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

e accelerated and the Enron scheme would immediately collapse. So, in late 11/01, Robert Rubin,
the Vice Chairman of CitiGroup, and William Harrison, the Chairman of JP Morgan, called Moody's
– a key rating agency – and pressured Moody's to keep Enron's investment grade credit rating in
place until they had completed the sale of Enron to Dynegy.
66. Rubin's and Harrison's effort to strong-arm Moody's failed. Despite the efforts of
Enron, JP Morgan 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 ever been disclosed
publicly to date and that Enron had been engaged in a wide-ranging falsification of its financial
statements over the several prior years. Thus, Dynegy refused to acquire Enron and Enron went
bankrupt. By 11/28/01, the charade could be continued no longer and Enron's publicly traded debt
had been downgraded to "junk" status by the rating agencies, and on 12/2/01, Enron filed for
bankruptcy – the largest bankruptcy in history. Enron's common and preferred stock have become
virtually worthless and its publicly traded debt securities have suffered massive price declines,
inflicting billions of dollars of losses on purchasers of those securities.
67. While Enron's publicly filed reports disclosed the existence of the LJM partnerships,
these disclosures did not reveal the essence of the transactions completely or clearly, and failed
to convey the substance of what was going on between Enron and the partnerships. The
disclosures also did not fully disclose the nature or extent of Fastow's financial interest in the
LJM partnerships. This was the result of an effort to avoid disclosing Fastow's financial interest
and to downplay the significance of the related-party transactions and to disguise their substance
and import. The disclosures also represented that the related-party transactions were reasonable
compared to transactions with third parties when, in fact, they were not. These misleading
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