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

without any adequate feasibility study or the creation of any detailed business plan, thus rendering
the venture one of extraordinarily high risk that defendants knew was unlikely to generate profits or
adequate returns going forward.
(i) In fact, Enron did not deserve an investment-grade credit rating and did not
have a solid or substantial financial structure because it was inflating the value of its assets by
billions of dollars while concealing billions of dollars of debt that should have been on its balance
sheet. As a result, Enron's true financial structure was extremely fragile.
(j) The forecasts for strong continued revenue and earnings growth for Enron's
WEOS and for continued growth and future profitability of the EES operations were false, in part,
because the historical financial performance and condition of those operations had been materially
falsified – thus there was no real basis upon which to forecast such further growth – and because
neither of those businesses had the current strengths or success to justify the forecasts and claims for
future growth that were being made.
(k) As a result of the foregoing, the revenue and EPS forecasts being made by and
for Enron going forward were also false because historical earnings, upon which those forecasts were
based, were falsified and the result of improper accounting manipulations. In truth, Enron's various
business operations not only had overvalued assets and huge concealed losses, which would have
to be recognized and would very adversely impact Enron's financial results, but those core business
operations did not have the strength or success necessary for them to generate anywhere near the
kind of revenue and profit growth being forecast for them.
122. On 10/21/98, Enron issued a release concerning its broadband fiber optic buildout:
Enron Corp., announced today that it has begun construction on a long-haul fiberoptic
route that will span from Salt Lake City to Houston.
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