UNITED
STATES DISTRICT COURT
SOUTHERN
DISTRICT OF TEXAS
HOUSTON
DIVISION
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RALPH A. WILT, JR., Plaintiff, v. ANDREW S. FASTOW; KENNETH L. LAY; JEFFREY K. SKILLING; RICHARD A. CAUSEY; JAMES V. DERRICK, JR.; REX R. ROGERS; THE ESTATE OF J. CLIFFORD BAXTER; MICHAEL J. KOPPER; MARK A. FREVERT; STANLEY C. HORTON; KENNETH D. RICE; RICHARD B. BUY; LOU L. PAI; ROBERT A. BELFER; NORMAN P. BLAKE, JR.; RONNIE C. CHAN; JOHN H. DUNCAN; WENDY L. GRAMM; ROBERT K. JAEDICKE; CHARLES A. LEMAISTRE; JOE H. FOY; JOSEPH M. HIRKO; KEN L. HARRISON; MARK E. KOENIG; STEVEN J. KEAN; REBECCA P. MARK-JUSBASCHE; MICHAEL S. MCCONNELL;JEFFREY MCMAHON; J. MARK METTS; CINDY K. OLSON; JOSEPH W. SUTTON; and ANDERSEN; ANDERSEN WORLDWIDE; ARTHUR ANDERSEN, LLP; DAVID B. DUNCAN; THOMAS H. BAUER; DEBRA A. CASH; ROGER D. WILLARD; D. STEPHEN GODDARD, JR.; MICHAEL M. LOWTHER; GARY B. GOOLSBY; MICHAEL C. ODOM; MICHAEL D. JONES; STEVE M. SAMEK; WILLIAM SWANSON; MICHAEL BENNETT; GREG JONAS; BOB KUTSENDA; JOHN DOE JENEAUX; JOHN DOE STEWART; NANCY A. TEMPLE; DORSEY L. BASKIN, JR.; C.E. ANDREWS; JOSEPH F. BERARDINO; and VINSON & ELKINS, LLP; RONALD T. ASTIN; JOSEPH DILG; MICHAEL P. FINCH; MAX HENDRICK III; and DOES 1-500, inclusive, Defendants. ______________________________________ |
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Case No. COMPLAINT; DEMAND FOR JURY TRIAL |
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Plaintiffs, by the undersigned
counsel, aver on personal knowledge as to themselves and their own acts, and on
information and belief (based on the investigation of their counsel) as to all
other matters (as to which averments they believe that substantial evidentiary
support will exist after a reasonable opportunity for further investigation and
discovery) as follows:
NATURE
OF THE ACTION
1.
This action
arises from the gargantuan fraud perpetrated by directors, officers,
accountants, and attorneys of Enron Corporation (“Enron”), with the assistance
of corrupt public officials, elected and appointed, against many of the shareholders
of Enron, potential investors in securities issued by Enron, and the integrity
of the securities market.
2.
Enron is not a
defendant in this action because Enron filed a Chapter 11 petition on December
2, 2001, in the United States Bankruptcy Court for the Southern District of New
York, whereupon an automatic stay was imposed under 11 U.S.C. § 362. Enron is an Oregon corporation with its
principal executive offices located at 1400 Smith Street, Houston, Texas. According to public filings, Enron is the
largest buyer and seller of natural gas and the top wholesale power marketer in
the United States; operates a 25,000-mile gas pipeline system in the United
States; and also markets and trades in commodities such as electricity, weather
futures, metals, paper, coal, chemicals, and fiber-optic bandwidth.
JURISDICTION
3.
Jurisdiction
exists under 28 U.S.C. § 1332 because the parties are of diverse citizenship
and the amount in controversy, including punitive and exemplary damages,
exceeds $75,000.00, exclusive of interest and costs. On information and belief, punitive and exemplary damages are
highly likely to be awarded in substantial amounts far exceeding $75,000.00 due
to the egregiousness of the fraudulent acts, omissions, and scheme set forth in
detail below.
VENUE
4.
Venue is proper
in this district under 28 U.S.C. § 1391(a)(2) because a substantial part of the
events or omissions giving rise to the claims occurred here.
PLAINTIFFS
5.
Plaintiff Ralph
A. Wilt, Jr. (“Wilt”) is a resident and citizen of the State of Missouri and at
relevant times bought and sold Enron securities. Due to the egregiousness of the fraudulent acts, omissions, and
schemes set forth below, Wilt seeks and expects to recover, in addition to
compensatory damages, at least $200,000.00 in punitive and exemplary damages
from each defendant pursuant to Texas Civil Practice & Remedies Code §
41.008(b).
DIRECTOR
AND OFFICER DEFENDANTS
6.
On information
and belief, Defendant Andrew S. Fastow (“Fastow”) is a resident of Houston,
Texas, and has been the Executive Vice President and Chief Financial Officer of
Enron since July 1999; was previously, from March 1998 to July 1999, the Senior
Vice President and Chief Financial Officer of Enron; and also served as the
Senior Vice President of Finance of Enron from January 1997 to March 1998. Fastow is sued herein as a direct
participant, aider and abettor, and co-conspirator in the fraudulent acts,
omissions, and scheme set forth below.
On information and belief, Fastow unjustly enriched himself in the
amount of approximately $30 million, or more, through his wrongful and unlawful
acts.
7.
On information
and belief, Defendant Kenneth L. Lay (“Lay”) is a resident of Houston, Texas,
and was the Chairman of the Board of Directors of Enron at relevant times; was
Chief Executive Officer of Enron from 1985 until Defendant Skilling was elected
to the position in early 2001; and assumed the duties of President and Chief
Executive Officer when Jeffrey K. Skilling resigned on August 14, 2001. Lay is sued herein as a direct participant,
aider and abettor, and co-conspirator in the fraudulent acts, omissions, and
scheme set forth below.
8.
On information
and belief, Defendant Jeffrey K. Skilling (“Skilling”) is a resident of
Houston, Texas, and has been a director of Enron since 1997; served as
President of Enron from January 1997 until August 14, 2001; was Chief Executive
Officer of Enron from early 2001 until August 14, 2001; and remains a
consultant to Enron and a member of its Board of Directors. Skilling is sued herein as a direct
participant, aider and abettor, and co-conspirator in the fraudulent acts,
omissions, and scheme set forth below.
9.
On information
and belief, Defendant Richard A. Causey (“Causey”) is a resident of Houston,
Texas, and was the Executive Vice President and Chief Accounting Officer of
Enron at relevant times and signed multiple financial disclosure documents and
filings with the United States Securities Exchange Commission (“SEC”). Causey is sued herein as a direct
participant, aider and abettor, and co-conspirator in the fraudulent acts,
omissions, and scheme set forth below.
10.
On information
and belief, Defendant James V. Derrick, Jr. (“Derrick”) is a resident of
Houston, Texas, and has been the Executive Vice President and General Counsel
of Enron since July 1999; was previously the Senior Vice President and General
Counsel; and was for many years an associate then a partner of Defendant law
firm Vinson & Elkins, LLP. Derrick
signed multiple opinion letters that were filed with the SEC and were of great
importance and utility to the perpetration of the fraudulent acts, omissions,
and scheme set forth below. Derrick is
sued herein as a direct participant, aider and abettor, and co-conspirator in
the fraudulent acts, omissions, and scheme set forth below.
11.
On information
and belief, Defendant Rex R. Rogers (“Rogers”) is a resident of Houston, Texas,
and has been the Vice President and Associate General Counsel of Enron at
relevant times. Rogers is listed in SEC
filings that were of great importance and utility to the perpetration of the
fraudulent acts, omissions, and scheme set forth below. Rogers is sued herein as a direct
participant, aider and abettor, and co-conspirator in the fraudulent acts,
omissions, and scheme set forth below.
///
12.
On information
and belief, until his recent death by suicide, J. Clifford Baxter (“Baxter”)
was a resident of Houston, Texas, and was the Vice Chairman of Enron since
October 2000; was the Chief Strategy Officer of Enron since June 2000; and
previously served as the Chairman and Chief Executive Officer of Enron North
America Corp. – an affiliate of Enron controlled by Enron – from January 1997
until June 1999. But for his recent
death by suicide, Baxter would have been sued herein as a direct participant,
aider and abettor, and co-conspirator in the fraudulent acts, omissions, and
scheme set forth below. By reason of
his recent death, this action is brought against Defendant Estate of J.
Clifford Baxter (the “Baxter Estate”) as Baxter’s successor in interest. Plaintiffs will seek leave to amend to
substitute the executor, administrator, or other personal representative, if
and when appropriate, upon ascertaining that information.
13.
On information
and belief, Defendant Michael J. Kopper
(“Kopper”) is a resident of Houston, Texas, and has been an officer
and/or director of Enron at relevant times.
Kopper is sued herein as a direct participant, aider and abettor, and
co-conspirator in the fraudulent acts, omissions, and scheme set forth
below. On information and belief,
Kopper unjustly enriched himself in the amount of approximately $10 million through
his wrongful and unlawful acts.
14.
On information
and belief, Defendant Mark A. Frevert (“Frevert”) is a resident of Houston,
Texas, and has been the Chairman and Chief Executive Officer of Enron Wholesale
Services since June 2000, and was previously the Chairman and Chief Executive
Officer of Enron Europe from March 1997 to June 2000. On information and belief, Enron Wholesale and Enron Europe are
both affiliates of Enron controlled by Enron.
Frevert is sued herein as a direct participant, aider and abettor, and
co-conspirator in the fraudulent acts, omissions, and scheme set forth below.
15.
On information
and belief, Defendant Stanley C. Horton (“Horton”) is a resident of Houston,
Texas, and was the Chairman and Chief Executive Officer of Enron Transportation
Services and/or Enron Pipeline Group at relevant times. On information and belief, Enron
Transportation Services and Enron Pipeline Group are affiliates of Enron
controlled by Enron. Horton is sued
herein as a direct participant, aider and abettor, and co-conspirator in the
fraudulent acts, omissions, and scheme set forth below.
16.
On information
and belief, Defendant Kenneth D. Rice (“Rice”) is a resident of Houston, Texas,
and has been the Chairman and Chief Executive Officer of Enron Broadband
Services, Inc. since June 2000, and was previously the Chairman and Chief
Executive Officer of Enron Capital & Trade – North America from March 1997
until June 1999. On information and
belief, Enron Broadband Services, Inc. and Enron Capital & Trade – North
America are both affiliates of Enron controlled by Enron. Rice is sued herein as a direct participant,
aider and abettor, and co-conspirator in the fraudulent acts, omissions, and
scheme set forth below.
17.
On information
and belief, Defendant Richard B. Buy (“Buy”) is a resident of Houston, Texas,
and has been the Executive Vice President and Chief Risk Officer of Enron since
June 1999; was previously the Senior Vice President and Chief Risk Officer of
Enron from March 1999 until June 1999; and was also the Managing Director and
Chief Risk Officer of Enron Capital & Trade – North America – an affiliate
of Enron controlled by Enron – from January 1998 to March 1999. Buy is sued herein as a direct participant,
aider and abettor, and co-conspirator in the fraudulent acts, omissions, and
scheme set forth below.
18.
On information
and belief, Defendant Lou L. Pai (“Pai”) is a resident of Houston, Texas, and
was at relevant times the Chairman and Chief Executive Officer of Enron
Accelerator, and was previously a Director of Enron Energy Services – an
affiliate of Enron controlled by Enron.
Pai is sued herein as a direct participant, aider and abettor, and
co-conspirator in the fraudulent acts, omissions, and scheme set forth below.
19.
On information
and belief, Defendant Robert A. Belfer (“Belfer”) is a resident of Houston,
Texas, and/or New York, New York, and was at relevant times a Director of
Enron. Belfer is sued herein as a
direct participant, aider and abettor, and co-conspirator in the fraudulent acts,
omissions, and scheme set forth below.
20.
On information
and belief, Defendant Norman P. Blake, Jr. (“Blake”) is a resident of Houston,
Texas, and/or Baltimore, Maryland, and was a Director of Enron at relevant
times. Blake is sued herein as a direct
participant, aider and abettor, and co-conspirator in the fraudulent acts,
omissions, and scheme set forth below.
21.
On information
and belief, Defendant Ronnie C. Chan (“Chan”) is a resident of Houston, Texas,
and/or Hong Kong, China, and was a Director of Enron at relevant times. Chan is sued herein as a direct participant,
aider and abettor, and co-conspirator in the fraudulent acts, omissions, and
scheme set forth below.
22.
On information
and belief, Defendant John H. Duncan (“J.Duncan”) is a resident of Houston,
Texas, and was a Director of Enron at relevant times. J.Duncan is sued herein as a direct participant, aider and
abettor, and co-conspirator in the fraudulent acts, omissions, and scheme set
forth below.
23.
On information
and belief, Defendant Wendy L. Gramm (“W.Gramm”) is a resident of Houston,
Texas, and/or Washington, D.C., and was at all relevant times either the chair
of the Commodity Futures Trading Commission (“CFTC”) or a Director of Enron and
a member of Enron’s Audit and Compliance Committee, which has full oversight
authority for the accounting, auditing, and financial reporting practices of
Enron. W.Gramm is the wife of the
senior U.S. Senator, Phil Gramm, from Texas (“Senator Gramm”). W.Gramm is sued
herein as a direct participant, aider and abettor, and co-conspirator in the
fraudulent acts, omissions, and scheme set forth below. On information and belief, W.Gramm knew or
recklessly failed to learn of the fraudulent acts, omissions, and scheme set
forth below, and joined herself thereto as a direct participant, aider and
abettor, and co-conspirator by inter alia (a) engaging in corrupt acts
in her capacity as former chair of the CFTC, when she advocated Enron’s
position and opposed regulation of energy derivatives, energy swaps, and/or
other important part’s of Enron’s business, in part because of large campaign
contributions over the years to Senator Gramm and a political payoff in the
form of her appointment to the Enron board of directors; and (b) intentionally
and wilfully, or recklessly, failing and refusing to fulfil her
responsibilities and to exercise her power and authority as a member of Enron’s
Audit and Compliance Committee inter alia to ensure full and fair
disclosure of Enron’s financial condition and to prevent the use of fraudulent
accounting practices, in part because of large campaign contributions over the
years to Senator Gramm. On information
and belief, Enron contributed approximately $97,000 to Senator Gramm in the
most recent election cycle alone, in addition to all prior campaign
contributions.
24.
On information
and belief, Defendant Robert K. Jaedicke (“Jaedicke”) is a resident of Houston,
Texas, and/or Stanford, California, and was a Director of Enron at relevant
times. Jaedicke is sued herein as a
direct participant, aider and abettor, and co-conspirator in the fraudulent
acts, omissions, and scheme set forth below.
25.
On information
and belief, Defendant Charles A. LeMaistre (“LeMaistre”) is a resident of
Austin, Texas, and was a Director of Enron at relevant times. LeMaistre is sued herein as a direct
participant, aider and abettor, and co-conspirator in the fraudulent acts,
omissions, and scheme set forth below.
26.
On information
and belief, Defendant Joe H. Foy (“Foy”) is a resident of Houston, Texas, and
was a Director of Enron at relevant times, until June 2000. Foy is sued herein as a direct participant,
aider and abettor, and co-conspirator in the fraudulent acts, omissions, and
scheme set forth below.
27.
On information
and belief, Defendant Joseph M. Hirko (“Hirko”) is a resident of Houston,
Texas, and was at relevant times the Chief Executive Officer of Enron Broadband
Services – an affiliate of Enron controlled by Enron. Hirko is sued herein as a direct participant, aider, abettor, and
co-conspirator in the fraudulent acts, omissions, and scheme set forth below.
28.
On information
and belief, Defendant Ken L. Harrison (“Harrison”) is a resident of Portland,
Oregon, and was a Director of Enron at relevant times and was the Chief
Executive Officer of Portland General Electric – an affiliate of Enron
controlled by Enron – until March 31, 2000.
Harrison is sued herein as a direct participant, aider and abettor, and
co-conspirator in the fraudulent acts, omissions, and scheme set forth below.
29.
On information
and belief, Defendant Mark E. Koenig (“Koenig”) is a resident of Houston,
Texas, and was the Executive Vice President of Enron for Investor Relations at
relevant times. Koenig is sued herein
as a direct participant, aider and abettor, and co-conspirator in the fraudulent
acts, omissions, and scheme set forth below.
30.
On information
and belief, Defendant Steven J. Kean (“Kean”) is a resident of Houston, Texas,
and has been the Executive Vice President and Chief of Staff of Enron since
1999. Kean is sued herein as a direct
participant, aider and abettor, and co-conspirator in the fraudulent acts,
omissions, and scheme set forth below.
31.
On information
and belief, Defendant Rebecca P. Mark-Jusbasche (“Mark-Jusbasche”) is a
resident of Houston, Texas, and was a Director of Enron at relevant times,
until August 2000. Mark-Jusbasche is
sued herein as a direct participant, aider and abettor, and co-conspirator in
the fraudulent acts, omissions, and scheme set forth below.
32.
On information
and belief, Defendant Michael S. McConnell (“McConnell”) is a resident of
Houston, Texas, and was the Executive Vice President of Enron for
Technology. McConnell is sued herein as
a direct participant, aider and abettor, and co-conspirator in the fraudulent
acts, omissions, and scheme set forth below.
33.
On information
and belief, Defendant Jeffrey McMahon (“McMahon”) is a resident of Houston,
Texas, and has been the Treasurer and Executive Vice President of Enron for
Finance since July 1999; was the Treasurer and Senior Vice President of Enron
for Finance from July 1998 to July 1999; and was previously the Chief Financial
Officer of Enron Europe from 1994 to July 1998. McMahon is sued herein as a direct participant, aider and
abettor, and co-conspirator in the fraudulent acts, omissions, and scheme set
forth below.
34.
On information
and belief, Defendant J. Mark Metts (“Metts”) is a resident of Houston, Texas,
and was the Executive Vice President of Enron for Corporate Development at
relevant times. Metts is sued herein as
a direct participant, aider and abettor, and co-conspirator in the fraudulent
acts, omissions, and scheme set forth below.
35.
On information
and belief, Defendant Cindy K. Olson (“Olson”) is a resident of Houston, Texas,
and was the Executive Vice President of Enron for Human Resources at relevant
times. Olson is sued herein as a direct
participant, aider and abettor, and co-conspirator in the fraudulent acts,
omissions, and scheme set forth below.
36.
On information
and belief, Defendant Joseph W. Sutton (“Sutton”) is a resident of Houston,
Texas, and was the Vice Chairman of Enron at relevant times, until early
2001. Sutton is sued herein as a direct
participant, aider and abettor, and co-conspirator in the fraudulent acts,
omissions, and scheme set forth below.
37.
On information
and belief, Defendant Does 1 through 50 are past or present directors,
officers, managing agents, and/or other employees or agents of Enron, whose
identities are currently unknown, but who committed, aided, abetted,
participated in, and/or furthered the fraudulent acts, omissions, and scheme
set forth below. On information and
belief, at least some of these Does are residents of Houston, Texas. Plaintiffs will seek leave of court to
identify these Does by their proper names and capacities when that information
is ascertained.
38.
Defendants
Fastow, Lay, Skilling, Causey, Derrick, Rogers, the Baxter Estate, Frevert,
Horton, Rice, Buy, Pai, Belfer, Blake, Chan, J.Duncan, W.Gramm, Jaedicke,
LeMaistre, Foy, Hirko, Harrison, Koenig, Kean, Mark-Jusbasche, McConnell,
McMahon, Metts, Olson, Sutton, and Does 1 through 50 are collectively called
the “Director and Officer Defendants.”
39.
On information
and belief, on dates currently unknown, the Director and Officer Defendants
secretly entered into an agreement, combination, and conspiracy with each
other, and with the other defendants identified below, to commit, aid, abet,
participate in, and further the fraudulent acts, omissions, and scheme set
forth below, all with the intent of misleading Enron’s shareholders, potential
investors, and the securities market as to the value of Enron’s securities.
40.
On information
and belief, the Director and Officer Defendants have engaged in a pattern of
fraudulent concealment, by inter alia shredding accounting and other
documents and destroying other evidence, in a concerted attempt to conceal the
fraudulent acts, omissions, and scheme set forth below and their conspiracy to
engage in such wrongful and unlawful conduct.
ACCOUNTANT
DEFENDANTS
41.
On information
and belief, Defendant Andersen is either a partnership or other type of
unincorporated association consisting of member firms within “the Andersen
global client service network.” On
information and belief, Andersen describes and promotes itself as a single,
integrated, full-service, professional business enterprise comprising “one
firm” with “one voice” and a “shared heritage and common values and
vision.” On information and belief,
Anderson does business and is found in Houston, Texas, and is one of the most
sophisticated international accounting, auditing, and management consulting
firms in the United States and the world, with expertise in all areas of
Enron’s business. Before the recent
bankruptcy of Enron, Andersen enjoyed an excellent reputation; Andersen’s
involvement with auditing, SEC filings, and securities offerings bestowed the
imprimatur of legitimacy, confidence, and stability on its many clients,
including Enron. Andersen is sued as a
direct participant, aider and abettor, and co-conspirator in the fraudulent
acts, omissions, and scheme set forth below.
Plaintiffs will seek leave of court to amend this pleading to name
constituent members of Andersen after discovery into the exact nature of Andersen,
members, alter ego issues, and sham transaction issues.
42.
On information
and belief, Defendant Andersen Worldwide is a corporation, a partnership, or
another type of unincorporated association consisting of member firms within “the
Andersen global client service network.”
On information and belief, Andersen Worldwide describes and promotes
itself as a single, integrated, full-service, professional business enterprise
comprising “one firm” with “one voice” and a “shared heritage and common values
and vision.” On information and belief,
Anderson Worldwide and does business and is found in Houston, Texas, and is one
of the most sophisticated international accounting, auditing, and management
consulting firms in the United States and the world, with expertise in all
areas of Enron’s business. Before the
recent bankruptcy of Enron, Andersen Worldwide enjoyed an excellent reputation;
Andersen Worldwide’s involvement with auditing, SEC filings, and securities
offerings bestowed the imprimatur of legitimacy, confidence, and stability on
its clients, including Enron. Andersen
Anderson Worldwide is sued herein as a direct participant, aider and abettor,
and co-conspirator in the fraudulent acts, omissions, and scheme set forth
below. Plaintiffs will seek leave of
court to amend this pleading to name constituent members of Andersen Worldwide
after discovery into the exact nature of Andersen Worldwide, its members, alter
ego issues, and sham transaction issues.
43.
On information
and belief, Defendant Arthur Anderson, LLP is a limited liability partnership,
a member of “the Andersen global client service network,” does business and is
found in Houston, Texas, and is one of the most sophisticated international
accounting, auditing, and management consulting firms in the United States and
the world, with expertise in all areas of Enron’s business. Before the recent bankruptcy of Enron,
Arthur Andersen, LLP enjoyed an excellent reputation; Arthur Andersen, LLP’s
involvement with auditing, SEC filings, and securities offerings bestowed the
imprimatur of legitimacy, confidence, and stability on its clients, including Enron. Arthur Andersen, LLP is sued herein as a
direct participant, aider and abettor, and co-conspirator in the fraudulent
acts, omissions, and scheme set forth below.
44.
On information
and belief, Andersen, Andersen Worldwide, and Arthur Andersen, LLP are alter
egos of each other in that they now and at all relevant times (a) held
themselves out to the public as a single, integrated, full-service,
professional business enterprise comprising “one firm” with “one voice” and a
“shared heritage and common values and vision”; (b) completely dominated and
controlled each other’s assets, operations, policies, procedures, strategies,
and tactics; (c) failed to observe corporate formalities; (d) and used and
commingled the assets, facilities, employees, and business opportunities of
each other, as if those assets, facilities, employees, and business
opportunities were their own -- all to such an extent that any adherence to the
fiction of the separate existence of any of these defendants distinct from the
others would be inequitable, would permit egregious wrongdoers to abuse a
corporate, limited liability partnership, and/or similar privilege of limited
liability, if any, and would promote injustice by allowing these defendants to
evade liability or veil assets that should be attachable.
45.
For
convenience, in light of the foregoing relationships among them, Defendants
Andersen, Andersen Worldwide, and Arthur Andersen, LLP are collectively called
“AA” below.
46.
On information
and belief, Defendant David B. Duncan (“B.Duncan”) is a resident of Houston,
Texas, and was at relevant times the lead AA auditor on the Enron account. On information and belief, B.Duncan acted as
a direct participant, aider and abetter, and/or co-conspirator in the
fraudulent acts, omissions, and scheme set forth below, and/or ordered and/or
participated inter alia in the shredding, destruction, and spoliation of
documents and other evidence of (a) the fraudulent acts, omissions, and scheme
set forth below, and (b) AA’s involvement therein as a direct participant,
aider and abettor, and co-conspirator.
On information and belief, B.Duncan intentionally, wilfully, and/or
recklessly did so with full knowledge that administrative, civil, and criminal
investigations and litigation to which such evidentiary matter was highly
relevant had already been commenced and/or were imminent. B.Duncan is sued herein as a direct
participant, aider and abettor, and co-conspirator in the fraudulent acts,
omissions, and scheme set forth below.
47.
On information
and belief, Defendant Thomas H. Bauer (“Bauer”) is a resident of Houston,
Texas, a partner in AA, and was at relevant times an auditor, accountant,
and/or management consultant on the Enron account. On information and belief, Bauer acted as a direct participant,
aider and abetter, and/or co-conspirator in the fraudulent acts, omissions, and
scheme set forth below, and/or ordered and/or participated inter alia in
shredding, destruction, and spoliation of documents and other evidence of (a)
the fraudulent acts, omissions, and scheme set forth below, and (b) AA’s
involvement therein as a direct participant, aider and abettor, and
co-conspirator. On information and
belief, Bauer intentionally, wilfully, and/or recklessly did so with full
knowledge that administrative, civil, and criminal investigations and
litigation to which such evidentiary matter was highly relevant had already
been commenced and/or were imminent.
Bauer is sued herein as a direct participant, aider and abettor, and
co-conspirator in the fraudulent acts, omissions, and scheme set forth below.
48.
On information
and belief, Defendant Debra A. Cash
(“Cash”) is a resident of Houston, Texas, a partner in AA, and was at
relevant times an auditor, accountant, and/or management consultant on the
Enron account. On information and
belief, Cash acted as a direct participant, aider and abetter, and/or
co-conspirator in the fraudulent acts, omissions, and scheme set forth below,
and/or ordered and/or participated inter alia in shredding, destruction,
and spoliation of documents and other evidence of (a) the fraudulent acts,
omissions, and scheme set forth below, and (b) AA’s involvement therein as a
direct participant, aider and abettor, and co-conspirator. On information and belief, Cash
intentionally, wilfully, and/or recklessly did so with full knowledge that
administrative, civil, and criminal investigations and litigation to which such
evidentiary matter was highly relevant had already been commenced and/or were
imminent. Cash is sued herein as a
direct participant, aider and abettor, and co-conspirator in the fraudulent acts,
omissions, and scheme set forth below.
49.
On information
and belief, Defendant Roger D. Willard (“Willard”) is a resident of Houston,
Texas, a partner in AA, and was at relevant times an auditor, accountant,
and/or management consultant on the Enron account. On information and belief, Willard acted as a direct participant,
aider and abetter, and/or co-conspirator in the fraudulent acts, omissions, and
scheme set forth below, and/or ordered and/or participated inter alia in
shredding, destruction, and spoliation of documents and other evidence of (a)
the fraudulent acts, omissions, and scheme set forth below, and (b) AA’s
involvement therein as a direct participant, aider and abettor, and
co-conspirator. On information and
belief, Willard intentionally, wilfully, and/or recklessly did so with full
knowledge that administrative, civil, and criminal investigations and
litigation to which such evidentiary matter was highly relevant had already
been commenced and/or were imminent.
Willard is sued herein as a direct participant, aider and abettor, and
co-conspirator in the fraudulent acts, omissions, and scheme set forth below.
50.
On information
and belief, Defendant D. Stephen Goddard, Jr. (“Goddard”) is a resident of
Houston, Texas, and was at relevant times the managing partner of AA’s Houston
office. On information and belief,
Goddard acted as a direct participant, aider and abetter, and/or co-conspirator
in the fraudulent acts, omissions, and scheme set forth below, and/or knew of,
condoned, authorized, directed, furthered, and/or participated inter alia
in the shredding, destruction, and spoliation of documents and other evidence
of (a) the fraudulent acts, omissions, and scheme set forth below, and (b) AA’s
involvement therein as a direct participant, aider and abettor, and
co-conspirator. On information and
belief, Goddard intentionally, wilfully, and/or recklessly did so with full
knowledge that administrative, civil, and criminal investigations and
litigation to which such evidentiary matter was highly relevant had already
been commenced and/or were imminent.
Goggard is sued herein as a direct participant, aider and abettor, and
co-conspirator in the fraudulent acts, omissions, and scheme set forth below.
51.
On information
and belief, Defendant Michael M. Lowther (“Lowther”) is a resident of Houston,
Texas, and was at relevant times an AA partner based in AA’s Houston
office. On information and belief,
Lowther acted as a direct participant, aider and abetter, and/or co-conspirator
in the fraudulent acts, omissions, and scheme set forth below, and/or knew of,
condoned, authorized, directed, furthered, and/or participated inter alia
in the shredding, destruction, and spoliation of documents and other evidence
of (a) the fraudulent acts, omissions, and scheme set forth below, and (b) AA’s
involvement therein as a direct participant, aider and abettor, and
co-conspirator. On information and
belief, Lowther intentionally, wilfully, and/or recklessly did so with full
knowledge that administrative, civil, and criminal investigations and
litigation to which such evidentiary matter was highly relevant had already
been commenced and/or were imminent.
Lowther is sued herein as a direct participant, aider and abettor, and
co-conspirator in the fraudulent acts, omissions, and scheme set forth
below.
52.
On information
and belief, Defendant Gary B. Goolsby (“Goolsby”) is a resident of Houston,
Texas, and was at relevant times an AA partner based in AA’s Houston
office. On information and belief,
Goolsby acted as a direct participant, aider and abetter, and/or co-conspirator
in the fraudulent acts, omissions, and scheme set forth below, and/or knew of,
condoned, authorized, directed, furthered, and/or participated inter alia
in the shredding, destruction, and spoliation of documents and other evidence
of (a) the fraudulent acts, omissions, and scheme set forth below, and (b) AA’s
involvement therein as a direct participant, aider and abettor, and
co-conspirator. On information and
belief, Goolsby intentionally, wilfully, and/or recklessly did so with full
knowledge that administrative, civil, and criminal investigations and
litigation to which such evidentiary matter was highly relevant had already
been commenced and/or were imminent.
Goolsby is sued herein as a direct participant, aider and abettor, and
co-conspirator in the fraudulent acts, omissions, and scheme set forth below.
53.
On information
and belief, Defendant Michael C. Odom (“Odom”) is a resident of Houston, Texas,
a partner in AA, and at relevant times a risk manager based in and responsible
for AA’s Houston office. On information
and belief, at relevant times Odom acted as a direct participant, aider and
abetter, and/or co-conspirator in the fraudulent acts, omissions, and scheme
set forth below, and/or inter alia knew of, condoned, authorized,
directed, participated in, furthered, and/or attempted to conceal the true
extent of AA’s involvement in the fraudulent acts, omissions, and scheme set
forth below. On information and belief,
Odom intentionally, wilfully, and/or recklessly did so with full knowledge that
administrative, civil, and criminal investigations and litigation to which such
evidentiary matter was highly relevant had already been commenced and/or were
imminent. Odom is sued herein as a
direct participant, aider and abettor, and co-conspirator in the fraudulent
acts, omissions, and scheme set forth below.
54.
On information
and belief, Defendant Michael D. Jones (“Jones”) is a resident of Houston,
Texas, a partner in AA, and was at relevant times an auditor, accountant,
and/or management consultant on the Enron account. On information and belief, Jones acted as a direct participant,
aider and abetter, and/or co-conspirator in the fraudulent acts, omissions, and
scheme set forth below, and/or ordered and/or participated inter alia in
shredding, destruction, and spoliation of documents and other evidence of (a)
the fraudulent acts, omissions, and scheme set forth below, and (b) AA’s
involvement therein as a direct participant, aider and abettor, and
co-conspirator. On information and
belief, Jones intentionally, wilfully, and/or recklessly did so with full
knowledge that administrative, civil, and criminal investigations and
litigation to which such evidentiary matter was highly relevant had already
been commenced and/or were imminent.
Jones is sued herein as a direct participant, aider and abettor, and
co-conspirator in the fraudulent acts, omissions, and scheme set forth below.
55.
On information
and belief, Defendant Steve M. Samek (“Samek”) is a resident of Houston, Texas,
or Chicago, Illinois, and was at relevant times either an auditor, accountant,
management consultant, or other AA partner or employee who serviced the Enron
account, and a co-author of the book, “Cracking the Value Code,” which may have
inspired the material overstatement of Enron’s income and assets, as set forth
more fully below. On information and
belief, Samek acted as a direct participant, aider and abetter, and/or
co-conspirator in the fraudulent acts, omissions, and scheme set forth below,
and/or ordered and/or participated inter alia in shredding, destruction,
and spoliation of documents and other evidence of (a) the fraudulent acts,
omissions, and scheme set forth below, and (b) AA’s involvement therein as a
direct participant, aider and abettor, and co-conspirator. On information and belief, Samek
intentionally, wilfully, and/or recklessly did so with full knowledge that
administrative, civil, and criminal investigations and litigation to which such
evidentiary matter was highly relevant had already been commenced and/or were
imminent. Samek is sued herein as a
direct participant, aider, abettor, and co-conspirator in the fraudulent acts,
omissions, and scheme set forth below.
56.
On information
and belief, Defendant William Swanson (“Swanson”) is a resident of Houston,
Texas, was at relevant times the head of the Audit and Business Advisory
practice in AA’s Houston office and the partner‑in‑charge of
assurance for the southwest region, and worked on the Enron account. On information and belief, Swanson acted as
a direct participant, aider and abetter, and/or co-conspirator in the
fraudulent acts, omissions, and scheme set forth below, and/or ordered and/or
participated inter alia in shredding, destruction, and spoliation of
documents and other evidence of (a) the fraudulent acts, omissions, and scheme
set forth below, and (b) AA’s involvement therein as a direct participant,
aider and abettor, and co-conspirator. On
information and belief, Swanson intentionally, wilfully, and/or recklessly did
so with full knowledge that administrative, civil, and criminal investigations
and litigation to which such evidentiary matter was highly relevant had already
been commenced and/or were imminent.
Swanson is sued herein as a direct participant, aider and abettor,
and/or co-conspirator in the fraudulent acts, omissions, and scheme set forth
below.
57.
On information
and belief, Defendant Michael Bennet (“Bennet”) is a resident of Houston,
Texas, was at relevant times a partner in AA’s Houston office, and worked on
the Enron account. On information and
belief, Bennett acted as a direct participant, aider and abetter, and/or
co-conspirator in the fraudulent acts, omissions, and scheme set forth below,
and/or ordered and/or participated inter alia in the shredding,
destruction, and spoliation of documents and other evidence of (a) the
fraudulent acts, omissions, and scheme set forth below, and (b) AA’s
involvement therein as a direct participant, aider and abettor, and
co-conspirator. On information and
belief, Bennett intentionally, wilfully, and/or recklessly did so with full
knowledge that administrative, civil, and criminal investigations and
litigation to which such evidentiary matter was highly relevant had already
been commenced and/or were imminent.
Bennett is sued herein as a direct participant, aider and abettor,
and/or co-conspirator in the fraudulent acts, omissions, and scheme set forth
below.
58.
On information
and belief, Defendant Greg Jonas (“Jonas”) is a resident of Chicago, Illinois,
was at relevant times a partner in AA’s Chicago office, and worked on the Enron
account. On information and belief,
Jonas acted as a direct participant, aider and abetter, and/or co-conspirator
in the fraudulent acts, omissions, and scheme set forth below, and/or ordered
and/or participated inter alia in the shredding, destruction, and
spoliation of documents and other evidence of (a) the fraudulent acts,
omissions, and scheme set forth below, and (b) AA’s involvement therein as a
direct participant, aider and abettor, and co-conspirator. On information and belief, Jonas intentionally,
wilfully, and/or recklessly did so with full knowledge that administrative,
civil, and criminal investigations and litigation to which such evidentiary
matter was highly relevant had already been commenced and/or were
imminent. Jonas is sued herein as a
direct participant, aider and abettor, and/or co-conspirator in the fraudulent
acts, omissions, and scheme set forth below.
59.
On information
and belief, Defendant Bob Kutsenda (“Kutsenda”) is a resident of Chicago,
Illinois, was at relevant times a partner in AA’s Chicago office, and worked on
the Enron account. On information and
belief, Kutsenda acted as a direct participant, aider and abetter, and/or
co-conspirator in the fraudulent acts, omissions, and scheme set forth below,
and/or ordered and/or participated inter alia in the shredding,
destruction, and spoliation of documents and other evidence of (a) the
fraudulent acts, omissions, and scheme set forth below, and (b) AA’s involvement
therein as a direct participant, aider and abettor, and co-conspirator. On information and belief, Kutsenda
intentionally, wilfully, and/or recklessly did so with full knowledge that
administrative, civil, and criminal investigations and litigation to which such
evidentiary matter was highly relevant had already been commenced and/or were
imminent. Kutsenda is sued herein as a
direct participant, aider and abettor, and/or co-conspirator in the fraudulent
acts, omissions, and scheme set forth below.
60.
The defendant
named herein as Defendant “John Doe Jeneaux” is the person identified simply as
“Jeneaux” in the February 6, 2001 memo from Michael D. Jones to David B. Duncan
and Thomas H. Bauer, describing “Jeneaux” as a participant “by phone” in a
meeting on February 5, 2001. On
information and belief, John Doe Jeneaux (“Jeneaux”) is a resident of Chicago,
Illinois, was at relevant times a partner or employee in AA’s Chicago office,
and worked on the Enron account. On
information and belief, Jeneaux acted as a direct participant, aider and
abetter, and/or co-conspirator in the fraudulent acts, omissions, and scheme
set forth below, and/or ordered and/or participated inter alia in the
shredding, destruction, and spoliation of documents and other evidence of (a)
the fraudulent acts, omissions, and scheme set forth below, and (b) AA’s
involvement therein as a direct participant, aider and abettor, and
co-conspirator. On information and
belief, Jeneaux intentionally, wilfully, and/or recklessly did so with full
knowledge that administrative, civil, and criminal investigations and
litigation to which such evidentiary matter was highly relevant had already
been commenced and/or were imminent.
Jeneaux is sued herein as a direct participant, aider and abettor, and/or
co-conspirator in the fraudulent acts, omissions, and scheme set forth
below. Plaintiffs will seek leave to
amend to state the full and correct name of Jeneaux when that information is
ascertained.
61.
The defendant
named herein as Defendant “John Doe Stewart” is the person identified simply as
“Stewart” in the February 6, 2001 memo from Michael D. Jones to David B. Duncan
and Thomas H. Bauer, describing “Stewart” as a participant “by phone” in a
meeting on February 5, 2001. On
information and belief, John Doe Stewart (“Stewart”) is a resident of Chicago,
Illinois, was at relevant times a partner or employee in AA’s Chicago office,
and worked on the Enron account. On
information and belief, Stewart acted as a direct participant, aider and
abetter, and/or co-conspirator in the fraudulent acts, omissions, and scheme
set forth below, and/or ordered and/or participated inter alia in the
shredding, destruction, and spoliation of documents and other evidence of (a)
the fraudulent acts, omissions, and scheme set forth below, and (b) AA’s
involvement therein as a direct participant, aider and abettor, and
co-conspirator. On information and
belief, Stewart intentionally, wilfully, and/or recklessly did so with full
knowledge that administrative, civil, and criminal investigations and
litigation to which such evidentiary matter was highly relevant had already
been commenced and/or were imminent.
Stewart is sued herein as a direct participant, aider and abettor,
and/or co-conspirator in the fraudulent acts, omissions, and scheme set forth
below. Plaintiffs will seek leave to
amend to state the full and correct name of Stewart when that information is
ascertained.
62.
On information
and belief, Defendant Nancy A. Temple (“Temple”) is a resident of Chicago,
Illinois, a former partner in the prestigious corporate law firm of Sidley
& Austin, and a high-level corporate attorney employed by AA. On information and belief, at relevant times
Temple acted as a direct participant, aider and abetter, and/or co-conspirator
in the fraudulent acts, omissions, and scheme set forth below, and/or inter
alia knew of, condoned, authorized, directed, participated in, furthered,
and/or attempted to conceal the true extent of AA’s involvement in the
fraudulent acts, omissions, and scheme set forth below. On information and belief, as set forth more
fully below, Temple inter alia wrote a clever email and caused it be
sent to AA’s Houston office to encourage and incite the shredding, destruction,
and spoliation of records. On
information and belief, Temple intentionally, wilfully, and/or recklessly did
so with full knowledge that administrative, civil, and criminal investigations
and litigation to which such evidentiary matter was highly relevant had already
been commenced and/or were imminent.
Temple is sued herein as a direct participant, aider and abettor, and/or
co-conspirator in the fraudulent acts, omissions, and scheme set forth below.
///
63.
On information
and belief, Defendant Dorsey L. Baskin, Jr. (“Baskin”) is a resident of
Chicago, Illinois, an AA partner, and at relevant times the managing director
of AA’s professional standards group.
On information and belief, at relevant times Baskin acted as a direct
participant, aider and abetter, and/or co-conspirator in the fraudulent acts,
omissions, and scheme set forth below, and/or inter alia knew of,
condoned, authorized, directed, participated in, furthered, and/or attempted to
conceal the true extent of AA’s involvement in the fraudulent acts, omissions,
and scheme set forth below. On
information and belief, Baskin intentionally, wilfully, and/or recklessly did
so with full knowledge that administrative, civil, and criminal investigations
and litigation to which such evidentiary matter was highly relevant had already
been commenced and/or were imminent.
Baskin is sued herein as a direct participant, aider and abettor, and
co-conspirator in the fraudulent acts, omissions, and scheme set forth below.
64.
On information
and belief, Defendant C.E. Andrews (“Andrews”) is a resident of Chicago,
Illinois, an AA partner, and the managing partner of AA’s global auditing
practice. On information and belief, at
relevant times Andrews acted as a direct participant, aider and abetter, and/or
co-conspirator in the fraudulent acts, omissions, and scheme set forth below,
and/or inter alia knew of, condoned, authorized, directed, participated
in, furthered, and/or attempted to conceal the true extent of AA’s involvement
in the fraudulent acts, omissions, and scheme set forth below. On information and belief, Andrews
intentionally, wilfully, and/or recklessly did so with full knowledge that
civil, administrative, and criminal investigations and litigation to which such
evidentiary matter was highly relevant had already been commenced and/or were
imminent. Andrews is sued herein as a
direct participant, aider and abettor, and co-conspirator in the fraudulent
acts, omissions, and scheme set forth below.
65.
On information
and belief, Defendant Joseph F. Berardino (“Berardino”) is a resident of
Chicago, Illinois, and the Chief Executive Office of AA. On information and belief, at relevant times
Berardino acted as a direct participant, aider and abetter, and/or
co-conspirator in the fraudulent acts, omissions, and scheme set forth below,
and/or inter alia knew of, condoned, authorized, directed, furthered,
and/or attempted to conceal the true extent of AA’s involvement in the
fraudulent acts, omissions, and scheme set forth below. On information and belief, Berardino
intentionally, wilfully, and/or recklessly did so with full knowledge that
administrative, civil, and criminal investigations and litigation to which such
evidentiary matter was highly relevant had already been commenced and/or were
imminent. Berardino is sued herein as a
direct participant, aider and abettor, and/or co-conspirator in the fraudulent
acts, omissions, and scheme set forth below.
66.
On information
and belief, Defendant Does 51 through 100 are past or present partners,
principals, officers, managing agents, and/or other employees or agents of AA,
whose identities are currently unknown, but who committed, aided, abetted,
participated in, and/or furthered the fraudulent acts, omissions, and scheme
set forth below, AA’s attempted cover-up, and the related spoliation of
documents and other evidence relevant thereto.
On information and belief, at least some of these Does are residents of
Houston, Texas. Plaintiffs will seek
leave of court to identify these Does by their true names and capacities when
ascertained.
67.
Defendants AA,
B.Duncan, Bauer, Cash, Willard, Goddard, Lowther, Goolsby, Odom, Jones, Samek,
Swanson, Bennett, Jonas, Kutsenda, Jeneaux, Stewart, Temple, Baskin, Andrews,
Berardino, and Does 51 through 100 are collectively called the “Accountant Defendants”
below.
68.
On information
and belief, an extremely close relationship has existed for many years between
AA and Enron at the business level, and between the partners or principals of
AA and the key management personnel of Enron on a personal and social
level. On information and belief,
several former partners or principals of AA have became directors or officers
of Enron.
69.
On information
and belief, AA was continuously engaged by Enron for many years, until January
2002, to provide “independent” accounting, auditing, and management consulting
services, tax services, examination and review of SEC filings, audits, and
reviews of financial statements included in Enron’s SEC filings, including
audited and unaudited information, and annual reports.
70.
On information
and belief, AA had personnel permanently stationed in Enron’s corporate
headquarters in Houston, Texas, for the purpose of continuously monitoring
Enron’s accounting, communicating with Enron’s personnel and its in-house and
retained counsel, and working directly with Enron’s personnel and its in-house
and retained counsel to help structure, organize, and/or account for the
operations and ventures of Enron, including inter alia the structuring
and organizing of and accounting for the hundreds or thousands of partnerships
that were euphemistically called “special purpose entities” (collectively, the
“SPE’s”) and were at the heart of the massive fraud set forth below. On information and belief, AA’s relationship
with Enron went far beyond “independent” auditing services to include both
internal and external auditing and accounting, management consulting, and
extensive, active involvement throughout the evaluation, adoption, creation,
structuring, organization, implementation, documentation, use, furtherance,
concealment, and/or the materially incomplete, misleading, and fraudulent
reporting and disclosure of the fraudulent acts, omissions, and scheme set
forth below.
71.
On information
and belief, the fraud set forth below included inter alia the use of
SPE’s to understate Enron’s liabilities and overstate its income and
assets. On information and belief, AA
rendered extensive internal and external accounting, auditing, consulting,
general advisory, and other services to Enron relating inter alia to
formation, structuring, accounting, auditing, use, reporting, and/or disclosure
of SPE’s and transactions effected through SPE’s. On information and belief, according to a 2/6/01 written
memorandum from Jones to B.Duncan and Bauer, one of the many services that AA
rendered to Enron in connection with SPE’s and transactions accomplished through
SPE’s was “to focus on timely documentation of final transaction structures to
ensure consensus is reached on the final structure” of each SPE and
transaction.
72.
On information and belief, as a result of the
myriad of services rendered to Enron, AA had personnel in Enron’s corporate
offices and operations continuously from 1997 to the end of 2001 or the
beginning of 2002, and had continual access to and knowledge of Enron’s inside
corporate and business information, including inter alia the relevant
facts concerning the SPE’s at the heart of the massive fraud set forth below
and related fraudulent accounting practices.
73.
On information
and belief, as a result of AA’s expertise, extremely close working relationship
with Enron (and retained counsel), constant interaction with Enron (and
retained counsel), consensus-building, and detailed knowledge of and access to
all relevant documents and information, at all relevant times AA knew full well
that it was a direct participant, aider and abettor, and co-conspirator in a
massive scheme to mislead and defraud Enron shareholders, potential investors,
and the securities market as to inter alia the value of Enron’s
securities.
74.
On information
and belief, AA received over $100 million in accounting, audit, management
consulting, and advisory fees in the period leading up to the Enron bankruptcy.
75.
On information
and belief, on dates currently unknown, the Accountant Defendants secretly
entered into an agreement, combination, and conspiracy with each other, with
the Director and Officer Defendants, and with the defendants identified below,
to commit, aid, abet, participate in, and further the fraudulent acts,
omissions, and scheme set forth below, all with the intent of keeping Enron as
a client and continuing to reap multi-million dollar fees.
76.
On information
and belief, the Accountant Defendants have engaged in a pattern of fraudulent
concealment, by inter alia shredding accounting and other records,
deleting email and other computer records, and destroying other evidence in
Houston, Texas, Chicago, Illinois, and/or other locations, all in a concerted
attempt to conceal the fraudulent acts, omissions, and scheme set forth below
and their conspiracy to engage in such wrongful and unlawful conduct.
///
ATTORNEY
DEFENDANTS
77.
On information
and belief, Defendant Vinson & Elkins, LLP (“V&E”) is based, does
business, and is found in Houston, Texas, and is one of the largest and most
sophisticated international corporate law firms in the United States and the world,
with expertise in all areas of Enron’s business. Before the recent bankruptcy of Enron, V&E enjoyed an
excellent reputation; V&E’s involvement with corporate transactions, SEC
filings, and securities offerings bestowed the imprimatur of legitimacy,
confidence, and stability on its many clients, including Enron.
78.
On information
and belief, Defendant Ronald T. Astin (“Astin”) is a resident of Houston,
Texas; was and is a partner in V&E who specializes inter alia in
corporate financing; and was at relevant times the lead V&E attorney
involved in forming, structuring, using, and issuing legal opinions on certain
partnerships and “special-purpose entities” at the heart of the massive fraud
set forth below. Astin is sued herein
as a direct participant, aider and abettor, and/or co-conspirator in the
fraudulent acts, omissions, and scheme set forth below.
79.
On information
and belief, Defendant Joseph Dilg (“Dilg”) is a resident of Houston, Texas; was
and is a partner in V&E who specializes inter alia in corporate law;
and was at relevant times, for at least a decade, V&E’s chief liaison with
Enron. On information and belief, Dilg
oversaw V&E’s relationship with Enron; was personally involved in providing
legal services relating to certain partnerships and “special-purpose entities”
at the heart of the massive fraud set forth below; and was aware how the
personnel of Enron, V&E, and AA were working together to form, structure,
use, and account for those partnerships and entities. Dilg is sued herein as a
direct participant, aider and abettor, and/or co-conspirator in the fraudulent
acts, omissions, and scheme set forth below.
80.
On information
and belief, Defendant Michael P. Finch (“Finch”) is a resident of Houston,
Texas; was and is a partner in V&E who specializes inter alia in
corporate law and securities law; and was at relevant times the attorney at
V&E in charge of some or all of Enron’s SEC registration statements and
prospectuses. On information and
belief, Finch was personally involved in providing legal services relating to
certain partnerships and “special-purpose entities” at the heart of the massive
fraud set forth below; and was aware how the personnel of Enron, V&E, and
AA were working together to form, structure, use, and account for those
partnerships and entities. Finch is sued herein as a direct participant, aider
and abettor, and/or co-conspirator in the fraudulent acts, omissions, and
scheme set forth below.
81.
On information
and belief, Defendant Max Hendrick III (“Hendrick”) is a resident of Houston,
Texas; was and is a litigation partner in V&E; and was at relevant times
the attorney at V&E charged with performing the “independent” review of
SPE’s and related transactions in or about August through October 2001. On information and belief, Hendrick was
personally involved in providing legal services relating to the SPE’s; knew how
the personnel of Enron, V&E, and AA collaborated and worked together
closely to create, structure, organize, use, and account for the SPE’s; ignored
an actual conflict of interest in purporting to do an “independent” review of
his own firm’s legal work in or about August through October 2001; and
participated in the fraudulent acts, omissions, and scheme set forth below by inter
alia participating in and aiding and abetting their concealment. Hendrick is sued herein as a direct
participant, aider and abettor, and/or co-conspirator in the fraudulent acts,
omissions, and scheme set forth below.
82.
On information
and belief, Defendant Does 101 through 150 are past or present partners or
principals of V&E, whose identities are currently unknown, but who
committed, aided, abetted, participated in, and/or furthered the fraudulent
acts, omissions, and scheme set forth below.
On information and belief, at least some of these Does are residents of
Houston, Texas. Plaintiffs will seek
leave of court to identify these Does by their proper names and capacities when
that information is ascertained.
///
///
83.
Defendants
V&E, Astin, Dilg, Finch, Hendrick, and Does 101 through 150 are
collectively called the “Attorney Defendants” below.
84.
On information
and belief, an extremely close relationship has existed for many years between
the Attorney Defendants and Enron at the business level, and between the
partners or principals of V&E and key management personnel of Enron on a
personal and social level. On
information and belief, several former partners or principals in V&E have
became directors or officers of Enron, and Enron is reported to be V&E’s
largest client. On information and belief, due to these business, personal, and
social ties, V&E has the nickname “Vinson & Enron.”
85.
On information
and belief, the Attorney Defendants have been continuously engaged by Enron for
many years to provide legal services, including inter alia corporate
transactions, securities offerings, SEC filings, shareholder communications,
and the formation, structuring, and use of the SPE’s at the heart of the
massive fraud set forth below.
86.
On information
and belief, V&E had attorneys permanently stationed in Enron’s corporate
headquarters in Houston, Texas, for the purpose of continuously monitoring
Enron’s corporate affairs, communicating with Enron’s personnel and the
Accountant Defendants, and working directly with Enron’s personnel and the
Accountant Defendants to create, structure, use, and account for the manifold
operations and ventures of Enron, including inter alia the SPE’s at the
heart of the massive fraud and the SEC filings set forth below. On information and belief, V&E’s
relationship with Enron went far beyond normal corporate legal services to
include extensive, active involvement in the consideration, adoption,
implementation, documentation, furtherance, and/or concealment of the
fraudulent acts, omissions, and scheme set forth below.
87.
On information and belief, for purposes of
servicing Enron, V&E had attorneys present in Enron’s corporate offices and
operations continuously for years and at all relevant times, and had continual
access to and knowledge of Enron’s inside corporate and business information,
including inter alia the manner in which Enron, the Accounting
Defendants, and the Attorney Defendants were collaborating and working together
inter alia in creating, structuring, using, and accounting for the SPE’s
and sham transactions accomplished through the SPE’s.
88.
On information
and belief, as a result of the Attorney Defendants’ expertise, their close collaboration and working relationship
with Enron and the Accountant Defendants, their constant interaction with Enron
and the Accountant Defendants, the consensus-building role of the Accountant
Defendants, and the Attorney Defendants’ detailed knowledge of and access to
all relevant documents and information, at all relevant times the Attorney
Defendants knew full well that they were direct participants, aiders and
abettors, and co-conspirators in a massive scheme to mislead and defraud Enron
shareholders, potential investors, and the securities market as to inter
alia the value of Enron’s securities.
89.
On information
and belief, the Attorney Defendants issued several opinion letters (and related
consents to use and dissemination) on the legality, independence, authenticity,
and non-sham nature of, and/or other issues relating to, the SPE’s at the heart
of the subject fraud. On information
and belief, when the Attorney Defendants issued those documents, and when they
did all other work described below, the Attorney Defendants knew or recklessly
failed to learn that the SPE’s were created, owned, and/or controlled by Enron
and certain Director and Officer Defendants and were being used for sham
transactions to hide liabilities and overstate income of Enron in SEC filings
that the Attorney Defendants intentionally, wilfully, or recklessly prepared.
90.
On information
and belief, the Attorney Defendants received over $100 million for legal and
related services rendered to Enron in the period leading up to Enron’s
bankruptcy.
91.
The Attorney
Defendants are sued herein as direct participants, aiders and abettors, and
co-conspirators in the fraudulent acts, omissions, and scheme set forth below.
92.
On information
and belief, on dates currently unknown, the Attorney Defendants secretly
entered into an agreement, combination, and conspiracy with each other, with
the Director and Officer Defendants, and with the Accountant Defendants, to
commit, aid, abet, participate in, and/or further the fraudulent acts,
omissions, and scheme set forth below, all with the intent of keeping Enron as
a client and continuing to reap multi-million dollar fees.
93.
On information
and belief, the Attorney Defendants have engaged in a pattern of fraudulent
concealment, by inter alia (a) condoning spoliation of evidence by the
Director and Officer Defendants and the Accountant Defendants; (b) purporting
to render (despite an actual conflict of interest) a favorable second
opinion on their own legal work on questioned SPE’s previously formed and
structured by the Attorney Defendants themselves, in an attempt to thwart a
disinterested review by independent counsel; (c) recklessly ignoring grave
deficiencies and illegalities in the accounting practices and SEC filings of
Enron, knowing full well that Enron shareholders, potential investors, and the
securities market were relying, directly or indirectly, on the legality and
reliability of those very accounting practices and SEC filings; (d) continuing
to perform legal services that delayed the public disclosure of and perpetuated
the fraudulent acts, omissions, and scheme set forth below; and/or (e)
continuing, without protest and without raising a “red flag,” to lend their
good names, reputations, and prestige to the fraudulent acts, omissions, and
scheme set forth below, of which the Attorney Defendants were an integral
component.
CORRUPT
OFFICIALS
94.
On information
and belief, Defendant Does 151 through 500 are past or present government
officials, elected and appointed, whose identities are currently unknown, but
who aided, abetted, furthered, and/or concealed the massive fraud set forth
below. Plaintiffs will seek leave of
court to identify these Does by their proper names and capacities when that
information is ascertained. Does 151 through
500 are collectively called the “Corrupt Officials” below.
///
95.
On information
and belief, on dates currently unknown, Corrupt Officials secretly entered into
an agreement, combination, and conspiracy with each other, with the Director
and Officer Defendants, with the Accountant Defendants, and with the Attorney
Defendants, to aid, abet, and/or further the fraudulent acts, omissions, and
scheme set forth below and/or the concealment thereof, with the intent of
requiting large campaign contributions from Enron, AA, V&E, and certain of
their directors, officers, partners, and principals, with major official
actions, favors, and favorable treatment in violation inter alia of 18
U.S.C. §§ 201, 371, and 600.
96.
On information
and belief, the Corrupt Officials have participated in the pattern of
fraudulent concealment of and bestowed illegal favors and favorable treatment
on Enron, AA, and V&E, by inter alia turning a blind eye to and
ignoring the SPE’s, material understatement of liabilities, material
overstatement of income or assets, conflicts of interest in connection with the
foregoing matters, and conflicts of interest of certain Accountant Defendants
in performing internal accounting, external auditing, and management consulting
for one and the same client; by opposing and defeating legislation and
regulations that would have exposed and/or stopped the fraudulent acts,
omissions, and scheme set forth below; by introducing, approving, supporting,
advancing, defending, and voting for legislation or regulations that would
facilitate the fraudulent acts, omissions, and scheme set forth below and/or
make it more difficult for Enron, the Director and Officer Defendants, the
Accountant Defendants, and the Attorney Defendants to be held accountable and
liable in private legal proceedings, including inter alia the Federal
Securities Litigation Reform Act of 1995 (“FSLRA”) and amendments to the
Racketeer Influenced and Corrupt Organizations Act (the “RICO Amendments”);
and/or by delaying civil, criminal, administrative, and Congressional
inquiries, hearings, investigations, and enforcement actions, adopting a “hands
off” approach, and refusing to take sides or to pursue blame as between major
campaign contributors, until it was politically impossible to continue doing
so.
97.
On information
and belief, the Corrupt Officials started furthering and continued furthering
the massive fraudulent scheme set forth below commencing in the early 1990's,
during the Administration of former President William Jefferson Clinton,
continuing through the 1990's, and continuing into the current Administration
of George W. Bush. On information and
belief, W.Gramm was one of the earliest public officials to join the conspiracy
and did so by engaging in corrupt acts in her capacity as chair of the CFTC,
when she advocated Enron’s position and opposed regulation of energy
derivatives, energy swaps, and/or other important part’s of Enron’s business,
in part because of large campaign contributions over the years to Senator Gramm
and a political payoff in the form of her appointment to the Enron board of
directors. Subsequently, on information
and belief, W.Gramm intentionally and wilfully, or recklessly, failed and
refused to fulfil her responsibilities and to exercise her power and authority
as a member of Enron’s Audit and Compliance Committee inter alia to
ensure full and fair disclosure of Enron’s financial condition and to prevent
the use of fraudulent accounting practices, in part because of large campaign
contributions over the years to Senator Gramm.
W.Gramm is named herein as one of the Director and Officer Defendants
because she was a director of Enron and a member of its Audit and Compliance
Committee when the majority of the following events occurred.
GENERAL
OVERVIEW OF SCHEME TO DEFRAUD
98.
Enron was at
all relevant times one of the world’s largest and most powerful energy
companies, with major operations, assets, connections, and influence around the
world.
99.
On Information
and belief, from the late 1980's or early 1990's until late 2001, the Director
and Officer Defendants entered into an agreement, combination, and conspiracy
with each other to “PUMP AND DUMP” Enron’s common stock and other securities
for their own personal profit, by fraudulently inflating the market price of
Enron’s securities, selling their own holdings to unsuspecting buyers at the
fraudulently inflated market price, inducing and otherwise causing unwitting
shareholders and investors to hold on to their Enron holdings, and utilizing a
massive blanket of political campaign contributions and/or bribes to the
Corrupt Officials to buy exemptions from and otherwise to evade government
regulation and oversight (the “SCHEME”).
100.
As a result of
(a) their expertise, (b) their collaboration and very close working
relationship with the Director and Officer Defendants and each other, (c) their
extensive, active involvement in the formation, structuring, and use of, and
the accounting for the SPE’s, and (d) their own specific acts and omissions set
forth below, the Accountant Defendants and Attorney Defendants understood, or
recklessly failed to understand, the workings of the SCHEME; joined the
conspiracy of the Director and Officer Defendants; and intentionally, wilfully,
or recklessly participated in, aided and abetted, and actively furthered the
SCHEME as co-conspirators.
101.
On information
and belief, using the services of the Accountant Defendants and Attorney
Defendants, and with the assistance of the Corrupt Officials, the Director and
Officer Defendants fraudulently inflated the market price of Enron’s stock by inter
alia (a) forming, structuring, and using SPE’s to conceal hundreds of
millions of dollars in liabilities of Enron and keep them off Enron’s financial
statements; (b) forming, structuring, and using SPE’s and accounting practices
that the Accountant Defendants characterized as “intelligent gambling” to
overstate materially the income or assets of Enron; (c) concealing that SPE’s
were controlled by Enron and/or were mere accounting shams; and (d) concealing
material facts, making materially incomplete and misleading representations,
and making material misrepresentations in financial reports and statements,
annual reports, SEC filings, shareholder communications, employee
communications, public information packages, press releases, interviews with
the news media and securities analysts, and other matters affecting the market
price of Enron’s stock.
102.
On information
and belief, the Director and Officer Defendants used their inside information
about the SCHEME and Enron’s true financial condition to reap illicit profits
of the SCHEME by selling their own Enron holdings to unsuspecting purchasers
through a series of securities transactions, including inter alia the
following estimates:
|
INSIDER |
SHARES SOLD |
PROCEEDS ($) |
|
Baxter |
577,436 |
$35,202,808 |
|
Buy |
54,874 |
4,325,309 |
|
Causey |
197,485 |
13,329,743 |
|
Derrick |
230,660 |
12,656,238 |
|
Fastow |
561,423 |
30,463,609 |
|
Frevert |
830,620 |
50,269,504 |
|
Horton |
734,444 |
45,472,278 |
|
Lay |
1,810,793 |
101,346,951 |
|
Rice |
1,138,370 |
72,786,034 |
|
Skilling |
1,119,958 |
66,924,028 |
|
Pai |
5,031,105 |
353,712,438 |
|
Belfer |
1,052,138 |
51,080,967 |
|
Blake |
21,200 |
1,705,328 |
|
Chan |
8,000 |
337,200 |
|
B.Duncan |
35,000 |
2,009,700 |
|
Gramm |
10,256 |
276,912 |
|
Jaedicke |
13,360 |
841,438 |
|
LeMaistgre |
17,344 |
481,768 |
|
Foy |
31,320 |
1,639,590 |
|
Hirko |
473,837 |
35,168,721 |
|
Harrison |
1,004,170 |
75,211,630 |
|
Koenig |
129,153 |
9,110,466 |
|
Kean |
64,932 |
5,166,414 |
|
Mark-Jasbasche |
1,410,262 |
79,526,787 |
|
McConnell |
30,960 |
2,353,431 |
|
McMahon |
39,630 |
2,739,226 |
|
Olson |
83,183 |
6,505,870 |
|
Metts |
17,711 |
1,448,937 |
|
Sutton |
614,960 |
40,093,346 |
|
TOTAL: |
17,344,584 |
$1,102,544,672 |
///
103.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, the
Attorney Defendants, and/or the Corrupt Officials have engaged in additional
transactions, for their personal gain, using inside information as to Enron’s
undisclosed financial condition, in addition to the $1.2 billion in insider
transactions estimated and summarized above.
104.
On information
and belief, commencing on a date currently unknown before or during the Clinton
Administration, and continuing for years through the most recent federal
election cycle up to and including the Bush Administration, the Director and
Officer Defendants, the Accountant Defendants, and the Attorney Defendants
undertook separate but overlapping and widespread political action in an
attempt to evade government regulation and oversight by regularly paying
campaign and other contributions and/or bribes to the Corrupt Officials and/or
other elected officials who were perceived to have political power to assist
Enron in evading regulation and oversight.
On information and belief, the Director and Officer Defendants, the
Accountant Defendants, and the Attorney Defendants made and/or caused Enron to
make such payments with the intent to influence the official acts of and/or to
obtain favors and favorable treatment from the Corrupt Officials, in violation inter
alia of 18 U.S.C. §§ 201, 371, and 600.
On information and belief, the Corrupt Officials acted as the other
defendants expected and/or requested, as a result of extensive contributions
and/or bribes, thereby engaging in unlawful acts and/or committing lawful acts
in an unlawful manner.
105.
On
information and belief, commencing on dates currently unknown before or during
the Clinton Administration, and continuing for years through the most recent
federal election cycle up to and including the Bush Administration, in
violation inter alia of 18 U.S.C. §§ 201, 371, and 600, the Corrupt
Officials joined themselves to the conspiracy with the Director and Officer
Defendants, the Accountant Defendants, and the Attorney Defendants – i.e. all
major campaign contributors -- by inter alia turning a blind eye to and
ignoring SPE’s, material understatement of liabilities, material overstatement
of income or assets, conflicts of interest in connection with the foregoing
matters, and/or conflicts of interest of certain Accountant Defendants in
performing internal accounting, external auditing, and management consulting
for one and the same client; by opposing and defeating legislation and
regulations that would have exposed and/or stopped the massive fraud set forth
below; by introducing, approving, supporting, advancing, defending, and voting
for legislation or regulations that would facilitate the fraudulent acts,
omissions, and scheme set forth below and/or make it harder for Enron, the
Director and Officer Defendants, the Accountant Defendants, and the Attorney
Defendants to be held accountable and liable in private legal proceedings,
including inter alia the FSLRA and RICO Amendments; and/or by delaying
civil, criminal, administrative, and Congressional inquiries, hearings,
investigations, and enforcement actions, adopting a “hands off” approach, and
refusing to take sides or pursue blame as between major campaign contributors,
until it was politically impossible to continue doing so.
SPECIFIC
CHRONOLOGY OF EVENTS
106.
On information
and belief, the SCHEME was initiated in either the late 1980's or early 1990's,
before or during the Clinton Administration.
On information and belief, the early stages of the SCHEME include the
early corruption of W.Gramm, to wit, her commission of corrupt acts in her
capacity as chair of the CFTC, when she advocated Enron’s position and opposed
regulation of energy derivatives, energy swaps, and/or other important part’s
of Enron’s business, in part because of large campaign contributions over the
years to Senator Gramm and a political payoff in the form of appointment to the
Enron board of directors. Subsequently,
on information and belief, W.Gramm intentionally and wilfully, or recklessly,
failed and refused to fulfil her responsibilities and to exercise her power and
authority as a member of Enron’s Audit and Compliance Committee inter alia
to ensure full and fair disclosure of Enron’s financial condition and to
prevent the use of fraudulent accounting practices, in part because of large
campaign contributions over the years to Senator Gramm. Plaintiffs will seek leave of court to amend
this pleading to allege additional acts of fraud, conspiracy, and political
corruption by public officials, elected and appointed, when that information is
ascertained.
107.
On information
and belief, from the 1990's through 2001, as a quid pro quo for years of
large campaign contributions and/or bribes, and as a result of the special
access granted to top elected and appointed government officials, Lay, other
Director and Officer Defendants, certain Accountant Defendants, and certain
Attorney Defendants were granted many favors and favorable treatment that
enabled them inter alia to evade much government regulation and
oversight and to perpetuate, enlarge, and enrich themselves from the
SCHEME.
108.
On information
and belief, from the 1990's through 2001, as a quid pro quo for large
campaign contributions, the Corrupt Officials granted favors and favorable
treatment to Enron and the Director and Officer Defendants by inter alia
turning a blind eye to and ignoring their use of SPE’s, material understatement
of liabilities, and material overstatement of income or assets, conflicts of
interest in the foregoing matters, and/or conflicts of interest of certain
Accountant Defendants in performing internal accounting, external auditing, and
management consulting for one and the same client; by opposing and defeating
legislation and regulations that would have exposed and stopped the SCHEME; by
introducing, approving, supporting, advancing, defending, and voting for
legislation or regulations that would facilitate the SCHEME and/or make it
harder for Enron and the Director and Officer Defendants to be held accountable
and liable in private legal actions, including inter alia the FSLRA and
RICO Amendments; and/or by delaying civil, criminal, administrative, and Congressional
inquiries, hearings, investigations, and enforcement actions against and the
“hand’s off” approach toward Enron and the Director and Officer Defendants
until it was politically impossible to continue doing so.
109.
On information
and belief, from the 1990's through 2001, as a quid pro quo for large
campaign contributions, the Corrupt Officials granted favors and favorable
treatment to the Accountant Defendants by inter alia turning a blind eye
to and ignoring their acceptance and/or promotion of SPE’s, material
understatement of liabilities, material overstatement of income or assets, and
their conflicts of interest in performing internal accounting, external
auditing, and management consulting for one and the same client; by opposing
and defeating legislation and regulations contrary to such accounting practices
and/or conflicts of interest; by introducing, approving, supporting, advancing,
defending, and voting for legislation or regulations that would facilitate the
SCHEME and make it harder for the Accountant Defendants to be held accountable
and liable in private legal actions, including inter alia the FSLRA and
the RICO Amendments; and/or by delaying civil, criminal, administrative, and
Congressional inquiries, hearings, investigations, and enforcement actions
against the Accountant Defendants and their clients, including Enron, until it
was politically impossible to continue doing so.
110.
On information
and belief, from the 1990's through
2001, as a quid pro quo for large campaign contributions, the Corrupt
Officials granted favors and favorable treatment to the Attorney Defendants by inter
alia turning a blind eye to and ignoring their acceptance and/or promotion
of SPE’s, material understatement of liabilities, and material overstatement of
income or assets; by opposing and defeating legislation and regulations curbing
such practices; by introducing, approving, supporting, advancing, defending,
and voting for legislation or regulations that would facilitate the SCHEME and
make it harder for the Attorney Defendants to be held accountable and liable in
private legal actions, including inter alia the FSLRA and the RICO
Amendments; by delaying civil, criminal, administrative, and Congressional
inquiries, investigations, hearings, and/or enforcement actions against the
Attorney Defendants and their clients, including inter alia Enron, until
it was politically impossible to continue doing so; and/or by turning a blind
eye to and ignoring the pervasive involvement of the Attorney Defendants in all
aspects of the Enron fiasco and failing
to include them in the scope of any inquiries, hearings, investigations, and/or
enforcement actions.
111.
On information
and belief, as a result of the foregoing political corruption from the 1990's
through 2001, the Director and Officer Defendants, the Accountant Defendants,
and the Attorney Defendants were materially enabled, aided, and assisted to
implement, perpetuate, enlarge, profit from, conceal, and/or avoid liability
for the SCHEME. On information and
belief, the SCHEME would not have been possible, or could not have grown and
continued and been as successful and remained undetected for as many years as
it was, without the affirmative acts and omissions knowingly committed by the
Corrupt Officials in furtherance of the SCHEME.
112.
The Accountant
Defendants audited Enron’s financial statements for the fiscal year ended
December 31, 1997 (the “1997 Financials”), and issued unqualified audit reports
dated February 23, 1998, and March 30, 1998, attesting to the accuracy and
reliability of the financial information (the “1997 Audit Reports”).
113.
Enron’s Form
10-K (Annual Report) for the fiscal year ended December 31, 1997, was filed
with the SEC on March 31, 1998 (the “1997 10-K”). The 1997 10-K is a public record and included the 1997 Financials
and the 1997 Audit Reports.
114.
On information
and belief, the 1997 Financials, the 1997 Audit Reports, and the 1997 10-K were
all provided not only to the SEC, but also, with the knowledge, approval, and
consent of all defendants (except the Corrupt Officials), to Enron
shareholders, potential investors, securities analysts, the news media, and
others who affect the securities market.
115.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants collaborated throughout and worked together closely in
preparing, finalizing, and filing the 1997 10-K, and they knew its contents.
116.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants knew or recklessly failed to learn that the 1997
Financials, the 1997 Audit Reports, and the 1997 10-K were materially false,
incomplete, misleading, and deceptive because these disclosure documents failed
to disclose fully and fairly that Enron was improperly using SPE’s in sham
transactions, materially understating its liabilities, and materially
overstating its income or assets.
///
117.
On information
and belief, despite knowledge or reckless failure to learn that the 1997
Financials, the 1997 Audit Reports, and the 1997 10-K were materially false,
incomplete, misleading, and deceptive, the Director and Officer Defendants, the
Accountant Defendants, and the Attorney Defendants intentionally, wilfully, or
recklessly continued to work for Enron and allow their good names, services,
and work product to be used in furtherance of the SCHEME, without resigning,
blowing the whistle, or raising a red flag.
118.
The Accountant
Defendants audited Enron’s financial statements for the fiscal year ended
December 31, 1998 (the “1998 Financials”), and issued unqualified audit reports
dated March 5, 1999, attesting to the accuracy and reliability of the financial
information (the “1998 Audit Reports”).
119.
Enron’s Form
10-K (Annual Report) for the fiscal year ended December 31, 1998, was filed
with the SEC on March 31, 1999 (the “1998 10-K”). The 1998 10-K is a public record and included the 1998 Financials
and the 1998 Audit Reports.
120.
On information
and belief, the 1998 Financials, the 1998 Audit Reports, and the 1998 10-K were
all provided not only to the SEC, but also, with the knowledge, approval, and
consent of all defendants (except the Corrupt Officials), to Enron
shareholders, potential investors, securities analysts, the news media, and
others who affect the securities market.
121.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants collaborated throughout and worked together closely in
preparing, finalizing, and filing the 1998 10-K, and they knew its contents.
122.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants knew or recklessly failed to learn that the 1998
Financials, the 1998 Audit Reports, and the 1998 10-K were materially false,
incomplete, misleading, and deceptive because these disclosure documents failed
to disclose fully and fairly that Enron was improperly using SPE’s, materially
understating its liabilities, and materially overstating its income or assets.
123.
On information
and belief, despite knowledge or reckless failure to learn that the 1998
Financials, the 1998 Audit Reports, and the 1998 10-K were materially false,
incomplete, misleading, and deceptive, the Director and Officer Defendants, the
Accountant Defendants, and the Attorney Defendants intentionally, wilfully, or
recklessly continued to work for Enron and allow their good names, services,
and work product to be used in furtherance of the SCHEME, without resigning,
blowing the whistle, or raising a red flag.
124.
On information
and belief, Enron entered into merger negotiations with Veba, a German company,
in or about 1999. On information and
belief, the due diligence conducted for the merger revealed to those involved
that Enron was at that time already engaging in the same conduct that
ultimately led to its collapse and bankruptcy, to wit, that Enron was (a) using
SPE’s to conceal liabilities; (b) using SPE’s to overstate income or assets;
(c) concealing that SPE’s were controlled by Enron and/or accounting shams;
and/or (d) concealing material facts, making materially incomplete and
misleading representations, and making material misrepresentations in financial
reports and statements, annual reports, SEC filings, shareholder
communications, employee communications, information packages, press releases,
interviews with the news media and securities analysts, and other matters
affecting the market price of Enron’s securities.
125.
On information
and belief, the Accountant Defendants participated in the Veba negotiations and
due diligence and knew, in 1999, why the merger failed. On information and belief, as a result of
the Veba deal, the Accountant Defendants knew full well no later than 1999 that
Enron was using SPE’s, sham transactions, illicit accounting practices, and
related acts and omissions to conceal and misrepresent Enron’s financial
position. Despite this actual
knowledge, the Accountant Defendants intentionally, wilfully, or recklessly
continued to work for Enron and allow their good names, services, and work
product to be used in furtherance of the SCHEME, without resigning, blowing the
whistle, or raising a red flag.
126.
On information
and belief, the Attorney Defendants participated in the Veba negotiations and
due diligence and knew, in 1999, why the merger failed. On information and belief, as a result of
the Veba deal, the Attorney Defendants knew full well no later than 1999 that
Enron was using SPE’s, sham transactions, illicit accounting practices, and
related acts and omissions to conceal and misrepresent Enron’s financial
position. Despite this actual
knowledge, the Attorney Defendants intentionally, wilfully, or recklessly
continued to work for Enron and allow their good names, services, and work
product to be used in furtherance of the SCHEME, without resigning, blowing the
whistle, or raising a red flag.
127.
On or about
April 5, 1999, the Accountant Defendants consented in writing to incorporation
of the 1998 Audit Reports into an imminent Form S-3 Registration Statement and
Prospectus.
128.
On or about
April 5, 1999, a Form S-3 Registration Statement and Prospectus was filed with
the SEC in connection with Enron’s issuance and offering of 3.8 million shares
of common stock for a proposed maximum aggregate offering price of
approximately $246 million (the “4/5/99 S-3"). The 4/5/99 S-3 is a public record and includes the 1998
Financials and the 1998 Audit Reports, with specific reference to AA as the
“independent” public accountants and experts that had audited the 1998
Financials.
129.
On information
and belief, the Attorney Defendants were central participants in all aspects of
the preparation, finalization, approval, and filing of the 4/5/99 S-3, knew its
contents, and/or issued an opinion that was used, with the knowledge, approval,
and consent of the Attorney Defendants, to facilitate the 4/5/99 S-3 and the
subject securities offering.
///
130.
On information
and belief, the 4/5/99 S-3 was provided not only to the SEC, but also, with the
knowledge, approval, and consent of all defendants (except the Corrupt
Officials), to Enron shareholders, potential investors, securities analysts,
the news media, and others who affect the securities market.
131.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants collaborated throughout and worked together closely in
preparing, finalizing, and filing the 4/5/99 S-3, and they knew its contents.
132.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants knew or recklessly failed to learn that the 4/5/99 S-3
was materially false, incomplete, misleading, and deceptive because it failed
to disclose fully and fairly that Enron was improperly using SPE’s for sham
transactions, materially understating its liabilities, and materially
overstating its income or assets.
133.
On information
and belief, despite knowledge or reckless failure to learn that the 4/5/99 S-3
was materially false, incomplete, misleading, and deceptive, the Director and
Officer Defendants, the Accountant Defendants, and the Attorney Defendants
intentionally, wilfully, or recklessly continued to work for Enron and allow
their good names, services, and work product to be used in furtherance of the
SCHEME, without resigning, blowing the whistle, or raising a red flag.
134.
On information
and belief, at a meeting of the Enron board of directors on or about June 28,
1999, Lay, Skilling, Fastow, and other Director and Officer Defendants
discussed inter alia off-balance sheet transactions. On information and belief, some of the
Accountant Defendants and Attorney Defendants attended the 6/28/99 meeting to
answer questions posed to them. On information and belief, as a result of the
6/28/99 meeting, the Director and Officer Defendants, the Accountant
Defendants, and the Attorney Defendants knew or recklessly failed to learn that
Enron was (a) using SPE’s to conceal liabilities; (b) using SPE’s to overstate
its income or assets; (c) concealing that SPE’s were accounting shams
controlled by Enron; and/or (d) concealing material facts, making materially
incomplete and misleading representations, and making material
misrepresentations in financial reports and statements, annual reports, SEC
filings, shareholder communications, employee communications, information
packages, press releases, interviews with the news media and securities
analysts, and other matters affecting the market price of Enron’s securities.
135.
On or about
June 30, 1999, the Accountant Defendants consented in writing to incorporation
of the 1998 Audit Reports into an imminent Form S-8 Registration Statement and
Prospectus.
136.
On or about
July 2, 1999, a Form S-8 Registration Statement and Prospectus was filed with
the SEC in connection with Enron’s issuance and offering of 10 million shares
of common stock for a proposed maximum aggregate offering price of
approximately $771 million (the “7/2/99 S-8"). The 7/2/99 S-8 is a public record and includes the 1998
Financials and the 1998 Audit Reports, with specific reference to AA as the
“independent” public accountants and experts that had audited the 1998
Financials.
137.
On information
and belief, the Attorney Defendants were central participants in all aspects of
the preparation, finalization, approval, and filing of the 7/2/99 S-8, knew its
contents, and/or issued an opinion that was used, with the knowledge, approval,
and consent of the Attorney Defendants, to facilitate the 7/2/99 S-8 and the
subject securities offering.
138.
On information
and belief, the 7/2/99 S-8 was provided not only to the SEC, but also, with the
knowledge, approval, and consent of all defendants (except the Corrupt
Officials), to Enron shareholders, potential investors, securities analysts,
the news media, and others who affect the securities market.
139.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants collaborated throughout and worked together closely in
preparing, finalizing, and filing the 7/2/99 S-8, and they knew its contents.
140.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants knew or recklessly failed to learn that the 7/2/99 S-8
was materially false, incomplete, misleading, and deceptive because it failed
to disclose fully and fairly that Enron was improperly using SPE’s for sham
transactions, materially understating its liabilities, and materially
overstating its income or assets.
141.
On information
and belief, despite knowledge or reckless failure to learn that the 7/2/99 S-8
was materially false, incomplete, misleading, and deceptive, the Director and
Officer Defendants, the Accountant Defendants, and the Attorney Defendants
intentionally, wilfully, or recklessly continued to work for Enron and allow
their good names, services, and work product to be used in furtherance of the
SCHEME, without resigning, blowing the whistle, or raising a red flag.
142.
On or about
July 23, 1999, the Accountant Defendants consented in writing to incorporation
of the 1998 Audit Reports into an imminent Form S-3 Registration Statement and
Prospectus.
143.
On or about
July 23, 1999, a Form S-3 Registration Statement and Prospectus was filed with
the SEC in connection with Enron’s issuance and offering of 10 million
Exchangeable Notes (the “7/23/99 S-3").
The 7/23/99 S-3 is a public record and includes the 1998 Financials and
the 1998 Audit Reports, with specific reference to AA as the “independent”
public accountants and experts that had audited the 1998 Financials.
///
///
144.
On information
and belief, the Attorney Defendants were central participants in all aspects of
the preparation, finalization, approval, and filing of the 7/23/99 S-3, knew
its contents, and/or issued an opinion that was used, with the knowledge,
approval, and consent of the Attorney Defendants, to facilitate the 7/23/99 S-3
and the subject securities offering.
145.
On information
and belief, the 7/23/99 S-3 was provided not only to the SEC, but also, with
the knowledge, approval, and consent of all defendants (except the Corrupt
Officials), to Enron shareholders, potential investors, securities analysts,
the news media, and others who affect the securities market.
146.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants collaborated throughout and worked together closely in
preparing, finalizing, and filing the 7/23/99 S-3, and they knew its contents.
147.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants knew or recklessly failed to learn that the 7/23/99 S-3
was materially false, incomplete, misleading, and deceptive because it failed
to disclose fully and fairly that Enron was improperly using SPE’s for sham
transactions, materially understating its liabilities, and materially
overstating its income or assets.
148.
On information
and belief, despite knowledge or reckless failure to learn that the 7/23/99 S-3
was materially false, incomplete, misleading, and deceptive, the Director and
Officer Defendants, the Accountant Defendants, and the Attorney Defendants
intentionally, wilfully, or recklessly continued to work for Enron and allow
their good names, services, and work product to be used in furtherance of the
SCHEME, without resigning, blowing the whistle, or raising a red flag.
///
///
149.
On or about
August 11, 1999, the Accountant Defendants consented in writing to
incorporation of the 1998 Audit Reports into an imminent Form S-8 Registration
Statement and Prospectus.
150.
On or about
August 12, 1999, a Form S-8 Registration Statement and Prospectus was filed with
the SEC in connection with Enron’s issuance and offering of 15 million shares
of common stock at a proposed aggregate offering price of approximately $1.275
billion (the “8/12/99 S-8"). The
8/12/99 S-8 is a public record and includes the 1998 Financials and the 1998
Audit Reports, with specific reference to AA as the “independent” public
accountants and experts that had audited the 1998 Financials.
151.
On information
and belief, the Attorney Defendants were central participants in all aspects of
the preparation, finalization, approval, and filing of the 8/12/99 S-8, knew
its contents, and/or issued an opinion that was used, with the knowledge,
approval, and consent of the Attorney Defendants, to facilitate the 8/12/99 S-8
and the subject securities offering.
152.
On information
and belief, the 8/12/99 S-8 was provided not only to the SEC, but also, with
the knowledge, approval, and consent of all defendants (except the Corrupt
Officials), to Enron shareholders, potential investors, securities analysts,
the news media, and others who affect the securities market.
153.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants collaborated throughout and worked together closely in
preparing, finalizing, and filing the 8/12/99 S-8, and they knew its contents.
154.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants knew or recklessly failed to learn that the 8/12/99 S-8
was materially false, incomplete, misleading, and deceptive because it failed
to disclose fully and fairly that Enron was improperly using SPE’s for sham
transactions, materially understating its liabilities, and materially
overstating its income or assets.
155.
On information
and belief, despite knowledge or reckless failure to learn that the 8/12/99 S-8
was materially false, incomplete, misleading, and deceptive, the Director and
Officer Defendants, the Accountant Defendants, and the Attorney Defendants
intentionally, wilfully, or recklessly continued to work for Enron and allow
their good names, services, and work product to be used in furtherance of the
SCHEME, without resigning, blowing the whistle, or raising a red flag.
156.
On information
and belief, at a meeting of the Enron board of directors on or about October
11, 1999, Fastow and other Director and Officer Defendants discussed that Enron
had both “on-balance and off-balance
sheet debt” from using SPE’s and sham transactions, and that Fastow had a
conflict of interest in connection with SPE’s and his position in Enron. On information and belief, some of the
Accountant Defendants and Attorney Defendants attended the 10/11/99 meeting to
answer questions posed to them. On information and belief, as a result of the
10/11/99 meeting, the Director and Officer Defendants, the Accountant
Defendants, and the Attorney Defendants knew or recklessly failed to learn that
Enron was (a) using SPE’s to conceal liabilities; (b) using SPE’s to overstate
its income or assets; (c) concealing that SPE’s were accounting shams
controlled by Enron; and/or (d) concealing material facts, making materially
incomplete and misleading representations, and making material
misrepresentations in financial reports and statements, annual reports, SEC
filings, shareholder communications, employee communications, information
packages, press releases, interviews with the news media and securities
analysts, and other matters affecting the market price of Enron’s securities.
157.
On information
and belief, on a date or dates currently unknown but no later than March 2000,
McMahon warned Skilling inter alia that use of SPE’s in sham
transactions, the material understatement of liabilities, the material
overstatement of income or assets, and/or related accounting practices or
conflicts of interest, were illegal or improper and/or threatened to expose
Enron and the defendants to scandal, investigation, litigation, and/or
prosecution. On information and belief,
Skilling and the other Director and Officer Defendants intentionally, wilfully,
or recklessly decided to ignore McMahon’s concerns, and McMahon intentionally,
wilfully, or recklessly decided to go along with their decision and to continue
furthering the SCHEME as a participant, aider and abetter, and/or
co-conspirator.
158.
The Accountant
Defendants audited Enron’s financial statements for the fiscal year ended
December 31, 1999 (the “1999 Financials”), and issued unqualified audit reports
dated March 13, 2000, attesting to their accuracy and reliability (the “1999
Audit Reports”).
159.
On or about
March 28, 2000, the Accountant Defendants consented in writing to incorporation
of the 1999 Audit Reports into an imminent Form 10-K (Annual Report).
160.
Enron’s Form
10-K (Annual Report) for the fiscal year ended December 31, 1999, was filed
with the SEC on March 30, 2000 (the “1999 10-K”). The 1999 10-K is a public record and includes the 1999 Financials
and the 1999 Audit Report, with specific reference to AA as the “independent”
public accountants and experts that had audited the 1999 Financials.
161.
On information
and belief, the 1999 10-K was provided not only to the SEC, but also, with the
knowledge, approval, and consent of all defendants (except the Corrupt
Officials), to Enron shareholders, potential investors, securities analysts,
the news media, and others who affect the securities market.
162.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants collaborated throughout and worked together closely in
preparing, finalizing, and filing the 1999 10-K, and they knew its contents.
///
163.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants knew or recklessly failed to learn that the 1999 10-K
was materially false, incomplete, misleading, and deceptive because it failed
to disclose fully and fairly that Enron was improperly using SPE’s for sham
transactions, materially understating its liabilities, and materially
overstating its income or assets.
164.
On information
and belief, despite knowledge or reckless failure to learn that the 1999 10-K
was materially false, incomplete, misleading, and deceptive, the Director and
Officer Defendants, the Accountant Defendants, and the Attorney Defendants
intentionally, wilfully, or recklessly continued to work for Enron and allow
their good names, services, and work product to be used in furtherance of the
SCHEME, without resigning, blowing the whistle, or raising a red flag.
165.
On or about
April 4, 2000, the Accountant Defendants consented in writing to incorporation
of the 1999 Audit Report into an imminent Form S-3 Registration Statement and
Prospectus.
166.
On or about
April 4, 2000, a Form S-3 Registration Statement and Prospectus was filed with
the SEC in connection with Enron’s issuance and offering of 4.9 million shares
of common stock at a proposed maximum aggregate offering price of approximately
$362 million (the “4/4/00 S-3"). The
4/4/00 S-3 is a public record and includes the 1999 Financials and the 1999
Audit Report, with specific reference to AA as the “independent” public
accountants and experts that had audited the 1999 Financials.
167.
On information
and belief, the Attorney Defendants were central participants in all aspects of
the preparation, finalization, approval, and filing of the 4/4/00 S-3, knew its
contents, and/or issued an opinion that was used, with the knowledge, approval,
and consent of the Attorney Defendants, to facilitate the 4/4/00 S-3 and the
subject securities offering.
168.
On information
and belief, the 4/4/00 S-3 was provided not only to the SEC, but also, with the
knowledge, approval, and consent of all defendants (except the Corrupt
Officials), to Enron shareholders, potential investors, securities analysts,
the news media, and others who affect the securities market.
169.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants collaborated throughout and worked together closely in
preparing, finalizing, and filing the 4/4/00 S-3, and they knew its contents.
170.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants knew or recklessly failed to learn that the 4/4/00 S-3
was materially false, incomplete, misleading, and deceptive because it failed
to disclose fully and fairly that Enron was improperly using SPE’s for sham
transactions, materially understating its liabilities, and materially
overstating its income or assets.
171.
On information
and belief, despite knowledge or reckless failure to learn that the 4/4/00 S-3
was materially false, incomplete, misleading, and deceptive, the Director and
Officer Defendants, the Accountant Defendants, and the Attorney Defendants
intentionally, wilfully, or recklessly continued to work for Enron and allow
their good names, services, and work product to be used in furtherance of the
SCHEME, without resigning, blowing the whistle, or raising a red flag.
172.
On information
and belief, at a meeting of the Enron board of directors on or about May 1,
2000, Fastow and other Director and Officer Defendants discussed that the risk
of “accounting scrutiny” of SPE’s, sham transactions, material understatement
of liabilities, and/or material overstatement of income or assets. On information and belief, some Accountant
Defendants and Attorney Defendants attended the 5/1/00 meeting to answer
questions posed to them. On information and belief, as a result of the 5/1/00
meeting, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants knew or recklessly failed to learn that Enron was (a)
using SPE’s to conceal liabilities; (b) using SPE’s to overstate its income or
assets; (c) concealing that SPE’s were accounting shams controlled by Enron;
and/or (d) concealing material facts, making materially incomplete and
misleading representations, and making material misrepresentations in financial
reports and statements, annual reports, SEC filings, shareholder
communications, employee communications, information packages, press releases,
interviews with the news media and securities analysts, and other matters
affecting the market price of Enron’s securities.
173.
On information
and belief, on or about May 19, 2000, the Accountant Defendants consented in
writing to incorporation of the 1999 Audit Report into an imminent Prospectus
Supplement and Prospectus.
174.
On or about May
19, 2000, a Prospectus Supplement and Prospectus dated May 18, 2000, were filed
with the SEC in connection with Enron’s issuance and offering for sale of debt
securities, preferred stock, and common stock worth several hundred millions
dollars (the “5/19/00 Prospectus Supplement”). The 5/19/00 Prospectus Supplement is a public record and includes
the 1999 Financials and the 1999 Audit Report, with specific reference to AA as
the “independent” public accountants and experts that had audited the 1999
Financials.
175.
On information
and belief, the Attorney Defendants were central participants in all aspects of
the preparation, finalization, approval, and filing of the 5/19/00 Prospectus
Supplement, knew its contents, and/or issued an opinion that was used, with the
knowledge, approval, and consent of the Attorney Defendants, to facilitate the
5/19/00 Prospectus Supplement and the subject securities offering.
176.
On information
and belief, the 5/19/00 Prospectus Supplement was provided not only to the SEC,
but also, with the knowledge, approval, and consent of all defendants (except
the Corrupt Officials), to Enron shareholders, potential investors, securities
analysts, the news media, and others who affect the securities market.
177.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants collaborated throughout and worked together closely in
preparing, finalizing, and filing the 5/19/00 Prospectus Supplement, and they
knew its contents.
178.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants knew or recklessly failed to learn that the 5/19/00 Prospectus
Supplement was materially false, incomplete, misleading, and deceptive because
it failed to disclose fully and fairly that Enron was improperly using SPE’s
for sham transactions, materially understating its liabilities, and materially
overstating its income or assets.
179.
On information
and belief, despite knowledge or reckless failure to learn that the 5/19/00
Prospectus Supplement was materially false, incomplete, misleading, and
deceptive, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants intentionally, wilfully, or recklessly continued to
work for Enron and allow their good names, services, and work product to be
used in furtherance of the SCHEME, without resigning, blowing the whistle, or
raising a red flag.
180.
Also on or
about May 19, 2000, a Form 8-K Current Report dated May 18, 2000, relating to
the 5/19/00 Prospectus Supplement, was filed with the SEC in regard to
medium-term notes (the “5/19/00 8-K”).
The 5/19/00 8-K included and was filed to submit inter alia the
Attorney Defendants’ opinion on tax issues and Attorney Defendants’ consent to
dissemination of its opinion for the 5/19/00 Prospectus Supplement. The 5/19/00 8-K is a public record.
181.
On information
and belief, the 5/19/00 8-K was provided not only to the SEC, but also, with
the knowledge, approval, and consent of all defendants (except the Corrupt
Officials), to Enron shareholders, potential investors, securities analysts,
the news media, and/or others who affect the securities market.
182.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants collaborated throughout and worked together closely in
preparing, finalizing, and filing the 5/19/00 8-K, and they knew its contents.
183.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants knew or recklessly failed to learn that the 5/19/00 8-K
was materially false, incomplete, misleading, and deceptive because it failed
to disclose fully and fairly that Enron was improperly using SPE’s for sham
transactions, materially understating its liabilities, and materially
overstating its income or assets.
184.
On information
and belief, despite knowledge or reckless failure to learn that the 5/19/00 8-K
was materially false, incomplete, misleading, and deceptive, the Director and
Officer Defendants, the Accountant Defendants, and the Attorney Defendants
intentionally, wilfully, or recklessly continued to work for Enron and allow
their good names, services, and work product to be used in furtherance of the
SCHEME, without resigning, blowing the whistle, or raising a red flag.
185.
On information
and belief, on or about June 2, 2000, the Accountant Defendants consented in
writing to incorporation of the 1999 Audit Report into an imminent Prospectus
Supplement and Prospectus.
186.
On or about
June 2, 2000, a second Prospectus Supplement to the Prospectus dated May 18,
2000, was filed with the SEC (the “6/2/00 Prospectus Supplement”). The 6/2/00 Prospectus Supplement is a public
record and includes the 1999 Financials and the 1999 Audit
///
Report, with specific reference to AA as the
“independent” public accountants and experts that had audited the 1999
Financials.
187.
On information
and belief, the Attorney Defendants were central participants in all aspects of
the preparation, finalization, approval, and filing of the 6/2/00 Prospectus
Supplement, knew its contents, and/or issued an opinion that was used, with the
knowledge, approval, and consent of the Attorney Defendants, to facilitate the
6/2/00 Prospectus Supplement and the subject securities offering.
188.
On information
and belief, the 6/2/00 Prospectus Supplement was provided not only to the SEC,
but also, with the knowledge, approval, and consent of all defendants (except
the Corrupt Officials), to Enron shareholders, potential investors, securities
analysts, the news media, and others who affect the securities market.
189.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants collaborated throughout and worked together closely in
preparing, finalizing, and filing the 6/2/00 Prospectus Supplement, and they
knew its contents.
190.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants knew or recklessly failed to learn that the 6/2/00
Prospectus Supplement was materially false, incomplete, misleading, and
deceptive because it failed to disclose fully and fairly that Enron was
improperly using SPE’s for sham transactions, materially understating its
liabilities, and materially overstating its income or assets.
191.
On information
and belief, despite knowledge or reckless failure to learn that the 6/2/00
Prospectus Supplement was materially false, incomplete, misleading, and
deceptive, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants intentionally, wilfully, or recklessly continued to
work for Enron and allow their good names, services, and work product to be
used in furtherance of the SCHEME, without resigning, blowing the whistle, or
raising a red flag.
192.
On or about
June 14, 2000, the Accountant Defendants consented in writing to incorporation
of the 1999 Audit Report into an imminent Form S-3 Registration Statement and
Prospectus.
193.
On or about
June 15, 2000, a Form S-3 Registration Statement and Prospectus was filed with
the SEC in connection with Enron’s issuance and offering of 616,778 shares of
common stock at a proposed maximum aggregate offering price of approximately
$44.6 million (the “6/15/00 S-3").
The 6/15/00 S-3 is a public record and includes the 1999 Financials and
the 1999 Audit Report, with specific reference to AA as the “independent”
public accountants and experts that had audited the 1999 Financials.
194.
On information
and belief, the Attorney Defendants were central participants in all aspects of
the preparation, finalization, approval, and filing of the 6/15/00 S-3, knew
its contents, and/or issued an opinion that was used, with the knowledge,
approval, and consent of the Attorney Defendants, to facilitate the 6/15/00 S-3
and the subject securities offering.
195.
On information
and belief, the 6/15/00 S-3 was provided not only to the SEC, but also, with
the knowledge, approval, and consent of all defendants (except the Corrupt
Officials), to Enron shareholders, potential investors, securities analysts,
the news media, and others who affect the securities market.
196.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants collaborated throughout and worked together closely in
preparing, finalizing, and filing the 6/15/00 S-3, and they knew its contents.
197.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants knew or recklessly failed to learn that the 6/15/00 S-3
was materially false, incomplete, misleading, and deceptive because it failed to
disclose fully and fairly that Enron was improperly using SPE’s for sham
transactions, materially understating its liabilities, and materially
overstating its income or assets.
198.
On information
and belief, despite knowledge or reckless failure to learn that the 6/15/00 S-3
was materially false, incomplete, misleading, and deceptive, the Director and
Officer Defendants, the Accountant Defendants, and the Attorney Defendants
intentionally, wilfully, or recklessly continued to work for Enron and allow
their good names, services, and work product to be used in furtherance of the
SCHEME, without resigning, blowing the whistle, or raising a red flag.
199.
On or about
July 13, 2000, the Accountant Defendants consented in writing to incorporation
of the 1999 Audit Report into an imminent Form S-3 Registration Statement and
Prospectus.
200.
On or about
July 19, 2000, a Form S-3 Registration Statement and Prospectus was filed with
the SEC in connection with Enron’s issuance and offering inter alia of
$1 billion worth of preferred stock (the “7/19/00 S-3"). The 7/19/00 S-3 is a public record and
includes the 1999 Financials and the 1999 Audit Report, with specific reference
to AA as the “independent” public accountants and experts that had audited the
1999 Financials.
201.
On information
and belief, the Attorney Defendants were central participants in all aspects of
the preparation, finalization, approval, and filing of the 7/19/00 S-3, knew
its contents, and/or issued an opinion that was used, with the knowledge,
approval, and consent of the Attorney Defendants, to facilitate the 7/19/00 S-3
and the subject securities offering.
///
202.
On information
and belief, the 7/19/00 S-3 was provided not only to the SEC, but also, with
the knowledge, approval, and consent of all defendants (except the Corrupt
Officials), to Enron shareholders, potential investors, securities analysts,
the news media, and others who affect the securities market.
203.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants collaborated throughout and worked together closely in
preparing, finalizing, and filing the 7/19/00 S-3, and they knew its contents.
204.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants knew or recklessly failed to learn that the 7/19/00 S-3
was materially false, incomplete, misleading, and deceptive because it failed
to disclose fully and fairly that Enron was improperly using SPE’s for sham
transactions, materially understating its liabilities, and materially
overstating its income or assets.
205.
On information
and belief, despite knowledge or reckless failure to learn that the 7/19/00 S-3
was materially false, incomplete, misleading, and deceptive, the Director and
Officer Defendants, the Accountant Defendants, and the Attorney Defendants
intentionally, wilfully, or recklessly continued to work for Enron and allow
their good names, services, and work product to be used in furtherance of the
SCHEME, without resigning, blowing the whistle, or raising a red flag.
206.
On information
and belief, at a meeting of the Enron board of directors on or about August 7,
2000, Director and Officer Defendants discussed that Enron was using SPE’s to “manage
its balance sheet debt.” On information
and belief, some Accountant Defendants and Attorney Defendants attended the
8/7/00 meeting to answer questions. On information and belief, as a result of
the 8/7/00 meeting, the Director and Officer Defendants, Accountant Defendants,
and Attorney Defendants knew or recklessly failed to learn that Enron was (a)
using SPE’s to conceal liabilities; (b) using SPE’s to overstate its income or
assets; (c) concealing that SPE’s were accounting shams controlled by Enron;
and/or (d) concealing material facts, making materially incomplete and
misleading representations, and making material misrepresentations in financial
reports and statements, annual reports, SEC filings, shareholder
communications, employee communications, information packages, press releases,
interviews with the news media and securities analysts, and other matters
affecting the market price of Enron’s securities.
207.
On or about
January 24, 2001, the Accountant Defendants consented in writing to incorporation
of the 1999 Audit Report into three separate, imminent Form S-8 Registration
Statements and Prospectuses.
208.
On or about
January 26, 2001, three separate Form S-8 Registration Statements and
Prospectuses were filed with the SEC in connection with several securities
issues and offering by Enron (the “1/26/01 S-8's"). The first S-8 (SEC filename h83596s-8.txt)
was filed in connection with an issuance and offering of 10,000,000 shares of
common stock at a proposed maximum aggregate offering price of approximately
$714 million. The second S-8 (SEC
filename h83597s-8.txt) was filed in connection with an issuance and
offering of 32,000,000 shares of common stock at a proposed maximum aggregate
offering price of approximately $2.285 billion. The third S-8 (SEC filename h83598s-8.txt) was filed in
connection with an issuance and offering of another 3,000,000 shares of common
stock at a proposed maximum aggregate offering price of approximately $214
million. The 1/26/01 S-8's are public records
and include the 1999 Financials and the 1999 Audit Report, with specific
reference to AA as the “independent” public accountants and experts that had
audited the 1999 Financials.
209.
On information
and belief, the Attorney Defendants were central participants in all aspects of
the preparation, finalization, approval, and filing of the 1/26/01 S-8's, knew
their contents, and/or issued an opinion that was used, with the knowledge,
approval, and consent of the Attorney Defendants, to facilitate the 1/26/01
S-8's and the subject securities offering.
210.
On information
and belief, the 1/26/01 S-8's were provided not only to the SEC, but also, with
the knowledge, approval, and consent of all defendants (except the Corrupt
Officials), to shareholders, potential investors, securities analysts, the news
media, and others who affect the securities market.
211.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants collaborated throughout and worked together closely in
preparing, finalizing, and filing the 1/26/01 S-8's, and they knew the contents
thereof.
212.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants knew or recklessly failed to learn that the 1/26/01
S-8's were materially false, incomplete, misleading, and deceptive because they
failed to disclose fully and fairly that Enron was improperly using SPE’s for
sham transactions, materially understating its liabilities, and materially
overstating its income or assets.
213.
On information
and belief, despite knowledge or reckless failure to learn that the 1/26/01
S-8's were materially false, incomplete, misleading, and deceptive, the
Director and Officer Defendants, the Accountant Defendants, and the Attorney
Defendants intentionally, wilfully, or recklessly continued to work for Enron
and allow their good names, services, and work product to be used in
furtherance of the SCHEME, without resigning, blowing the whistle, or raising a
red flag.
214.
On January 29,
2001, Enron issued a press release to announce plans to raise gross proceeds of
approximately $1.5 billion through an offering of zero coupon convertible
senior debt securities. Enron touted
itself as “one of the world’s leading electricity, natural gas and
communications companies.” Enron boasted
inter alia that “Fortune magazine has named Enron ‘America’s Most
Innovative Company’ for five consecutive years, the top company for ‘Quality of
Management’ and the second best company for ‘Employee Talent.’”
215.
On January 30,
2001, Enron issued another press release to announce the pricing for its
anticipated offering of zero coupon convertible senior debt securities. Enron again touted itself as “one of the
world’s leading electricity, natural gas and communications companies.” Enron again boasted inter alia that
“Fortune magazine has named Enron ‘America’s Most Innovative Company’ for five
consecutive years, the top company for ‘Quality of Management’ and the second
best company for ‘Employee Talent.’”
216.
Just in case
anyone had missed Enron’s press releases dated January 29 and 30, 2001, Enron
included copies of these two press releases in a Form 8-K Current Report filed
with the SEC on January 31, 2001 (the “1/31/01 8-K”).
217.
On information
and belief, the Attorney Defendants were central participants in all aspects of
the preparation, finalization, approval, release, and/or filing of the press
releases dated January 29 and 30, 2001, and the 1/31/01 8-K, and knew their
contents.
218.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants collaborated and worked together to prepare, finalize,
and file the 1/31/01 8-K, and they knew the contents thereof.
219.
On information
and belief, the 1/31/01 8-K was provided not only to the SEC, but also, with
the knowledge, approval, and consent of all defendants (except the Corrupt
Officials), to Enron shareholders, potential investors, securities analysts, the
news media, and others who affect the securities market.
220.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants knew or recklessly failed to learn that the 1/31/01 8-K
was materially false, incomplete, misleading, and deceptive because it failed
to disclose fully and fairly that Enron was improperly using SPE’s for sham
transactions, materially understating its liabilities, materially overstating
its income or assets, and being managed by dishonest, even criminal directors
and officers who were destroying the company for their own personal gain.
221.
On information
and belief, despite knowledge or reckless failure to learn that the 1/31/01 8-K
was materially false, incomplete, misleading, and deceptive, the Director and
Officer Defendants, the Accountant Defendants, and the Attorney Defendants
intentionally, wilfully, or recklessly continued to work for Enron and allow
their good names, services, and work product to be used to further the SCHEME,
without resigning, blowing the whistle, or raising a red flag.
222.
On information
and belief, the Accountant Defendants undertook to audit Enron’s financial
statements for the fiscal year ended December 31, 2000 (the “2000
Financials”). On information and
belief, during this audit and before February 5, 2001, the Accountant
Defendants had grave concerns and second thoughts about continuing to represent
Enron in light of its use of SPE’s for sham transactions, understatement of
liabilities, overstatement of income or assets, and similar accounting,
auditing, legal, management, and liability issues, as well as the exposure of
the Accountant Defendants as direct participants, aiders and abetters, and
co-conspirators in the SCHEME. On
information and belief, these concerns and second thoughts were raised with the
highest levels of the Accountant Defendants’ management.
223.
On information
and belief, the Accountant Defendants’ senior management had meetings and
conferred in Houston, Texas, Chicago, Illinois, and/or other locations, on
various dates currently unknown, to discuss inter alia (a) the Enron
account; (b) the management and financial problems at Enron; (c) the Accounting
Defendants’ knowledge of, involvement in, and responsibility and liability for
those problems; (d) whether the Accounting Defendants had an actual conflict of
interest with Enron; (e) whether the Accounting Defendants should terminate
their relationships with Enron; (f) whether the Accounting Defendants should
withdraw their prior unqualified audit reports or otherwise blow the whistle or
raise a red flag for the SEC or other regulators; and/or (g) whether the
Accounting Defendants would instead continue to participate in the SCHEME, as
they had been doing for years, and continue to profit from their lucrative
relationships with Enron.
224.
On information
and belief, the Accountant Defendants held a large meeting and conference call
in Houston, Texas, on or about February 5, 2001, to consider whether to keep
Enron as a client. On information and
believe, the Accountant Defendants who attended in person or participated by
conference call were aware of, discussed, and intentionally, wilfully, or
recklessly decided to do nothing about the ongoing fraud of the Director and
Officer Defendants, involving the use of SPE’s for sham transactions,
understatement of liabilities, and overstatement of assets or income. Instead, the Accounting Defendants
intentionally, wilfully, or recklessly decided to keep Enron as a client and continue
as knowing participants, aiders and abetters, and co-conspirators in
furtherance of the SCHEME to preserve lucrative relationships with Enron.
225.
On information
and belief, on or about February 6, 2001, Jones wrote a memo to D. Duncan and
Bauer about the 2/5/01 meeting conducted by the Accountant Defendants,
admitting inter alia that the
Accounting Defendants knew that Enron was using SPE’s for sham transactions,
materially understating its liabilities, and materially overstating its income
or assets (the “5/6/01 Memo”). The
5/6/01 Memo admits that most Accountant Defendants had directly participated in
the meeting; that they had discussed “the fact that Enron often is creating
industries and markets and transactions for which there are no specific rules
which requires significant judgement and that Enron is aggressive in its
transaction structuring”; and that certain earnings figures were nothing but
“intelligent gambling.”
226.
Despite serious
concerns and second thoughts about the propriety of Enron’s business and
accounting practices, the Accountant Defendants failed to resign, blow the
whistle, or raise a red flag, completed the audit of Enron’s financial
statements for the fiscal year ended December 31, 2000 (the “2000 Financials”),
and issued an unqualified audit report dated February 23, 2001, attesting to
their accuracy and reliability (the “2000 Audit Report”).
227.
On
information and belief, when the Accounting Defendants issued the 2000 Audit
Report, they knew and intended that it would be broadly disseminated and relied
upon and would be provided not only to the SEC, but also, with the knowledge,
approval, and consent of all defendants (except the Corrupt Officials), to
Enron shareholders, potential investors, securities analysts, the news media,
and others who affect the securities market.
228.
Also on
February 23, 2001, the Accountant Defendants consented in writing to
incorporation of the 2000 Audit Report not only into an imminent Form 8-K
Current Report, but also into 18 separate registration statements that had
previously been filed with the SEC.
229.
Enron’s Form
8-K Current Report dated February 27, 2001, was filed with the SEC on or about
February 28, 2001 (the “2/28/01 8-K”).
The 2/28/01 8-K is a public record and includes the 1999 Financials and
the 1999 Audit Report, with specific reference to AA as the “independent” public
accountants and experts that had audited the 1999 Financials.
230.
On information
and belief, the 2/28/01 8-K was provided not only to the SEC, but also, with
the knowledge, approval, and consent of all defendants (except the Corrupt
Officials), to Enron shareholders, potential investors, securities analysts,
the news media, and others who affect the securities market.
231.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants collaborated throughout and worked together closely in
preparing, finalizing, and filing the 2/28/01 8-K, and they knew its contents.
232.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants knew or recklessly failed to learn that the 2/28/01 8-K
was materially false, incomplete, misleading, and deceptive because it failed
to disclose fully and ///
fairly that Enron was improperly using SPE’s
for sham transactions, materially understating its liabilities, and materially
overstating its income or assets.
233.
On information
and belief, despite knowledge or reckless failure to learn that the 2/28/01 8-K
was materially false, incomplete, misleading, and deceptive, the Director and
Officer Defendants, the Accountant Defendants, and the Attorney Defendants
intentionally, wilfully, or recklessly continued to work for Enron and allow
their good names, services, and work product to be used in furtherance of the
SCHEME, without resigning, blowing the whistle, or raising a red flag.
234.
On or about
March 30, 2001, the Accountant Defendants consented in writing to incorporation
of the 2000 Audit Report not only into an imminent Form 10-K (Annual Report),
but also into 18 separate registration statements that had previously been
filed with the SEC.
235.
Enron’s Form
10-K (Annual Report) for the fiscal year ended December 31, 2000, was filed
with the SEC on April 2, 2001 (the “2000 10-K”). The 2000 10-K is a public record and includes the 2000 Financials
and the 2000 Audit Report, with specific reference to AA as the “independent”
public accountants and experts that had audited the 2000 Financials.
236.
On information
and belief, the 2000 10-K was provided not only to the SEC, but also, with the
knowledge, approval, and consent of all defendants (except the Corrupt
Officials), to Enron shareholders, potential investors, securities analysts,
the news media, and others who affect the securities market.
237.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants collaborated throughout and worked together closely in
preparing, finalizing, and filing the 2000 10-K, and they knew its contents.
///
238.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants knew or recklessly failed to learn that the 2000 10-K
was materially false, incomplete, misleading, and deceptive because it failed
to disclose fully and fairly that Enron was improperly using SPE’s for sham
transactions, materially understating its liabilities, and materially
overstating its income or assets.
239.
On information
and belief, despite knowledge or reckless failure to learn that the 2000 10-K
was materially false, incomplete, misleading, and deceptive, the Director and
Officer Defendants, the Accountant Defendants, and the Attorney Defendants
intentionally, wilfully, or recklessly continued to work for Enron and allow
their good names, services, and work product to be used in furtherance of the
SCHEME, without resigning, blowing the whistle, or raising a red flag.
240.
On information
and belief, in or about April 2001, the Enron legal department sought and
obtained the legal opinion of the prestigious New York law firm Fried, Frank,
Harris, Shriver & Jacobson (the “Fried Firm”) as to the legality inter
alia of Enron’s use of SPE’s for sham transactions, the material
understatement of liabilities, and/or the material overstatement of income or
assets. On information and belief,
Enron’s legal department was advised inter alia to “halt this practice”
immediately. On information and belief,
the Director and Officer Defendants intentionally, wilfully, or recklessly
decided to ignore this advice and to continue the SCHEME.
241.
On information
and belief, in or about April 2001 or shortly afterward, the Accountant
Defendants and the Attorney Defendants learned of the Fried Firm’s legal advice
to stop using SPE’s for sham transactions and/or to stop materially
understating liabilities and overstating income or assets. On information and belief, the Accountant
Defendants and the Attorney Defendants intentionally, wilfully, or recklessly
decided to ignore this advice and to continue as direct participants, aiders
and abetters, and co-conspirators in the SCHEME.
///
242.
On or about May
14, 2001, Wilt purchased 350 shares of Enron common stock at a price of $58.25
per share, for a total cost, with commissions, of $20,417.45. On information and belief, unbeknownst to
Wilt, this stock transaction occurred at a grossly inflated price because of
the SCHEME.
243.
On or about May
31, 2001, the Accountant Defendants consented in writing to incorporation of
the 2000 Audit Report into an imminent S-3 Registration Statement and
Prospectus.
244.
On or about
June 1, 2001, a Form S-3 Registration Statement and Prospectus was filed with
the SEC in connection with Enron’s issuance and offering for resale of
approximately $1.9 billion worth of Zero Coupon Convertible Senior Notes and
the shares of common stock issuable upon conversion of the notes (the “6/1/01
S-3"). The 6/1/01 S-3 is a public
record and includes the 2000 Financials and the 2000 Audit Report, with
specific reference to AA as the “independent” public accountants and experts
that had audited the 2000 Financials.
245.
On information
and belief, the Attorney Defendants were central participants in all aspects of
the preparation, finalization, approval, and filing of the 6/1/01 S-3, knew its
contents, and/or issued an opinion that was used, with the knowledge, approval,
and consent of the Attorney Defendants, to facilitate the 6/1/01 S-3 and the
subject securities offering.
246.
On information
and belief, the 6/1/01 S-3 was provided not only to the SEC, but also, with the
knowledge, approval, and consent of all defendants (except the Corrupt Officials),
to Enron shareholders, potential investors, securities analysts, the news
media, and others who affect the securities market.
///
///
247.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants collaborated throughout and worked together closely in
preparing, finalizing, and filing the 6/1/01 S-3, and they knew its contents.
248.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants knew or recklessly failed to learn that the 6/1/01 S-3
was materially false, incomplete, misleading, and deceptive because it failed
to disclose fully and fairly that Enron was improperly using SPE’s for sham
transactions, materially understating its liabilities, and materially
overstating its income or assets.
249.
On information
and belief, despite knowledge or reckless failure to learn that the 6/1/01 S-3
was materially false, incomplete, misleading, and deceptive, the Director and
Officer Defendants, the Accountant Defendants, and the Attorney Defendants
intentionally, wilfully, or recklessly continued to work for Enron and allow
their good names, services, and work product to be used in furtherance of the
SCHEME, without resigning, blowing the whistle, or raising a red flag.
250.
On or about
July 13, 2001, Form S-3A Amendment No. 1 to the 6/1/01 S-3 was filed with the
SEC (the “7/13/01 S-3A"). The
7/13/01 S-3A is a public record and includes the 2000 Financials and the 2000
Audit Report, with specific reference to AA as the “independent” public
accountants and experts that had audited the 2000 Financials.
251.
On information
and belief, the Attorney Defendants were central participants in all aspects of
the preparation, finalization, approval, and filing of the 7/13/01 S-3A, knew
its contents, and/or issued an opinion that was used, with the knowledge,
approval, and consent of the Attorney Defendants, to facilitate the 7/13/01
S-3A and the subject securities offering.
///
///
252.
On information
and belief, the 7/13/01 S-3A was provided not only to the SEC, but also, with
the knowledge, approval, and consent of all defendants (except the Corrupt
Officials), to Enron shareholders, potential investors, securities analysts,
the news media, and others who affect the securities market.
253.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants collaborated throughout and worked together closely in
preparing, finalizing, and filing the 7/13/01 S-3A, and they knew its contents.
254.
On information
and belief, the Director and Officer Defendants, the Accountant Defendants, and
the Attorney Defendants knew or recklessly failed to learn that the 7/13/01
S-3A was materially false, incomplete, misleading, and deceptive because it
failed to disclose fully and fairly that Enron was improperly using SPE’s for
sham transactions, materially understating its liabilities, and materially
overstating its income or assets.
255.
On information
and belief, despite knowledge or reckless failure to learn that the 7/13/01
S-3A was materially false, incomplete, misleading, and deceptive, the Director
and Officer Defendants, the Accountant Defendants, and the Attorney Defendants
intentionally, wilfully, or recklessly continued to work for Enron and allow
their good names, services, and work product to be used in furtherance of the
SCHEME, without resigning, blowing the whistle, or raising a red flag.
256.
On information
and belief, on a date currently unknown but no later than August 14, 2001,
Skilling came to the conclusion that the SCHEME would soon be exposed despite
the best efforts of everyone involved to conceal it and to evade government
regulation and oversight. Accordingly,
Skilling abruptly resigned on or about August 14, 2001.
///
///
257.
On information
and belief, Skilling’s abrupt resignation was unexpected and came as a surprise
to the financial community. On
information and belief, other Director and Officer Defendants, the Accountant
Defendants, and/or the Attorney Defendants embarked upon a public deception
campaign in an attempt to mollify Enron’s employees, shareholders, investors,
and others, and/or to influence the Corrupt Officials to grant favors and
favorable treatment by way of turning a blind eye and failing to investigate
whether Skilling’s resignation was a possible red flag justifying an
investigation into Enron’s true financial condition and/or the possible need
for regulatory intervention to protect employees, shareholders, investors, and
the securities market.
258.
On information
and belief, Sherron S. Watkins (“Watkins”) was formerly a vice president and
accountant employed by Enron. On
information and belief, on a date currently unknown but no later than August
2001, Watkins learned of the SPE’s, material understatement of liabilities,
material overstatement of income or assets, and related accounting
practices. On information and belief,
Watkins came to have serious concerns about these matters.
259.
On information
and belief, on or about August 15, 2001, Watkins prepared a brief anonymous
memo, and caused it to be delivered to Lay, warning that Skilling’s sudden
departure might “raise suspicions of accounting improprieties” (the “8/16/01
Memo”). On information and belief, the
8/16/01 Memo was widely circulated among the Director and Officer Defendants
and came to the attention of the Accountant Defendants and/or the Attorney
Defendants.
260.
On or about
August 16, 2001, as seen in an internal Enron videotape recorded at a
companywide meeting, Lay gave a “pep talk” to an assembly of Enron employees
and others, during which he represented to those in attendance that Enron’s
stock was a “great value.” Lay also
urged those in attendance not to sell, but to hold, their Enron stock. On information and belief, Lay gave this
“pep talk” as the agent of the other Director and Officer Defendants, in
concert with them, and with the knowledge, approval, and consent of the
Accountant Defendants and/or the Attorney Defendants, all in furtherance of
their conspiracy and the SCHEME. On
information and belief, while Lay was urging others to keep their Enron stock,
he was selling his own Enron Stock for millions of dollars, and the other
Director and Officer Defendants, the Accountant Defendants, and/or the Attorney
Defendants were doing likewise.
261.
On information
and belief, on or about August 20, 2001, Watkins contacted one of the
Accountant Defendants (whose name is currently unknown) and discussed her
serious concerns about the SPE’s, Enron’s accounting practices, and/or
accounting scandals.
262.
Also on or
about August 20, 2001, on information and belief, Lay provided an interview to
BusinessWeek Dallas Correspondent Stephanie Anderson Forest, in which he
falsely represented that “There are absolutely no problems that had anything to
do with Jeff [Skilling]’s departure.... There are no accounting issues, no
trading issues, no reserve issues, no previously unknown problem.... There is no other shoe to fall.” On information and belief, Lay knew these
statements were false when made, but he made them intentionally to further the
SCHEME.
263.
On information
and belief, on or about August 21, 2001, one of the Accountant Defendants (whose name is currently unknown)
prepared a memo detailing Watkins’ concerns for the AA auditors, accountants, and/or
management consultants on the Enron account.
On information and belief, this memo was widely circulated among the
Accountant Defendants and came to the attention of the Director and Officer
Defendants and/or the Attorney Defendants.
264.
On information and
belief, on a date currently unknown but no later than August 22, 2001, Watkins
prepared a more detailed memo to Lay about Skilling’s resignation, the public
deception campaign to avoid exposure of the SCHEME, the fraudulent accounting
practices, the prospect of scandal, and/or related matters (the “8/22/01
Memo”). On information and belief,
Watkins stated that she was “incredibly nervous that we will implode in a wave
of accounting scandals.” On information
and belief, the 8/22/01 Memo was quickly provided to the other Director and
Officer Defendants, the Accountant Defendants, and/or the Attorney Defendants.
265.
On information
and belief, on or about August 22, 2001, Watkins met with Lay, gave him the
8/22/01 Memo outlining her concerns, and urged Lay to have independent counsel
(i.e. not the Attorney Defendants, given their actual conflict of interest)
review the SPE’s and related legal accounting issues. On information and belief, Lay told Watkins that he would have
independent counsel review these matters.
In fact, however, Lay, Derrick, and other Director and Officer
Defendants decided to use the Attorney Defendants for the “independent” review.
266.
On information
and belief, in responding to Watkins’s concerns and memos, Lay, Derrick, and
other Director and Officer Defendants never had any intention to have
independent counsel review the SPE’s or related legal accounting issues because
a truly independent review would have again concluded (as in the Fried Firm’s
review) that the SPE’s were shams that were being used wrongfully and
unlawfully to understate liabilities and overstate income or assets in a
massive fraud against shareholders, potential investors, and the integrity of
the securities market. Rather, on
information and belief, the Director and Officer Defendants intentionally and
wilfully decided to have the Attorney Defendants review their own work because
they had repeatedly and consistently proven themselves to be willing
participants, aders and abetters, and co-conspirators who could be counted on
to continue acting in furtherance of the SCHEME and its concealment.
267.
On information
and belief, despite their actual conflict of interest, the Attorney Defendants
agreed to undertake a limited review of their own prior work on the SPE’s, the
sham transactions, and related matters, while expressly declining to address
accounting issues that the Attorney Defendants self-servingly stated were the
responsibility of the Accountant Defendants.
On information and belief, the Attorney Defendants agreed to perform the
limited review, despite their actual conflict of interest, in an attempt to
conceal their past and present role as participants, aiders and abetters, and
co-conspirators in the SCHEME, to avoid exposure of the SCHEME, and to continue
reaping many millions of dollars in attorneys’ fees from the Enron Account.
///
///
268.
On or about
September 19, 2001, in an effort to mitigate his losses, Wilt sold his 350
shares of Enron common stock and dividend stock at the reduced price of $26.67
per share, for a net total of only $9,329.62, and for a loss of approximately
$11,088.00.
269.
On information
and belief, on various dates including inter alia September 26, 2001,
Lay and/or other Director and Officer Defendants reassured employees and
shareholders that inter alia Enron’s “financial liquidity has never been
stronger” and “Enron stock is an incredible bargain at current prices.” On information and belief, Lay and/or other
Director and Officer Defendants made such statements with the knowledge,
approval, and consent of the Accountant Defendants and/or the Attorney
Defendants, and in furtherance of their conspiracy and the SCHEME, to urge
employees and shareholders to hold, and not sell, their Enron stock. On information and belief, all defendants
knew such statements were false when made.
On information and belief, while Lay and/or other Director and Officer
Defendants were urging others to keep their Enron stock, they were selling
there own stock for millions of dollars, and the Accountant Defendants and/or
the Attorney Defendants were doing likewise.
270.
On information
and belief, on a date or dates currently unknown but no later than February 5,
2001, AA’s senior management came to understand that AA and several Accountant
Defendants were exposed to major civil and criminal liability as participants,
aiders and abetters, and co-conspirators in the SCHEME. On information and belief, as a result of
determining that Enron’s fraudulent accounting practices were about to explode
in a major accounting scandal, AA on or about October 9, 2001, hired outside
counsel, David Polk & Wardwell (“Davis Polk”), and intensified its
litigation preparation. On information
and belief, Temple participated in the retention of Davis Polk and knew of AA’s
litigation preparation at all relevant times.
271.
On information
and belief, on or about October 12, 2001, Temple sent an email to Odom in
Houston, who forwarded it to B. Duncan in Houston, stating “It might be useful
to consider reminding the engagement team of our documentation and retention
policy. It will be helpful to make
sure that we have complied with the policy. Let me know if you have any questions” (emphasis added) (the
“10/12/01 Email”). On information and
belief, when Temple sent the 10/12/01 Email, she knew that AA’s documentation
and retention policy called for the destruction of certain documents, and she
intended to and did refer to that destruction policy.
272.
On information
and belief, during several telephone conference calls in October 2001, concurrently
with other litigation preparation, Temple made a point of specifically asking
whether the Accountant Defendants who were located in the Houston office were
in compliance with AA’s documentation and retention policy.
273.
On information
and belief, the 10/12/01 Email and the telephone inquiries about compliance
with AA’s documentation and retention policy were clever attempts by Temple, a
very sophisticated lawyer, to encourage and incite the shredding, destruction,
and spoliation of AA’s records relating to Enron in the face or actual and
imminent administrative, civil, and criminal investigations, litigation, and
prosecutions, while maintaining deniability on her part, in an attempt to
destroy the full record of AA’s active complicity in furthering the SCHEME.
274.
On information
and belief, Odom, B.Duncan, and all the other AA partners in Houston construed
the 10/12/01 Email and Temple’s telephone inquiries about compliance with AA’s
documentation and retention policy to have the meaning intended by Temple, to
wit, as a directive to shred, destroy, and spoliate evidence that would be
damning to AA in litigation; at no time did any AA partners in Houston doubt
that intended meaning or seek clarification.
275.
On information
and belief, on a date or dates currently unknown but no later than the receipt
of the 10/12/01 Email in Houston, AA undertook a massive campaign to shred,
destroy, and spoliate huge quantities of records and documents relating to the
Enron account and/or evidencing AA’s role in furthering the SCHEME. On information and belief, this
evidence-destruction campaign was conducted and/or condoned by at least 8
partners in the Houston office, at least four of whom had management authority
and duties, together with scores of secretaries, staff accountants, office
assistants, and other AA employees. On
information and belief, the evidence-destruction campaign was so extensive,
interrupted normal operations so much, and was so frenetic in its conduct, that
no AA personnel in management in the Houston office could have been unaware
that it was occurring.
276.
On information
and belief, on or about October 15, 2001, the Attorney Defendants issued a
report essentially stating inter alia that the SPE’s were legitimate and
Enron had done nothing wrong, while purporting to ignore the fraudulent
accounting practices that were well known to the Attorney Defendants (the
“10/15/01 Report”). On information and
belief, the 10/15/01 Report also stated that no further investigation by
independent counsel and auditors was warranted. On information and belief, when the 10/15/01 Report was prepared
and issued, the Attorney Defendants knew that they had a conflict of interest,
and they issued the report in bad faith in an attempt to justify and conceal
their own wrongful and unlawful misconduct, knowing that SPE’s had been used to
effect sham transactions, understate liabilities, and overstate income or
assets, in a massive fraud that they had knowingly furthered as willing participants.
277.
On information
and belief, on or about October 16, 2001, Temple sent an email to B.Duncan
asking him to alter one or more documents to delete her name and references to
legal advice in news releases relating to Enron’s financial position. On information and belief, Temple made this
request with the intent to minimize the appearance of her involvement and to
create the false impression that the massive evidence-destruction campaign in
Houston was unauthorized.
278.
On information
and belief, on or about October 16, 2001, Enron announced a $618 million
third-quarter loss and a $1.2 billion reduction in shareholder equity as a
result of the manner in which the SPE’s and fraudulent accounting practices had
been used for several years. Due to the
egregiousness of the SCHEME, Wilt seeks and expects to recover, in addition to
this ///
economic loss, at least $200,000.00 in
punitive and exemplary damages from each defendant pursuant to Texas Civil
Practice & Remedies Code § 41.008(b).
279.
On information
and belief, on a date currently unknown but no later than October 17, 2001, the
SEC made its first inquiry of AA relating to Enron. On information and belief, on dates currently unknown but
promptly after the SEC’s first inquiry, the Accountant Defendants all knew or
recklessly failed to learn of that inquiry.
On information and belief, notwithstanding knowledge or reckless failure
to learn of the SEC’s inquiry, the evidence-destruction campaign continued, and
the Accountant Defendants made no effort to stop it or to preserve documents.
280.
On information
and belief, on or about October 17, 2001, the Director and Officer Defendants
manipulated the 401(k) of Enron’s employees to freeze all purchases and sales
in the 401(k) for almost four weeks until on or about November 12, 2001. On information and belief, the Director and
Officer Defendants did so to reduce selling activity by others and support the
market price so that the Director and Officer Defendants could sell their own
Enron holdings at higher prices than would be possible if all Enron employees
were able to sell off their holdings.
On information and belief, the Director and Officer Defendants breached
their fiduciary duties to the 401(k) plan beneficiaries in this manner in order
to further the SCHEME.
281.
On information
and belief, on a date currently unknown but no later than October 22, 2001,
Enron publicly disclosed that the SEC was investigating Enron. On information and belief, any of the
Accountant Defendants who may not have learned of the SEC investigation from
the first inquiry to AA on or about October 17, 2001, learned of it from
Enron’s disclosure no later than October 22, 2001. On information and belief, notwithstanding knowledge of the SEC
investigation, the evidence-destruction campaign continued, and the Accountant
Defendants made no effort to stop it or to preserve documents.
///
///
282.
On information
and belief, on a date currently unknown but no later than October 31, 2001, the
SEC opened a formal inquiry into Enron.
On information and belief, the Accountant Defendants immediately learned
of this formal inquiry. On information
and belief, notwithstanding knowledge of the SEC’s formal inquiry, the
evidence-destruction campaign continued, and the Accountant Defendants made no
effort to stop it or to preserve documents.
283.
Enron’s Form
8-K Current Report dated November 8, 2001, was filed with the SEC on or about
November 8, 2001 (the “11/8/01 8-K”).
The 11/8/01 8-K is a public record, relates to the previously disclosed
$1.2 billion reduction in shareholder equity, and included various unaudited
income statement and balance sheet adjustments.
284.
On information
and belief, on a date currently unknown but no later than November 8, 2001, the
SEC served a subpena on AA for Enron records.
On information and belief, the Accountant Defendants promptly learned of
this subpena. On information and belief,
notwithstanding knowledge of the subpena, the evidence-destruction campaign
continued, and the Accountant Defendants initially made no effort to stop it or
to preserve documents.
285.
On information
and belief, on a date currently unknown but no later than November 9, 2001, a
secretary in AA’s Houston office sent an email to others in the Houston office
directing them to “stop the shredding” (the “11/9/01 Email”). On information and belief, the
evidence-destruction campaign continued for an unknown period after the 11/9/01
Email. On information and belief, at no
time prior to November 9, 2001, did Temple or other Accountant Defendants
attempt to stop the ongoing evidence-destruction campaign.
286.
On information
and belief, the Accountant Defendants tried to conceal the widespread
evidence-destruction campaign for almost two months after the 11/9/01
Email. On information and belief, the
Accountant Defendants did not admit that massive quantities of
///
evidence had been destroyed until January 4,
2002, and then only because they realized that they could not possibly succeed
in concealing such extensive spoliation involving so many people.
287.
On information
and belief, commencing on a date currently unknown until the U.S. Federal
Bureau of Investigation descended upon Enron’s offices in or about January
2002, certain unknown persons at Enron and among the Director and Officer
Defendants shredded, destroyed, and spoliated massive quantities of records
relating to Enron’s SPE’s, understatement of liabilities, overstatement of
income or assets, and/or other matters relating to the SCHEME.
288.
As a result of
the SCHEME, Enron suffered a disastrous financial meltdown and, on December 2,
2001, was forced to file a petition under Chapter 11 of the Bankruptcy Code in
the United States Bankruptcy Court for the Southern District of New York.
289.
On information
and belief, on or about January 16, 2002, the New York Stock Exchange
(“N.Y.S.E.”) took the extraordinary step of delisting Enron’s securities,
stating that “the company’s securities are longer suitable for trading on the
N.Y.S.E.”
290.
On information
and belief, Enron fired the Accountant Defendants on or about January 17, 2002,
after they had completed their services in furtherance of the SCHEME.
291.
On information
and belief, from the 1990's through 2001, as a quid pro quo for large
campaign contributions, Lay, other Director and Officer Defendants, certain
Accountant Defendants, and certain Attorney Defendants were granted favors and
favorable treatment inter alia in the form of special access to the
leaders and members of key Congressional committees, top officials in the
Clinton Administration, and top officials of the current Bush Administration.
292.
On information
and belief, on dates currently unknown, as a quid pro quo for large
campaign contributions, Lay, other Director and Officer Defendants, certain
Accountant Defendants, and/or certain Attorney Defendants were granted the
favor of being allowed to give the Clinton Administration and the current Bush
Administration lists of names of persons who were favored by them for
appointment to key government positions with regulatory oversight of Enron,
Director and Officer Defendants, Accountant Defendants, and/or Attorney
Defendants, including inter alia the SEC, Treasury Department, Commerce
Department, Energy Department, and/or federal commissions. On information and belief, as a quid pro
quo for large campaign contributions, the Clinton Administration appointed
persons on such lists to key positions, and the current Bush Administration
appointed at least two such persons: Pat Wood to Chairman of the Federal Energy
Regulatory Commission (“FERC”) and Nora Brownell to member of the FERC. On information and belief, these favors and
favorable treatment furthered the conspiracy of all defendants by facilitating
the evasion of government regulation, oversight, and/or reform.
293.
On information and belief, as Enron’s
financial condition rapidly deteriorated in 2001, Lay, other Director and
Officer Defendants, certain Accountant Defendants, and/or certain Attorney
Defendants contacted and/or met with the leaders and members of key
Congressional committees from both political parties, the Secretary of the
Treasury, other top Treasury officials, the Secretary of Commerce, other top
Commerce officials, the President’s budget director, and/or others currently
unknown, to seek additional favors and favorable treatment. On information and belief, Enron’s financial
crisis, a financial bailout, and Enron’s continuing evasion of government
regulation and oversight were discussed on these occasions. On information and belief, as a quid pro
quo for large campaign contributions, the Corrupt Officials participating
in the conversations and meetings granted favors and favorable treatment inter
alia by way of considering a financial bailout, other special treatment,
and/or allowing evasion of government regulation and oversight.
294.
On information
and belief, the appointments of Pat Wood and Nora Brownell to the FERC, the
special access to top government officials, the continuing evasion of
regulation and oversight, and/or other favors and favorable treatment granted
from the 1990's through 2001 were all granted to requite campaign
contributions, in violation inter alia of 18 U.S.C. §§ 201, 371, and
600, and contributed substantially to the lack of government regulation and
oversight of Enron, the SPE’s, the related accounting practices, and the
bankruptcy and shareholders losses.
295.
On information
and belief, from the 1990's through 2001, the Corrupt Officials intentionally,
wilfully, or recklessly ignored early warnings and adopted a “hand’s off”
approach to Enron, AA, and V&E, and refrained from doing anything to expose
the fraud at Enron or to protect shareholders, potential investors, and the
integrity of the securities market, until it was too late. On information and belief, the Corrupt Officials
did not change course and begin to act concerned for the victims of the SCHEME
and the integrity of the securities market until the Corrupt Officials
concluded, based on Machiavellian calculations, that their receipt of campaign
contributions and/or bribes in exchange for official action, favors, and
favorable treatment would be a scandalous political liability unless they acted
independent and outraged. Before then,
the Corrupt Officials were participants, aiders and abetters, and
co-conspirators in the SCHEME.
296.
Notwithstanding
the financial collapse of Enron and the economic losses of many ordinary
shareholders, many if not all Director and Officer Defendants exploited their
special positions and inside information to enrich themselves by selling Enron
holdings at artificially inflated prices before the truth about Enron’s use of
SPE’s, material understatement of liabilities, material overstatement of income
or assets, and fraudulent accounting practices were publicized and dramatically
lowered the market price of Enron securities.
On information and belief, as set forth supra in the General
Overview of Scheme to Defraud, Plaintiffs currently estimate that the Director
and Officer Defendants wrongfully and unlawfully received more than $1.2
billion dollars from their elaborate scheme to “PUMP AND DUMP” Enron
securities. On information and belief,
for their participation in the SCHEME, the Accountant Defendants and the
Attorney Defendants earned more than $100 million in fees and/or other
compensation, and the Corrupt Officials received years of contributions and/or
bribes in total amounts currently unknown.
///
///
FIRST
CLAIM FOR RELIEF
(Fraud in
Stock Transactions and Civil Conspiracy,
pursuant to Texas
Business & Commerce Code Section 27.01,
against
All Defendants)
297.
Plaintiffs
hereby fully incorporate by reference all allegations set forth in preceding
Paragraphs 1 through 296 as if fully set forth at this point.
298.
On information
and belief, the Director and Officer Defendants, acting in concert and
conspiracy with the Accountant Defendants, the Attorney Defendants, and the
Corrupt Officials, as set forth fully above, made material misrepresentations
to Plaintiffs relating to Enron’s financial condition and the value of Enron’s
securities, in and in connection with inter alia the following
communications and SEC filings: the 1997 Financials, the 1997 Audit Reports,
the 1997 10-K, the 1998 Financials, the 1998 Audit Reports, the 1998 10-K, the
4/5/99 S-3, the 7/2/99 S-8, the 7/23/99 S-3, the 8/12/99 S-8, the 1999
Financials, the 1999 Audit Reports, the 1999 10-K, the 4/4/00 S-3, the 5/19/00
Prospectus Supplement, the 5/19/00 8-K, the 6/2/00 Prospectus Supplement, the
6/15/00 S-3, the 7/19/00 S-3, the 1/26/01 S-8's, the 1/29/01 press release, the
1/30/01 press release, the 1/31/01 8-K, the 2000 Financials, the 2000 Audit
Report, the 2/28/01 8-K, the 2000 10-K, the 6/1/01 S-3, the 7/13/01 S-3A, the
8/16/01 “pep talk” of Lay, the 8/20/01 interview of Lay, and the 9/26/01
statements to employees and shareholders.
299.
On information
and belief, the Director and Officer Defendants, acting in concert and
conspiracy with the Accountant Defendants, the Attorney Defendants, and the
Corrupt Officials, as set forth fully above, concealed material information
relating to Enron’s financial condition and the value of Enron’s securities --
e.g. the use of SPE’s for sham transactions, the material understatement of
liabilities, and the material overstatement of income or assets -- in and in
connection with inter alia the following communications and SEC filings:
the 1997 Financials, the 1997 Audit Reports, the 1997 10-K, the 1998
Financials, the 1998 Audit Reports, the 1998 10-K, the 4/5/99 S-3, the 7/2/99
S-8, the 7/23/99 S-3, the 8/12/99 S-8, the 1999 Financials, the 1999 Audit Reports,
the 1999 10-K, the 4/4/00 S-3, the 5/19/00 Prospectus Supplement, the 5/19/00
8-K, the 6/2/00 Prospectus Supplement, the 6/15/00 S-3, the 7/19/00 S-3, the
1/26/01 S-8's, the 1/29/01 press release, the 1/30/01 press release, the
1/31/01 8-K, the 2000 Financials, the 2000 Audit Report, the 2/28/01 8-K, the
2000 10-K, the 6/1/01 S-3, the 7/13/01 S-3A, the 8/16/01 “pep talk” of Lay, the
8/20/01 interview of Lay, and the 9/26/01 statements to employees and
shareholders. As a result of the
foregoing concealment of material information, the affirmative representations
that were made relating to the SPE’s, Enron’s financial condition, and the
value of Enron’s securities were at all relevant times materially incomplete,
misleading, and fraudulent misrepresentations.
300.
On information
and belief, the Director and Officer Defendants, acting in concert and
conspiracy with the Accountant Defendants, the Attorney Defendants, and the
Corrupt Officials, as set forth fully above, made inter alia the
foregoing misrepresentations intentionally, wilfully, maliciously, with
knowledge of, or with recklessness as to the materially incomplete, misleading,
and fraudulent nature of the misrepresentations.
301.
On information
and belief, the Director and Officer Defendants, acting in concert and
conspiracy with the Accountant Defendants, the Attorney Defendants, and the
Corrupt Officials, as set forth fully above, intended and/or had reason to
expect that their foregoing misrepresentations would be relied upon by
Plaintiffs, would influence and manipulate the market for Enron securities, and
would artificially inflate the price paid and received in all purchases and
sales thereof, from a date currently unknown but no later than 1997, and for as
long as possible into 2001.
302.
On information
and belief, the foregoing misrepresentations of the Director and Officer
Defendants, the Accountant Defendants, the Attorney Defendants, and the Corrupt
Officials, acting in concert and conspiracy with each other, as set forth fully
above, did in fact induce reliance on the misrepresentations, manipulate and
influence the market for Enron securities, and artificially inflate the market
price paid and received in all purchases and sales thereof, from a date
currently unknown but no later than 1997, until October 16, 2001.
303.
Plaintiffs
reasonably and justifiably relied on the foregoing misrepresentations, on the
integrity of the securities market, and/or on the absence of a fraud on the
securities market in purchasing and selling securities, as set forth more fully
above.
304.
As a direct and
proximate result of the defendants’ fraud and conspiracy in the foregoing stock
transactions, as set forth fully above, Plaintiffs have suffered injury and
damages in that they were fraudulently induced to purchase securities at
artificially inflated prices and lost some or all of the amount and value of
their investments, in amounts according to proof at trial.
305.
On information
and belief, the foregoing fraud in stock transactions would not have been
possible, or could not have grown and continued and been as successful and
remained undetected for as many years as it was, without the affirmative acts
and omissions knowingly committed by the Corrupt Officials in furtherance of the
SCHEME.
306.
The securities
fraud perpetrated by the defendants was aggravated by the kind of fraud for
which Texas law allows the imposition of punitive and exemplary damages, in
that the defendants (in concert and conspiracy with each other) made material
representations that were false, knowing that they were false or with reckless
disregard as to their truth and as positive assertions, with the intent that
Plaintiffs rely on the representations.
In fact, Plaintiffs relied on the representations and suffered injury
and damages as a result of this reliance.
Hence, Plaintiffs seek punitive and exemplary damages in the maximum
amount authorized by Texas law.
///
///
SECOND
CLAIM FOR RELIEF
(Common
Law Fraud and Civil Conspiracy,
against
All Defendants)
307.
Plaintiffs
hereby fully incorporate by reference all allegations set forth in preceding
Paragraphs 1 through 296 as if fully set forth at this point.
308.
On information
and belief, the Director and Officer Defendants, acting in concert and
conspiracy with the Accountant Defendants, the Attorney Defendants, and the
Corrupt Officials, as set forth fully above, made material misrepresentations
to Plaintiffs relating to Enron’s financial condition and the value of Enron’s
securities, in and in connection with inter alia the following
communications and SEC filings: the 1997 Financials, the 1997 Audit Reports,
the 1997 10-K, the 1998 Financials, the 1998 Audit Reports, the 1998 10-K, the
4/5/99 S-3, the 7/2/99 S-8, the 7/23/99 S-3, the 8/12/99 S-8, the 1999
Financials, the 1999 Audit Reports, the 1999 10-K, the 4/4/00 S-3, the 5/19/00
Prospectus Supplement, the 5/19/00 8-K, the 6/2/00 Prospectus Supplement, the 6/15/00
S-3, the 7/19/00 S-3, the 1/26/01 S-8's, the 1/29/01 press release, the 1/30/01
press release, the 1/31/01 8-K, the 2000 Financials, the 2000 Audit Report, the
2/28/01 8-K, the 2000 10-K, the 6/1/01 S-3, the 7/13/01 S-3A, the 8/16/01 “pep
talk” of Lay, the 8/20/01 interview of Lay, and the 9/26/01 statements to
employees and shareholders.
309.
On information
and belief, the Director and Officer Defendants, acting in concert and
conspiracy with the Accountant Defendants, the Attorney Defendants, and the
Corrupt Officials, as set forth fully above, concealed material information
relating to Enron’s financial condition and the value of Enron’s securities --
e.g. the use of SPE’s for sham transactions, the material understatement of
liabilities, and the material overstatement of income or assets -- in and in
connection with inter alia the following communications and SEC filings:
the 1997 Financials, the 1997 Audit Reports, the 1997 10-K, the 1998
Financials, the 1998 Audit Reports, the 1998 10-K, the 4/5/99 S-3, the 7/2/99
S-8, the 7/23/99 S-3, the 8/12/99 S-8, the 1999 Financials, the 1999 Audit Reports,
the 1999 10-K, the 4/4/00 S-3, the 5/19/00 Prospectus Supplement, the 5/19/00
8-K, the 6/2/00 Prospectus Supplement, the 6/15/00 S-3, the 7/19/00 S-3, the
1/26/01 S-8's, the 1/29/01 press release, the 1/30/01 press release, the
1/31/01 8-K, the 2000 Financials, the 2000 Audit Report, the 2/28/01 8-K, the
2000 10-K, the 6/1/01 S-3, the 7/13/01 S-3A, the 8/16/01 “pep talk” of Lay, the
8/20/01 interview of Lay, and the 9/26/01 statements to employees and
shareholders. As a result of the
foregoing concealment of material information, the affirmative representations
that were made relating to the SPE’s, Enron’s financial condition, and the
value of Enron’s securities were at all relevant times materially incomplete,
misleading, and fraudulent misrepresentations.
310.
On information
and belief, the Director and Officer Defendants, acting in concert and
conspiracy with the Accountant Defendants, the Attorney Defendants, and the
Corrupt Officials, as set forth fully above, made inter alia the
foregoing misrepresentations intentionally, wilfully, maliciously, with
knowledge of, or with recklessness as to the materially incomplete, misleading,
and fraudulent nature of the misrepresentations.
311.
On information
and belief, the Director and Officer Defendants, acting in concert and
conspiracy with the Accountant Defendants, the Attorney Defendants, and the
Corrupt Officials, as set forth fully above, intended and/or had reason to
expect that their foregoing misrepresentations would be relied upon by
Plaintiffs, would influence and manipulate the market for Enron securities, and
would artificially inflate the price paid and received in all purchases and
sales thereof, from a date currently unknown but no later than 1997, and for as
long as possible into 2001.
312.
On information
and belief, the foregoing misrepresentations of the Director and Officer
Defendants, the Accountant Defendants, the Attorney Defendants, and the Corrupt
Officials, acting in concert and conspiracy with each other, as set forth fully
above, did in fact induce reliance on the misrepresentations, manipulate and
influence the market for Enron securities, and artificially inflate the market
price paid and received in all purchases and sales thereof, from a date
currently unknown but no later than 1997, until October 16, 2001.
313.
Plaintiffs
reasonably and justifiably relied on the foregoing misrepresentations, on the
integrity of the securities market, and/or on the absence of a fraud on the
securities market in purchasing and selling securities, as set forth more fully
above.
314.
As a direct and
proximate result of the defendants’ pervasive fraud and conspiracy against
shareholders, potential investors, and the integrity of the securities market,
as set forth fully above, Plaintiffs have suffered injury and damages in that
they were fraudulently induced to purchase securities at artificially inflated
prices and lost some or all of the amount and value of their investments, in
amounts according to proof at trial.
315.
On information
and belief, the foregoing fraud against shareholders, potential investors, and
the integrity of the securities market would not have been possible, or could
not have grown and continued and been as successful and remained undetected for
as many years as it was, without the affirmative acts and omissions knowingly
committed by the Corrupt Officials in furtherance of the SCHEME.
316.
The foregoing
fraud and conspiracy perpetrated by the defendants was aggravated by the kind
of fraud for which Texas law allows the imposition of punitive and exemplary
damages, in that the defendants (in concert and conspiracy with each other)
made material representations that were false, knowing that they were false or
with reckless disregard as to their truth and as positive assertions, with the
intent that Plaintiffs rely on the representations. In fact, Plaintiffs relied on the representations and suffered
injury and damages as a result of this reliance. Hence, Plaintiffs seek punitive and exemplary damages in the
maximum amount authorized by Texas law.
///