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

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international projects, how executives collected their bonuses before any thought was given to whether the project would actually work – let alone turn a profit – and how expenses were “snowballed” – added to the next project – for many projects that never went beyond the negotiation stage. 41. The Court’s February 15, 2002 appointment of The Regents as Lead Plaintiff coincided with a new direction for our investigators and lawyers. The combination of SEC filings, media reports and details from witness interviews outlined how Enron accounted for bank loans as something called prepays, using commodity trades to disguise debt and reporting the loans as cash flow from operations rather than from financing. Consequently, we went back to witnesses connected to Enron’s global-finance and accounting sections, as well as to industry and banking consultants. We focused first on Citigroup, CSFB, and JPMorgan and how their swap transactions bolstered Enron’s positive credit ratings. We delved into SPE Mahonia’s relation to JPMorgan and Enron to facilitate off-shore gas trades, and spent considerable time being educated about Generally Accepted Accounting Principles (“GAAP”) accounting by our in-house forensic accountants. And we monitored daily Internet and media articles that detailed Enron’s use of prepays and SPEs. IV. THE FIRM AGGRESSIVELY PROSECUTED THE CASE BEFORE AND AFTER LEAD PLAINTIFF WAS APPOINTED 42. From the outset we undertook an aggressive discovery and law-and-motion litigation posture. Among other things, we pursued evidence, attempted to preserve Enron stock sales proceeds for future investor recovery, prevent evidence spoliation and curtail abusive defense discovery. 1. Motion to Freeze Insider Trading Gains 43. Lead Counsel’s prosecution began immediately after its initial investigation and filing of the class action complaint. Lead Counsel’s analysis revealed Enron’s directors and officers had engaged in massive insider selling before material adverse information about Enron was disclosed to - 26 -
the market in October 2001. The analysis showed 29 Enron insiders had sold 17.3 million Enron shares before Enron’s implosion in fall 2001, resulting in illegal insider trading proceeds of $1.1 billion. 44. On December 5, 2001 Lead Counsel filed an ex parte application for a temporary restraining order (“TRO”) imposing a constructive trust over the $1.1 billion in insider trading proceeds. Lead Counsel also sought an accounting of the Enron defendants’ gains and sought limited expedited discovery under the PSLRA pursuant to 15 U.S.C. §78u-4(b)(3). 45. Lead Counsel’s ex parte application explained how Enron and its executives concealed their fraud until Enron declared bankruptcy on December 2, 2001 and why Enron’s financial statements from 1997 through the second quarter of 2001 were false and misleading, overstating Enron’s financial results by billions of dollars. The ex parte application included opinions from two knowledgeable experts in securities fraud and the federal securities laws. 46. Lead Counsel detailed the insider trading of numerous Enron executives, including Lay, Skilling, Fastow, Richard Causey (“Causey”), Lou Pai (“Pai”), Harrison, and others. Lead Counsel’s ex parte application explained how the federal securities laws provided for equitable disgorgement of defendants’ insider trading proceeds. The ex parte application sought limited expedited discovery, in part because defendants had used offshore partnerships and illicit straw entities to accomplish the Enron fraud. Lead Counsel also explained why discovery should not be stayed under the PSLRA. Other plaintiffs joined in support of Lead Plaintiff’s TRO application. 47. Defendants opposed the ex parte application for a TRO, stating plaintiffs were attempting an “end-run” around the PSLRA and its discovery stay. Defendants further argued plaintiffs were not entitled to a “prejudgment restraint” on defendants’ assets absent a lien or viable equitable interest in the insider trading proceeds. Defendants filed a subsequent joint brief, again arguing plaintiffs had no “equitable interest” in the $1.1 billion in insider trading proceeds. - 27 -
Page 1 and 2: UNITED STATES DISTRICT COURT SOUTHE
Page 3 and 4: 2. The Parties Establish a Document
Page 5 and 6: I, HELEN J. HODGES, declare as foll
Page 7 and 8: • Reviewed over 70 million pages
Page 9 and 10: 6. The above recoveries were based
Page 11 and 12: gathered and which the banks and En
Page 13 and 14: 14. In this endeavor, Coughlin Stoi
Page 15 and 16: 17. Lead Counsel prosecuted the lit
Page 17 and 18: [T]his representation has been unde
Page 19 and 20: and the necessary involvement with
Page 21 and 22: case. The Court hereby awards attor
Page 23 and 24: published an article, “Enron Jolt
Page 25 and 26: statements. We compiled profiles on
Page 27 and 28: 34. We had no way of knowing whethe
Page 29: which witnesses to pursue, but cont
Page 33 and 34: said it was unable to determine whe
Page 35 and 36: depositions because discovery was p
Page 37 and 38: 65. After the motion was filed, The
Page 39 and 40: institutional plaintiffs, their rep
Page 41 and 42: drawing on the expertise of our in-
Page 43 and 44: 83. On May 3, 2002, the Preferred P
Page 45 and 46: finance certain of the partnerships
Page 47 and 48: and participated in a scheme to def
Page 49 and 50: (j) Arthur Andersen LLP (Docket No.
Page 51 and 52: Lead Plaintiff had adequately alleg
Page 53 and 54: (a) The Court ruled that Lead Plain
Page 55 and 56: director of New Power, and issuance
Page 57 and 58: 94. On September 26, 2002, Lead Pla
Page 59 and 60: mandamus review, and that the Court
Page 61 and 62: 106. On May 6, 2003, defendant Citi
Page 63 and 64: scheme, and certain specific allega
Page 65 and 66: pled with the requisite particulari
Page 67 and 68: Merrill Lynch and Deutsche Bank Ent
Page 69 and 70: 4. Motions to Intervene Additional
Page 71 and 72: Gramm, Jaedicke, LeMaistre, Meyer,
Page 73 and 74: professionals and experts, and atte
Page 75 and 76: 121. On May 7, 2003, the Outside Di
Page 77 and 78: of Enron’s prominence and magnitu
Page 79 and 80: 131. As part of discovery, Lead Cou
Page 81 and 82:
Third Parties and Defendants Date S
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Third Parties and Defendants Date S
Page 85 and 86:
133. Document requests and subpoena
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139. In responding to the document
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146. In addition to JPMorgan’s in
Page 91 and 92:
10. Requests for Admission 152. In
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Protocol Order provided for the ord
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privilege. And the defendants agree
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Deponent Entity Date[s] Location No
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Page 101 and 102:
Page 103 and 104:
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promptly responded to all discovery
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Enron securities, and questions con
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securities, understanding of a repr
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187. Lead Counsel made further supp
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April 16, 2004, Lead Counsel filed
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195. On April 13, 2004, defendants
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Plaintiffs’ Investors Partner Lif
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• Outside Directors’ Memorandum
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208. A two-day hearing was held reg
Page 123 and 124:
Expert Entity Area of Opinion Dorri
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and is the basis for a presumption
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nature of Enron’s financial condi
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economically valid method and frame
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primarily involving Deutsche Bank,
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We filed a notice of request for se
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236. Bankruptcy Examiner Batson him
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egarding the §11 claims, which wer
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proceeds for our settlement. Thus,
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egarding the policies and he moved
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team; for example, we reviewed info
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Court ruled that Lead Plaintiff fai
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Opposition to Deutsche Bank’s Mot
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Sec. Litig., 443 F.3d 987 (8th Cir.
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Plaintiff’s Opposition to Motion
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dated June 5, 2006 as It Pertains t
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the Pleadings (Docket No. 5019). On
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joint-and-several liability for kno
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pricing or trade volume data, estim
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y the court and cited in In re Cend
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296. Attached hereto as Ex. 2 is a
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ADDITIONAL SERVICE LIST Stuart Yoes
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ENRON COUGHLIN STOIA GELLER RUDMAN
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Name Title Hours Rate Lodestar Meye
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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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