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

S-K required the disclosure of the amount of Fastow's interest in the transactions. This was not
merely an unintentional omission. There was significant discussion, both within Enron management
and with outside advisors, about how Enron could avoid disclosing Fastow's compensation from the
related parties in the face of clear language in the regulations that such disclosure was required.
512. The "Certain Transactions" sections of Enron's proxy statements in 00 and 01
included disclosures of transactions with the LJM partnerships. Enron described the establishment
of LJM1 and LJM2 in its 5/00 proxy statement. Each was described as "a private investment
company that primarily engages in acquiring or investing in energy and communications related
investments." However, it was impossible for a reader of the proxy statements to understand the
nature of the transactions or their significance.
513. The description of LJM1 in the Form 10-Q for the 2ndQ 99 was similar to the one
the Company used in the 00 proxy statement, described above. The footnote said that "[a] senior
officer of Enron is managing member of LJM's general partner." This footnote did not identify
Fastow as the "senior officer of Enron," nor did the financial statement disclosure in any subsequent
period. The disclosure concealed Fastow's identity and his compensation from LJM. Substantially
the same disclosures were made in the 3rdQ Form 10-Q and in the 99 10-K.
514. In the Form 10-Q for the 2ndQ 00, Enron described the LJM partnerships as follows:
"In the first half of 2000, Enron entered into transactions with limited partnerships (the Related
Party), whose general partner's managing member is a senior officer of Enron. The limited partners
of the Related Party are unrelated to Enron." From the 2ndQ 00 forward, Enron never identified
LJM1 or LJM2 by name in the financial statement disclosures.
515. These descriptions were false and misleading. In each of the financial statement
footnote disclosures concerning the transactions with LJM, Enron made a false representation
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