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

LJM2 would do had tripled their investment in just two years and that overall returns of 2,500%
to LJM2 investors were actually anticipated. In short, the non-public offering memorandum was
an invitation to join in the benefits of self-dealing transactions with Enron. Enron's bankers and the
top executives of those banks were permitted to invest in LJM2, as a reward to them for their
ongoing participation in the scheme – a sure thing for them.
26. It was indispensable to defendants' scheme that LJM2 be formed before year-end 99
because of the need to use it as a vehicle to consummate some transactions with Enron before year-
end 99 to create huge profits for Enron in the 4thQ 99 so that Enron could meet and exceed its
forecasted 99 earnings. However, as had been the case with Chewco at year-end 97, there was
tremendous time pressure and Merrill Lynch could not raise the money from outside investors in
LJM2 in time to fund LJM2 by year-end 99 with sufficient capital to enable it to do the desperately
needed transactions with Enron. So, in an extraordinary step, in 12/99, Enron, Fastow, Kopper,
Andersen, Vinson & Elkins and Enron's banks and bankers (JP Morgan, CIBC, Deutsche Bank, CS
First Boston, Lehman Brothers and Merrill Lynch), knowing that LJM2 was going to be an
extraordinarily lucrative investment anyway, created documentation that enabled the banks to
advance virtually 100% of the monies needed to initially fund LJM2, i.e., many times more than their
allocated shares in 12/99. Then, after LJM2 was fully funded in 00 and other investors' money
flowed into LJM2, those banks' initial "over-funding" in 12/99 was adjusted for in subsequent capital
contributions to LJM2.
27. To ensure that LJM2 could be an effective instrumentality of defendants' scheme to
manipulate Enron's reported profits and financial condition and enable Enron to conceal the true
extent of its debt, LJM2 needed bank financing. So JP Morgan initially provided a $65 million line
of credit to LJM2 – later, increased to $120 million with CS First Boston doing the lending – to
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