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

The document ... sharply criticizes the firm for "an absence of ... objective
and critical professional advice."
* * *
The Powers report focuses on the formation and activities of Enron's nowinfamous
partnerships – known as JEDI, Chewco, LJM1, LJM2 and the cluster of
entities dubbed the Raptors.
The report's summary of Enron's use of Chewco, LJM1 and LJM2 is
particularly damning.
"Many of the most significant transactions apparently were designed to
accomplish favorable financial statement results, not to achieve bona fide
economic objectives or to transfer risk."
It continues, "Other Transactions were implemented – improperly, we are
informed by our accounting advisors – to offset losses. They allowed Enron to
conceal from the market very large losses resulting from Enron's merchant
investments by creating an appearance that those investments were hedged ... when
in fact that third party was simply an entity in which only Enron had a substantial
economic stake."
The report asserts that these deals "resulted in" Enron overstating its earnings
from the third quarter of 2000 through the third quarter of last year by almost $1
billion.
* * *
... [T]he report also asserts that Vinson & Elkins played a significant role.
According to the Powers document, the law firm "provided advice and
documentation" for many of these partnership deals and "assisted Enron with the
preparation of its disclosures of related-party transactions in the proxy statements
and the footnotes to the financial statements in Enron's periodic SEC filings."
Enron's managers and its board "relied heavily on the perceived approval by
Vinson & Elkins of the structure and disclosure of the transactions," the report
claims.... [T]he report concludes, the firm "should have brought a stronger, more
objective and more critical voice to the disclosure process."
Legal Times, "Vinson & Elkins Shoots Back," 2/11/02.
Newsweek has obtained confidential legal documents showing that Enron knew
about a disastrous accounting error months before mentioning it in a crucial Oct.
16 meeting with investors. And that lawyers probing Sherron Watkins's
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