Declaration Of Helen J. Hodges In Support Of Lead Counsel's ...

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opined the transactions improperly manipulated Enron’s publicly filed financial statements by materially overstating income, understating debt, overstating cash provided by operating activities, overstating equity, and understating financing cash flow. He opined Enron’s publicly reported financial statements were not in accordance with GAAP and the SEC’s requirements for full and fair disclosure. Mr. Solomon further opined Enron’s financial strength, as represented in its publicly filed financial statements, was materially misstated. Mr. Solomon also provided a detailed 306-page appendix to his expert report, providing detailed accounting analyses of Enron’s prepay, FAS 125/140, minority interest, and share trust transactions. Mr. Solomon was deposed for three days in May 2006. He testified that the structured finance transactions the banks did with Enron falsified Enron’s financial statements. He detailed the complex structures of dozens of the transactions and provided the impact of the transactions on Enron’s financial statements. The banks’ structured finance transactions disguised billions of debt and thereby allowed Enron to maintain an investment grade credit rating essential to its trading operations. The transactions caused Enron’s cash flow from operations to be materially overstated. Simply put, the transactions made Enron appear able to generate huge amounts of cash from its business operations, when in fact, the cash was being borrowed. No less than six experts for defendants attacked Solomon’s report. <strong>In</strong> rebuttal, Mr. Solomon held firm in his opinion that the substance of a transaction should be reflected in the financial statements and that the banks knew very well that the transactions they designed had the intended effect on Enron’s reported financial condition. 217. Professor Bernard Black is Professor of Law with the University of Texas Law School and Professor of Finance with the University of Texas, McCombs School of Business. Professor Black holds a J.D. from Stanford Law School and has extensive experience with, among other things, corporate finance, the federal securities laws, and compliance with the securities laws’ disclosure requirements. Professor Black submitted expert and rebuttal reports concerning the true - 122 -
nature of Enron’s financial condition during the Class Period, how Enron-related transactions were structured by defendants to distort Enron’s financial results, and generally how investors were deceived by the Enron-related transactions and resultant material omissions and misstatements. Professor Black was deposed for two days in May 2006. His testimony addressed the true nature of Enron’s financial condition, when Enron likely became insolvent, what investors would want to know about Enron, and the disclosures Enron provided (or failed to provide) about its financial results. He opined that “many of Enron’s disclosures were grossly and often intentionally incomplete and misleading” (1/17/06 Expert Report of Bernard Black at 6) and that Enron was cashflow insolvent by 1999 and perhaps as early as 1998. Professor Black’s rebuttal report was filed in response to ten defense expert reports challenging Professor Black’s expert opinions about Enron’s true financial condition, material omissions, and misleading disclosures resulting from the Enronrelated transactions. Two of them asserted he was not qualified to and had not performed any valid insolvency analysis. He held firm that if the truth had been told, Enron would not have maintained its investment grade credit rating and investors would have known early on that Enron was not generating enough cash from its operations to pay the interest on its debt. 218. Professor Claire Hill is a Professor of Law and Norman and Edna Freehling Scholar with Chicago-Kent College of Law, and is a Visiting Professor of Law at the University of Minnesota Law School. Professor Hill received her J.D. from American University, Washington College of Law and her LLM and JSD degrees from Columbia University School of Law. Professor Hill submitted an expert report concerning Enron’s interactions with the national credit rating agencies. Professor Hill opined on what the credit rating agencies did in response to their dealings with Enron, and further opined on how Enron security purchasers and sellers were affected by the interactions. Professor Hill testified about rating agencies, how they set ratings and how Enron misled them when it hid its true debt level and reported inflated cash flows from operations. She - 123 -
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UNITED STATES DISTRICT COURT SOUTHE
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2. The Parties Establish a Document
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I, HELEN J. HODGES, declare as foll
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• Reviewed over 70 million pages
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6. The above recoveries were based
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gathered and which the banks and En
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14. In this endeavor, Coughlin Stoi
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17. Lead Counsel prosecuted the lit
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[T]his representation has been unde
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and the necessary involvement with
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case. The Court hereby awards attor
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published an article, “Enron Jolt
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statements. We compiled profiles on
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34. We had no way of knowing whethe
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which witnesses to pursue, but cont
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the market in October 2001. The ana
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said it was unable to determine whe
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depositions because discovery was p
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65. After the motion was filed, The
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institutional plaintiffs, their rep
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drawing on the expertise of our in-
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83. On May 3, 2002, the Preferred P
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finance certain of the partnerships
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and participated in a scheme to def
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(j) Arthur Andersen LLP (Docket No.
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Lead Plaintiff had adequately alleg
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(a) The Court ruled that Lead Plain
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director of New Power, and issuance
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94. On September 26, 2002, Lead Pla
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mandamus review, and that the Court
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106. On May 6, 2003, defendant Citi
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scheme, and certain specific allega
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pled with the requisite particulari
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Merrill Lynch and Deutsche Bank Ent
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4. Motions to Intervene Additional
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Gramm, Jaedicke, LeMaistre, Meyer,
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professionals and experts, and atte
Page 75 and 76: 121. On May 7, 2003, the Outside Di
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Page 79 and 80: 131. As part of discovery, Lead Cou
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Page 93 and 94: Protocol Order provided for the ord
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Page 121 and 122: 208. A two-day hearing was held reg
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Page 135 and 136: 236. Bankruptcy Examiner Batson him
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Page 151 and 152: Plaintiff’s Opposition to Motion
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Page 166 and 167: ADDITIONAL SERVICE LIST Stuart Yoes
Page 168 and 169: ENRON COUGHLIN STOIA GELLER RUDMAN
Page 170 and 171: Name Title Hours Rate Lodestar Meye
Page 172 and 173: ENRON - SUMMARY OF PLAINTIFFS' FIRM
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EXHIBIT 4
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TOP SECURITIES SETTLEMENTS Case Nam
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Exhibit Listings and Notes regardin
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