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threats of no future business or promises of exorbitant returns. A Citigroup document says best whatevery LJM Investor Defendant knew: “In committing to LJM2, we understood that the Fund wouldbe relying on Enron directly for transactions. . . . Additionally, LJM2 principals argue that Enronwould make the Fund whole should it suffer losses because the vehicles that the Fund invests in arecritically important to Enron’s ability to manage its earnings.” CITI-B 0017103.254. In late 2001, the Insiders’ scheme began to unravel, exposing their fraud. OnOctober 16, 2001, Enron announced it would take a $544 million after-tax charge against earningsand a reduction of shareholders’ equity of $1.2 billion related to the LJM2 transactions. InNovember 2001, Enron restated its financials for the period 1997 through 2001 because ofaccounting errors relating to LJM1 and Chewco. The restatement reduced Enron’s reported netincome by $28 million in 1997; $133 million in 1998; $248 million in 1999; and $99 million in2000. The restatement also reduced shareholders’ equity by $258 million in 1997; $391 million in1998; $710 million in 1999; and $747 million in 2000. It increased debt over these years by morethan $2.5 billion. Powers Report at 2-3.255. Discovery of the truth about Chewco and the LJM entities led to discovery of theBank Defendants’ role in the Insiders’ fraud. It also exposed how the Bank Defendants knowinglyhelped the Insiders become rich at Enron’s expense.f. Enron’s outside directors were unaware of the scheme.256. From 1997 through 2001, Enron’s Board of Directors consisted largely ofindependent, outside directors who had no involvement in the Insiders’ and Bank Defendants’scheme and were unaware of it. From 1997 through 2001, these independent, non-managementdirectors constituted at least two-thirds of the Board, which ranged in number between fifteen andnineteen. Enron’s outside directors were well-qualified, accomplished business people orprofessionals. Twelve outside directors had served as CEOs of companies; one was a former Dean604041v1/007457-73-