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

published an article, “Enron Jolt: Investments, Assets Generate Big Loss – Part of Charge Tied to 2
Partnerships’ Interests Wall Street,” which detailed not only the Company’s $1.01 billion charge
connected to write-downs of soured investments, producing a $618 million third-quarter loss, but
also the conflict-of-interest questions raised by a pair of limited partnerships – LJM1 and 2 – run by
Enron’s CFO Fastow. John Emshwiller and Rebecca Smith, Enron Jolt: Investments, Assets
Generate Big Loss – Part of Charge Tied to 2 Partnerships’ Interest Wall Street, Wall St. J., Oct. 17,
2001, at C1. A week later the Wall Street Journal reported on October 23, 2001 that Enron had been
contacted by the SEC seeking information about the LJM partnerships, with concerns that, “if
Enron’s credit rating and stock price fell far enough, the company would be obligated to issue tens of
millions of additional shares to [related] entities.” Rebecca Smith and John R. Emshwiller, SEC
Seeks Information On Enron Dealings With Partnerships Recently Run By Fastow, Wall St. J., Oct.
23, 2001, at A3. The implosion of the seventh-largest company in America had begun, and with it,
months of intense witness development and investigation. On October 22, 2001, the Company
announced the informal SEC inquiry about the controversial LJM partnerships. We had been
analyzing and watching these developments unfold and began preliminary database researches and
reviewing all recent media references to Enron before preparing internal stock-sale charts for
insiders. As our ongoing investigation heated up, the firm engaged L.R. Hodges & Associates, Ltd.
(“LRH&A”), 11 a firm of investigators, in developing many of the particulars for the allegations in the
Consolidated Complaints filed in April 2002 and May 2003. Without benefit of formal discovery
tools, barred by the PSLRA until the resolution of motions to dismiss, we utilized an arsenal of
informal discovery techniques: review of thousands of pages of media and SEC filings, confidential
informants and database searches, which led to cold calls and interviews with myriad former
11
Lynne Hodges, the principal of LRH&A, is not related to me.
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