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

to be utilized to engage in transactions with Enron where Enron insiders would be on both sides of
the transactions, the LJM2 partnership would be extremely lucrative – a deal that was virtually
guaranteed to provide huge returns to LJM2's early investors as the Enron Ponzi scheme went
forward. In fact, Fastow's dual role by which he could self-deal on behalf of the LJM2 partnership
with Enron's assets was so important that investors in LJM2 were assured that they did not have
to make any additional capital contributions if Fastow's dual role ended.
25. Because the LJM2 partnership was potentially so lucrative to investors in that private
entity, Enron's top insiders and Merrill Lynch decided that in funding LJM2, they would allow
certain favored investment banks and high-level officers of those investment banks and other
favored Merrill Lynch clients to invest in LJM2 because they knew the investment was virtually
guaranteed to produce exceptional returns as the Enron Ponzi scheme continued. In fact, the
offering memorandum for the LJM2 partnership by which Enron and Merrill Lynch brought
investors into the partnership – which was not a public document – contained an invitation to
benefit from the insider self-dealing transactions that LJM2 would engage in. It stressed the
"unusually attractive investment opportunity" resulting from LJM2's connection to Enron. It
emphasized Fastow's position as Enron's CFO, and that LJM2's day-to-day activities would be
managed by Enron insiders Fastow, Kopper, and Ben Glisan, Enron's Treasurer. It explained that
"[t]he Partnership expects that Enron will be the Partnership's primary source of investment
opportunities" and that it "expects to benefit from having the opportunity to invest in Enron-
generated investment opportunities that would not be available otherwise to outside investors."
It specifically noted that Fastow's "access to Enron's information pertaining to potential
investments will contribute to superior returns." In addition, investors were told that investors
in a similar Fastow controlled partnership (JEDI) that had done deals with Enron like the ones
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