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

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Merrill Lynch CitiGroup Banks Named As Defendants ENRON SECURITIES UNDERWRITINGS Date of Offering Security Sold 11/96 8 million shares Enron Capital Trust I 8.3% Trust Originated Preferred Securities at $25 per share JP Morgan 7/97 $100,000,000 6-5/8% Enron Notes Lehman Brothers CitiGroup 8/97 $150,000,000 6.5% Notes due 8/1/2002 Merrill Lynch 11/97 $200,000,000 Remarketed Reset Notes due 11/15/2037 Merrill Lynch CitiGroup 1/97 6 million shares Enron Capital Trust II 8-1/8% Trust Originated Preferred Securities at $25 per share Bank America 11/97 $250,000,000 6.625% Notes due 11/15/2005 CitiGroup 11/97 $300,000,000 6.45% Notes due 2001 CS First Boston Lehman Brothers Merrill Lynch CIBC JP Morgan Bank America JP Morgan Lehman Brothers Merrill Lynch CitiGroup 5/98 35 million shares of common stock at $25 per share 7/98 $250,000,000 6.40% Notes due 7/15/2006 $250,000,000 6.95% Notes due 7/15/2028 9/98 $250,000,000 Floating-rate Notes due 3/30/2000 CS First Boston 11/98 $250,000,000 6.95% Notes due 7/15/2028 CS First Boston Lehman Brothers Merrill Lynch CitiGroup 2/99 27.6 million shares of common stock at $31.34 - 40 -
Banks Named As Defendants Lehman Brothers Bank America CIBC Bank America CitiGroup Bank America Lehman Brothers Deutsche Bank JP Morgan Bank America Barclays CitiGroup Date of Offering Security Sold 5/19/99 $500,000,000 7.375% Notes due 5/15/2019 8/10/99 $222,500,000 7% Exchangeable Notes due 7/31/2002 5/00 $500,000,000 Notes due 5/23/2005 and 6/15/2003 2/01 (private placement) 7/01 (resales) - 41 - $1,907,698,000 Zero Coupon Convertible Senior Notes due 2021, original issue date 2/7/2001 49. Some of the offerings of the associated entities are shown below: Banks Named As Defendants Merrill Lynch CS First Boston Deutsche Bank Bank America ENRON-RELATED SECURITIES UNDERWRITINGS Date of Offering Security Sold 6/9/99 36.6 million shares Azurix stock at $19 per share Bank America 7/99 27 million shares of Enron Oil & Gas at $22.25 per share Deutsche Bank CS First Boston 9/23/99 $1,400,000,000 8.31% Osprey Trust, Osprey I, Inc. Senior Secured Notes due 03 CitiGroup 11/15/99 $750,000,000 8.25% Yosemite Securities Trust I Series 1999-A Linked Enron Obligations (LEOs) due 11/15/04 CS First Boston Merrill Lynch JP Morgan 2/11/00 $440 million and £100 million Azurix 10.375% and 10.75% Senior Notes
Page 2 and 3: KEN L. HARRISON, STEVEN J. KEAN, RE
Page 4 and 5: TABLE OF CONTENTS - i - Page PREAMB
Page 6 and 7: ... hiding losses/SEC violations)..
Page 8 and 9: 2 Certain defendants named herein,
Page 10 and 11: to do so would incriminate them. Wh
Page 12 and 13: y Enron to keep high-debt assets li
Page 14 and 15: in JEDI, making it possible for tra
Page 16 and 17: continued to accelerate, ultimately
Page 18 and 19: financial condition and investment
Page 20 and 21: it controlled, and was doing phony
Page 22 and 23: Bobcat Raptor-IV Marlin Trust I Mar
Page 24 and 25: to be utilized to engage in transac
Page 26 and 27: facilitate and finance LJM2's illic
Page 28 and 29: unnoticed: 30. This blatant self-de
Page 30 and 31: LJM1 and LJM2 in transactions struc
Page 32 and 33: and more of the stock issuance "tri
Page 34 and 35: dollar contracts which allowed it t
Page 36 and 37: 41. Just eight months after announc
Page 38 and 39: Dollars Per Share 30 25 20 15 10 5
Page 40 and 41: Enron's financial condition to make
Page 42 and 43: Enron's finances, but very likely w
Page 46 and 47: CitiGroup Barclays Banks Named As D
Page 48 and 49: The employee adds that anyone who q
Page 50 and 51: of the SPEs Enron did business with
Page 52 and 53: destroying millions of pages of doc
Page 54 and 55: - Statement of Financial Accounting
Page 56 and 57: eporting earnings from the 3rdQ 00
Page 58 and 59: disclosures were crafted and approv
Page 60 and 61: falsify its financial results and t
Page 62 and 63: 72. On 2/26/02, Dow Jones News Serv
Page 64 and 65: Dollars Per Share 100 90 80 70 60 5
Page 66 and 67: A. Lead Plaintiff PARTIES 79. Court
Page 68 and 69: (g) Plaintiff Amalgamated Bank, as
Page 70 and 71: D. Defendants and Related Parties (
Page 72 and 73: Enron Corp. Defendant J. Skilling's
Page 74 and 75: Dollars per Share Enron Corp. Defen
Page 76 and 77: Enron Corp. Defendant S. Horton's Q
Page 86 and 87: Ms. Olson [told] employees in Decem
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Dollars per Share Enron Corp. Defen
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Page 98 and 99:
Page 100 and 101:
(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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Even though a misstatement of an in
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522. In order for Enron to accrue r
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engaged in swapping capacity of thi
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earnings and separately disclosed i
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practice was common in all trading
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What made it all work, Dickson said
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14 Securities that are bought and h
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(4) Quaker Oats 557. Under one of i
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supplied by Enron under the terms o
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(2) Prepaid Swaps with CitiGroup an
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In essence, his report concluded, E
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Project Name Description Contract V
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earnings below expectations. By 97,
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content services business. In fact,
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593. Enron also failed to disclose
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Enron arrived in India in the early
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holdings for $700 million. It is no
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investment and credit decisions ref
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Date of Offering Effective Date of
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created in Enron, the Offering Docu
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621. The true effect of "early sett
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FINANCIAL RISK MANAGEMENT * * * Enr
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Vinson & Elkins also knew because t
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could connect. Enron's BOS was to b
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not even make a broadband connectio
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05/17/01 Enron Euro Credit Linked N
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usiness is the management of certai
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Yosemite Securities Trust I Offerin
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Communications Enron is developing
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(a) Annual Report on Form 10-K for
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ENRON HISTORICAL CONSOLIDATED FINAN
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Business of Enron DESCRIPTION OF EN
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Income Statement Data: SELECTED HIS
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• the transportation of natural g
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Balance Sheet Data (at end of perio
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wholesale customers to view Enron's
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ENRON HISTORICAL CONSOLIDATED FINAN
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Marlin Water Trust II/Marlin Water
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Retail Energy Services Enron Energy
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Cumulative effect of accounting cha
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A. General INVOLVEMENT OF THE BANKS
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manage such conflicts of interests.
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privately held entity created by En
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caused its stock to plunge and impa
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its financial results. Thus, the ba
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something each of the banks named a
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7/01 Marlin Water Trust II, Marlin
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default puts" on Enron's publicly t
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were fraudulent and used to conceal
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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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Dollars Per Share 30 25 20 15 10 5
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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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