Enron Corp. - University of California | Office of The President

in JEDI, making it possible for transactions between JEDI and Enron to artificially boost
Enron's reported results. Barclays also loaned the money to two straw parties (Little River and
Big River to provide the $11.4 million in funds for the 3% "equity" investment in Chewco. But
because Barclays knew that the purported equity investors in Chewco were, in fact, "strawmen"
for Enron, Barclays required Chewco to support the purported "equity loans" Barclays made to
the two "strawmen" via a $6.6 million reserve paid to Barclays! Because there was no legitimate
independent outside investor in Chewco, Chewco was required to have been consolidated with Enron
and all of Enron's 97 profits generated by transactions with JEDI would have been eliminated!
11. By forming Chewco at year-end 97, Enron's top insiders avoided a disaster by keeping
Enron's previously recorded profits from transactions with JEDI in place, thus inflating Enron's 97
reported profits by $45 million. They also kept as much as $700 million worth of debt off Enron's
books, making Enron look much more creditworthy and liquid than it actually was. Chewco was
now also positioned to serve as a controlled entity which Enron could use going forward to do non-
arm's-length transactions with, creating phony profits for Enron (at least $350 million) and allowing
Enron to conceal the true state of its indebtedness by improperly moving debt off its balance sheet
and onto the books of Chewco. Between 98 and 01, Enron, its accountants, lawyers and bankers
would create numerous other secretly controlled partnerships and entities and use them to generate
billions of dollars of additional phony profits for Enron and to conceal billions of dollars of Enron
debt by moving it off Enron's balance sheet.
C. The 97-00 Successes – Enron's Stock Soars
12. As Enron reported its better-than-expected year-end 97 financial performance,
Enron stock began to move higher, more than recovering all of the ground it had lost in 97. Then,
during 98 through mid-01, Enron appeared to evolve into an enormously profitable high-growth
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