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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M. The Actual Knowledge <strong>of</strong> the Outside Direc<strong>to</strong>rs<br />
The details below are compiled from the m<strong>in</strong>utes <strong>of</strong> certa<strong>in</strong> meet<strong>in</strong>gs <strong>of</strong> the Enron Board or<br />
its Executive, F<strong>in</strong>ance or Audit Committees. This <strong>in</strong>formation dramatically demonstrates the<br />
knowledge, <strong>in</strong>volvement and participation <strong>of</strong> the Outside Direc<strong>to</strong>rs <strong>in</strong> the Enron scheme and their<br />
knowledge <strong>of</strong> the falsity <strong>of</strong> the statements they made dur<strong>in</strong>g the Class Period:<br />
• 11/5/97 Executive Committee: Committee recommends that the Board approve the formation<br />
<strong>of</strong> Chewco and JEDI2, and that Enron would provide a bridge loan <strong>of</strong> $383 million and a<br />
guaranty <strong>of</strong> a $250 million loan <strong>to</strong> Chewco, which CFO Fas<strong>to</strong>w managed. 6<br />
Present at the 11/5/97 F<strong>in</strong>ance Committee meet<strong>in</strong>g were: John Duncan, Belfer, Foy,<br />
Lay, LeMaistre, Skill<strong>in</strong>g, W<strong>in</strong>okur, Kopper, Derrick, Fas<strong>to</strong>w, Grathman, Kean, Koenig,<br />
Shapiro, White, Menchaca.<br />
• 2/7/99 Audit Committee: Arthur Andersen <strong>in</strong>forms the Committee that the account<strong>in</strong>g <strong>in</strong><br />
many <strong>of</strong> Enron's core bus<strong>in</strong>ess areas are high risk and highly judgmental. 7 Present at this<br />
meet<strong>in</strong>g were: Chan, Foy, Gramm, Jaedicke, and Wakeham.<br />
• 10/11/99 F<strong>in</strong>ance Committee: Fas<strong>to</strong>w gives committee a report about LJM1 and presents a<br />
proposal for the formation <strong>of</strong> LJM2; committee recommends that full Board waive Fas<strong>to</strong>w's<br />
conflict <strong>of</strong> <strong>in</strong>terest. 8<br />
Mr. Fas<strong>to</strong>w reviewed the Company's key f<strong>in</strong>ancial ratios and long-term<br />
liability analysis, not<strong>in</strong>g the mix between fixed and float<strong>in</strong>g rate liabilities<br />
and on-balance and <strong>of</strong>f-balance sheet debt.... He reviewed the <strong>in</strong>vestments<br />
made year-<strong>to</strong>-date by each bus<strong>in</strong>ess unit and compared them <strong>to</strong> the plan<br />
amount. He discussed the status <strong>of</strong> capital commitments year-<strong>to</strong>-date and<br />
commented on the transactions the Company had taken or would be tak<strong>in</strong>g<br />
<strong>to</strong> fund the cash outflows and noted the importance <strong>of</strong> funds flow <strong>to</strong> the<br />
Credit Rat<strong>in</strong>g Agencies....<br />
Mr. Fas<strong>to</strong>w then updated the Committee on a f<strong>in</strong>anc<strong>in</strong>g structure<br />
approved earlier <strong>in</strong> the year, LJM 1, and discussed the benefits that the<br />
Company had <strong>in</strong>curred s<strong>in</strong>ce the transaction closed on June 30, 1999. He<br />
recommended that the Company cont<strong>in</strong>ue <strong>to</strong> syndicate capital <strong>in</strong>vestments<br />
<strong>to</strong> address the funds flow issue. He presented <strong>in</strong>formation concern<strong>in</strong>g an<br />
unaffiliated <strong>in</strong>vestment partnership, LJM2 and discussed the rationale and<br />
benefits <strong>of</strong> the proposed partnership. He stated that the partnership could<br />
possibly provide the Company with an alternative, optional source <strong>of</strong><br />
private equity <strong>to</strong> manage an <strong>in</strong>vestment portfolio risk, funds flow, and<br />
f<strong>in</strong>ancial flexibility. He noted that he would be act<strong>in</strong>g as manag<strong>in</strong>g partner<br />
<strong>of</strong> LJM2 and discussed his role <strong>in</strong> the LJM 2 partnership and how it would<br />
benefit the Company.... He stated that the Audit and Compliance Committee<br />
would, on an annual basis, review all transactions completed with<strong>in</strong> the past<br />
6<br />
Ex. 21.<br />
7<br />
Exs. 16, 22.<br />
8<br />
Ex. 23.<br />
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