Enron shareholders seeking $40 billion (£20 billion) in damages from several Wall Street banks accused of contributing to the collapse of the energy trading giant received a welcome boost as the US Securities and Exchange Commission (SEC) pledged its backing for their case.

The class-action lawsuit, set to begin in the US Supreme Court in October, alleges that Credit Suisse, Merrill Lynch and Barclays should be held equally as liable as Enron for the massive accounting fraud that led to the company's bankruptcy in December 2001.

Thirty States have backed the case but in recent weeks unions, regulators and lawyers have lobbied the SEC to add its support and send a strong signal in favour of consumer protection.

On Saturday The Washington Post, citing unnamed sources, reported that the agency had asked the Justice Department to file a brief in favour of the shareholders' position.

The news comes less than a week after the lawyer leading the case, Bill Lerach, told colleagues at Lerach Coughlin Stoia Geller Rudman & Robbins that he was considering retirement.

Mr Lerach, 61, is one of the most accomplished class-action litigators in the US.

A colourful, abrasive figure, he has built his reputation as a champion of shareholders' rights and is said to have recovered $7.3 billion in damage awards.

But his decision to step down during the most high-profile case of his career has provoked surprise in the American legal industry and led to widespread speculation that a corruption scandal at his former firm, Millberg Weiss & Bershad, may have come back to haunt him.

Last year, two lawyers at Millberg Weiss, David Bershad and Steven Schulman, were indicted for allegedly handing out $11 million in kickbacks to class-action claimants in more than 150 cases.

Mr Lerach, who left the firm in 2004, was not included in the indictment but the investigation is continuing.

Mr Lerach led the Enron shareholders' case to the Supreme Court after a federal appeals court in New Orleans rejected their suit in March.

The shareholders claim that the banks played a leading role in the fraud that led to the collapse of America's seventh-largest corporation, which wiped out thousands of jobs, more than $60 billion in market value and $2 billion in pension plans.

Under a 1995 law, a single defendant can be held liable for the entire amount of damages if a judge determines that securities laws were violated knowingly.

In a seperate Enron-related case, Credit Suisse agreed to pay $61.5 million to clear itself of all its legal disputes with Enron itself.

Credit Suisse accepted no liability as part of the settlement, which is subject to the approval of the US Bankruptcy Court for the Southern District of New York.

"We are pleased with this settlement reached with Credit Suisse and look forward to successfully resolving the remaining equity transactions cases," John J. Ray III, the Enron chairman, said in a statement.

Enron is still involved in claims against UBS and Bear Stearns.

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