Plaintiffs' Memorandum of Law in Opposition to Motions to Dismiss ...
Plaintiffs' Memorandum of Law in Opposition to Motions to Dismiss ...
Plaintiffs' Memorandum of Law in Opposition to Motions to Dismiss ...
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made by the primary viola<strong>to</strong>r." Id.; Crescendo Invs., Inc. v. Brice, 61 S.W.3d 465, 472 (Tex. App. -<br />
San An<strong>to</strong>nio 2001, pet. denied). The CC satisfies each <strong>of</strong> these requirements.<br />
b. Enron Committed a Primary Violation <strong>of</strong> the Texas<br />
Securities Act<br />
An issuer <strong>of</strong> securities is strictly liable for untrue statements <strong>of</strong> material fact conta<strong>in</strong>ed <strong>in</strong> a<br />
prospectus accompany<strong>in</strong>g a public <strong>of</strong>fer<strong>in</strong>g. Tex. Rev. Civ. Stat. Ann. art. 581-33C(2) (Vernon<br />
2001). Enron's <strong>of</strong>fer<strong>in</strong>g documents <strong>in</strong>corporated Enron's f<strong>in</strong>ancial statements, <strong>in</strong>clud<strong>in</strong>g the<br />
representations concern<strong>in</strong>g Enron's levels <strong>of</strong> debt and earn<strong>in</strong>gs, which were manipulated by, among<br />
other th<strong>in</strong>gs, the defendants' use <strong>of</strong> SPEs and partnerships <strong>to</strong> engage <strong>in</strong> the transactions detailed <strong>in</strong><br />
the CC, the abuse <strong>of</strong> mark-<strong>to</strong>-market account<strong>in</strong>g, the creation <strong>of</strong> hidden loans, etc. By restat<strong>in</strong>g these<br />
f<strong>in</strong>ancial statements, Enron and the Enron defendants have now admitted that these <strong>of</strong>fer<strong>in</strong>g<br />
documents were untrue statements <strong>of</strong> material fact. See APB Op<strong>in</strong>ion 20, at 13; In re Telxon Corp.<br />
Secs. Litig., 133 F. Supp. 2d 1010, 1026 (N.D. Ohio 2000) ("Telxon, itself, admitted its prior<br />
disclosures were materially misstated when it issued the restatements which gave rise <strong>to</strong> this<br />
litigation."). Enron thus violated the Texas Securities Act. Tex. Rev. Civ. Stat. art. 581-33C(2).<br />
c. Each Defendant Had a General Awareness <strong>of</strong> Its Role <strong>in</strong><br />
Enron's Violations and Rendered Substantial<br />
Assistance <strong>to</strong> Enron<br />
Each defendant had a general awareness <strong>of</strong> its role <strong>in</strong> Enron violat<strong>in</strong>g the Texas Securities<br />
Act. See Section on Rule 96 Particularity. Each defendant has performed actions <strong>in</strong> furtherance <strong>of</strong><br />
the fraudulent scheme, as demonstrated here<strong>in</strong>. See Section on Rule 9(b) Particularity. These<br />
allegations are sufficient <strong>to</strong> show each defendant "was generally aware <strong>of</strong> its role <strong>in</strong> a securities<br />
violation by a primary party." F<strong>in</strong>e v. American Solar K<strong>in</strong>g Corp., 919 F.2d 290, 300 (5th Cir.<br />
1990).<br />
Pla<strong>in</strong>tiffs need not allege that each defendant was aware <strong>of</strong> its role <strong>in</strong> the underwriters'<br />
violations <strong>of</strong> the Texas Securities Act. This is not necessary because each defendant materially aided<br />
Enron's – the issuer's – violations <strong>of</strong> the Texas Securities Act. "A person who directly or <strong>in</strong>directly<br />
with <strong>in</strong>tent <strong>to</strong> deceive or defraud or with reckless disregard for the truth <strong>of</strong> the law materially aids<br />
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