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

Defendants' scheme and fraudulent course of business was also designed to and did enable Enron
to issue billions of dollars of new equity and debt securities to investors during the Class Period.
3. This fraudulent scheme and course of business enabled defendants to pocket billions
of dollars of legal, accounting, auditing and consulting fees, underwriting commissions, interest and
credit facility payments, cash bonuses based on Enron's reported earnings and its stock performance
and illegal insider trading proceeds, such that each defendant was significantly enriched. In 10/01,
Enron suddenly reported $1 billion (after-tax) in write-offs and a billion dollar shareholder equity
writedown. It then restated its previously reported financial results to eliminate hundreds of millions
of dollars of previously reported profits and billions more in shareholders' equity. Enron's stock
collapsed, its credit rating was downgraded to "junk" and it went bankrupt, as investors realized that
the huge profits Enron had reported over the past several years had been grossly inflated and
falsified, that Enron had hidden billions of dollars of debt that should have been reported on Enron's
balance sheet and that Enron had misrepresented the current success and future prospects of its
WEOS, EES and EBS businesses.
4. This fraud was accomplished, in part, through clandestinely controlled partnerships
and so-called special purpose entities ("SPEs") that the defendants created, structured, financed and
used to do transactions with Enron to inflate its profits and hide its debt and thus perpetuate the fraud
by violating Generally Accepted Accounting Principles ("GAAP") and the principles of "fair
presentation" of financial results. Virtually all of Enron's top insiders have been kicked out of the
Company. The Securities and Exchange Commission ("SEC") and the Department of Justice
("DOJ") are conducting wide-ranging investigations of the Enron fiasco. Enron and Andersen have
admitted destroying incriminating evidence and Andersen has been indicted for obstruction of
justice. Enron executives and Andersen officials have "taken the 5th" and refused to testify because
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