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

and the annual reports on Form 10-K. Item 404(a) requires disclosure of, among other things,
transactions exceeding $60,000 in which an executive officer of the company has a material interest,
naming such person and indicating the person's relationship to the registrant, the
nature of such person's interest in the transaction(s), the amount of such
transaction(s) and, where practicable, the amount of such person's interest in the
transaction(s).
The instructions to this section provide:
The materiality of any interest is to be determined on the basis of the significance of
the information to investors in light of all the circumstances of the particular case.
The importance of the interest to the person having the interest, the relationship of
the parties to the transaction with each other and the amount involved in the
transactions are among the factors to be considered in determining the significance
of the information to investors.
509. According to GAAP, financial statements are complete only when they contain all
material information necessary to represent validly the underlying events and conditions. See
Statement of Financial Accounting Concepts 2, 79. Financial statements must disclose the financial
effects of transactions and events that already have happened. See Statement of Financial
Accounting Concepts 1, 21.
510. The Enron Defendants failed to disclose Chewco and JEDI as related parties during
the Class Period. In fact, no related parties were disclosed in Enron's 97 or 98 10-Ks. Enron's 00
Form 10-K merely stated that it had "entered into transactions with limited partnerships (the Related
Party) whose general partner's managing member is a senior officer of Enron." This statement was
misleading. There was no disclosure of Fastow as managing member of the general partners of
LJM1 and LJM2 or that he received more than $30 million relating to his management and
investment activities. This was in violation of the disclosure requirements of SFAS No. 57.
511. The failure to set forth Fastow's compensation from the LJM transactions and the
process leading to that decision was a violation of GAAP and SEC rules. Item 404 of Regulation
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