Footnote 8

LJM2 (technically, LJM Co-Investment, L.P.) was a Delaware limited partnership. Through entitieshe controlled, Fastow served as the general partner of the managing partner of each.228. Both LJM partnerships were formed in 1999. From June 1999 through June 2001 – aperiod of two years – the Insiders had Enron enter into more than twenty distinct transactions withthe partnerships. Three were with LJM1 and the rest with LJM2. Through those twenty-plustransactions, the Insiders were able to increase dramatically their manipulation of Enron’s financialstatements. They moved many poorly performing assets off-balance sheet. They manufacturedearnings for Enron through sham transactions when Enron was having trouble otherwise meetingits goals for a quarter. They even improperly inflated the value of Enron’s investments bybackdating transaction documents to dates advantageous to Enron. Powers Report at 4-5, 134;Exam. II., App. L at 1, 6, 28.(3) In 1999, CSFB and RBS aided Fastow by knowingly participatingin and supporting LJM1.229. Subject to conditions imposed by Enron’s board, Fastow formed LJM1 at the end ofJune 1999. The ostensible reason for its formation dates back to 1998.230. In March 1998, an Enron subsidiary purchased 37% (5.2 million shares) of the equityin Rhythms NetConnection, Inc. (“Rhythms”) common stock for $10 million. Under the purchaseterms, Enron was restricted from selling its equity until January 2000 (the “Lock-up”). In April1999, 9.4 million shares of Rhythms stock were sold in an initial public offering. As a result, thevalue of Enron’s Rhythms investment increased to approximately $260 million.231. After the public offering, Enron marked its Rhythms stock to market. However, itrecognized that considerable risk was associated with marking to market the highly volatile Rhythmsshares. The Lock-up prohibited Enron from selling its shares, making it vulnerable to any marketdecline in Rhythms’ value. Moreover, even if Rhythms retained its value until Enron could sell its604041v1/007457-65-