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

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05/17/01 Enron Euro Credit Linked Notes Trust 05/17/01 Enron Credit Linked Notes Trust II 05/17/01 Enron Sterling Credit Linked Notes Trust 07/12/01 Marlin Water Trust II Marlin Water Capital Corp. II Osprey Trust/Osprey I Inc. Offering i200,000,000 6.5% Enron Euro Credit Linked Notes due 06 $500,000,000 7.375% Enron Credit Linked Notes due 06 £125,000,000 7.25% Enron Sterling Credit Linked Notes due 06 $475,000,000 6.31% Senior Secured Notes due 03; and i515,000,000 6.19% Senior Secured Notes due 03 - 410 - Salomon International Salomon Salomon International Credit Suisse First Boston Corp., Deutsche Bank Securities Inc. fka Deutsche Banc Alex. Brown, Banc of America Securities LLC, CIBC World Markets Corp., CIBC World Markets plc and JP Morgan 641.3 On 9/23/99, Deutsche Bank, CSFB and CitiGroup, as underwriters/initial purchasers sold $1,400,000,000 8.31% Senior Secured Notes due 03 issued by Osprey Trust, Osprey I, Inc., pursuant to an Offering Memorandum. The repayment of these notes was dependent upon the credit, financial condition and ability to pay of Enron. These notes were publicly traded on the Luxembourg Exchange. CitiGroup. with the SEC: 641.4 The underwriters/initial purchasers of these notes were Deutsche Bank, CSFB and 641.5 The Offering Memorandum for this security incorporated the following Enron filings (a) Annual Report on Form 10-K for the year ended 12/31/98; (b) Quarterly Report on Form 10-Q for the quarter ended 3/31/99;
(c) Quarterly Report on Form 10-Q for the quarter ended 6/30/99; and (d) Current Reports on Form 8-K dated 1/26/99 and 3/99. 641.6 The Offering Circular for this security also described Enron's business in detail, including the following: DESCRIPTION OF ENRON Enron is one of the world's leading international integrated natural gas, electricity and communications companies. Enron's activities are conducted through its subsidiaries and affiliates which are principally engaged in the transportation of natural gas through pipelines to markets throughout the United States; the generation and transmission of electricity to markets in the northwestern United States; the marketing of natural gas, electricity and other commodities and related risk management and finance services worldwide; the development, construction and operation of power plants, pipelines and other energy related assets worldwide; and the delivery of high bandwidth communication applications throughout the United States. * * * Wholesale Energy Operations and Services Enron's wholesale energy operations and services businesses operate in North America, Europe and evolving energy markets in developing countries. These businesses provide integrated energy-related products and services to wholesale customers worldwide. Wholesale energy operations and services can be categorized into two business lines: (a) Commodity Sales and Services and (b) Energy Assets and Investments. Commodity Sales and Services. Enron's commodity sales and services operations include: • the purchase, sale, marketing and delivery of natural gas, electricity, liquids and other commodities; • the restructuring of existing long-term contracts; and • The management of Enron's commodity portfolios. In addition, Enron provides risk management products and services to energy customers that hedge movements in price and location-based price differentials. Enron's risk management products and services are designed to provide stability to customers in markets impacted by commodity price volatility. Also included in this - 411 -
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KEN L. HARRISON, STEVEN J. KEAN, RE
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TABLE OF CONTENTS - i - Page PREAMB
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... hiding losses/SEC violations)..
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2 Certain defendants named herein,
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to do so would incriminate them. Wh
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y Enron to keep high-debt assets li
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in JEDI, making it possible for tra
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continued to accelerate, ultimately
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financial condition and investment
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it controlled, and was doing phony
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Bobcat Raptor-IV Marlin Trust I Mar
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to be utilized to engage in transac
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facilitate and finance LJM2's illic
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unnoticed: 30. This blatant self-de
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LJM1 and LJM2 in transactions struc
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and more of the stock issuance "tri
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dollar contracts which allowed it t
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41. Just eight months after announc
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Dollars Per Share 30 25 20 15 10 5
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Enron's financial condition to make
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Enron's finances, but very likely w
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Merrill Lynch CitiGroup Banks Named
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CitiGroup Barclays Banks Named As D
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The employee adds that anyone who q
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of the SPEs Enron did business with
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destroying millions of pages of doc
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- Statement of Financial Accounting
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eporting earnings from the 3rdQ 00
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disclosures were crafted and approv
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falsify its financial results and t
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72. On 2/26/02, Dow Jones News Serv
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A. Lead Plaintiff PARTIES 79. Court
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(g) Plaintiff Amalgamated Bank, as
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D. Defendants and Related Parties (
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Enron Corp. Defendant J. Skilling's
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Dollars per Share Enron Corp. Defen
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Enron Corp. Defendant S. Horton's Q
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Ms. Olson [told] employees in Decem
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(dd) Defendants John Mendelsohn ("M
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(ii) The Marlin Water and Atlantic
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public information, pocketing over
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Dollars per Share $100 $80 $60 $40
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As of 3/98 Executive Committee Comp
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Steven J. KeanSenior Vice President
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Kevin P. Hannon Chief Operating Off
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shortly after their issuance and/or
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(b) Defendant Thomas H. Bauer ("Bau
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(l) Defendant Richard R. Petersen (
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(4) Investment Banks 99.1 Each of t
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Notes due 7/15/06 and 6.95% Notes d
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devised, implemented and financed (
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6.19% Senior Secured Notes due 03;
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of and controlled by Bank of Americ
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fraudulent scheme by disguising deb
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fraudulent scheme by repeatedly iss
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BACKGROUND TO THE CLASS PERIOD 109.
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"Enron's water subsidiary initially
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• Enron just had a great, great q
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loans to the SPEs and Barclays had
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without any adequate feasibility st
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Registration Statement was signed b
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• Wholesale Energy Operations and
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... Together, our business units re
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10-K report. The Form 10-K containe
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performance and all of the indicati
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150. On 5/7/99, Lehman Brothers iss
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Communications Is Running Faster an
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costs. For example, Enron picked th
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(k) Under Mark-Jusbasche, Enron Int
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(p) As a result of the foregoing, t
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160. On 7/14/99, The Houston Chroni
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In discussing the most recent decli
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• Enron expects this sector ... t
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178. On 10/12/99, Bloomberg reporte
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three times the $850 million contra
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Enron Corp. had a 12.5% increase in
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months there was speculation of a c
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* * * ECI has two new and related b
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198. On 1/18/00, CS First Boston is
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• This is a huge step forward for
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208. On 1/21/00, Merrill Lynch issu
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The company hopes to capture 10 per
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of mark-to-market accounting by ado
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(ii) EES entered into demand-side-m
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(j) To inflate the purported revenu
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(q) As a result of the foregoing, t
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Andersen: 218. With respect to EES,
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Fastow also appeared at the Enron A
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227. On 4/12/00, CitiGroup issued a
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communications segment. The wholesa
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TRADING GROWING FASTER THAN EXPECTE
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Enron and Blockbuster plan to intro
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• The bandwidth trading component
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Broadband Services In our view, Enr
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• ENE reported 2Q00 EPS of $0.34,
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• ... Enron Broadband Services ..
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• In terms of content, Enron Broa
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It also had over 10 additional tran
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• Impressive wholesale energy res
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271. As a result of defendants' fal
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let alone continue to engage in sim
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Retail Energy Services: ... Enron E
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Well, we were up, 1998, we were up,
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• Growth Targets Lifted .... * *
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acceleration of growth and creation
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Our talented people ... financial s
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stock, selling 1.1 million shares i
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evenue. Even though Enron could not
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ecognized a multi-million dollar pr
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exchange for orders by Enron in 99
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streaming content because the EIN a
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not have the legal right to electro
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illions of dollars while concealing
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4 years .... We are projecting mini
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and Content Delivery which remain s
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• a 281 percent increase in reven
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[W]e ... said to investors, as long
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growth in '98, 18% growth in '99 an
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conference calls and in follow-up c
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stated: 332. On 7/12/01, Skilling a
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337. On 7/25/01, Bloomberg News rep
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financial condition and liquidity -
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equipment, a significant portion of
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million up-front cash just to sign
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(i) Enron entered into dark-fiber s
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intermediation. Even worse, Enron g
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sense, to "just drink more Enron Ko
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Dear Mr. Lay, * * * Skilling's abru
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. Cliff Baxter complained mightily
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is up 40%, earnings per share up ab
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CEO Jeff Skilling Resigns; A Negati
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356. On 8/28/01, Lay was interviewe
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... But all of the problems I have
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362. On 10/9/01, Merrill Lynch issu
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- $180 million associated with the
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income, to about $400 million and a
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Enron Corporation (BUY) Third Quart
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of things - the LJM transactions we
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Enron Continues As Market-Maker of
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failing to eliminate additional hun
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391. Rubin's and Harrison's effort
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DEFENDANTS' SCHEME AND FRAUDULENT C
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Enron Defendants had permitted Enro
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Derrick 230,660 $ 12,563,928 John D
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Dollars per Share $100 $80 $60 $40
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executives will be generally hesita
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and 99.9%. This level of certainty
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ENRON'S FALSE FINANCIAL STATEMENTS
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$12,000,000,000 $10,000,000,000 $8,
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50.00% 45.00% 40.00% 35.00% 30.00%
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8 Debt to equity is calculated usin
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executed in accordance with managem
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SPEs, under any accounting machinat
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439. However, even after employing
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(a) Enron Guarantee Fee 443. Enron
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(2) LJM Partnerships 448. Enron als
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comparable securities in the market
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CS First Boston, Merrill Lynch, JP
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hedged through traditional transact
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gathering system in the Gulf of Mex
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(b) Raptors (i) Raptor I 477. The f
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only entered to avoid recognition o
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million, giving LJM2 its specified
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y a total of $1 billion in the unau
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Skilling, knew of the decline, by w
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(2) the transferred assets were not
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S-K required the disclosure of the
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Page 368 and 369: engaged in swapping capacity of thi
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Page 372 and 373: practice was common in all trading
Page 374 and 375: What made it all work, Dickson said
Page 376 and 377: 14 Securities that are bought and h
Page 378 and 379: (4) Quaker Oats 557. Under one of i
Page 380 and 381: supplied by Enron under the terms o
Page 382 and 383: (2) Prepaid Swaps with CitiGroup an
Page 384 and 385: In essence, his report concluded, E
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Page 388 and 389: earnings below expectations. By 97,
Page 390 and 391: content services business. In fact,
Page 392 and 393: 593. Enron also failed to disclose
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Page 396 and 397: holdings for $700 million. It is no
Page 398 and 399: investment and credit decisions ref
Page 400 and 401: Date of Offering Effective Date of
Page 402 and 403: created in Enron, the Offering Docu
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Page 406 and 407: FINANCIAL RISK MANAGEMENT * * * Enr
Page 408 and 409: Vinson & Elkins also knew because t
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Page 412 and 413: not even make a broadband connectio
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Page 420 and 421: Communications Enron is developing
Page 422 and 423: (a) Annual Report on Form 10-K for
Page 424 and 425: ENRON HISTORICAL CONSOLIDATED FINAN
Page 426 and 427: Business of Enron DESCRIPTION OF EN
Page 428 and 429: Income Statement Data: SELECTED HIS
Page 430 and 431: • the transportation of natural g
Page 432 and 433: Balance Sheet Data (at end of perio
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Page 436 and 437: ENRON HISTORICAL CONSOLIDATED FINAN
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Page 440 and 441: Retail Energy Services Enron Energy
Page 442 and 443: Cumulative effect of accounting cha
Page 444 and 445: A. General INVOLVEMENT OF THE BANKS
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Page 448 and 449: privately held entity created by En
Page 450 and 451: caused its stock to plunge and impa
Page 452 and 453: its financial results. Thus, the ba
Page 454 and 455: something each of the banks named a
Page 456 and 457: 7/01 Marlin Water Trust II, Marlin
Page 458 and 459: default puts" on Enron's publicly t
Page 460 and 461: were fraudulent and used to conceal
Page 462 and 463: 667. These phony commodity transact
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anging falsification of its financi
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DATE SECURITY 11/93 8 million share
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8/01 $3 billion Enron credit facili
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a year in interest payments, and sy
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participation in the scheme to defr
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illicit partnerships or SPEs, and h
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698. In 6/99, CS First Boston acted
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703. In addition to the foregoing,
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These transactions included Marlin,
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of the firm, invested $22.5 million
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the CIBC legal entity, as its knowl
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sales where CIBC was one of the und
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not a true investor and was not at
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"It was nothing but a pilot project
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Tilney's wife was a Managing Direct
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otherwise to outside investors'" an
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an effort spearheaded by Schuyler M
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Barry S. Friedberg, $500,000 Chairm
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Flash Report" for 12/23/99 identifi
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• Currently pitching to become En
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Concurrently, Enron advised Merrill
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742.19 Internally, Merrill Lynch co
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if Enron defaulted within a given t
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748. By the beginning of the Class
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- something that Barclays was in a
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length transactions with to generat
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Brothers legal entity, as its knowl
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5/99 $500 million 7-3/8% Enron note
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financial information as Enron's le
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instance: 5/00 $500 million 8.375%
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and condition of Enron's business o
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eturn for Deutsche Bank's participa
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DATE TRANSACTION 7/98 $252 million
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797. Deutsche Bank also actively en
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would pay it a large fee for the ea
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797.8 The Washington Post further f
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797.12 Bankers Trust's role in Proj
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797.17 In the words of the Joint Co
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797.25 Project Tomas was structured
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emaining from Bankers Trust to Enro
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INVOLVEMENT OF VINSON & ELKINS 800.
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accommodated Enron's desire for one
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The document ... sharply criticizes
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to "close," i.e., take place, and t
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806. However, Enron could not find
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810. During 12/97, Vinson & Elkins
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day-to-day activities would be mana
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equired to pay Enron on the "hedge"
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these SPEs, Enron would have to tak
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Vinson & Elkins Concealed the Phony
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In March 2001, Enron acquired the l
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ecause it participated in the negot
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839. The related-party disclosures
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846. The "disclosures" above are fa
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The Attempted Coverup 850. In mid-8
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3. There is a veil of secrecy aroun
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854. The result of this letter - la
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standpoint. In this regard, AA cons
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A. General INVOLVEMENT OF ARTHUR AN
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Andersen also consented to the use
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905. Andersen's reports were false
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investors that would hold assets an
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915. Andersen also performed certai
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ing to light documents illustrating
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he was aware of many of the company
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Andersen employees destroyed incrim
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departments, knew about the excessi
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a blind eye to the numerous red fla
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• How Enron could, with its own c
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Tallying all expected profits immed
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c. Determine whether the transactio
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keep the Chewco deal off the books.
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improper accounting was corrected).
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in order for the financial statemen
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959. As detailed herein, Enron's di
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connection with an SEC investigatio
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eached by David Duncan and other ac
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. Fails to correct an entity's fina
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(j) The fourth standard of reportin
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Professional Standards Group has fi
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headquarters are located at 33 West
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STATUTORY SAFE HARBOR 985. The stat
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988. Plaintiffs' claims are typical
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- 628 - Michael M. Lowther* Benjami
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1000. This Claim is brought by the
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Type of Offering Enron Corp. 7.875%
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day of the offering. day of the off
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liable as detailed herein. Defendan
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08/17/00 Enron Credit Linked Notes
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subdivisions thereof and/or State P
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JP Morgan and Lehman Brothers had a
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1016.26 This Claim is brought pursu
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Plaintiffs hereby demand a trial by
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SHAPIRO HABER & URMY LLP THOMAS G.
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