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

which witnesses to pursue, but continued meeting with anyone who would talk substantively, as we
grappled with myriad entities and increasing complexity unique in our experience. Many times we
received information that had no seeming relevance – or at least we did not yet know enough about
how Enron did business to evaluate the relevance of the information we received. Coordinating the
efforts of interviewing investigators, database researchers, and staff doing locate and employmentconfirmation
calls required continued reevaluation, while ongoing research to identify prospective
witnesses expanded to include – beyond Enron, Andersen and Vinson & Elkins (“V&E”) –
McKinsey Consulting, Andrews & Kurth (“A&K”), Dynegy, and a growing list of energy-sector
traders, companies and counterparties to transactions, which would lead us, ultimately, to investigate
Enron’s banks.
40. We continued with witness interviews and database research on underwater EES
contracts, the California energy crisis and dark-fiber swaps for EBS. One of our lawyers traveled to
New Orleans to talk with a former internal auditor who investigated the rogue trading operation in
Valhalla, New York, in 1987. This was the best in a series of sessions with internal auditors. They
told us how their group reported to Kenneth Lay (“Lay”) and a Board member that he had no choice
but to fire the two New York trading executives for criminal conduct, let alone a serious conflict of
interest. They were stunned by Lay’s response: Take away their administrative duties, but let them
continue trading because they are making the Company too much money and we can’t disappoint the
shareholders. These internal auditors proved invaluable as direct sources and in pointing the
investigative team to the right people and helping us ask the right questions. Through this group we
learned crucial details, later pleaded in the Consolidated Complaint, about over-budget international
deals and how executives padded true construction costs to provide for their huge bonuses – none of
which was ever shared with the engineers and construction crews that did their best to make the
projects work. And we learned the hows and whys of Enron’s overpaying for virtually all of its
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