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

ENRON DEFENDANTS' SCIENTER ALLEGATIONS
395. As pleaded in this Complaint, the financial fraud and fraudulent course of business
at Enron permeated virtually all aspects of Enron's operations, including all of its three major
business operations WEOS, EES and EBS. In addition, the fraud was not only widespread
throughout Enron but involved the frequent manipulation of Enron's public disclosures and financial
reports via huge transactions – many of which were entered into at or near the end of reporting
periods, a circumstance, especially when it is repeated quarter after quarter as it was at Enron, which
is a significant red flag. Further, not only were these transactions large, frequent, widespread and
often at quarter-end, they were also highly structured and complex, requiring the personal attention
of several top executives of Enron, especially those sitting on the Enron Management Committee,
and the review and approval of board members, especially those sitting on the Enron Board's
Executive, Finance and Audit Committees, which had direct jurisdiction over these types of
corporate transactions and activities. Thus, it is logical, if not obvious, that all of Enron's officers
and directors knew of, or at a minimum acted in reckless disregard of, the falsification of Enron's
financial reports and the other false and misleading statements being made about its business
operations.
396. In addition, every Enron Defendant sued for fraud had a strong motive to engage and
participate in the scheme to defraud and to conduct Enron's business in a manner that operated as
a fraud or deceit on purchasers of Enron's publicly traded securities. Every Enron Defendant sued
for fraudulent misconduct sold substantial amounts, either in absolute or relative terms, of his or her
Enron stock, pocketing significant proceeds from his or her illegal insider trading. In addition,
Enron's officers were in a position to also pocket huge cash bonuses if, but only if, Enron achieved
certain preset earnings targets and its stock advanced to certain targeted trading levels. Also, the
- 309 -