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1000. This Claim is brought by the plaintiffs and against the defendants detailed in Ex. A of the Exhibit Appendix. Each of the plaintiffs detailed in Ex. A of the Exhibit Appendix purchased Enron stock contemporaneously with sales of Enron stock by defendants named in this Claim. 1001. By virtue of their positions as senior insiders of Enron, defendants named in this Claim were in possession of material, non-public information about Enron at the time of their collective sales of more than $1 billion of their own Enron stock to plaintiffs and members of the Class at artificially inflated prices. 1002. By virtue of their participation in the scheme to defraud investors described herein, and/or their sales of stock while in possession of material, non-public information about the adverse information detailed herein, these defendants violated the 1934 Act and applicable rules and regulations thereunder. 1003. Plaintiffs and all other members of the Class who purchased shares of Enron stock contemporaneously with the sales of Enron stock by the defendants named in this Claim: (1) have suffered substantial damages in that they paid artificially inflated prices for Enron stock as a result of the violations of §§10(b) and 20(a) and Rule 10b-5 herein described; and (2) would not have purchased Enron stock at the prices they paid, or at all, if they had been aware that the market prices had been artificially inflated by defendants' false and misleading statements. 1004. The Enron Defendants are required to account for all such stock sales and to disgorge their profits or ill-gotten gains. - 630 -
THIRD CLAIM FOR RELIEF For Violations of §§11 and 15 of the 1933 Act (Against Lehman Brothers Holding, Inc., Lehman Brothers, Inc., Bank of America Corp., Banc of America Securities LLC, Canadian Imperial Bank of Commerce, CIBC World Markets Corp., CitiGroup, Inc., Salomon Smith Barney, Inc., Andersen-U.S., Lay, Causey, Fastow, Belfer, Blake, Chan, Duncan, Foy, Gramm, Harrison, Jaedicke, LeMaistre, Mark-Jusbasche, Mendelsohn, Meyer, Ferraz Pereira, Savage/Alliance, Skilling, Urquhart, Wakeham, Walker and Winokur) 1005. Plaintiffs incorporate 75-86, 101, 103, 104, 108, 121, 124, 126, 134-135, 141, 151, 164-165, 236, 336, 384, 419, 421, 447-448, 450, 518, 610, 612-641 and 986-991. For purposes of this claim, plaintiffs expressly exclude and disclaim any allegation that could be construed as alleging fraud or intentional or reckless misconduct, as this claim is based solely on claims of strict liability and/or negligence under the 1933 Act. 1006. This Claim is brought pursuant to §§11 and 15 of the 1933 Act, 15 U.S.C. §§77k and 77o, by plaintiffs detailed below against Andersen-U.S. and the defendants detailed below. Type of Offering Enron Corp. 7.375% Notes due 5/15/2019 ($500 million) Enron Corp. 7% Exchangeable Notes due 7/31/2002 ($222 million) Offering Date Date of Registration Effective Date of Registration (Pursuant to 17 C.F.R. §230.158) 5/19/99 02/05/99 02/05/99 (at the earliest) 8/10/99 08/10/99 (Amendment No. 2) 08/10/99 (at the earliest) - 631 - Defendant Underwriters Lehman Brothers, Inc., Banc of America Securities LLC, CIBC World Markets Corp. Banc of America Securities LLC, Salomon Smith Barney, Inc. Individual Defendants/ Registration Statement Signatories Lay, Causey, Fastow, Belfer, Blake, Chan, Duncan, Foy, Gramm, Harrison, Jaedicke, LeMaistre, Meyer, Skilling, Urquhart, Wakeham, Walker and Winokur Lay, Causey, Fastow, Belfer, Blake, Chan, Duncan, Foy, Gramm, Harrison, Jaedicke, LeMaistre, Mark-Jusbasche, Mendelsohn, Meyer, Skilling, Urquhart, Wakeham and Winokur Class Representative Local 175/505, Washington Board Pulsifer
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KEN L. HARRISON, STEVEN J. KEAN, RE
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TABLE OF CONTENTS - i - Page PREAMB
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... hiding losses/SEC violations)..
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2 Certain defendants named herein,
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to do so would incriminate them. Wh
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y Enron to keep high-debt assets li
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in JEDI, making it possible for tra
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continued to accelerate, ultimately
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financial condition and investment
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it controlled, and was doing phony
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Bobcat Raptor-IV Marlin Trust I Mar
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to be utilized to engage in transac
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facilitate and finance LJM2's illic
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unnoticed: 30. This blatant self-de
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LJM1 and LJM2 in transactions struc
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and more of the stock issuance "tri
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dollar contracts which allowed it t
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41. Just eight months after announc
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Dollars Per Share 30 25 20 15 10 5
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Enron's financial condition to make
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Enron's finances, but very likely w
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Merrill Lynch CitiGroup Banks Named
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CitiGroup Barclays Banks Named As D
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The employee adds that anyone who q
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of the SPEs Enron did business with
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destroying millions of pages of doc
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- Statement of Financial Accounting
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eporting earnings from the 3rdQ 00
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disclosures were crafted and approv
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falsify its financial results and t
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72. On 2/26/02, Dow Jones News Serv
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A. Lead Plaintiff PARTIES 79. Court
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(g) Plaintiff Amalgamated Bank, as
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D. Defendants and Related Parties (
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Enron Corp. Defendant J. Skilling's
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Dollars per Share Enron Corp. Defen
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Enron Corp. Defendant S. Horton's Q
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Ms. Olson [told] employees in Decem
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(dd) Defendants John Mendelsohn ("M
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(ii) The Marlin Water and Atlantic
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public information, pocketing over
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Dollars per Share $100 $80 $60 $40
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As of 3/98 Executive Committee Comp
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Steven J. KeanSenior Vice President
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Kevin P. Hannon Chief Operating Off
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shortly after their issuance and/or
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(b) Defendant Thomas H. Bauer ("Bau
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(l) Defendant Richard R. Petersen (
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(4) Investment Banks 99.1 Each of t
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Notes due 7/15/06 and 6.95% Notes d
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devised, implemented and financed (
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6.19% Senior Secured Notes due 03;
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of and controlled by Bank of Americ
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fraudulent scheme by disguising deb
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fraudulent scheme by repeatedly iss
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BACKGROUND TO THE CLASS PERIOD 109.
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"Enron's water subsidiary initially
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• Enron just had a great, great q
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loans to the SPEs and Barclays had
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without any adequate feasibility st
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Registration Statement was signed b
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• Wholesale Energy Operations and
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... Together, our business units re
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10-K report. The Form 10-K containe
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performance and all of the indicati
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150. On 5/7/99, Lehman Brothers iss
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Communications Is Running Faster an
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costs. For example, Enron picked th
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(k) Under Mark-Jusbasche, Enron Int
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(p) As a result of the foregoing, t
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160. On 7/14/99, The Houston Chroni
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In discussing the most recent decli
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• Enron expects this sector ... t
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178. On 10/12/99, Bloomberg reporte
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three times the $850 million contra
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Enron Corp. had a 12.5% increase in
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months there was speculation of a c
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* * * ECI has two new and related b
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198. On 1/18/00, CS First Boston is
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• This is a huge step forward for
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208. On 1/21/00, Merrill Lynch issu
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The company hopes to capture 10 per
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of mark-to-market accounting by ado
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(ii) EES entered into demand-side-m
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(j) To inflate the purported revenu
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(q) As a result of the foregoing, t
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Andersen: 218. With respect to EES,
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Fastow also appeared at the Enron A
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227. On 4/12/00, CitiGroup issued a
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communications segment. The wholesa
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TRADING GROWING FASTER THAN EXPECTE
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Enron and Blockbuster plan to intro
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• The bandwidth trading component
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Broadband Services In our view, Enr
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• ENE reported 2Q00 EPS of $0.34,
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• ... Enron Broadband Services ..
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• In terms of content, Enron Broa
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It also had over 10 additional tran
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• Impressive wholesale energy res
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271. As a result of defendants' fal
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let alone continue to engage in sim
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Retail Energy Services: ... Enron E
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Well, we were up, 1998, we were up,
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• Growth Targets Lifted .... * *
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acceleration of growth and creation
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Our talented people ... financial s
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stock, selling 1.1 million shares i
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evenue. Even though Enron could not
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ecognized a multi-million dollar pr
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exchange for orders by Enron in 99
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streaming content because the EIN a
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not have the legal right to electro
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illions of dollars while concealing
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4 years .... We are projecting mini
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and Content Delivery which remain s
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• a 281 percent increase in reven
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[W]e ... said to investors, as long
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growth in '98, 18% growth in '99 an
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conference calls and in follow-up c
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stated: 332. On 7/12/01, Skilling a
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337. On 7/25/01, Bloomberg News rep
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financial condition and liquidity -
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equipment, a significant portion of
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million up-front cash just to sign
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(i) Enron entered into dark-fiber s
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intermediation. Even worse, Enron g
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sense, to "just drink more Enron Ko
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Dear Mr. Lay, * * * Skilling's abru
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. Cliff Baxter complained mightily
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is up 40%, earnings per share up ab
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CEO Jeff Skilling Resigns; A Negati
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356. On 8/28/01, Lay was interviewe
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... But all of the problems I have
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362. On 10/9/01, Merrill Lynch issu
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- $180 million associated with the
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income, to about $400 million and a
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Enron Corporation (BUY) Third Quart
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of things - the LJM transactions we
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Enron Continues As Market-Maker of
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failing to eliminate additional hun
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391. Rubin's and Harrison's effort
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DEFENDANTS' SCHEME AND FRAUDULENT C
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Enron Defendants had permitted Enro
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Derrick 230,660 $ 12,563,928 John D
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Dollars per Share $100 $80 $60 $40
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executives will be generally hesita
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and 99.9%. This level of certainty
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ENRON'S FALSE FINANCIAL STATEMENTS
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$12,000,000,000 $10,000,000,000 $8,
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50.00% 45.00% 40.00% 35.00% 30.00%
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8 Debt to equity is calculated usin
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executed in accordance with managem
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SPEs, under any accounting machinat
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439. However, even after employing
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(a) Enron Guarantee Fee 443. Enron
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(2) LJM Partnerships 448. Enron als
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comparable securities in the market
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CS First Boston, Merrill Lynch, JP
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hedged through traditional transact
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gathering system in the Gulf of Mex
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(b) Raptors (i) Raptor I 477. The f
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only entered to avoid recognition o
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million, giving LJM2 its specified
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y a total of $1 billion in the unau
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Skilling, knew of the decline, by w
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(2) the transferred assets were not
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S-K required the disclosure of the
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Even though a misstatement of an in
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522. In order for Enron to accrue r
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engaged in swapping capacity of thi
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earnings and separately disclosed i
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practice was common in all trading
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What made it all work, Dickson said
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14 Securities that are bought and h
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(4) Quaker Oats 557. Under one of i
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supplied by Enron under the terms o
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(2) Prepaid Swaps with CitiGroup an
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In essence, his report concluded, E
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Project Name Description Contract V
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earnings below expectations. By 97,
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content services business. In fact,
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593. Enron also failed to disclose
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Enron arrived in India in the early
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holdings for $700 million. It is no
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investment and credit decisions ref
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Date of Offering Effective Date of
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created in Enron, the Offering Docu
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621. The true effect of "early sett
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FINANCIAL RISK MANAGEMENT * * * Enr
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Vinson & Elkins also knew because t
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could connect. Enron's BOS was to b
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not even make a broadband connectio
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05/17/01 Enron Euro Credit Linked N
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usiness is the management of certai
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Yosemite Securities Trust I Offerin
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Communications Enron is developing
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(a) Annual Report on Form 10-K for
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ENRON HISTORICAL CONSOLIDATED FINAN
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Business of Enron DESCRIPTION OF EN
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Income Statement Data: SELECTED HIS
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• the transportation of natural g
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Balance Sheet Data (at end of perio
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wholesale customers to view Enron's
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ENRON HISTORICAL CONSOLIDATED FINAN
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Marlin Water Trust II/Marlin Water
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Retail Energy Services Enron Energy
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Cumulative effect of accounting cha
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A. General INVOLVEMENT OF THE BANKS
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manage such conflicts of interests.
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privately held entity created by En
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caused its stock to plunge and impa
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its financial results. Thus, the ba
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something each of the banks named a
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7/01 Marlin Water Trust II, Marlin
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default puts" on Enron's publicly t
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were fraudulent and used to conceal
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667. These phony commodity transact
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anging falsification of its financi
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DATE SECURITY 11/93 8 million share
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8/01 $3 billion Enron credit facili
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a year in interest payments, and sy
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participation in the scheme to defr
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illicit partnerships or SPEs, and h
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698. In 6/99, CS First Boston acted
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703. In addition to the foregoing,
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These transactions included Marlin,
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of the firm, invested $22.5 million
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the CIBC legal entity, as its knowl
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sales where CIBC was one of the und
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not a true investor and was not at
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"It was nothing but a pilot project
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Tilney's wife was a Managing Direct
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otherwise to outside investors'" an
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an effort spearheaded by Schuyler M
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Barry S. Friedberg, $500,000 Chairm
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Flash Report" for 12/23/99 identifi
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• Currently pitching to become En
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Concurrently, Enron advised Merrill
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742.19 Internally, Merrill Lynch co
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if Enron defaulted within a given t
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748. By the beginning of the Class
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- something that Barclays was in a
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length transactions with to generat
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Brothers legal entity, as its knowl
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5/99 $500 million 7-3/8% Enron note
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financial information as Enron's le
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instance: 5/00 $500 million 8.375%
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and condition of Enron's business o
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eturn for Deutsche Bank's participa
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DATE TRANSACTION 7/98 $252 million
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797. Deutsche Bank also actively en
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would pay it a large fee for the ea
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797.8 The Washington Post further f
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797.12 Bankers Trust's role in Proj
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797.17 In the words of the Joint Co
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797.25 Project Tomas was structured
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emaining from Bankers Trust to Enro
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INVOLVEMENT OF VINSON & ELKINS 800.
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accommodated Enron's desire for one
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The document ... sharply criticizes
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to "close," i.e., take place, and t
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806. However, Enron could not find
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810. During 12/97, Vinson & Elkins
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day-to-day activities would be mana
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equired to pay Enron on the "hedge"
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these SPEs, Enron would have to tak
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Vinson & Elkins Concealed the Phony
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In March 2001, Enron acquired the l
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ecause it participated in the negot
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839. The related-party disclosures
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846. The "disclosures" above are fa
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The Attempted Coverup 850. In mid-8
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3. There is a veil of secrecy aroun
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854. The result of this letter - la
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standpoint. In this regard, AA cons
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A. General INVOLVEMENT OF ARTHUR AN
Page 584 and 585: Andersen also consented to the use
Page 586 and 587: 905. Andersen's reports were false
Page 588 and 589: investors that would hold assets an
Page 590 and 591: 915. Andersen also performed certai
Page 592 and 593: ing to light documents illustrating
Page 594 and 595: he was aware of many of the company
Page 596 and 597: Andersen employees destroyed incrim
Page 598 and 599: departments, knew about the excessi
Page 600 and 601: a blind eye to the numerous red fla
Page 602 and 603: • How Enron could, with its own c
Page 604 and 605: Tallying all expected profits immed
Page 606 and 607: c. Determine whether the transactio
Page 608 and 609: keep the Chewco deal off the books.
Page 610 and 611: improper accounting was corrected).
Page 612 and 613: in order for the financial statemen
Page 614 and 615: 959. As detailed herein, Enron's di
Page 616 and 617: connection with an SEC investigatio
Page 618 and 619: eached by David Duncan and other ac
Page 620 and 621: . Fails to correct an entity's fina
Page 622 and 623: (j) The fourth standard of reportin
Page 624 and 625: Professional Standards Group has fi
Page 626 and 627: headquarters are located at 33 West
Page 628 and 629: STATUTORY SAFE HARBOR 985. The stat
Page 630 and 631: 988. Plaintiffs' claims are typical
Page 632 and 633: - 628 - Michael M. Lowther* Benjami
Page 636 and 637: Type of Offering Enron Corp. 7.875%
Page 638 and 639: day of the offering. day of the off
Page 640 and 641: liable as detailed herein. Defendan
Page 642 and 643: 08/17/00 Enron Credit Linked Notes
Page 644 and 645: subdivisions thereof and/or State P
Page 646 and 647: JP Morgan and Lehman Brothers had a
Page 648 and 649: 1016.26 This Claim is brought pursu
Page 650 and 651: Plaintiffs hereby demand a trial by
Page 652 and 653: SHAPIRO HABER & URMY LLP THOMAS G.
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