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

Plaintiff had failed to properly allege claims for control person liability. Lead Plaintiff’s opposition
argued that its claims were timely asserted, the offerings were public, and control person liability
was adequately alleged. The Court ruled that the claims were timely filed, Lead Plaintiff had
standing, and rejected the defendants’ contentions regarding the supposed private nature of the
offerings, ruling that it was a fact issue not properly decided on a motion to dismiss. The Court also
ruled that Lead Plaintiff had properly pled claims for control person liability. As such, the Court
denied the motion to dismiss. See 4/6/04 Order re Bank of America Defendants’ Motion to Dismiss
(Docket No. 2064) at 10-11.
(f)
Merrill Lynch argued that Lead Plaintiff had not alleged facts establishing that
Merrill Lynch was a primary violator of the securities laws, and that Lead Plaintiff had not alleged
loss causation for the Nigerian Barges transaction. With regard to the primary violator issue, Merrill
Lynch argued that Lead Plaintiff’s claims were barred by Central Bank, claiming that Merrill Lynch
did not have any special relationship to Enron’s shareholders, did not make any purported
misstatements, did not direct or create the alleged fraudulent transactions, and did not participate in
Enron’s accounting. With regard to loss causation, Merrill Lynch argued that it was absent because
the details of the Nigerian Barges transaction were not publicly revealed until after the collapse of
Enron. Lead Plaintiff’s opposition argued that Lead Plaintiff’s claims were cognizable
notwithstanding Central Bank, and that loss causation was adequately pled. The Court denied
Merrill Lynch’s motion to dismiss, finding primary liability adequately alleged based on Lead
Plaintiff’s allegations that Merrill Lynch engaged in deceptive conduct in the Nigerian Barges
transaction, its issuance of analyst reports on Enron containing false and misleading statements, and
internal acknowledgment that the Nigerian Barges transaction was calculated to manipulate Enron’s
financial statements. Similarly, the FACC’s allegations about Merrill Lynch’s power trades with
Enron suggested conduct calculated to deceive investors. See 3/29/04 Memorandum and Order re
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