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

Enron's closeness to LJM2 was reinforced not just by Fastow's role, but by
an appearance by Enron then-President Jeffrey Skilling at an LJM2 partnership
meeting in the fall of 2000.
In a Feb. 6, 2001, letter to investors, Fastow recounted a successful year with
"deal flow higher than originally expected" and the projected returns "far in excess
of the targeted 30%."
The partnership still had nearly $400 million in assets in early January ....
31. Not only did these favored investors in LJM2 get a promise of superior returns when
LJM2 was formed, they actually witnessed a series of extraordinary pay outs from the Raptor SPEs
which LJM2 controlled over the next two years – securing hundreds of millions of dollars in
distributions from the Raptors to LJM2 and then to themselves – cash generated by the illicit and
improper transactions Enron was engaging in – i.e., the manipulative devices – with the Raptors to
falsify Enron's financial results. Thus, the banks and bankers who were partners in LJM2 were not
only knowing participants in the Enron scheme to defraud, they were economic beneficiaries of
it. Had the Enron Ponzi scheme continued to operate for the full life of the LJM2 partnership,
Enron's banks would have achieved the stupendous returns they were promised – measured in
thousands of percent. And these actual and potential payments from LJM2 were on top of the
huge advisory fees, underwriter fees, interest and loan commitment fees these banks were already
getting from Enron and would continue to get if the Enron scheme continued.
32. From 6/99 through 6/01, Enron entered into numerous transactions with the LJM
partnerships. Enron sold assets to LJM that it wanted to get off its books on terms that no
independent third party would ever have agreed to. The transactions between the LJM partnerships
and Enron or its affiliates occurred close to the end of financial reporting periods to artificially
boost reported results to meet forecasts Enron and other participants in the scheme had been
making. For instance, near the end of the 3rd and 4thQ 99, Enron sold interests in seven assets to
- 25 -