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

participation in the scheme to defraud, CitiGroup (or its top executives) were permitted to invest
some $15 million to facilitate the financing of that vehicle. They put their money up early – on or
about 12/22/99 – so LJM2 would have the cash to fund four SPEs to do deals with Enron prior to
year-end 99 to create huge profits for Enron so it could meet its 99 profit forecasts.
688. Finally, in 10/01-11/01, when the Enron scheme began to unravel, as Enron reported
a huge 3rdQ 01 loss and restated its 97-01 financial results, CitiGroup worked hand-in-hand with
Enron to desperately try to save the Enron enterprise in the hope that by arranging a salvation merger
with Dynegy (for which CitiGroup would be paid approximately $45 million in fees) they could
prevent the insolvency of Enron and the inevitable investigations and revelations that would follow
such insolvency. However, despite the efforts of Enron and CitiGroup to conceal Enron's true
financial condition from Dynegy and get Dynegy to agree to acquire Enron, the due diligence efforts
of Dynegy and its investment bankers uncovered that the true financial condition of Enron was far
worse than had even been disclosed publicly to date and that Enron had been engaged in a wide-
ranging falsification of its financial statements over several prior years. Thus, Dynegy refused to
acquire Enron and Enron went bankrupt.
689. During the Class Period, CitiGroup knew that Enron was falsifying its publicly
reported financial results and that its true financial condition was much more precarious than was
publicly known. It obtained this knowledge due to its access to Enron's internal business and
financial information as one of Enron's lead lending banks, as well as its intimate interaction with
Enron's top officials which occurred virtually on a daily basis.
690. In late 11/01, JP Morgan and CitiGroup were desperately trying to arrange the sale
of Enron to Dynegy so they could split a $90 million fee and so Enron would not go bankrupt, which
they knew would lead to suits over, and investigations into, their prior deals with Enron – which they
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