rabobank had fulfilled its contractual obligations related to the transaction and we expected that Rabobank would continue to act in good faith with respect to the terms of the transaction which include a full and final payment from Rabobank to RBC of US$517 million on June 28, 2002,” RBC says.

“We have reviewed the document filed with the New York court with our lawyers and believe the claim to be without merit. It consists of nothing more than innuendo and baseless speculation that inaccurately attempts to portray Rabobank, a large sophisticated international bank with a highly experienced team of derivative specialists and lawyers, as an unwitting victim of circumstance,” RBC argues. “We find this to be particularly astonishing given Rabobank’s involvement in at least one other Enron related off-balance sheet transaction.”

RBC calls Rabobank’s claims “a highly irresponsible and unwarranted attack on the reputation of RBC in an attempt to avoid meeting a clear financial obligation”. It concludes, “We intend to vigorously defend against Rabobank’s claims and to take action against this spurious and totally unfounded attack on our reputation. We will seek through the courts to require Rabobank to meet its financial obligation to Royal Bank of Canada.”