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

(a) Collateralized Loan Obligations ("CLOs").
(b) Nowa Sarzyna (Poland Power Plant).
(c) MEGS, LLC.
(d) Yosemite.
Vinson & Elkins structured each of these transactions for Enron.
815. The transactions between the LJMs and Enron or its affiliates occurred close to
the end of financial reporting periods to artificially boost reported results to meet forecasts Enron
and other participants in the scheme had been making. For instance, near the end of the 3rdQ and
4thQ 99, Enron sold interests in seven assets to LJM1 and LJM2 in transactions structured, reviewed
and approved by Vinson & Elkins. The transactions permitted Enron to conceal its true debt levels
by removing the assets from Enron's balance sheet and, at the same time, record large gains.
However, (i) as Vinson & Elkins knew Enron had agreed in advance it would do, Enron bought
back five of the seven assets after the close of the financial reporting period; (ii) the LJM
partnerships made large profits on every transaction, even when the asset it had purchased
actually declined in market value; and (iii) those transactions generated "earnings" for Enron
of $229 million in the second half of 99 out of total earnings for that period of $549 million. In
three of these transactions where Enron ultimately bought back LJM's interest, Enron had agreed
in advance to protect the LJM partnerships against any loss. Thus, the LJM partnerships
functioned only as vehicles to accommodate defendants in the manipulation, falsification and
artificial inflation of Enron's reported financial results, while enriching the LJM2 investors.
816. One "hedging" transaction with LJM in 6/99 involved Rhythms stock owned by
Enron, to "hedge" Enron's huge gains in Rhythms stock and enable Enron to create a huge
profit. Enron transferred its own stock to the SPE in exchange for a note. But if the SPE were
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