Mergers and acquisitions, commercial loans, IPOs, bonds, fraud: Yes, fraud may be the new Wall Street profit center if two judges of the US Court of Appeals for the Fifth Circuit have their way. They ruled that the banks were immune from liability despite participating in and profiting from Enron’s myriad fraudulent schemes.

Enron was the most spectacular corporate fraud in a time of jackals. Kenneth “Kenny Boy” Lay and his cohorts cooked the books, cashed out more than $1 billion in holdings and bilked hundreds of thousands of small investors out of their savings. Some executives were found guilty and are serving time. Led by the University of California Regents, investors sued the executives, accountants and banks involved in defrauding them.

Mervyn “Buddy” Schwartz worked for thirty years as a mechanic on the Hershey candy company assembly line. When he retired, his son, a financial adviser at Merrill Lynch, told him that Merrill was touting Enron. So Buddy invested heavily in the company. When Enron collapsed, he lost it all. Gone was the plan for a retirement place in Arizona with his wife. Gone were the small funds he hoped to leave his grandchildren. He joined the shareholders suit, hoping to recover something from those who concocted the schemes that helped Enron cook its books. To avoid embarrassment, several of the banks settled with the plaintiffs.

But Merrill Lynch and a number of others held out. The suit was headed to trial when the Fifth Circuit, in a two-to-one decision, ruled in March that although the banks had participated in and profited from the fraudulent schemes, they were not liable. Using words to evoke Dickens’s “the law is a ass,” the two judges ruled that the “factual probability that the market relied on the banks’ behavior…does not mean that plaintiffs are entitled to the legal presumption of reliance.” After all, the judges wrote, “the banks only aided and abetted [Enron’s] fraud by engaging in transactions to make it more plausible; they owed no duty to Enron shareholders.” Their schemes were a public lie, but they made no other false statements directly to shareholders. The two judges confessed that “our ruling…may not coincide…with notions of justice and fair play,” but to rule otherwise would open the “floodgates” to litigation by defrauded investors. For these “justices,” allowing banks to participate in fraud risk-free is preferable to requiring them to help police the market.

Consider Merrill Lynch. It was peddling Enron stock through brokers like Buddy’s son. But at the same time, its investment side was cooking up a deal to inflate Enron’s finances. In one of many deals, Merrill agreed to “buy” a power plant floating off the coast of Nigeria from Enron in time for the “profits” to be reported in Enron’s year-end financial statement, while secretly contracting to sell the plant back to Enron at a higher price six months later. The fraudulent transaction was designed solely to falsify Enron’s books, generating fake profits that Merrill’s own brokers were touting in driving up the price of the stock.

The issues in the Enron scandal are now before the Supreme Court in a separate case. In early June, after a furious lobby drive that included regulators from thirty states, the Securities and Exchange Commission apparently decided to stand with the defrauded investors. The Washington Post reports that the SEC, in an act that is still not public, asked the Solicitor General to file in support of the investors.

Enron, WorldCom and hundreds of other companies and banks engaged in the worst corporate thievery in history. Companies cooked their books, aided by banks, accountants and lawyers, while senior executives backdated their pensions and cashed in before the truth came out.

Never has the need for legal accountability been clearer. It would be perverse beyond imagination if the Supreme Court were to ignore simple justice and the weight of the SEC and make fraud the new profit center for Wall Street’s banks. That would give new meaning to the term “bank robbers.”