Plaintiffs' Memorandum of Law in Opposition to Motions to Dismiss ...

M. The Actual Knowledge of the Outside Directors
The details below are compiled from the minutes of certain meetings of the Enron Board or
its Executive, Finance or Audit Committees. This information dramatically demonstrates the
knowledge, involvement and participation of the Outside Directors in the Enron scheme and their
knowledge of the falsity of the statements they made during the Class Period:
• 11/5/97 Executive Committee: Committee recommends that the Board approve the formation
of Chewco and JEDI2, and that Enron would provide a bridge loan of $383 million and a
guaranty of a $250 million loan to Chewco, which CFO Fastow managed. 6
Present at the 11/5/97 Finance Committee meeting were: John Duncan, Belfer, Foy,
Lay, LeMaistre, Skilling, Winokur, Kopper, Derrick, Fastow, Grathman, Kean, Koenig,
Shapiro, White, Menchaca.
• 2/7/99 Audit Committee: Arthur Andersen informs the Committee that the accounting in
many of Enron's core business areas are high risk and highly judgmental. 7 Present at this
meeting were: Chan, Foy, Gramm, Jaedicke, and Wakeham.
• 10/11/99 Finance Committee: Fastow gives committee a report about LJM1 and presents a
proposal for the formation of LJM2; committee recommends that full Board waive Fastow's
conflict of interest. 8
Mr. Fastow reviewed the Company's key financial ratios and long-term
liability analysis, noting the mix between fixed and floating rate liabilities
and on-balance and off-balance sheet debt.... He reviewed the investments
made year-to-date by each business unit and compared them to the plan
amount. He discussed the status of capital commitments year-to-date and
commented on the transactions the Company had taken or would be taking
to fund the cash outflows and noted the importance of funds flow to the
Credit Rating Agencies....
Mr. Fastow then updated the Committee on a financing structure
approved earlier in the year, LJM 1, and discussed the benefits that the
Company had incurred since the transaction closed on June 30, 1999. He
recommended that the Company continue to syndicate capital investments
to address the funds flow issue. He presented information concerning an
unaffiliated investment partnership, LJM2 and discussed the rationale and
benefits of the proposed partnership. He stated that the partnership could
possibly provide the Company with an alternative, optional source of
private equity to manage an investment portfolio risk, funds flow, and
financial flexibility. He noted that he would be acting as managing partner
of LJM2 and discussed his role in the LJM 2 partnership and how it would
benefit the Company.... He stated that the Audit and Compliance Committee
would, on an annual basis, review all transactions completed within the past
6
Ex. 21.
7
Exs. 16, 22.
8
Ex. 23.
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