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

privately held entity created by Enron with the help of Merrill Lynch, Andersen and Vinson & Elkins
at year-end 99. They knew, because LJM2 was going to be principally utilized to engage in
transactions with Enron where Enron insiders (Fastow, Kopper and Glisan) would be on both sides
of the transactions, that the LJM2 partnership would be extremely lucrative – virtually guaranteed
to provide huge returns to LJM2's partners. In fact, Fastow's dual role by which he could self-deal
on behalf of the partnership with Enron's assets was so important that investors in LJM2 were
assured that they did not have to make any additional capital contributions if Fastow's dual role
ended. As a result, Enron and Merrill Lynch decided that in raising the money to fund LJM2, they
would allow certain favored investment banks and/or high-level officers of those investment banks
to invest in LJM2 because they knew the investment was virtually guaranteed to produce
extremely good returns. In fact, the offering memorandum for the LJM2 partnership by which
Merrill secured investors into the partnership – which was not a public document – contained a
virtual invitation to benefit from the insider self-dealing transactions that LJM2 would engage in.
It stressed the "unusually attractive investment opportunity" resulting from the partnership's
connection to Enron. It emphasized Fastow's position as Enron's CFO, and that LJM2's day-to-day
activities would be managed by Enron insiders Fastow, Kopper and Glisan. It explained that "[t]he
Partnership expects that Enron will be the Partnership's primary source of investment
opportunities" and that it "expects to benefit from having the opportunity to invest in Enron-
generated investment opportunities that would not be available otherwise to outside investors."
The Private Placement Memorandum ("PPM") specifically noted that Fastow's "access to Enron's
information pertaining to potential investments will contribute to superior returns." In addition,
investors were told that investors in a similar Fastow controlled partnership (JEDI) that had done
deals with Enron like the ones LJM2 would do had tripled their investment in just two years! In
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