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

transactions involving no true third party. These factors, and others, led V&E to
conclude that Enron was at "serious risk for adverse publicity and litigation."
Despite that, V&E found that none of Watkins' allegations warranted
further investigation ....
The Daily Deal, 1/17/02.
Just six weeks after Enron Corp. directed its lawyers at Vinson & Elkins to
investigate allegations about its secret partnerships, a report came back Oct. 15
saying everything was just fine. No need for "further widespread investigation,"
the lawyers added.
The very next day, Enron delivered the first in a series of shocks when it
slashed shareholder equity by $1.2 billion, partly due to the partnerships. Sixteen
days later the board of directors launched their own inquiry, which quickly found
massive improprieties. And on Dec. 2, Enron filed for bankruptcy protection.
"Even as the Titanic was sinking, there were certain rooms that were perfectly
dry," said Matthew Spitzer, USC Law School dean. "If you asked someone in one
of those rooms, 'See any water?,' they'd say no. That's the sort of investigation
Vinson & Elkins did."
Los Angeles Times, 3/14/02.
[R]ecent documents released by congressional committees investigating Enron, as
well as a scathing report produced by the Enron board's own investigating committee,
suggest that [Vinson & Elkins] may have been too cozy with its biggest client.
* * *
In 1997, when Enron launched a new strategy to move debt off its books
by using partnerships operated by its own financial officer, it turned to Vinson &
Elkins for guidance on how to make the deals work.
Enron's management and board of directors relied heavily on the perceived
approval by Vinson & Elkins of how the deals were structured and reported,
according to the board's special investigating committee.... [I]t ... said it observed
an absence of "objective and professional advice by outside counsel at Vinson &
Elkins."
Among the report's allegations:
The law firm was "consulted frequently" on the transaction documents for
partnership deals that allowed Enron to get around accounting rules. The firm
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