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

of the Class, we necessarily had to cut off the further payment of defense costs for other insureds. At
the time our discussions with Kathy Patrick began, the insurance policies had been drained of $150
million out of the $350 million available. Since the Court had dismissed the Class’ §10(b) claims
against the Outside Directors, the only Class claims remaining against them were the §11 claims on
four Enron notes.
244. With Professor Green’s assistance, we reached an agreement with Kathy Patrick’s
clients that called for the Outside Directors to personally pay 10% of their gains on the sale of Enron
stock, plus their agreement to secure the remaining $200 million in insurance. That agreement was
reached only after hard-fought negotiations overseen by Professor Green, and it was just the starting
point for achieving an agreement that we could get approved.
245. First, Enron and its Creditors Committee stood in the way. Since the insurance
policies were arguably assets of the bankrupt entity, the Enron estate would object to payment of the
proceeds to the Class unless the estate received a cut. In order to obtain the remaining $200 million
for investors and to implement the agreement with the Outside Directors, the carriers would have to
ask Judge Gonzalez to lift the stay as to the balance of the excess coverage. Since the insurance
provided for entity coverage, Enron had an interest in obtaining some of the proceeds for the
creditors. Thus, Enron and the Creditors Committee could object to the motion to lift the stay and
thereby hold up payment of the insurance for the settlement. After more negotiations overseen by
Professor Green, we and counsel for Enron and the Creditors Committee reached an agreement for
the allocation of the insurance proceeds: 82.8% to the Class and 17.2% to Enron/Creditors
Committee.
246. Second, the non-settling insureds were unhappy that their ability to defend themselves
using the D&O insurance was coming to an abrupt halt. Since they were insureds and were not
receiving a release from our case, they arguably had a right to object to the use of the insurance
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