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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
In re ENRON CORPORATION SECURITIES LITIGATION
This Document Relates To:
MARK NEWBY, et al., Individually and On Behalf of All Others Similarly Situated,
Plaintiffs,
vs.
ENRON CORP., et al.,
Defendants. THE REGENTS OF THE UNIVERSITY OF CALIFORNIA, et al., Individually and On Behalf of All Others Similarly Situated,
Plaintiffs,
vs.
KENNETH L. LAY, et al.,
Defendants.
§ § § § § § § § § § § § § § § § § § § § § § § § § § § §
Civil Action No. H-01-3624 (Consolidated)
CLASS ACTION
DECLARATION OF HELEN J. HODGES IN SUPPORT OF LEAD COUNSEL’S MOTION FOR AN AWARD OF ATTORNEY FEES
TABLE OF CONTENTS
Page I. OVERVIEW ........................................................................................................................1
II. THE REGENTS NEGOTIATED THE 8%-10% ENRON FEE AGREEMENT AT ARM’S LENGTH..............................................................................................................12
III. THE INVESTIGATION OF FACTS: GATHERING DOCUMENTS AND WITNESS INTERVIEWS.................................................................................................18
IV. THE FIRM AGGRESSIVELY PROSECUTED THE CASE BEFORE AND AFTER LEAD PLAINTIFF WAS APPOINTED .............................................................26
1. Motion to Freeze Insider Trading Gains....................................................26
2. Preventing Evidence Spoliation at Andersen.............................................28
3. Lead Counsel Subpoenas Andersen Witnesses and Secures Deposition Testimony re Document Destruction ......................................30
4. Expedited Discovery Concerning Document Destruction at Enron ..........31
5. Enjoining Andersen Proceeds ....................................................................33
6. Lead Counsel Defeats Early Abusive “Class Certification” Discovery ...................................................................................................34
V. DRAFTING THE CONSOLIDATED COMPLAINT ......................................................36
VI. LEAD COUNSEL’S PERSUASIVE SKILLS GENERATED THE TREMENDOUS RESULTS..............................................................................................38
1. Motions to Dismiss and Other Motion Practice.........................................38
2. Motions to Strike, Motions for Certification Under §1292(b) and Writs of Mandamus....................................................................................52
3. Additional Motions to Dismiss in Response to Lead Plaintiff’s First Amended Consolidated Complaint....................................................57
4. Motions to Intervene Additional Plaintiffs and Motions to Dismiss the WSIB Case...........................................................................................65
VII. DISCOVERY.....................................................................................................................68
1. Lead Counsel Serves Document Production Requests on the Financial Institutions and Seeks Other Relevant Documents ....................68
2. The Parties Establish a Document Depository for the Exchange of Information ................................................................................................70
3. Lead Counsel Compels Enron Executives to Produce Particularized Discovery Concerning Financial Conflicts.........................70
4. Lead Plaintiff Defeats Efforts to Establish a Blanket Protective Order ..........................................................................................................72
5. Discovery Propounded by Lead Plaintiff...................................................73
6. Lead Counsel’s Interrogatories and Motions to Compel Responses .........81
7. Motion to Compel Citigroup Documents ..................................................82
8. Subpoenas and Moving to Compel Production of JPMorgan Documents .................................................................................................84
9. CIBC Is Forced to Deem Facts as Admitted..............................................85
10. Requests for Admission .............................................................................87
11. Lead Plaintiff Succeeds in Obtaining SEC and Bankruptcy Deposition Transcripts ...............................................................................87
12. The Parties Agree to a Deposition Protocol Order ....................................88
13. Compelling Knowledgeable Rule 30(b)(6) Witnesses to Appear for Deposition ..................................................................................................89
14. Lead Counsel Challenges the “Advice of Counsel” Defense ....................90
15. Lead Plaintiff Compels Production of Trading Data by the Financial Institutions..................................................................................91
16. Depositions ................................................................................................92
17. Lead Plaintiff’s Responses to Discovery .................................................100
a. Lead Counsel, Lead Plaintiff, Institutional Plaintiffs and Individuals Responded to Initial Class Certification Discovery .....................................................................................101
b. Lead Counsel, Lead Plaintiff and Class Representatives Respond to Interrogatories...........................................................102
c. Plaintiffs and Lead Counsel Answer Class Certification Requests for Admission ...............................................................103
d. Lead Plaintiff Responds to Additional Discovery and Supplements Its Responses ..........................................................103
e. Lead Counsel Defends Numerous Class Certification Depositions ..................................................................................104
f. Lead Plaintiff, Institutional Plaintiffs and Class Representatives Produce Tens of Thousands of Pages of Documents to Defendants ............................................................106
VIII. ADDITIONAL MOTION PRACTICE: ADDED DEFENDANTS AND RENEWED MOTIONS TO DISMISS............................................................................107
IX. CLASS CERTIFICATION BRIEFING ..........................................................................113
X. EXPERT DISCOVERY AND DISCLOSURES.............................................................118
XI. REPRESENTING THE CLASS IN ENRON’S AND LJM2’S BANKRUPTCY CASES .............................................................................................................................128
XII. SETTLEMENT NEGOTIATIONS .................................................................................131
XIII. MOTIONS AT THE CLOSE OF DISCOVERY AS THE LAW SHIFTS – DURA AND LOSS CAUSATION..............................................................................................140
XIV. DRAFTING THE PLAN OF ALLOCATION ................................................................154
XV. THE FEE REQUEST IS REASONABLE.......................................................................157
XVI. CONCLUSION................................................................................................................160
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I, HELEN J. HODGES, declare as follows:
1. I am a member of Coughlin Stoia Geller Rudman & Robbins LLP (“Coughlin Stoia”),
Lead Counsel for Lead Plaintiff in this action.1 I have been actively involved in the prosecution of
this litigation, I am familiar with its proceedings, and have personal knowledge of the matters set
forth here based on my active supervision of and participation in all aspects of the case.
2. I submit this declaration in support of Lead Counsel’s motion, pursuant to Rule 23(h)
of the Federal Rules of Civil Procedure (“Rule”), for an award of attorney fees.
I. OVERVIEW
3. For the benefit of the Class, to date, $7.227 billion has been recovered, an
extraordinary outcome, the largest class action securities recovery in history. Coughlin Stoia
requests a fee award of 9.52% of the total recovered plus interest accrued. This request is in accord
with the fee agreement which The Regents of the University of California (“The Regents”)
negotiated at the start of this litigation in January 2002, before it was appointed lead plaintiff
pursuant to the provisions of the Private Securities Litigation Reform Act of 1995 (“PSLRA”). The
recoveries are as follows:
1 On May 1, 2004, Lead Counsel, formerly with Milberg Weiss Bershad Hynes & Lerach LLP, changed its law firm affiliation to Lerach Coughlin Stoia & Robbins LLP, and, on July 1, 2004, to Lerach Coughlin Stoia Geller Rudman & Robbins LLP. On August 31, 2007, the firm name became Coughlin Stoia Geller Rudman & Robbins LLP. All references to Coughlin Stoia herein include Milberg Weiss and Lerach Coughlin and its predecessors.
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Andersen Worldwide $33,330,000BofA $69,000,000Lehman $222,500,000Outside Directors/Harrison $168,000,000LJM2 $51,900,000Andersen $72,500,000Kirkland & Ellis $10,160,000Citigroup $2,000,000,000JPMorganChase $2,200,000,000CIBC $2,400,000,000Total $7,227,390,000
4. The tremendous recoveries for Enron investors are due to the skill, persistence and
dedication of Class Counsel. At every stage of the litigation, defendants’ counsel asserted
aggressive, complex and compelling defenses, and expressed their belief that the Class could not
prevail on its claims. Defendants spared no expense in defending against the claims. All the more
remarkable, the recoveries were achieved in the face of repeated assertions that Lead Plaintiff’s
“scheme liability” theory was legally flawed and, in any event, precluded class certification – a
position the Fifth Circuit ultimately agreed with. During the course of these proceedings, counsel for
the Lead Plaintiff:
• Thoroughly investigated the facts underlying the allegations in the consolidated and amended complaints, including several hundred initial contacts with and scores of substantive interviews of former Enron, bank, and Andersen employees and third parties;
• Moved for and negotiated the order appointing the Bankruptcy Examiner;
• Opposed complicated motions to dismiss and prevailed against many defendants;
• Worked collegially with all parties for more than five years and coordinated the Deposition Scheduling Committee (“DSC”) on myriad discovery issues, including establishing the document depository, the deposition scheduling protocol and a cost-sharing agreement to run the deposition centers in New York and Houston;
• Litigated complex class-certification issues in this Court and the Fifth Circuit;
• Successfully conducted massive and comprehensive fact and expert discovery on exacting schedules;
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• Reviewed over 70 million pages of documents produced by defendants and third-parties;
• Participated in over 370 depositions of defendants, former employees, third-parties, experts, and class representatives;
• Propounded interrogatories and Requests for Admission (“RFAs”) to streamline depositions;
• Completed detailed discovery responses, which included extensive interrogatories and RFAs;
• Prepared market efficiency, damage, investment-banking, disclosure, tax, credit-rating-agency, ethics, insolvency and accounting experts for their depositions, after assisting in the compilation of their reports, which were crucial to class certification, summary judgment and trial issues;
• Reviewed and analyzed expert reports generated by, and deposed each of, defendants’ 40 experts;
• Led several focus group sessions to evaluate discovery and trial issues;
• Evaluated issues crucial to summary judgment and pre-trial motions and assessed the risks of prevailing on each of Lead Plaintiff’s claims at trial; and,
• Prepared for trial against three bank defendants covering dozens of complex transactions and had the case virtually “trial ready,” having filed the Joint Pretrial Order, when the case was stayed.
5. Concurrent with our diligent prosecution through the investigation, briefing complex
issues and formal discovery, we applied tremendous skill and experience in negotiating each of the
settlements. The challenges to obtaining any significant recovery cannot be overstated. Enron was
bankrupt. Andersen went out of business due to the criminal proceedings against it. The federal
government seized assets of insiders who pled or were convicted. The directors and officers
insurance was a “wasting” asset, largely consumed by defense costs. The only defendants with the
wherewithal to pay – the banks – argued at every opportunity that they could not be held liable for
their allegedly fraudulent acts under Central Bank. The Court dismissed Deutsche Bank and,
ultimately, the Fifth Circuit agreed with the nonsettling bank defendants about Central Bank.
Nonetheless, prior to the Fifth Circuit’s class certification opinion – an opinion that said our core
theory was legally flawed and prevented class certification – we obtained over $7.2 billion for the
Class. A summary of the recoveries follows:
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• Arthur Andersen LLP (“Andersen”) approached us early in the litigation. Despite multiple mediation sessions over several months in 2002, which involved many competing constituencies, Andersen’s indictment and conviction, although later overturned, drove Andersen out of business and the early settlement discussions were for naught. After Andersen’s conviction, Andersen Worldwide SC (“AWSC”) renewed the discussions on behalf of the Andersen foreign affiliates. The Class and the Tittle (ERISA) plaintiffs agreed to settle with AWSC for $40 million. Near the close of fact discovery Andersen agreed to pay $72.5 million.
• Kirkland & Ellis (“K&E”) agreed to pay $13.5 million shortly after being dismissed from the case.2
• Bank of America (“BofA”) and Lehman next contacted the firm about settlement just prior to the commencement of fact depositions. We reached an agreement to settle with BofA for $69 million, which began earning interest for the benefit of the Class in late May 2004, and an agreement to settle with Lehman for $222.5 million that began earning interest for the Class in October 2004.
• The Outside Directors next approached, agreeing to pay the Class 10% of their Enron stock sales gains plus $200 million of the directors and officers insurance (the remaining coverage). It was and remains unusual for individuals to contribute from their own pockets to securities class action settlements.3
• LJM2 was pursued by our bankruptcy co-counsel, Genovese Joblove & Battista. The proof of claim we filed in the LJM2 bankruptcy was resolved by agreement to divide the LJM2 estate with Enron such that the Class received 2/3 and Enron received 1/3. The Class has received over $51.9 million from the LJM2 estate due to these efforts.
• Citigroup, JPMorgan Chase (“JPMorgan”) and Canadian Imperial Bank of Commerce (“CIBC”) came to the table as litigation pressure increased and the negotiations with these banks spanned many months culminating in a $2 billion settlement with Citigroup, an agreement with JPMorgan for $2.2 billion and finally CIBC, the bank with the smallest comparative market size, agreed to pay $2.4 billion. The $6.6 billion in pretrial settlements with Citigroup, JPMorgan and CIBC were the largest recoveries ever in a class action securities case.
2 At K&E’s insistence, this settlement included a refund provision in the event the Class recovered K&E-related funds in connection with the LJM2 bankruptcy. As a result, $3.34 million was ultimately returned to K&E for a net settlement of $10.16 million.
3 To overcome objections by Enron and by the non-settling insured defendants to this use of the remaining insurance proceeds, we negotiated an agreement to pay 17.2% of insurance proceeds to the Enron estate and $13 million of the proceeds to non-settling insured individual defendants. Ultimately, the Class received $168 million from the settlement with the Outside Directors and Kenneth Harrison (“Harrison”). The settlement halted further depletion of the wasting asset insurance policies through payment of defense costs.
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6. The above recoveries were based in large part on the successful presentation of the
scheme and pursuit of a scheme/conduct liability theory – i.e., that the insiders and third parties
participated with Enron in a scheme to defraud Enron’s investors. Some argued the theory was
foreclosed by the Supreme Court’s Central Bank decision prohibiting aiding and abetting liability.
The skillful pleading of the banks’ active involvement in structuring deals and falsifying Enron’s
financials, together with aggressive briefing, resulted in a series of landmark opinions by Judge
Melinda Harmon upholding this legal theory and sustaining the complaint even in the face of the
PSLRA’s elevated and very difficult pleading standards. In re Enron Corp. Sec. Litig., 235 F. Supp.
2d 549 (S.D. Tex. 2002); In re Enron Corp. Sec. Litig., 310 F. Supp. 2d 819 (S.D. Tex. 2004).4
Eventually the SEC adopted and expanded on the theory filing an amicus brief in the Ninth Circuit
outlining the elements. Simpson v. Homestore.com, Inc., No. 04-55665, Brief of the Securities and
Exchange Commission, Amicus Curiae, In Support of Positions that Favor Appellant (9th Cir. Oct.
21, 2004).
7. During the time period (2003-2006) that these settlements were obtained, Coughlin
Stoia was mounting an unprecedented litigation offensive to prepare the Enron case for trial. The
firm opened a state-of-the-art litigation center in Houston, Texas, regularly visited and inspected by
The Regents personnel, who praised the scope and efficiency of the operation. In addition, the
firm’s San Diego office devoted attorneys, forensic accountants, investigators, paralegals and other
4 As we were preparing our oppositions to the numerous motions to dismiss in 2002, we approached the Securities and Exchange Commission (“SEC”) about filing an amicus curiae brief in support of plaintiffs. Although it is highly unusual for the SEC to take action at the trial court level, we succeeded in having it do so here. The SEC submitted briefs it had filed in other cases on the issue. In addition, we reached out to Attorneys General and with the Texas Attorney General leading the charge, they filed amicus curiae briefs in support of investors at the trial court level and in the Fifth Circuit. Judge Harmon referenced both the SEC and the Attorneys General briefs when she denied the banks’ motions to dismiss in December 2002.
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full-time support to discovery and countless briefs. At every stage, this case consumed the full-time
attention of at least a dozen of our lawyers. During the fact and expert discovery phases, there were
over two dozen lawyers who devoted themselves to the effort. During these years of pretrial
preparation, hundreds of witnesses were interviewed, over 370 depositions were taken and/or
defended and over 70 million pages of documents were obtained and reviewed. Experts in matters
financial and economic, as well as loss causation and damage, were retained and prepared to create
detailed, persuasive reports in connection with class certification and summary judgment.5 These
experts also were prepared for and represented at lengthy depositions. Defendants fielded 40 experts
taking aim at ours. Attorneys for Coughlin Stoia reviewed their reports, researched their prior
testimony and writings, and deposed them in a short time period.
8. Some critics might claim that significant evidence was gathered for us by Bankruptcy
Examiner Neal Batson (“Batson”) and others who investigated Enron’s meltdown. Not so.6 First, it
was our motion for appointment of a trustee in bankruptcy and our negotiation for an order that
resulted in the appointment of a bankruptcy examiner. Second, Batson used our Consolidated
Complaint as a “roadmap” for his investigation. After Batson gathered evidence, the banks asked
Judge Gonzalez to deny us access to the evidence and Judge Gonzalez granted that motion. In the
meantime, we moved Judge Harmon for and were granted access to the evidence which Batson
5 Blaine Nye, Ph.D. (damages and market efficiency), Scott D. Hakala, Ph.D., CFA (damages), Israel Shaked (insolvency), Bernard Black (disclosure), Claire Hill (rating agencies), Craig Shenkman (tax transactions), Charles Drott (auditing), Joel Finard (investment banking), Saul Solomon (accounting), George Cohen (lawyer ethics and conduct), Susan Koniak (lawyer ethics and conduct) and Mark Sargent (lawyer ethics and conduct).
6 Notably, the criminal cases tried by the United States Department of Justice (“DOJ”) did not, with the exception of the case against some former Merrill Lynch executives, reveal any evidence against the banks. And, the case against the Merrill Lynch individuals addressed only one transaction, the Nigerian Barge deal.
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gathered and which the banks and Enron had. While we used Batson’s evidence to streamline our
depositions, we didn’t stop there. We gathered evidence far beyond what Batson had from the
banks, from third parties such as the rating agencies and stock analysts, and most notably, from
Andrew Fastow (“Fastow”). Finally, it should be noted that the non-settling banks moved to exclude
Batson’s reports from our trial. Thus, while we reviewed Batson’s evidence, we went far beyond it
and were ready to prove our case.
9. As the case neared trial, the non-settling bank defendants, including Merrill Lynch,
Credit Suisse First Boston (“CSFB”), Barclays Bank (“Barclays”), Royal Bank of Scotland (“RBS”),
Toronto Dominion Bank (“TD”) and Royal Bank of Canada (“RBC”), continued to vigorously
defend the case. In the face of expanding adverse Fifth Circuit class certification precedents,
Coughlin Stoia assembled an overwhelming showing in favor of certification of the large multi-year
fraud class. The showing included expert testimony, a multi-day evidentiary hearing and a detailed
trial plan. The Court found the trial plan “presents an orderly and methodical approach for trying the
alleged overarching scheme, arising from a common nucleus of fact and common course of conduct,
to misrepresent Enron’s financial status, fool credit rating agencies, and deceive investors.” In re
Enron Corp. Sec. Litig., 236 F.R.D. 313, 316 (S.D. Tex. 2006). After the Court considered this
voluminous information, it ruled in favor of class certification. In preparing the case for trial,
Coughlin Stoia also fully briefed several large and complex summary judgment motions from the
non-settling bank defendants, while defeating the motions to dismiss pursued by RBC.
10. After securing class certification and filing hundreds of pages of briefs in opposition
to the non-settling banks’ summary judgment motions, the case was virtually trial ready as to Merrill
Lynch, CSFB and Barclays. In the early months of 2007, the Coughlin Stoia litigation team was just
weeks away from trial. We filed the joint pretrial order, including witness and exhibits lists and
motions in limine. Then, however, a two-member majority of a Fifth Circuit Court of Appeals panel
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reversed this Court’s class certification order on a Rule 23(f) interlocutory appeal, ruling that earlier
decisions upholding scheme liability were erroneous, and that because no scheme liability existed,
no class could be certified, thus bringing this case to an abrupt halt, preventing any further
proceedings in the district court on the pending summary judgment motions or the scheduled trial. A
petition for a writ of certiorari on this issue is pending.
11. The adverse ruling of the Fifth Circuit further demonstrates how outstanding the $6.6
billion recovery was on the fraudulent scheme claims against Citigroup, JPMorgan and CIBC.
Taken at face value, this decision means that Coughlin Stoia’s skill and efforts produced a $6.6
billion recovery – itself the largest securities fraud recovery in history – on a legal theory that was
ultimately rejected by the Appellate Court in this Circuit.
12. Consistent with the determination and excellence that it has brought to bear on this
case from the outset, Coughlin Stoia has continued to press forward to overcome the adverse ruling
of the Fifth Circuit panel. So as to present the case to the Supreme Court for review quickly, before
the end of its 2006 term, and so that review of Enron might be considered in connection with another
case presenting the scheme liability issue already pending before the Supreme Court, Stoneridge
Investment Partners v. Scientific-Atlanta, Inc., No. 06-43 (“Stoneridge”), Coughlin Stoia quickly
prepared and filed a certiorari petition.
13. Coughlin Stoia’s continued devotion to the case did not stop with the drafting of the
certiorari petition. We also realized that the fraudulent scheme liability issue – and thus the fate of
The Regents’ case and the Enron victims’ cause – would likely be determined in the Stoneridge
appeal, regardless of whether the Enron case itself was ever accepted for review by the Supreme
Court. So, Coughlin Stoia undertook a massive effort to put together an amicus curiae program in
support of the plaintiffs’ deceptive device/fraudulent scheme position in the Stoneridge case.
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14. In this endeavor, Coughlin Stoia’s efforts have met with unprecedented success.
Thirty-three of the nation’s State Attorneys General, under the joint leadership of the Texas
Republican Attorney General and the Ohio Democratic Attorney General, filed a Stoneridge amicus
curiae brief in support of deceptive device/fraudulent scheme liability theory. Further, Coughlin
Stoia persuaded the North American Securities Administrators Association (NASAA) – comprised
of state equivalents of the SEC – to file an amicus curiae brief in favor of fraudulent conduct/scheme
liability. Coughlin Stoia intervened with the Council of Institutional Investors, the most important
and prestigious institutional investor organization in America, to persuade it to appear amicus curiae
in favor of the deceptive device/scheme liability in the Supreme Court. Coughlin Stoia also
encouraged the filing of amicus curiae briefs by Change to Win (a major labor organization), the
American Association of Retired Persons and the Consumer Federation of America and several other
large public pension funds and investor organizations. Coughlin Stoia also prepared an amicus
curiae brief for The Regents in the Stoneridge case and provided substantial assistance in the
preparation of the brief for a group of law professors – recognized experts in securities law – for
their amicus curiae filing in support of the defrauded investors.
15. In addition, the firm was successful in persuading the SEC to vote to file a brief in
support of the deceptive device/scheme liability reading of §10(b) and Rule 10b-5 in the Supreme
Court. The fact that the DOJ went against the recommendation of the SEC by refusing to file an
amicus curiae brief supporting scheme liability – and actually filing one against the SEC’s position –
only shows how hard fought this issue was and the incredible power of the forces on the other side of
these issues.
16. The litigation has spanned more than five years and the following is a summary of
significant events that occurred during its duration:
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First complaint filed October 22, 2001 [Newby filed]
Lead Plaintiff motions filed December 21, 2001
The Regents of the University of California appointed Lead Plaintiff
February 15, 2002
Consolidated complaint filed April 8, 2002
Defendants file 41 motions to dismiss May 8, 2002
Lead Plaintiff’s motions-to-dismiss oppositions filed June 10, 2002
Motion for Class Certification filed October 1, 2002
Motion to Dismiss Memorandum and Order re Secondary Actors
December 20, 2002
First Amended Consolidated Complaint filed May 14, 2003
Amended Motion for Class Certification filed May 28, 2003
Class certification discovery August-September 2003
18-month fact discovery begins – over 370 depositions taken and 70 million pages of documents obtained
June 1, 2004
Fact discovery closes November 30, 2005
Lead Plaintiff’s expert reports served January 17, 2006
Class certification hearing March 7-8, 2006
Defendants’ expert reports served March 17, 2006
Rebuttal expert reports served April 13, 2006
V&E summary judgment motion filed April 13, 2006
Opposition to V&E summary judgment filed June 13, 2006
Summary judgment motions filed by Barclays, CSFB, Merrill Lynch, Frevert, Pai
June 26, 2006
Order certifying class July 5, 2006
Stayed witnesses, 5th Amendment and Andersen depositions
July-August 2006
Motion for reconsideration re Barclay’s dismissal filed August 3, 2006
Oppositions to CSFB’s, Merrill Lynch’s summary judgment motions filed
November 13, 2006
Response to Merrill’s, CSFB’s and V&E’s appeals regarding class certification
December 29, 2006
Fifth Circuit hearing on class certification appeals February 5, 2007
Opposition to Barclays’s summary judgment motion filed February 8, 2007
Filed Joint Pretrial Order March 16, 2007
Fifth Circuit reverses class certification March 19, 2007
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17. Lead Counsel prosecuted the litigation on a wholly contingent basis, advancing and
incurring all expenses and, by doing so, shouldered the risk of an unfavorable result over more than
six years. Lead Counsel received no fee compensation – only intermittent, and partial, expense
reimbursement – for its extraordinary efforts. The intense and massive document review, fact and
expert discovery, and pre-trial preparation added significant expenditures to an otherwise costly
prosecution, resulting in expenses of more than $40 million, which includes the significant fees and
expenses of investigators, document-coding teams and analysts, consultants, and experts whose
services Lead Counsel required for the successful prosecution and resolution of this portion of the
litigation. Coughlin Stoia professionals have spent over 247,000 hours on this case. The total hours
of attorney and other professional time expended by Coughlin Stoia and co-counsel working with us
exceed 280,000 hours. Major expenses included the costs associated with a comprehensive
investigation; preparation for and participation in depositions; the production, review and analysis of
millions of images in document discovery for use in depositions, summary-judgment oppositions,
and at trial; the work performed by Lead Counsel’s 12 experts in preparation for their depositions
and trial testimony; and pre-trial consultants.
18. As of September 30, 2007, Coughlin Stoia’s lodestar [hours x hourly rates] for
lawyers, paralegals and other professionals was over $112 million. When combined with the
lodestar of our co-counsel, the lodestar of those dedicated to prosecuting the case for over six years
is $127 million. Substantial additional work on, among other things, the Plan of Allocation, has
been done since September 30, 2007. Paragraphs 295 and 296 below and Exhibits 1 and 2 hereto set
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forth the hours and lodestar of counsel through December 15, 2007. Thus, the resulting “multiplier”
on the requested fee is 5.4 (5.2 if time through December 15, 2007 is used).7
19. The fee application is fair both to the Class and Lead Counsel and warrants the
Court’s approval, because, beyond the terms of the contract with The Regents, it is justified in light
of the substantial benefit conferred on the Class, balanced against Lead Counsel’s risks, the quality
of its representation, and the nature and extent of the legal services it performed for Lead Plaintiff
and the Class. The fee request is supported by Professor Charles Silver from the University of
Texas, Professor John C. Coffee, Jr. from Columbia University Law School, both nationally
recognized experts on fee awards in class actions, a former Federal District and Circuit Court Judge,
H. Lee Sarokin, who was Chair of the Third Circuit Judicial Task Force on Court Awarded Attorney
Fees and Harvard Professor Lucian Bebchuk. As important, this is the result envisioned by Congress
in enacting the PSLRA, with the litigation directed by a large institutional investor, who negotiated a
fee agreement with Lead Counsel at the beginning of its involvement in the litigation. Several courts
have held that this type of agreement is entitled to a presumption of reasonableness and significant
deference by the Court in awarding fees.
II. THE REGENTS NEGOTIATED THE 8%-10% ENRON FEE AGREEMENT AT ARM’S LENGTH
20. After The Regents decided to seek appointment as the lead plaintiff in the Enron
securities class action, The Regents entered into written retention and fee agreements in December
2001-January 2002 with Coughlin Stoia. The fee provision provided:
7 The fee agreement is 8% of the first $1 billion, 9% of amounts over $1 billion and less than $2 billion and 10% of amounts over $2 billion, net of expenses, which are estimated at $45 million. The resulting fee is $688 million or 9.52% of the gross recoveries. $688 million divided by $127 million in lodestar generates a 5.4 multiplier, which is well within the range of reason. $688 million divided by the updated lodestar for all firms of $131 million generates a 5.2 multiplier.
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[T]his representation has been undertaken on a contingent fee basis and my firm will look only to the proceeds of any recovery for all of our fees. We have agreed upon the following fees as a percentage of the recovery for the class: 0-$1 billion 8%; $1-$2 billion, 9%; $2+ billion, 10%. The higher percentages apply only to the marginal amounts. In addition, we will also advance all costs and disbursements, and will also look only to the proceeds of any recovery for repayment of those costs.
Ex. 3. The fee agreement was entered into as a result of protracted, arm’s length negotiations
between Coughlin Stoia and James Holst, John Lundberg and Lloyd Lee of The Regents’ General
Counsel’s office.
21. The Enron fee agreement was described to the Court by The Regents’ General
Counsel’s office during the Enron lead plaintiff proceedings:
1. The Regents has negotiated a fee agreement with [Coughlin Stoia] which we believe to be extremely beneficial to the class because it incentivizes counsel to achieve the maximum possible recovery. This fee agreement was the result of extensive, arms-length negotiation between this office and [Coughlin Stoia] during December 2001 and January 2002.
2. The Regents’ objective in negotiating the fee agreement was to maximize the eventual recovery to the class in the event The Regents and [Coughlin Stoia] are appointed lead plaintiff and lead counsel. To achieve that overriding objective, we adhered to several principles. First, we sought to negotiate fee percentages that would be substantially lower than those that are commonly agreed to or awarded so that the portion of the total recovery going to the class members would be maximized. At the same time, we recognized that this suit would likely be the largest, most complex, and most difficult securities class action in history. Accordingly, our second principle recognized that the fee agreement had to provide a sufficient fee to create an adequate incentive for counsel to commit the necessary resources to litigate this difficult case. Finally, we recognized that, given Enron’s pending bankruptcy, there is no single source of recovery that is likely to be able to provide an acceptable level of compensation for the class and that achieving recovery above certain levels would become increasingly challenging. Therefore, our third principle held that there should be a modest increase in the marginal fee percentage as the recovery increased to provide counsel an adequate incentive to pursue additional sources of recovery. We believe that the fee agreement we have executed meets these criteria and creates the proper incentives for counsel to maximize the class recovery.
3. In addition, we insisted that [Coughlin Stoia] commit to provide all the funds (without a cap) for the considerable expenses necessary to vigorously prosecute this multi-year litigation.
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Supplemental Declaration of The Regents of the University of California in Support of Its Motion
for Appointment as Lead Plaintiff and in Response to Surreply of the New York City Pension Funds
and The Florida State Board of Administration (S.D. Tex., dated Feb. 6, 2002) (Docket No. 252) at
1-2.8
22. The district court recognized The Regents’ premier status and that of the firm:
The University of California, a premier public research university . . . . The twenty-six-member Board of Regents, the majority of whom are appointed by the Governor of California and confirmed by the California Senate, seeks appointment as Lead Plaintiff in this litigation. . . .
The Regents emphasize that it is the largest, single, institutional proposed Lead Plaintiff . . . that it possesses the sophistication, expertise and resources to prosecute this litigation, and that it seeks to employ only one law firm . . . .
[T]he Regents claim, it brings a single law firm with exceptional resources and capability to prosecute this action: a team of two dozen attorneys, investigators, forensic accountants, and corporate governance experts that are already working on this litigation. Moreover, its and its attorneys’ zealous prosecution of this action is already evident. With its earlier co-applicant, the Regents moved to freeze insider trading proceeds. In Amalgamated Bank’s name, Mr. Lerach moved ex parte for an injunction freezing and imposing a constructive trust over insider trading proceeds. Counsel also requested particularized and expedited discovery and an accounting of insider trading proceeds. Furthermore Amalgamated Bank and Regents sought limited expedited discovery from Arthur Andersen LLP. Finally, its attorney brought evidence into court of document destruction at Enron’s headquarters in Houston.
* * *
This litigation is probably the largest and most complex of its kind in the history of this country and it will demand the full focus of Lead Plaintiff(s) and Lead Counsel.
In re Enron Corp. Sec. Litig., 206 F.R.D. 427, 454-57 (S.D. Tex. 2002). The district court also noted:
Higher fees can be warranted by superior services, but the fees in this class action must be reasonable in light of the circumstance and in compliance with the PSLRA’s policy to preserve the substantial portion of any recovery for the Plaintiffs. Given the magnitude and complexity of this litigation, the geographical and temporal expanse it covers, the number of governmental and private investigations occurring,
8 Emphasis is added unless otherwise noted.
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and the necessary involvement with the bankruptcy proceeding in New York, the selection of competent, experienced and committed Lead Counsel has even greater import than in normal securities class actions. In reviewing the extensive briefing submitted regarding the Lead Plaintiff/Lead Counsel selection, the Court has found that the submissions of [Coughlin Stoia] stand out in the breadth and depth of its research and insight.
Enron, 206 F.R.D. at 458.
23. Months after the negotiation and signing of the Enron fee agreement, the General
Counsel’s office of The Regents in July 2002 negotiated and signed a separate fee agreement with
Coughlin Stoia in connection with The Regents seeking to be appointed lead plaintiff in the Dynegy
Securities Litigation. It provided:
We have agreed upon the following fees as a percentage of the recovery for the class: $0-$200 million, 8%; $200-$400 million, 9%; $400 million+, 10%. The higher percentages apply only to the marginal amounts.
Ex. 4. The Dynegy litigation ultimately resulted in a recovery of $474 million for the class. The size
of this litigation was dwarfed by Enron as recognized by The Regents resulting in much lower break
points on the incentivized fee. The Regents’ General Counsel James Holst represented to the district
court overseeing the Dynegy litigation in connection with the settlement and fee application, that:
The Regents possess substantial expertise in financial matters and legal affairs. The Regents also has the benefit of relying upon an accomplished professional staff, which includes financial professionals and a legal staff with over 35 in-house lawyers. Our legal staff includes lawyers with extensive experience in securities class actions and tobacco industry actions. As described further below, our office has gained significant experience monitoring securities class action litigation through our participation in the In re Enron Corp. Securities Litigation. I have direct oversight responsibility for all litigation conducted on the University’s behalf. The volume of such litigation is substantial and much of it is high profile, complex litigation.
In December 2001, The Regents applied for appointment as Lead Plaintiff in the Enron litigation. At that time, The Regents carefully considered its choice of Lead Counsel. This office reviewed the qualifications and resources of a number of class action specialist law firms and retained outside class counsel which possess the financial resources, skill, experience and track record to obtain optimum results for the Class. It selected Lead Counsel, then Milberg Weiss Bershad Hynes & Lerach LLP (“Milberg Weiss”), now Lerach Coughlin Stoia Geller Rudman & Robbins LLP (“Lerach Coughlin”), on the basis of its attorneys’ extensive experience representing
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plaintiffs in securities litigation, the resources the firm had available to prosecute the case, the aggressiveness it had already demonstrated in doing so, and, after interviews with the key attorneys involved, our belief that they would work cooperatively with this office and would welcome the high level of supervision we intended to apply in our role as Lead Plaintiff. In June 2002, The Regents applied for appointment as Lead Plaintiff in this action. By that time we had acquired extensive experience working with Lead Counsel in the Enron case. We had observed first-hand the skill and determination of Lead Counsel and their dedication to the best interests of the class. We had developed an extremely effective working relationship with Lead Counsel, and our role in supervision and management of every aspect of the Enron litigation had been welcomed by them. Based on this experience, as well as the similarity of many issues in the Enron and Dynegy cases, we concluded that Lead Counsel in the Enron litigation was also the best choice for Lead Counsel in this case.
In Enron, we developed a very effective working relationship with Lead Counsel which, I believe, has been extremely beneficial to prosecution of the case. Since The Regents’ appointment as Lead Plaintiff in the Enron litigation, attorneys from this office participated in all significant settlement discussions and mediations, attended hearings, reviewed all major pleadings, and participated in all major strategic decisions. We established regularized oversight procedures including weekly conference calls, regular meetings, and circulation of documents. We applied these same procedures to oversight of the Dynegy litigation and strongly believe that prosecution of the case was benefited by them and by the working relationship we have established with the Lerach Coughlin firm.
Declaration of James E. Holst of the University of California Regents in Support of Lead Plaintiff’s
Motion for Final Approval of Settlements and Award of Attorneys’ Fees and Reimbursement of
Expenses (S.D. Tex., dated June 23, 2005) (Docket No. 675 in Case No. 02-1571) at 3-4.
24. The Dynegy court (Judge Lake) awarded the fee as agreed to by The Regents, stating:
Counsel for the Lead Plaintiff are entitled to a fee paid out of the common fund created for the benefit of the Class. Boeing Co. v. Van Gemert, 444 U.S. 472, 478-79, 100 AS. Ct. 745 (1980). In class action suits where a fund is recovered and fees are awarded therefrom by the court, the Supreme Court has indicated that computing fees as a percentage of the common fund recovered is the proper approach. Blum v. Stenson, 465 U.S. 886, 900 n.16, 104 S. Ct. 1541 (1984).
Lead Plaintiff’s counsel have moved for an award of attorneys’ fees in the amount of 8.7257% of the Settlement Amount (after deduction of reimbursable expenses in the amount of $3.2 million). This is the fee percentage negotiated by the Court-appointed Lead Plaintiff with Lead Counsel prior to their appointment by the Court pursuant to 15 U.S.C. §78u-4(a)(6) of the PSLRA. This Court adopts the percentage-of-recovery method of awarding fees in this case, and concludes that the percentage of the benefit is the proper method for awarding attorneys’ fees in this
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case. The Court hereby awards attorneys’ fees of $35,151,482 in cash and 1,533,872 shares of Dynegy common stock from the Settlement Amount, plus interest on the cash portion of the award at the same rate as earned on the Settlement Amount. These amounts represent the percentage fee award negotiated between the Court-appointed Lead Plaintiff and Lead Counsel at this level of recovery.
In re Dynegy, Inc. Sec. Litig., No. H-02-1571, slip op. at 1-2 (S.D. Tex. July 8, 2005) (Compendium,
Ex. C).9
25. The Regents reaffirmed the Enron fee agreement when, in supporting the motion for
class certification in 2006, The Regents General Counsel’s office recognized the extraordinary
nature of the recovery, stating to Judge Harmon:
Another important aspect of this case has been the negotiation of a retention agreement with Lead Counsel. As discussed in the Supplemental Declaration of The Regents of the University of California in Support of its Motion for Appointment as Lead Plaintiff (Docket No. 252), this agreement was negotiated at the outset with the best interests of the class in mind. The Regents wants to ensure the damaged investors of Enron receive as much of their losses as possible, while at the same time retaining skilled and resourceful counsel and providing that counsel with a fair fee based on results obtained. The retention agreement provides for counsel to receive 8% of the first billion dollars recovered, 9% of the second billion dollars recovered and 10% of all recoveries beyond two billion dollars. Under this agreement, we assured that more than 90% of the recovery in this action will go to the class. The Regents believe this will lead to an extraordinarily good result for the class.
The settlements reached to date of $7.3 billion (including interest) are the largest ever in securities litigation. The Regents expect, with the assistance of Judge Irving and Lead Counsel, more significant settlements can be reached.
Declaration of Christopher M. Patti in Support of Lead Plaintiff’s Amended Motion for Class
Certification (S.D. Tex., dated Mar. 15, 2006) (Docket No. 4551) at 3-4.
26. Certainly at the time the fee agreement was negotiated, it was well-known that the
percentages were far below the usual rate in such cases. In an April 2002 article, a Wall Street
Journal reporter stated:
9 “Compendium, Ex. __” refers to Lead Counsel’s Compendium of Exhibits In Support of Lead Counsel’s Memorandum of Law in Support of Fee Award and Reimbursement of Plaintiffs’ Expenses filed concurrently herewith.
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[B]ig investors have become increasingly active, using their clout to drive down attorneys’ fees and increasing the payment available for shareholders large and small. The Regents of the University of California, for example, are the lead plaintiffs for claims against Enron; their law firm, Milberg Weiss Bershad Hynes & Lerach, is seeking 8% to 10% of any recovery – about one-third of the customary take.
Michael Orey, Cashing In On Shareholder Suits – Class Actions Are Mounting and So Are Payouts,
As Deep Pockets Get Tapped; Should You File?, Wall St. J., Apr. 25, 2002, at D1 (Compendium, Ex.
E).
27. In addition, disinterested experts have praised the Enron fee agreement as an example
of how institutional investor lead plaintiffs should act. As SEC Commissioner Paul Atkins stated in
a February 16, 2006 speech to the U.S. Chamber Institute for Legal Reform:
When talking about the importance and effectiveness of the lead plaintiff provision of the PSLRA, Chairman Cox likes to point to the Enron class action suits. As you know, under the PSLRA a judge, not the plaintiff’s lawyers, chooses the lead plaintiff – the plaintiff who best represents the class. In the Enron litigation, the court chose the Regents of the University of California as the lead plaintiff. One of the first moves made by the UC Regents was to negotiate a significantly reduced legal fee that resulted in hundreds of millions more dollars for injured investors.
Paul S. Atkins, Speech by SEC Commissioner: Remarks before the U.S. Chamber Institute For
Legal Reform (Feb. 16, 2006) (Compendium, Ex. F).
III. THE INVESTIGATION OF FACTS: GATHERING DOCUMENTS AND WITNESS INTERVIEWS
28. As information concerning Enron’s problems began to reach the market in 2001,
Coughlin Stoia began its own internal investigation of Enron. In the spring and summer of 2001
news articles began to surface questioning Enron’s operations.10 Enron fought back vigorously, but
on August 15, 2001, Enron’s new CEO Jeff Skilling (“Skilling”) abruptly resigned raising further
questions about Enron’s operations by the fall of 2001. On October 17, 2001 the Wall Street Journal
10 A March 2001 Fortune article complained about the Company’s black-box financials and, with hindsight, foretold of its demise.
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published an article, “Enron Jolt: Investments, Assets Generate Big Loss – Part of Charge Tied to 2
Partnerships’ Interests Wall Street,” which detailed not only the Company’s $1.01 billion charge
connected to write-downs of soured investments, producing a $618 million third-quarter loss, but
also the conflict-of-interest questions raised by a pair of limited partnerships – LJM1 and 2 – run by
Enron’s CFO Fastow. John Emshwiller and Rebecca Smith, Enron Jolt: Investments, Assets
Generate Big Loss – Part of Charge Tied to 2 Partnerships’ Interest Wall Street, Wall St. J., Oct. 17,
2001, at C1. A week later the Wall Street Journal reported on October 23, 2001 that Enron had been
contacted by the SEC seeking information about the LJM partnerships, with concerns that, “if
Enron’s credit rating and stock price fell far enough, the company would be obligated to issue tens of
millions of additional shares to [related] entities.” Rebecca Smith and John R. Emshwiller, SEC
Seeks Information On Enron Dealings With Partnerships Recently Run By Fastow, Wall St. J., Oct.
23, 2001, at A3. The implosion of the seventh-largest company in America had begun, and with it,
months of intense witness development and investigation. On October 22, 2001, the Company
announced the informal SEC inquiry about the controversial LJM partnerships. We had been
analyzing and watching these developments unfold and began preliminary database researches and
reviewing all recent media references to Enron before preparing internal stock-sale charts for
insiders. As our ongoing investigation heated up, the firm engaged L.R. Hodges & Associates, Ltd.
(“LRH&A”),11 a firm of investigators, in developing many of the particulars for the allegations in the
Consolidated Complaints filed in April 2002 and May 2003. Without benefit of formal discovery
tools, barred by the PSLRA until the resolution of motions to dismiss, we utilized an arsenal of
informal discovery techniques: review of thousands of pages of media and SEC filings, confidential
informants and database searches, which led to cold calls and interviews with myriad former
11 Lynne Hodges, the principal of LRH&A, is not related to me.
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Company employees – contacts and referrals that were compiled in the LRH&A Developing Witness
List (“DWL”); plus legal and industry sources, media and congressional contacts.
29. We also had investigators look for internal Company directories, and started to build
employee profiles. Dividing the work between the west and east coast offices, by late-October we
and LRH&A had developed some prospective witness resumes and identified focus areas, including
the Blockbuster video-on-demand deal, dark-fiber swaps, and the LJM and JEDI investment entities.
An immediate task was to identify and locate the author of the anonymous Enron-will-implode-in-
an-accounting-scandal letter, for which Sherron Watkins would become famous. Similarly, a
consequence of publishing notice under the PSLRA was the receipt of both anonymous and
attributed letters and calls, and the law firm’s shareholder-relations section fielded scores of these
week after week. Regardless of the method of contact, all were annotated in the initial DWL, which
would have some 40 iterations. We started with 57 prospective witnesses from general and industry
research, which centered on identifying analysts and market reports containing information about the
LJM partnerships. Launching the investigation included reviewing Internet searches, Intelligence
Data research, SEC filings, plus establishing sources to assist us in the Cayman Islands, when all that
was known about the LJM entities, in some respects, was that the first one was LJM Cayman.
30. The database researchers plumbed a host of sources, including chat-room message
postings, which were growing exponentially, investment-fund reports and energy-sector materials.
In pre-bankruptcy days, researchers and investigators spent considerable effort to confirm
employment status, a prerequisite to contacting witnesses. In what was thought to be a substantial
number – only to be dwarfed as the investigation continued – a preliminary list noted 56 Enron-
related partnerships, 19 investment vehicles, and 18 prospective witnesses. Each day brought a
review of the growing number of media articles about the SEC’s investigation into off-balance-sheet
accounting of transactions with the LJM entities and Enron’s penchant for opaque financial
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statements. We compiled profiles on all identified executives and Board members. Resumes of
current and former employees were identified from various sources and were added to the latest
DWL, including the confirmation in early November by an Enron receptionist of executives assigned
to the defunct Broadband Services unit. Each day brought more topics for the database researchers:
investments in JEDI, East Coast Power, The New Power Company, Azurix, and an entity known
first only by its abbreviation – EES. Investigators, following employment confirmation, began
initial contacts of prospective witnesses, while reviewing all media reports on the Company.
31. Through Form 8-K filings and press releases, we developed background data on key
players: Fastow; his deputies Glisan, Mordaunt, Lynn, and Yeager; as well as the first glimpse of
some Raptor investment entities: HGK, JSB, and Blackdog. The Company’s Form 8-K regarding a
necessary four-year restatement in early November 2001, coupled with questionable related-party
transactions, expanded research areas exponentially. Discreet calls were made during and after
working hours to confirm, for example on one day, the employment status of 59 prospective
witnesses, and that data was added to the latest DWL. Research into the LJM-related entities, and
the relationship between subsidiary, partner, and investment interests from just a handful of
documents, often produced more than 100 names, all of which were added to a database and
researched for potential integration in the DWL. We retrieved court records from Oregon, New
York, Delaware, and the Cayman Islands relating to prior cases involving Enron or defendants.
32. The announced Dynegy and Enron merger, before its dissolution at Thanksgiving
2001, compounded our workload, producing a host of new names and entities to be examined,
including Enron Oil & Gas – the pipeline business – and executives Stan Horton and Forest
Hoglund. Investigators drew upon their contacts from other cases with other companies who had
done business with Enron, including key witnesses from Cisco and several Silicon Valley entities.
Meanwhile, sources provided an internal Andersen directory and late-90s directories from Enron.
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Every day produced new names or entities, many with no current significance – no one knew early
on the crucial role that RhythmsNet would play in Enron’s implosion or what Raptors would entail –
but they would prove an integral component of detailed allegations in the Consolidated Complaint
several months later. There were continual emails, calls and conferences as we directed
investigators and worked with LRH&A and the New York staff to assess, prioritize and assign
research and witness-development work, as well as to conduct our own ongoing witness contacts and
interviews. Areas of comprehensive database research continued to grow as well: LJM entities,
partnerships, Dynegy-merger implications, message postings, SEC filings, conference-call
transcripts, and the still undecipherable references to something called Raptors. For example, within
four weeks the database team compiled several hundred pages related to some 150 investment
entities, with 34 subjects having some connection to officer-related entities – all of which had to be
explored.
33. As witness contacts transformed to scheduled interviews with potential witnesses, we
performed supplemental database research and background investigations, and conducted follow-up
research after each substantive interview on all Enron-related individuals, entities, and transactions.
Each substantial witness identified potential additional witnesses. Ultimately, hundreds of people,
topics and companies proved to have no significant connection to our allegations. But we had no
way of knowing then whether Alligator Alley Pipeline Company or the information gleaned from an
anonymous letter from Independence, Kansas would be a smoking gun or an unloaded one. At the
same time, some initial contacts, followed by either telephone or in-person interviews, produced
specifics for the Consolidated Complaint. As executives left or were terminated – in particular,
Fastow, Glisan and Mordaunt – information was developed and interviews were pursued, most
without success.
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34. We had no way of knowing whether any interview would prove fruitful. We were
learning as much as we could, as fast as possible, about dark-fiber swaps, infrastructure build-out,
excess fiber-optic pipelines, and other issues related to the telecommunications bubble bursting and
where Enron’s EBS fit in. We made calls to potential witnesses and industry sources at all hours to
accommodate domestic and international time zones and everyone’s schedule. Our research also
included reviewing other companies with off-balance-sheet accounting related to so-called “special
purpose entities” (“SPEs”) to understand what was kosher. By necessity, we were learning an
entirely new nomenclature from accounting literature and industry standards.
35. After Thanksgiving 2001 Coughlin Stoia continued what would total hundreds of
personal contacts and interviews with former Enron employees and industry sources. Whether in
their homes, at their jobs, or in restaurants, bars, hotel rooms, fast-food joints, parking lots or
standing outside the building of their new employer, we always touched on Enron’s culture: how
was business done? did anyone ever say no? were there only two ways to do things – the Enron way
and how everybody else did it? As the DWL burgeoned, LRH&A investigators wrote an ongoing
background memo – the Developing Issues Brief – setting out investigative themes, comprehensive
details about particular entities, timelines of key events, and summaries of substantive interviews,
which was invaluable in compiling the Consolidated Complaint.
36. To provide investigators with contact and interview sources, LRH&A made hundreds
of discreet inquiries to confirm current-employer status, segregated confirmed names in designated
DWL categories, annotated additional names developed from calls to the Company directory, with
follow-up calls to receptionists to reconfirm the employment status of names not recognized from
the old internal directories. This process continued for months, as the DWL went through constant
updates, and more and more names were developed as interview possibilities. The investigative
team’s workload was nearly overloaded when the Company terminated 3,500 Houston employees on
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one day in late 2001. With the cancellation of the Dynegy merger, a credit-rating downgrade, and
then bankruptcy, preceded by a one-day 50% workforce termination, the numbers of potential
witnesses skyrocketed.
37. Summaries of substantive witnesses were compiled expeditiously and shared with
lawyers and investigators. Some issues took investigators deep into areas that would later prove not
nearly as relevant as they first appeared. For example, many former employees disclosed seemingly
sinister dealings by managers to freeze employees’ ability to liquidate their 401-K contributions as
the stock price plummeted. And sometimes choosing which topic to pursue was difficult. A good
interview would detail problems with Broadband, while another revealed great particulars about
underwater contracts at EES. Another disclosed a letter that was as revealing and incriminatory for
Enron’s top management as the Watkins letter proved to be, while another witness detailed how
investment bankers clamored for Enron’s business, providing the Company with innovative
transaction schematics that moved its debt off the books and shored up its credit rating.
Consequently, we scrambled to move the investigation forward on all fronts.
38. The investigators were being educated about Enron’s culture and purposeful
complexity, which was, as explained to us, just the way it did business. In fact, the more boxes, the
bigger the bonus – creativity was rewarded – was how one witness described why every structured-
finance transaction’s only goal was to move debt off the Company’s books. And the greater the
complexity devised to meet that goal, the greater the reward for the dealmakers, because they had
demonstrated creativity and innovation and made the financial statements look good to credit-rating
agencies and investors.
39. Coughlin Stoia focused on the financial-statement-misrepresentation aspects, while
still sifting through leads related to the Company’s 401-K debacle for material omissions.
Sometimes the investigative landscape changed daily or hourly. We reevaluated priorities as to
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which witnesses to pursue, but continued meeting with anyone who would talk substantively, as we
grappled with myriad entities and increasing complexity unique in our experience. Many times we
received information that had no seeming relevance – or at least we did not yet know enough about
how Enron did business to evaluate the relevance of the information we received. Coordinating the
efforts of interviewing investigators, database researchers, and staff doing locate and employment-
confirmation calls required continued reevaluation, while ongoing research to identify prospective
witnesses expanded to include – beyond Enron, Andersen and Vinson & Elkins (“V&E”) –
McKinsey Consulting, Andrews & Kurth (“A&K”), Dynegy, and a growing list of energy-sector
traders, companies and counterparties to transactions, which would lead us, ultimately, to investigate
Enron’s banks.
40. We continued with witness interviews and database research on underwater EES
contracts, the California energy crisis and dark-fiber swaps for EBS. One of our lawyers traveled to
New Orleans to talk with a former internal auditor who investigated the rogue trading operation in
Valhalla, New York, in 1987. This was the best in a series of sessions with internal auditors. They
told us how their group reported to Kenneth Lay (“Lay”) and a Board member that he had no choice
but to fire the two New York trading executives for criminal conduct, let alone a serious conflict of
interest. They were stunned by Lay’s response: Take away their administrative duties, but let them
continue trading because they are making the Company too much money and we can’t disappoint the
shareholders. These internal auditors proved invaluable as direct sources and in pointing the
investigative team to the right people and helping us ask the right questions. Through this group we
learned crucial details, later pleaded in the Consolidated Complaint, about over-budget international
deals and how executives padded true construction costs to provide for their huge bonuses – none of
which was ever shared with the engineers and construction crews that did their best to make the
projects work. And we learned the hows and whys of Enron’s overpaying for virtually all of its
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international projects, how executives collected their bonuses before any thought was given to
whether the project would actually work – let alone turn a profit – and how expenses were
“snowballed” – added to the next project – for many projects that never went beyond the negotiation
stage.
41. The Court’s February 15, 2002 appointment of The Regents as Lead Plaintiff
coincided with a new direction for our investigators and lawyers. The combination of SEC filings,
media reports and details from witness interviews outlined how Enron accounted for bank loans as
something called prepays, using commodity trades to disguise debt and reporting the loans as cash
flow from operations rather than from financing. Consequently, we went back to witnesses
connected to Enron’s global-finance and accounting sections, as well as to industry and banking
consultants. We focused first on Citigroup, CSFB, and JPMorgan and how their swap transactions
bolstered Enron’s positive credit ratings. We delved into SPE Mahonia’s relation to JPMorgan and
Enron to facilitate off-shore gas trades, and spent considerable time being educated about Generally
Accepted Accounting Principles (“GAAP”) accounting by our in-house forensic accountants. And
we monitored daily Internet and media articles that detailed Enron’s use of prepays and SPEs.
IV. THE FIRM AGGRESSIVELY PROSECUTED THE CASE BEFORE AND AFTER LEAD PLAINTIFF WAS APPOINTED
42. From the outset we undertook an aggressive discovery and law-and-motion litigation
posture. Among other things, we pursued evidence, attempted to preserve Enron stock sales
proceeds for future investor recovery, prevent evidence spoliation and curtail abusive defense
discovery.
1. Motion to Freeze Insider Trading Gains
43. Lead Counsel’s prosecution began immediately after its initial investigation and filing
of the class action complaint. Lead Counsel’s analysis revealed Enron’s directors and officers had
engaged in massive insider selling before material adverse information about Enron was disclosed to
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the market in October 2001. The analysis showed 29 Enron insiders had sold 17.3 million Enron
shares before Enron’s implosion in fall 2001, resulting in illegal insider trading proceeds of $1.1
billion.
44. On December 5, 2001 Lead Counsel filed an ex parte application for a temporary
restraining order (“TRO”) imposing a constructive trust over the $1.1 billion in insider trading
proceeds. Lead Counsel also sought an accounting of the Enron defendants’ gains and sought
limited expedited discovery under the PSLRA pursuant to 15 U.S.C. §78u-4(b)(3).
45. Lead Counsel’s ex parte application explained how Enron and its executives
concealed their fraud until Enron declared bankruptcy on December 2, 2001 and why Enron’s
financial statements from 1997 through the second quarter of 2001 were false and misleading,
overstating Enron’s financial results by billions of dollars. The ex parte application included
opinions from two knowledgeable experts in securities fraud and the federal securities laws.
46. Lead Counsel detailed the insider trading of numerous Enron executives, including
Lay, Skilling, Fastow, Richard Causey (“Causey”), Lou Pai (“Pai”), Harrison, and others. Lead
Counsel’s ex parte application explained how the federal securities laws provided for equitable
disgorgement of defendants’ insider trading proceeds. The ex parte application sought limited
expedited discovery, in part because defendants had used offshore partnerships and illicit straw
entities to accomplish the Enron fraud. Lead Counsel also explained why discovery should not be
stayed under the PSLRA. Other plaintiffs joined in support of Lead Plaintiff’s TRO application.
47. Defendants opposed the ex parte application for a TRO, stating plaintiffs were
attempting an “end-run” around the PSLRA and its discovery stay. Defendants further argued
plaintiffs were not entitled to a “prejudgment restraint” on defendants’ assets absent a lien or viable
equitable interest in the insider trading proceeds. Defendants filed a subsequent joint brief, again
arguing plaintiffs had no “equitable interest” in the $1.1 billion in insider trading proceeds.
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48. The Court held a hearing on the ex parte application, and the Court requested
additional briefing. Lead Counsel responded on December 21, 2001, arguing the Court had the
inherent authority under the federal securities laws to order disgorgement of insider trading proceeds
under the Securities Exchange Act of 1934 (“Exchange Act”), which expressly authorized district
courts to grant equitable relief.
49. In its January 8, 2002 ruling the Court held that plaintiffs had “asserted cognizable
claims to equitable relief” and the Court could properly consider “a prejudgment restraint on the
assets defendants obtained by trading Enron stock.” 1/8/02 Memorandum Opinion and Order
(Docket No. 111) at 44. The Court did not enter a TRO, deferring until the record was more fully
developed. The Court sought additional briefing on Lead Plaintiff’s request for discovery.
50. On February 8, 2002, the Outside Directors moved for limited reconsideration of the
Court’s January 8, 2002 Order (Docket No. 266), arguing the defendants owed no fiduciary duty to
plaintiffs and thus plaintiffs had no cognizable claim for equitable relief. As the litigation
progressed, Lead Plaintiff and Lead Counsel again sought discovery from Enron’s officers and
directors, and were successful in opposing defendants’ efforts to conceal the information regarding
stock sales proceeds. A number of the Enron individual defendants who traded on insider
information would later plead guilty to, or be convicted of, violating the federal securities laws,
resulting in disgorgement of their ill-gotten gains, fines, penalties and prison terms.
2. Preventing Evidence Spoliation at Andersen
51. Immediately after the Court’s ruling on Lead Counsel’s TRO application (Docket No.
111) on January 8, 2002, Andersen, Enron’s auditor, issued a press release admitting individuals at
Andersen involved with the Enron engagement had “disposed of a significant but undetermined
number of electronic and paper documents and correspondence relating to” the Company. Andersen
- 29 -
said it was unable to determine whether any document destruction occurred after it received a
subpoena from the SEC.
52. Just one day after Andersen admitted it had shredded Enron documents, Lead Counsel
moved for an order allowing plaintiff to propound discovery directed at safeguarding all Enron-
related evidence in Andersen’s possession. Lead Counsel advised the Court of Andersen’s
obligations under the PSLRA to preserve evidence. Lead Counsel sought permission to serve
particularized discovery to protect the remaining Enron evidence in Andersen’s possession. Lead
Counsel also sought to retrieve already-deleted electronic evidence using computerized restoration to
mitigate the evidence loss.
53. Lead Counsel demanded the depositions of Andersen witnesses to question them
about, among other things, Andersen employees who directed and executed the destruction of Enron-
related documents, Andersen’s efforts to preserve Enron documents, the facts surrounding how
Enron-related documents were destroyed and the location of the document destruction, and all
efforts to recover, reconstitute, or recreate the destroyed documents. Lead Counsel also asked the
Court to order Andersen to make all Enron-related electronic evidence available to an independent
forensic computer specialist. Lead Counsel specifically requested Andersen’s computer servers be
made available for forensic examination to create back-up tapes and to allow recovery of deleted
evidence. After Lead Counsel filed its motion to preserve Andersen evidence, other plaintiffs
followed.
54. Before and after the filing, Lead Counsel gathered additional evidence of Andersen’s
document destruction and the need for an order preserving Enron-related documents. Lead Plaintiff
showed the Court that document destruction was not confined to Andersen’s Houston office and
demonstrated Andersen’s head office in Chicago participated in regular conference calls to discuss
destroying documents. Lead Counsel also pointed out how Andersen was concerned about
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accounting irregularities at Enron as early as February 2001. Under these circumstances, Lead
Plaintiff argued physical documents and backups of all electronic documents should be placed in the
Court’s Registry for protection. Lead Counsel requested the Court appoint an expert to restore and
retrieve Andersen’s electronically-stored data including email.
55. Supplemental briefing further developed the facts surrounding the shredding of
Enron-related documents. Lead Counsel’s investigative efforts culminated in the production of a
box of shredded Enron-related documents at a January 22, 2002 hearing on the emergency relief.
56. After the hearing, the Court issued an order prohibiting the destruction of evidence by
Andersen and granting discovery against Andersen. The Court ordered Andersen report to the Court
and to plaintiffs its efforts to preserve and recover destroyed Enron-related documents. The Court
also lifted the PSLRA discovery stay and allowed the deposition of six Andersen employees
including David Duncan, the lead partner in charge of the Enron engagement, and Nancy Temple,
author of an email concerning destruction of Enron-related documents. The depositions were limited
to document and data retention, storage, removal, deletion, destruction, and attempts to restore or
recover deleted or destroyed materials. In addition, Andersen was required to make its experts
available to plaintiffs, thereby allowing plaintiffs’ experts to conduct their own independent
evaluation of Andersen’s recovery and preservation efforts.
3. Lead Counsel Subpoenas Andersen Witnesses and Secures Deposition Testimony re Document Destruction
57. In addition to the motions to enjoin and preserve evidence at Andersen, Lead Counsel
also served deposition subpoenas on the Andersen employees who at the time were known to have
been involved in the document destruction. On January 29, 2002 Lead Counsel served deposition
subpoenas on Andersen employees Nancy Temple, Thomas Bauer, David Duncan and Michael
Odom. Andersen opposed the depositions, arguing its employees did not have to sit for the
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depositions because discovery was premature, and arguing the Court did not have the authority to
compel appearance by the witnesses.
58. During a March 12, 2002 telephonic hearing Lead Counsel, along with counsel for
other plaintiffs, successfully persuaded the Court to compel the appearance of the witnesses for
deposition. Certain Andersen defendants immediately appealed the district court’s order to the Fifth
Circuit Court of Appeals under the All Writs Act, arguing service was improper and the district court
did not have the authority to compel the Andersen witnesses to sit for oral examination. Lead
Plaintiff opposed, arguing the Andersen witnesses were properly served and the court had the
authority to compel the sworn testimony.
59. On March 15, 2002 the Fifth Circuit ruled the district court should make a factual
determination whether one Andersen witness, Nancy Temple, had been served and made a party to
the action. On March 18, 2002 Lead Counsel served an ex parte motion and memorandum proving
Temple was a party.
60. The District Court held another telephonic hearing on March 18, 2002, at which time
Temple was ordered to appear for deposition on March 22, 2002 at 9:00 a.m. in Houston, Texas.
Lead Counsel was successful in its efforts to secure sworn testimony concerning the Andersen
document destruction. Ms. Temple was deposed, along with other witnesses, securing important
evidence spoliation testimony while recollections were fresh.
4. Expedited Discovery Concerning Document Destruction at Enron
61. At a January 22, 2002 hearing concerning potential document destruction at
Andersen, Lead Counsel also brought forth evidence of document destruction at Enron’s corporate
headquarters. At the hearing, Enron’s counsel admitted some shredded material had been found, but
steps had been taken to preserve evidence. National media organizations would later report
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individuals at Enron had executed a massive shredding operation and, even as late as February 2002,
Enron continued to shred documents.
62. On February 8, 2002 Lead Counsel filed a motion for particularized discovery from
Enron executives (Docket Nos. 259, 260). Lead Counsel argued the PSLRA discovery stay should
be lifted to permit the examination of Enron executives Lay, Jeff McMahon, Robert Butts, Richard
Buy (“Buy”), Causey, Mark Lindsey, Rodney Faldyn, and James Derrick (“Derrick”). Lead Counsel
alleged that Enron General Counsel Derrick had ordered Enron employees in writing several times to
refrain from destroying company documents. Yet despite Derrick’s warnings, and notwithstanding a
formal SEC investigation announced October 31, 2001, document shredding at Enron began shortly
after the SEC announced its investigation. The document shredding accelerated during
Thanksgiving 2001, and continued into the first quarter of 2002. News reports confirmed shredding
companies were seen at Enron corporate headquarters.
63. Lead Counsel’s February 8, 2002 motion for expedited discovery argued Enron’s
document shredding violated the PSLRA’s document preservation requirements, necessitating a
partial lifting of the discovery stay. Lead Counsel argued it was entitled to particularized discovery
to preserve evidence and to prevent undue prejudice to the Class, and in particular argued the
depositions of Enron executives were necessary to secure testimony concerning the evidence
spoliation.
64. Defendants filed their oppositions on March 11, 2002, arguing the PSLRA prohibited
the requested discovery and arguing Enron’s bankruptcy filing also automatically stayed discovery
(Docket Nos. 354, 355, 357). The defendants further argued Lead Plaintiff’s motion would do
“nothing” to preserve evidence, since the FBI and other agencies had already taken measures to
investigate and stop any alleged document destruction or evidence spoliation.
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65. After the motion was filed, The Regents was appointed Lead Plaintiff (Docket No.
294). In light of the PSLRA discovery stay, Lead Plaintiff filed its Proposed Pretrial Scheduling
Order on February 21, 2002, which included dates for discovery to commence (Docket No. 315).
On February 25, 2002, the Court held a scheduling conference attended by all parties, at which time
the Court held it would set forth a scheduling order governing the consolidated actions.
5. Enjoining Andersen Proceeds
66. On March 14, 2002, the DOJ charged Andersen with obstruction of justice, resulting
from Andersen’s destruction of Enron-related evidence. Following the revelations about Andersen’s
involvement with Enron and its document destruction, Andersen’s business declined rapidly in the
first three quarters of 2002.
67. Before Andersen was convicted of obstructing justice, Lead Plaintiff and Lead
Counsel, on April 5, 2002, sought to preserve Andersen’s proceeds to satisfy a future judgment
(Docket No. 440). Lead Plaintiff had moved for an order enjoining the dissolution or sale of
Andersen’s businesses. Andersen responded on April 22, 2002, by arguing it was “downsizing” to
preserve its resources and continue as a going concern (Docket No. 533). In a May 16, 2002 ruling
the Court denied the requested relief (Docket No. 743). The Court held injunctive relief was
unwarranted because Lead Plaintiff had not sufficiently established irreparable injury and “[t]he
evidence presented . . . indicates that Andersen is engaged in a legitimate effort to mitigate the losses
suffered by its client exodus.” 5/16/02 Memorandum and Order at 7.
68. One month later, on June 15, 2002, Andersen was convicted of obstructing justice in
the Enron matter by interfering with the SEC’s Enron investigation. Shortly thereafter, Lead
Plaintiff learned Andersen intended to cease practicing by August 31, 2002. As part of its business
wind down, Andersen intended to distribute capital to its qualified partners.
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69. Lead Plaintiff and Lead Counsel moved quickly to preserve Andersen’s assets for
future recovery by Enron’s investors. On August 12, 2002, Lead Counsel filed an Emergency
Motion for a Temporary Restraining Order to enjoin the distribution of Andersen’s assets to its
partners (Docket No. 997). The emergency motion argued the distribution would frustrate any
judgment on the merits against Andersen, and render satisfaction of any future judgment virtually
impossible. In the August 12, 2002 Emergency Motion for a TRO, Lead Counsel argued Andersen
could no longer credibly claim it was “downsizing” its operations to “preserve” resources. Lead
Plaintiff and Lead Counsel argued it was likely to succeed in proving its securities fraud claims
against Andersen, and that Andersen was unlikely to remain solvent to pay any future judgment, not
only because of other stock frauds involving Andersen clients (including WorldCom, Qwest and
Global Crossing), but also because Andersen had admitted its insurance carrier was insolvent.
70. Andersen opposed the motion on August 13, 2002, arguing Andersen had no plans to
dissolve, did not intend on returning capital to its partners, and the Court had previously denied a
similar attempt to set aside Andersen assets (Docket No. 998).
71. Lead Plaintiff’s motion was resolved by agreement among the parties. On August 15,
2002 the Court entered an order outlining the agreement (Docket No. 1006). In exchange for Lead
Plaintiff agreeing to withdraw the TRO application, Andersen agreed to provide Lead Plaintiff with
30 days notice prior to any plan to dissolve or return capital to Andersen’s partners, and Andersen
agreed it would not distribute capital to its partners before August 30, 2002.
6. Lead Counsel Defeats Early Abusive “Class Certification” Discovery
72. On August 7, 2002, the Court ordered discovery stayed under the PSLRA, pending
rulings on defendants’ myriad motions to dismiss the allegations (Docket No. 983). But under the
guise of “class certification” discovery, defendants propounded duplicative discovery against
plaintiffs, seeking to depose at least seven individuals from The Regents, 20 other depositions from
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institutional plaintiffs, their representatives, as well as individual investors’ depositions, and any
experts plaintiffs intended to rely on for class certification purposes. Notably, the “class
certification” depositions were noticed for the week of August 12, 2002 through August 16, 2002,
resulting in as many as eight plaintiffs being deposed, simultaneously, in a single eight-hour period
at various Houston law firms. When totaled, defendants had noticed a minimum of 29 “class
certification” depositions over five business days in Houston at various law firms representing
defendants.
73. Lead Counsel immediately moved for a protective order to curtail the abuse. The
motion for protective order was filed on August 13, 2002 (Docket No. 1000). In the protective order
motion Lead Plaintiff said it responded to the noticed depositions by offering a Rule 30(b)(6)
deponent from The Regents who would be most knowledgeable about the decision to invest in Enron
securities. Lead Plaintiff had conferred with other plaintiffs, and further agreed to produce persons
most knowledgeable on behalf of each institutional plaintiff, and even agreed to produce individual
named plaintiffs, committing to at least 16 depositions. Defendants, however, rejected the proffer.
74. In its motion for protective order Lead Plaintiff argued its proffer of the person most
knowledgeable was preferred to the “shotgun” method of noticing myriad individuals for deposition,
resulting in satellite litigation that would be duplicative, wasteful and costly. Lead Counsel argued
the Federal Rules command that litigants depose persons most knowledgeable instead of the
duplicative, costly depositions propounded by the defendants, and that the depositions’ true purpose
was harassment.
75. The protective order also sought an order preventing defendants from propounding
onerous document production requests that sought personal and financial information unrelated to
Enron. For example, defendants had propounded document requests asking individual plaintiffs to
produce “all documents” concerning their financial net worth, assets, debts, financial status – even
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their tax returns dating back to 1997, a clearly overbroad request. Similarly, defendants demanded
institutional plaintiffs produce “all documents” concerning “all trading activity” for “all” positions in
securities and investments dating back to 1997, a request so burdensome no financial institution
could comply. Lead Plaintiff deemed the requests abusive, unrelated to class certification, and
requested an order prohibiting this discovery.
76. Defendants opposed the motion for protective order on August 30, 2002, arguing the
protective order filing was premature, Lead Plaintiff was uncooperative, and the number of
depositions sought by defendants “is a direct function of the number of class representatives named.”
Opposition to Lead Plaintiff The Regents’ Motion for Protective Order by Defendants Bank of
America Corporation, Credit Suisse First Boston Corp., Citigroup, Inc., Deutsche Bank AG.,
Barclays Plc, Merrill Lynch & Co. Inc., J.P. Morgan Chase and Company, Canadian Imperial Bank
of Commerce and Lehman Brothers Holding Inc. (Docket No. 1021) at 2. Defendants further argued
the individuals noticed for deposition possessed “relevant and discoverable information.”
77. On March 27, 2003, the Court granted Lead Plaintiff’s motion for protective order,
holding the deposition of The Regents’ Rule 30(b)(6) designee was sufficient, whereas the other
myriad depositions “are not relevant to the class certification issues.” 3/27/03 Order re Lead
Plaintiff’s Protective Order at 2. Lead Counsel defended the deposition of The Regents’ persons
most knowledgeable, and further defended a number of class representative depositions.
V. DRAFTING THE CONSOLIDATED COMPLAINT
78. To draft the Consolidated Complaint, Coughlin Stoia attorneys closely re-reviewed
Enron’s SEC filings, news articles and analyst statements regarding Enron for the time period
starting in 1998 and continuing through the bankruptcy filing and thereafter for information that
differed from what was gathered to plead claims against the officers and directors, Andersen,
Enron’s investment banks and its law firms. We combined this review with our investigative results
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drawing on the expertise of our in-house forensic accountants for the accounting allegations and
consulting with former investment bankers for the allegations against the banks. We combined all of
these resources to piece together the puzzle of Enron’s accounting, its false financials, and its
ultimate collapse.
79. At the scheduling conference in late February 2002, the Court set a very tight
schedule for filing the Consolidated Complaint and briefing motions to dismiss. Coughlin Stoia
continued to gather information for the complaint, took steps to preserve evidence which we could
not obtain through formal discovery, served subpoenas for preservation of documents on banks
which had done business with Enron and moved to lift the stay in bankruptcy in an effort to obtain
documents from Enron.
80. Preparing the Consolidated Complaint for filing within 30 days after the scheduling
conference was an enormous undertaking. In March 2002 we had an “all-hands” meeting in
California to strategize and coordinate our efforts. University Counsel Chris Patti, attorneys from
our New York and San Diego offices, investigators, forensic accountants and other consultants
gathered and spent a day and a half reviewing evidence, and sharing ideas on which defendants
should be named and identifying the claims that would be pled against them. Topics at the all-hands
meeting included evidence about broadband; related-party partnerships and financial structures,
including Raptors, JEDI/Chewco, LJM, and Braveheart; legal standards to establish auditor and
banker liability; the role of lawyers, bankers, and auditors in Enron’s fraudulent misrepresentations
and omissions; and the Company’s improper accounting for its sham transactions. Throughout
March 2002, the team continued drafting the Consolidated Complaint and we went through countless
drafts. Our efforts culminated in the 500+-page Consolidated Complaint which named Enron
officers and directors, its auditor Andersen, and for the first time, nine of the largest financial
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institutions in the world, and two law firms as defendants. The Consolidated Complaint detailed the
defendants’ scheme to defraud investors.
VI. LEAD COUNSEL’S PERSUASIVE SKILLS GENERATED THE TREMENDOUS RESULTS
81. Lead Counsel’s Consolidated Complaint filed in April 2002, and the oppositions to
motions to dismiss shortly thereafter, resulted in the Court’s December 2002 order denying the
banks’ motions to dismiss. Without the extensive investigation leading to a solid foundation for the
case, the bank settlements would not have been possible. The motion practice in this case was
exceptional in terms of the number of motions brought and the effort required to respond to the
myriad issues of unrivaled complexity and sophistication. Starting with motions to expedite
discovery and prevent document destruction, hundreds of motions were filed and litigated. The
following is a summary of some of the significant motions we have brought or addressed in the
course of the litigation.
1. Motions to Dismiss and Other Motion Practice
82. On April 15, 2002, defendant Fastow filed a motion to postpone discovery (Docket
No. 478). In the motion, Fastow argued for the postponements of discovery to protect both his
constitutional right not to incriminate himself in criminal proceedings against him, and his due
process right to defend civil litigation against him. Lead Plaintiff filed an opposition to Fastow’s
motion (Docket No. 599), arguing that an indefinite stay should not be imposed, that a delay in
discovery would prejudice plaintiffs, Fastow’s testimony was important to resolve the civil case, and
a postponement would threaten the trial date and the prospect of complete adjudication of the
controversy. The Court granted Fastow’s motion to postpone discovery, given the overlap in the
civil and criminal cases against Fastow. See 3/24/03 Memorandum and Order re Motions filed by
Enron Insider Defendant Andrew S. Fastow (Docket No. 1298) at 22-23.
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83. On May 3, 2002, the Preferred Purchaser Plaintiffs filed a motion to have certain
claims appended to Lead Plaintiff’s complaint (Docket No. 682). On July 5, 2002, Lead Plaintiff
filed a response (Docket No. 963), which argued against adding the Preferred Purchasers’ claims to
the Newby complaint, based on the statue of limitations, the inapplicability of the relation-back
doctrine, the statute of repose, and because not all claims and defendants were included. The Court
agreed with the reasoning of Lead Plaintiff, and ordered that the Preferred Purchasers’ claims should
not be pursued in the Newby complaint. See 8/5/02 Order re Multiple Motions re Consolidation,
Clarification and Scheduling (Docket No. 983) at 6.
84. In May of 2002, the bank defendants and others filed motions to dismiss the
Consolidated Complaint, to which Lead Counsel filed oppositions. The parties argued, and the
Court ruled, as follows:
(a) Merrill Lynch (Docket No. 667) argued for dismissal because one of Lead
Plaintiff’s claims was time-barred; the complaint failed to specify analyst statements claimed to the
fraudulent; the complaint failed to adequately plead scienter or a primary violation of the securities
laws. On June 10, 2002, Lead Plaintiff filed a 122-page opposition to Merrill Lynch’s motion to
dismiss (Docket No. 846), arguing that Merrill Lynch faced liability because it sold Enron and
Enron-related securities to investors via false Registration Statements; issued false analyst reports on
Enron; employed acts, contrivances and deceptive devices to deceive Enron investors; and
participated in a scheme to defraud purchasers of Enron’s securities. Lead Plaintiff highlighted its
allegations that Merrill Lynch funded Enron’s LJM2 partnership and purported to “purchase” three
Enron electricity barges in Nigeria, when, in fact, it had insisted on a secret repurchase promise and
no loss guarantee. Lead Plaintiff also argued that the complaint properly pled scienter as to Merrill
Lynch. The Court ruled that Lead Plaintiff’s Consolidated Complaint stated a claim against this
defendant with its allegations of Merrill Lynch’s involvement in the Nigerian Barges and Enron
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North America transactions, if Lead Plaintiff supplemented its complaint with certain allegations.
See Enron, 235 F. Supp. 2d at 702-03.
(b) Lehman Brothers Holdings Inc. (Docket No. 679), argued for dismissal
because the complaint failed to allege a primary violation of the securities laws; the complaint’s
claims were not pled with the requisite specificity; and the complaint failed to adequately plead a
claim for control person liability. On June 10, 2002, Lead Plaintiff filed a 120-page opposition to
Lehman’s motion to dismiss (Docket No. 851), arguing that Lehman faced liability because it sold
Enron and Enron-related securities to investors via false Registration Statements; issued false analyst
reports on Enron; employed manipulative and deceptive devices; and participated in a scheme to
defraud purchasers of Enron’s securities. Lead Plaintiff highlighted its allegations that Lehman
helped raise over $2 billion from the investing public for Enron via the sale of Enron and Enron-
related securities, and also helped structure and fund the key LJM2 partnership Enron secretly
controlled and helped structure its illicit transactions with SPEs, knowing they were vehicles being
utilized by Enron to falsify its reported financial results. Lead Plaintiff also argued that the
complaint properly pled scienter as to Lehman, and also adequately alleged claims against Lehman
under the Texas Securities Act (“TSA”). The Court dismissed the §10 claims against this defendant,
but sustained the §11 claim against it. See id. at 705.
(c) JPMorgan Chase & Co. (Docket No. 632), argued for dismissal because the
complaint failed to plead a primary violation of the securities laws, any misleading statement by the
defendant, or scienter. On June 10, 2002, Lead Plaintiff filed a 132-page opposition to JPMorgan’s
motion to dismiss (Docket No. 852), arguing that JPMorgan faced liability because it sold Enron
securities to investors via a false Registration Statements; issued false analyst reports on Enron;
employed manipulative and deceptive devices; and participated in a scheme to defraud purchasers of
Enron’s securities. Lead Plaintiff highlighted its allegations that JPMorgan helped structure and
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finance certain of the partnerships Enron controlled and their illicit transactions with SPEs –
including LJM2 – knowing they were vehicles being utilized by Enron to falsify its reported
financial results; and also engaged in numerous deceptive transactions with Enron to disguise
billions of dollars in loans to Enron. Lead Plaintiff also argued that the complaint properly pled
scienter as to JPMorgan, and also adequately alleged claims against JPMorgan under the TSA. The
Court ruled that Lead Plaintiff’s Consolidated Complaint stated a claim against this defendant with
its allegations that JPMorgan made repeated “loans” of about $5 billion to Enron between 1997 and
2000 which were disguised as commodities trades, was extensively involved in structuring
fraudulent Enron transactions with Enron, and failed to disclose certain transactions, and issued
analyst reports on Enron containing material misrepresentations. See Enron, 235 F. Supp. 2d at 695-
97.
(d) Deutsche Bank AG (Docket No. 716) argued for dismissal because the
complaint failed to plead scienter or materiality; Deutsche Bank’s allegedly fraudulent analyst
reports did not make assertions of fact; the complaint was not pled in conformity with Rule 8; and
the complaint failed to state a claim for control person liability. On June 10, 2002, Lead Plaintiff
filed a 109-page opposition to Deutsche Bank’s motion to dismiss (Docket No. 848), arguing that
Deutsche Bank faced liability because it sold Enron and Enron-related securities to investors via
false Registration Statements; issued false analysts’ reports on Enron; employed manipulative and
deceptive devices; and participated in a scheme to defraud purchasers of Enron’s securities. Lead
Plaintiff highlighted its allegations that Deutsche Bank participated in loans and lending
commitments of over $2 billion to Enron; and helped raise over $5 billion for Enron via the sale of
Enron and Enron-related securities. Lead Plaintiff also argued that the complaint properly pled
scienter as to Deutsche Bank. The Court dismissed the claims against Deutsche Bank. See Enron,
235 F. Supp. 2d at 704.
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(e) Credit Suisse First Boston (Docket No. 658) argued for dismissal because the
complaint failed to satisfy the pleading requirements of Rule 8 and the PSLRA; certain of the claims
were time-barred; the complaint failed to allege a primary violation; and the complaint failed to
adequately allege a claim for control person liability. On June 10, 2002, Lead Plaintiff filed a 109-
page opposition to CSFB’s motion to dismiss (Docket No. 855), arguing that CSFB faced liability
because it sold Enron and Enron-related securities to investors via false Registration Statements;
issued false analyst reports on Enron; employed manipulative and deceptive devices; and
participated in a scheme to defraud purchasers of Enron’s securities. Lead Plaintiff highlighted its
allegations that CSFB helped structure and finance the partnerships Enron controlled and funded
their illicit transactions with SPEs, knowing they were vehicles being used to falsify Enron’s
reported financial results; and engaged in numerous deceptive transactions with Enron to disguise
billions of dollars in loans to Enron. Lead Plaintiff also argued that the complaint properly pled
scienter as to CSFB. The Court ruled that Lead Plaintiff’s Consolidated Complaint stated a claim
against this defendant with its allegations of CSFB’s involvement in the New Power IPO scheme
and a disguised loan to Enron, as well as designing, structuring and funding the SPEs that were the
primary vehicles utilized by Enron to falsify its financial condition. See Enron, 235 F. Supp. 2d at
698-701.
(f) Citigroup Inc. (Docket No. 629) argued for dismissal because the complaint’s
claims were not pled with the requisite particularity; the complaint failed to allege a primary
violation of the securities laws; and Lead Plaintiff’s §11 claim should be dismissed because Lead
Plaintiff lacks standing and failed to plead reliance. On June 10, 2002, Lead Plaintiff filed a 122-
page opposition to Citigroup’s motion to dismiss (Docket No. 850), arguing that Citigroup faced
liability because it sold Enron and Enron-related securities via false Registration Statements; issued
false analysts’ reports on Enron; employed acts, contrivances and manipulative or deceptive devices;
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and participated in a scheme to defraud purchasers of Enron’s securities. Lead Plaintiff highlighted
its allegations that Citigroup also helped structure and finance certain of the partnerships Enron
controlled and their illicit transactions with SPEs, knowing they were vehicles being utilized by
Enron to falsify its reported financial results; and also engaged in contrived and deceptive
transactions with Enron to disguise billions of dollars in loans to Enron. Lead Plaintiff also argued
that the complaint properly pled scienter as to Citigroup. The Court ruled that Lead Plaintiff’s
Consolidated Complaint stated a claim against this defendant with its allegations of Citigroup’s
involvement in the New Power IPO scheme, the LJM2 partnership, and $2.4 billion of disguised
loans to Enron. See Enron, 235 F. Supp. 2d at 697-98.
(g) Canadian Imperial Bank of Commerce (Docket No. 615) argued for dismissal
because the complaint failed to meet the heightened pleading requirements of the PSLRA; the claims
failed to constitute a primary violation of the securities laws; the complaint failed to identify alleged
false analyst statements; and the complaint failed to adequately plead a claim for control person
liability. On June 10, 2002, Lead Plaintiff filed a 123-page opposition to CIBC’s motion to dismiss
(Docket No. 849), arguing that CIBC faced liability because it sold Enron and Enron-related
securities via false Registration Statements; issued false analyst reports on Enron; employed acts,
contrivances and manipulative or deceptive devices; and participated in a scheme to defraud
purchasers of Enron’s securities. Lead Plaintiff highlighted its allegations that CIBC also helped
structure and finance certain of the partnerships Enron controlled and their illicit transactions with
SPEs, knowing they were vehicles being used to falsify Enron’s reported financial results. Lead
Plaintiff also argued that the complaint properly pled scienter as to CIBC. The Court ruled that Lead
Plaintiff’s Consolidated Complaint stated a claim against this defendant with its allegations of
CIBC’s involvement in the New Power IPO, LJM2 partnership, and the fraud concerning Enron’s
Broadband division. See Enron, 235 F. Supp. 2d at 701-02.
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(h) Bank of America Corporation (Docket No. 664) argued for dismissal because
the BofA parent entity was not liable for the conduct of its subsidiaries; the complaint’s allegations
of misrepresentations and omissions failed for lack of particularity; the complaint failed to plead
scienter and a primary violation of the securities laws; Lead Plaintiff lacked standing to sue
concerning a certain offering; and the complaint failed to plead a claim for control person liability.
On June 10, 2002, Lead Plaintiff filed a 114-page opposition to BofA’s motion to dismiss (Docket
No. 845), arguing that BofA faced liability because it sold Enron and Enron-related securities to
investors via false Registration Statements; issued false analyst reports on Enron; employed
manipulative or deceptive devices; and participated in a scheme to defraud purchasers of Enron’s
securities. Lead Plaintiff also argued that the complaint properly pled scienter as to BofA. The
Court dismissed the claims against BofA. See Enron, 235 F. Supp. 2d at 703.
(i) Barclays PLC (Docket No. 653) argued for dismissal because the complaint
failed to allege that Barclays made any statements concerning Enron, failed to allege a primary
violation of the securities laws, and failed to plead scienter. On June 10, 2002, Lead Plaintiff filed a
70-page opposition to Barclays’ motion to dismiss (Docket No. 844), arguing that Barclays faced
liability because it employed acts, devices and contrivances to deceive; and participated in a scheme
to defraud purchasers of Enron’s securities. Lead Plaintiff highlighted its allegations that Barclays
participated in key illicit transactions with Enron, which it knew would contribute materially to
Enron’s ability to continue to falsify its financial condition and thus continue the operation of the
Enron Ponzi scheme (e.g., the Chewco/JEDI entity which Enron secretly controlled). Lead Plaintiff
also argued that the Consolidated Complaint properly pled scienter as to Barclays. The Court ruled
that Lead Plaintiff’s Consolidated Complaint stated a claim against this defendant with its allegations
of Barclays’ formation and funding of JEDI/Chewco in 1997. See Enron, 235 F. Supp. 2d at 703.
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(j) Arthur Andersen LLP (Docket No. 650) argued for dismissal because the
complaint failed to plead a primary violation of the securities laws and scienter; and certain of the
§11 claims failed because the complaint failed to allege Andersen’s consent to being named as
having prepared or certified certain information. On June 10, 2002, Lead Plaintiff filed an 86-page
opposition to Andersen’s motion to dismiss (Docket No. 854), arguing that Andersen faced liability
because it made false and misleading statements about Enron’s financial statements; and played a
significant role in authoring those financial statements. Lead Plaintiff also argued that the complaint
properly pled scienter as to Andersen. The Court ruled that Lead Plaintiff’s Consolidated Complaint
stated a claim against this defendant with its allegations of Arthur Andersen’s role as Enron’s public
auditor. See Enron, 235 F. Supp. 2d at 706-07.
(k) Vinson & Elkins L.L.P. (Docket No. 648) argued for dismissal because the
Consolidated Complaint failed to plead a primary violation of the securities laws; and the
Consolidated Complaint failed to satisfy the PSLRA’s pleading requirements. On June 10, 2002,
Lead Plaintiff filed an 87-page opposition to Vinson & Elkins’ motion to dismiss (Docket No. 843),
arguing that Vinson & Elkins faced liability because it employed acts, contrivances and devices to
deceive; made or substantially participated in making false or misleading statements; and
participated in a scheme to defraud purchasers of Enron’s securities. Specifically, Lead Plaintiff
highlighted its allegations that Vinson & Elkins created the bogus transactions with the LJM
Partnerships and fake SPEs; issued false opinion letters; backdated documents; and whitewashed
employee allegations of fraud. Lead Plaintiff also argued that the complaint properly pled scienter
as to Vinson & Elkins. The Court ruled that Lead Plaintiff’s Consolidated Complaint stated a claim
against this defendant with its allegations of Vinson & Elkins’ involvement in the New Power IPO,
the Mahonia trades and the investigation of a whistleblower’s letter, as well as its co-authorship of
false and misleading statements. See Enron, 235 F. Supp. 2d at 704-05.
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(l) Kirkland & Ellis (Docket No. 660) argued for dismissal because the
Consolidated Complaint failed to allege a primary violation of the securities laws; and the
Consolidated Complaint represented an impermissible attempt to expand attorney liability. On June
10, 2002, Lead Plaintiff filed a 92-page opposition to the motion to dismiss filed by K&E (Docket
No. 847), arguing that K&E was liable because it employed acts and contrivances to deceive; made
or substantially participated in making false or misleading statements; and participated in a scheme
to defraud purchasers of Enron’s securities. The Court dismissed the claims against K&E. See
Enron, 235 F. Supp. 2d at 705-06.
85. On May 8, 2002 and May 9, 2002, defendants Philip Randall, Roman McAlindon,
Andersen-United Kingdom, Andersen-Brazil, Andersen Worldwide Societe Cooperative, and Arthur
Andersen & Co., India, filed motions to dismiss (Docket Nos. 697, 698, 701, 702, 733, 738, 739),
arguing for dismissal based on a lack of personal jurisdiction and acts which were the proper subject
of liability, and improper service. On June 10, 2002, Lead Plaintiff filed a 27-page opposition
(Docket No. 842), arguing that service on the defendants was proper, the Court had jurisdiction over
defendants, and that they were liable. Because, however, a settlement was reached with these
defendants, the Court did not rule on these motions to dismiss.
86. On May 8, 2002, certain individual defendants, all partners in defendant Arthur
Andersen, filed motions to dismiss (Docket Nos. 651 and 684). These individual defendants
contended that the claims against them should be dismissed because Lead Plaintiff’s averments were
sparse, vague and conclusory; failed to adequately allege scienter; failed to indicate that any of the
moving defendants made a false statement; and failed to allege the degree of control required for
control person liability. In its 67-page opposition (Docket No. 840), filed on June 10, 2002, Lead
Plaintiff argued that it had alleged the defendants’ liability with sufficient particularity, the
defendants had made false statements and, in any event faced liability even in the absence of such,
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Lead Plaintiff had adequately alleged scienter and control person liability. The Court ruled that the
allegations were insufficient to state a claim under §10(b), but were sufficient to state claims against
certain of the moving defendants under §20(a) for control person liability. See 1/28/03
Memorandum and Order of Partial Dismissal of Claims Against Individual Andersen Defendants
(Docket No. 1241) at 58.
87. On May 8, 2002, Outside Director defendants Robert A. Belfer, Norman P. Blake, Jr.,
Ronnie C. Chan, John H. Duncan, Joe H. Foy, Wendy L. Gramm, Robert Jaedicke, Charles A.
LeMaistre, John Mendelsohn, Jerome Meyer, Paulo Ferraz Pereira, Frank Savage, John Wakeham,
Charls E. Walker, Herbert S. Winokur and John A. Urquhart filed motions to dismiss (Docket Nos.
618, 661, 662, 647). These defendants argued for dismissal of the §10 and §20A claims because the
Consolidated Complaint relied on the use of group pleading, failed to adequately allege scienter, and
sought imposition of liability for performing the routine director functions at Enron. They argued
for dismissal of the §11 and §15 claims because there is no liability under the statute for private
placements, some of the defendants did not serve on Enron’s Board at the time of the subject
offerings, false or misleading statements had not been identified, reliance was not pled when
required, the defendants relied on experts, the pleading of the claims failed to comply with Rule 9(b),
and the claims fail to allege that the defendants acted in bad faith. The defendants also argued for
dismissal of the controlling person claims because the complaint failed to allege a primary violation,
sufficient control, and culpable participation in the wrongdoing. The defendants also argued that the
TSA claim by plaintiff The Washington State Investment Board must be dismissed because of the
timing of the securities purchases, the failure to plead in compliance with Rule 9(b), the failure to
allege misstatements or omissions, and the failure to allege that the defendants were “sellers” under
the TSA.
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88. Lead Plaintiff filed a 105-page opposition on June 10, 2002 (Docket No. 853), which
argued that the defendants were liable because they made misrepresentations and omissions of
material fact, used manipulative and deceptive devices, and ignored obvious evidence of fraud given
the nature, size and frequency of the subject transactions. Lead Plaintiff contended that its complaint
was sufficient based on submitted minutes of Enron Board meetings and the detail in the complaint
concerning the defendants’ conduct and Enron’s false financial statements.
89. The Court ruled that, as to the §10 claims, while some of the Outside Directors could
be considered to have made statements by virtue of their signing of financial statements, the
complaint failed to plead scienter with allegations of matters discussed at Board meetings and insider
trading; and the §§20(a) and 20A claims accordingly failed for lack of a predicate violation. As to
the §11 claims, the Court dismissed some of them based on the arguments of the Outside Directors,
but upheld others based on the arguments of Lead Plaintiff; it upheld certain of the §15 claims,
finding an adequate predicate violation and sufficient allegations of control. As to the TSA claim,
the Court dismissed it (while granting leave to amend) for failure to adequately plead seller,
aider/abettor or control person liability. See 3/12/03 Memorandum and Order Regarding Enron
Outside Director Defendants’ Motions (Docket No. 1269) at 89-138.
90. On May 8, 2002, motions to dismiss were filed by defendants Rebecca Mark-
Jusbasche (Docket No. 597), Horton, Olson (Docket No. 641), Whalley (Docket No. 643), Frevert
(Docket No. 646), Koenig (Docket No. 656), Kean (Docket No. 657) and Sutton (Docket No. 686);
Fastow (Docket No. 1299), Harrison, Pai, Buy, Hirko, Rice, Causey, McMahon, Derrick, Hannon,
Lay, and Skilling (Docket Nos. 718, 735, 740). In general, the defendants argued for dismissal
because the complaint failed to comply with applicable pleading requirements, such as those
regarding particularity and scienter, and failed to allege any actionable conduct. On June 10, 2002,
Lead Plaintiff filed a 160-page opposition thereto (Docket No. 856). The Court ruled as follows:
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(a) The Court ruled that Lead Plaintiff had failed to state a claim against Mark-
Jusbasche under §10, because the complaint did not identify with specificity any material non-public
information possessed by the defendant while she traded in Enron securities, and her sales of stock
failed to raise an adequate inference of scienter. The Court also dismissed the §20(a) claim against
her, finding no predicate violation or adequate allegations of control. The Court, however, ruled that
Lead Plaintiff had sufficiently alleged a claim against her under §11, and thus sustained that claim.
See 3/24/03 Memorandum and Order re: Insider Defendant Rebecca Mark-Jusbasche (Docket No.
1300) at 15.
(b) The Court denied the motion as to defendants Horton, Olson, Whalley,
Frevert, Koenig, Kean, and Sutton, based on Lead Plaintiff’s allegations that the Insider Defendants
were involved in the day-to-day operations of Enron and had a hand in controlling the company, the
pervasive and extensive scope of the alleged fraud, awareness within Enron of the sham nature of the
company, the compensation provided to the defendants, and the defendants’ trading in Enron stock.
These allegations sufficed to state claims against the defendants under §§10 and 20A. Also finding
the presence of an adequate predicate violation and sufficient allegations of control, the Court
sustained Lead Plaintiff’s §20(a) claims against defendants. See 3/24/03 Memorandum and Order
re: Enron Insider Defendants Horton, Olson, Whalley, Frevert, Koenig, Kean and Sutton (Docket
No. 1299).
(c) The Court held that Lead Plaintiff had stated a claim against Fastow under
§10, in light of allegations of Fastow’s close involvement in the alleged scheme, issuance of false
and misleading statements, and insider trading. The Court also sustained Lead Plaintiffs’ §20(a)
claim, finding sufficient the allegations of Fastow’s control over Enron, related entities and
transactions. The Court further upheld Lead Plaintiff’s claims against Fastow under §§20A, 11 and
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15. See 3/24/03 Memorandum and Order re: Motions filed by Enron Insider Defendant Andrew S.
Fastow (Docket No. 1298) at 1-4.
(d) The Court upheld Lead Plaintiff’s claims under §§10, 20A and 20(a) against
Harrison, based on the allegations of his involvement in running Enron, knowledge of abusive
accounting practices and insider trading. See 4/23/03 Memorandum and Order Regarding
Remaining Enron Insider Defendants (“4/23/03 Enron Insider MTD Order”) (Docket No. 1347) at 5-
9.
(e) The Court sustained Lead Plaintiff’s claims against Pai under §§10, 20A and
20(a), based on the Consolidated Complaint’s allegations of Pai’s stocks sales, the pervasive
accounting fraud in the Enron division overseen by Pai, and Pai’s compensation. See 4/23/03 Enron
Insider MTD Order at 9-13.
(f) The Court sustained Lead Plaintiff’s claims against Buy under §§10, 20A and
20(a), based on the Consolidated Complaint’s allegations of Buy’s sales of Enron stock and role as
Enron’s chief risk officer. See 4/23/03 Enron Insider MTD Order at 13-17.
(g) The Court dismissed Lead Plaintiff’s claims against Hirko under §§10, 20A
and 20(a), because of Hirko’s early departure from Enron and limited stock sales. See 4/23/03 Enron
Insider MTD Order at 17-19.
(h) The Court sustained Lead Plaintiff’s claims against Rice under §§10, 20A and
20(a), based on the Consolidated Complaint’s allegations of Rice’s day-to-day management of Enron
Broadband Services, stocks sales, bonuses, personal involvement in improper deals, and issuance of
false and misleading statements. See 4/23/03 Enron Insider MTD Order at 19-24.
(i) The Court sustained Lead Plaintiff’s claims against Causey under §§10, 20A
and 20(a), based on the Consolidated Complaint’s allegations of Causey’s sales of Enron stock,
bonuses, membership on the Management Committee, approval of challenged deals, position as a
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director of New Power, and issuance and approval of false and misleading statements. See 4/23/03
Enron Insider MTD Order at 24-29.
(j) The Court sustained Lead Plaintiff’s claims against McMahon under §§10,
20A and 20(a), based on the Consolidated Complaint’s allegations of McMahon’s sales of Enron
stock, bonuses, membership on the Management Committee, and his familiarity with the challenged
SPEs and transactions. See 4/23/03 Enron Insider MTD Order at 24-32.
(k) The Court dismissed Lead Plaintiff’s claims against Derrick under §§10, 20A
and 20(a), in light of his lack of management over Enron’s day-to-day operations, and failure to
make any false or misleading statement. See 4/23/03 Enron Insider MTD Order at 32-36.
(l) The Court sustained Lead Plaintiff’s claims against Hannon under §§10, 20A
and 20(a), based on the Consolidated Complaint’s allegations of Hannon’s stock sales and
membership on the Management Committee, coupled with Lead Plaintiff’s allegations against Rice.
See 4/23/03 Enron Insider MTD Order at 36-37.
(m) The Court sustained Lead Plaintiff’s claims against Lay under §§10, 20A and
20(a), based on the Consolidated Complaint’s allegations of Lay’s high position at Enron, bonuses
and salary, membership on the Executive and Management Committees, sales of Enron stock, and
issuance of false and misleading statements. See 4/23/03 Enron Insider MTD Order at 37-42.
(n) The Court sustained Lead Plaintiff’s claims against Skilling under §§10, 20A,
20(a), 11 and 15, based on the Consolidated Complaint’s allegations of Skilling’s stock sales,
membership on the Executive and Management Committees, bonuses, knowing endorsement of
deception and misleading financial reports, issuance of false and misleading statements. See 4/23/03
Enron Insider MTD Order at 42-46.
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2. Motions to Strike, Motions for Certification Under §1292(b) and Writs of Mandamus
91. At the same time some defendants were moving to dismiss, others were filing various
motions including motions to strike portions of the complaint, motions to certify issues for appeal
and writs to wrest control of the litigation from the district court.
92. On May 8, 2002, defendant Kenneth L. Lay filed a motion to strike the declaration of
Scott D. Hakala (Docket No. 730), which Lead Plaintiff had appended to Lead Plaintiff’s
Consolidated Complaint. Lay contended that the declaration should be stricken because it was not a
“written instrument” with the meaning of Rule 10(c); it would require an evidentiary hearing and
would interfere with the discovery stay provision of the PSLRA; and would not relieve Lead
Plaintiff of the pleading burden under the PSLRA. Lay also contended that the declaration was
inadmissible. On May 28, 2002, plaintiffs filed a response to Lay’s Motion (Docket No. 800), which
argued that the declaration could properly be considered on a motion to dismiss, and contributed to a
finding that the Lead Plaintiff’s had satisfied their pleading burden. The Court refused to strike the
declaration, but declined to consider it in ruling on a motion to dismiss. See 8/9/02 Order re
Denying Lay’s Motion to Strike Declaration of Scott Hakala (“8/9/02 Strike Order”) (Docket No.
996) at 12.
93. On June 10, 2002, Lead Plaintiff filed a motion to strike (Docket No. 838) the Officer
Defendants’ Joint Disclosure Brief, on the ground that it presented material not properly considered
on a motion to dismiss. On June 24, 2002, the Officer Defendants filed a Response of Officer
Defendants to Plaintiffs’ Motion to Strike Defendants’ Joint Disclosure Brief and Reply to Plaintiffs’
Objections to Defendants’ Argument (Docket No. 919), which contended that the Joint Disclosure
Brief should be considered in ruling on the defendants’ motions to dismiss. While the Court
declined to strike the pleading, it noted that it would disregard any improper matter in ruling on a
motion to dismiss. See 8/9/02 Strike Order at 13.
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94. On September 26, 2002, Lead Plaintiff filed a Joint Motion to Enter Order
Establishing a Document Depository (Docket No. 1041). The Court granted the motion. See
10/30/02 Order Establishing Document Depository (Docket No. 1116) at 2.
95. On September 27, 2002, defendants Belfer, Blake, Chan, Duncan, Foy, Gramm,
Jaedicke, LeMaistre, Mendelsohn, Meyer, Pereira, Savage, Wakeham, Walker, Winokur, Urquhart
and Mark-Jusbasche filed a motion to strike the class action complaint in the Pulsifer action (Docket
No. 1042). These defendants argued that this complaint was an unauthorized amendment to the
Newby complaint. Lead Plaintiff filed an opposition to the motion on September 17, 2002 (Docket
No. 1089), which argued that the Pulsifer complaint was filed to the toll the statute of limitations,
and amendment would not present any prejudice to defendants. The Court denied the motion to
strike, citing the arguments made by Lead Plaintiff. See 3/12/03 Memorandum and Order Regarding
Enron Outside Director Defendants’ Motions (Docket No. 1269) at 59.
96. On October 15, 2002, the Bank Defendants filed the Banks Defendants’ Motion to
Modify Scheduling Order and Request for Expedited Consideration (Docket No. 1080), which
argued to delay the briefing regarding Lead Plaintiff’s motion for class certification until defendants
had been given the opportunity to conduct certain discovery. Lead Plaintiff filed an opposition to the
motion (Docket No. 1112) on October 25, 2002, arguing that the discovery sought was not necessary
for determination of the class certification motion, and that the Court had discretion to deny the Bank
Defendants’ request. The Court granted the Bank Defendants’ motion. See 10/28/02 Order Granting
Bank Defendants’ Motion to Modify Scheduling Order (Docket No. 1113) at 3.
97. On December 12, 2002, Lead Plaintiff filed a motion to modify the pretrial
scheduling order (Docket No. 1189). Lead Plaintiff argued that because of the discovery stay in
place, it might not have sufficient time to meet the Court’s deadline for joining new parties. The
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Court granted the motion. See 12/17/02 Order re The Regents’ Motion to Modify Pretrial
Scheduling (Docket No. 1190) at 2.
98. On January 7, 2003, Merrill Lynch filed the Memorandum of Law of Merrill Lynch
& Co., Inc. in Support of its Motion for Reconsideration or Certification Pursuant to 28 U.S.C.
§1292(b) (Docket No. 1213), which argued for reconsideration of the Court’s order denying Merrill
Lynch’s motion to dismiss, on the ground that that Court considered alleged facts not contained in
Lead Plaintiff’s Complaint, and eliminated the distinction between primary liability and aiding and
abetting. In the alternative, the motion sought certification of the order for appeal pursuant to 28
U.S.C. §1292(b). On January 13, 2003, CIBC, Barclays, Citigroup, CSFB and JPMorgan, and on
January 16, 2003, Vinson & Elkins, also filed motions seeking certification for appeal of the Court’s
order denying their motions to dismiss (Docket Nos. 1220, 1227). The Court denied these motions.
See 1/23/03 Order re §1292(b) Certification for Immediate Appeal of 12/20/02 Order (“1/23/03
§1292(b) Order”) (Docket No. 1238) at 7.
99. On January 7, 2003, defendants CSFB and JPMorgan filed a Petition for a Writ of
Mandamus in the Fifth Circuit Court of Appeals, seeking review of the Court’s order refusing to
certify for interlocutory appeal pursuant to 28 U.S.C. §1292(b) its December 20, 2002 Order denying
the motions to dismiss filed by these defendants. The Petition argued for mandamus because the
order involved a controlling issue of law; as to which there was substantial ground for difference of
opinion; and an immediate appeal may materially advance the ultimate termination of the litigation.
On December 13, 2003, Barclays, and on February 14, 2003, Vinson & Elkins, also filed Petitions
making essentially the same arguments. On February 20, 2003, Lead Plaintiff received letters from
the Fifth Circuit requesting a response to the petitions. On March 6, 2003, Lead Plaintiff filed a
consolidated opposition to the petitions, which argued that the Court’s decision did not qualify for
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mandamus review, and that the Court did not clearly err in declining to certify the subject order for
interlocutory appeal. By Order dated March 11, 2003, the Fifth Circuit denied the petition.
100. In response to the Court’s dismissal of certain claims, on January 14, 2003, Lead
Plaintiff sent a letter to the Court inquiring about amending or supplementing the complaint to cure
any pleading deficiencies. In response, on January 23, 2003, the Court issued an order instructing
Lead Plaintiff to defer any amendment or supplementation until all of the motions to dismiss had
been ruled upon. See 1/23/03 §1292(b) Order.
101. On January 27, 2003, Lead Plaintiff filed a motion to file a first supplemental
complaint concerning Merrill Lynch (Docket No. 1240). The Court ruled the motion moot, because
it indicated in subsequent orders that Lead Plaintiff shall file an amended complaint as a single
instrument. See 5/2/03 Order re Lead Plaintiff’s Motion for Leave to File Consolidated Complaint
(Docket No. 1364) at 1-2.
102. On March 5, 2003, certain defendants filed the Joint Motion of Certain Defendants to
Strike The Washington State Board Class Action Complaint (Docket No. 1256), arguing that it was
unauthorized, untimely, and inconsistent with the Court’s orders. On March 24, 2003, Lead Plaintiff
filed an opposition (Docket No. 1297) (and on April 16, 2003 a sur-reply (Docket Nos. 1336 and
1337)), arguing that the complaint was timely and not in conflict with the Court’s orders. The Court
ruled that the motion was moot, in light of the filing of an agreed motion, which the Court granted,
to allow plaintiffs to file an amended complaint, and defendants to file motions to dismiss. See
9/13/03 Order re Joint Motion to Strike (Docket No. 1660) at 2-3.
103. On April 4, 2003, Officer Defendants Olson, Whalley, Frevert, Koenig and Kean filed
a motion seeking reconsideration of the Court’s 3/24/03 Memorandum and Order denying their
motion to dismiss (Docket No. 1318). In the motion, these defendants urged reconsideration on the
bases that the Court committed an error in analyzing Lead Plaintiff’s allegations about Enron’s
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Executive Committee, embellished Lead Plaintiff’s allegations, reversed its prior rulings concerning
pleading under the PSLRA, and obfuscated matters favorable to the moving defendants. On April
16, 2003, Lead Plaintiff filed an opposition (Docket No. 1338), arguing that Lead Plaintiff’s
allegations in its complaint supported the Court’s order denying the motion to dismiss. The Court
denied the motion. See 4/21/03 Order re Certain Officer Defendants’ Motion for Reconsideration
(Docket No. 1345) at 8.
104. On April 8, 2003, Fastow filed a motion seeking to postpone his filing of an answer to
the complaint pending conclusion of the criminal proceedings against him (Docket No. 1322). On
April 25, 2003, Lead Plaintiff filed a response (Docket No. 1350), arguing that Fastow was required
to formally invoke his Fifth Amendment privilege and concurrently answer those allegations where
the privilege did not apply. The Court granted Fastow’s motion. See 4/28/03 Order re Fastow
Motion to Postpone Answer (Docket No. 1353) at 3.
105. On April 29, 2003 and April 30, 2003, defendants CIBC and BofA filed motions for
summary judgment (Docket Nos. 1362, 1357), contending they were not proper parties to the
litigation, but rather that certain of their subsidiaries were. The defendants argued for judgment as a
matter of law because their parent entities did not engage in the conduct alleged, and the conduct of
their subsidiaries could not be imputed to it. On May 19, 2003 and May 20, 2003, Lead Plaintiff
filed oppositions to the motions (Docket Nos. 1396, 1405), which raised several legal theories under
which the moving defendants could be held liable. Lead Plaintiff also highlighted admissions by
defendants and evidence which raised issues of fact germane to the contentions of the movants, and
argued that Lead Plaintiff’s inability to conduct discovery further warranted denial of the motions.
The Court denied the motions, citing the arguments advanced by Lead Plaintiff. See 5/21/03 Order
re CIBC and BofA Summary Judgment Motions (Docket No. 1392) at 3.
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106. On May 6, 2003, defendant Citigroup filed a motion for summary judgment (Docket
No. 1379), arguing that the alleged wrongful conduct was not performed by it, but to the extent it
was performed by any Citigroup-related entities, they were its subsidiaries. The defendant also
sought dismissal of the control person liability claim against it. On June 11, 2003, Lead Plaintiff
filed an opposition (Docket No. 1479), in which it argued that there existed issues of material fact
precluding summary judgment, and highlighting its inability to conduct discovery on the issues. The
Court denied the motions, citing the arguments advanced by Lead Plaintiffs. See 6/19/03 Order re
Citigroup Motion for Summary Judgment (Docket No. 1531) at 4.
3. Additional Motions to Dismiss in Response to Lead Plaintiff’s First Amended Consolidated Complaint
107. In response to Lead Plaintiff’s First Amended Consolidated Complaint (Docket No.
1388) (“FACC”) filed on May 14, 2003, certain individual defendants filed motions to dismiss:
Joseph. M. Hirko (Docket No. 1448); Ken Harrison (Docket No. 1494); and Officer Defendants
Steven J. Kean, Lawrence Greg Whalley, Mark A. Frevert; Mark E. Koenig, Cindy K. Olson,
Richard B. Buy, Richard A. Causey and Jeffrey McMahon (Docket No. 1509). The parties
contended, and the Court ruled, as follows:
(a) Hirko argued that Lead Plaintiff should not be able to rely on allegations in an
SEC case against him to support its claims; Lead Plaintiff has failed to satisfy the pleading
requirements of the PSLRA, and that the claims against him have previously been dismissed with
prejudice. On June 18, 2003, Lead Plaintiff filed an opposition (Docket No. 1529), which argued
that the claims against Hirko had not been dismissed with prejudice, and that the complaint’s
allegations stated a claim against Hirko. The Court ruled that Lead Plaintiff was permitted to replead
claims against Hirko, that the Court could take judicial notice of the SEC suit against Hirko in ruling
on the sufficiency of Lead Plaintiff’s claims. For these reasons, the Court denied Hirko’s motion to
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dismiss. See 3/15/04 Order re Motions to Dismiss Hirko’s, Harrison’s and Certain Officer
Defendants (“3/15/04 MTD Order”) (Docket No. 2020) at 2-11.
(b) Harrison challenged the specificity of the allegations against him, and argued
that he did not receive bonuses, did not manage Enron’s day-to-day operations, left Enron
Broadband Services before the alleged fraud there occurred, his sales of Enron stock were for
innocuous reasons, the FACC failed to plead scienter against him, and that Lead Plaintiff had failed
to fulfill the contemporaneity requirement concerning his sales of Enron stock. On July 17, 2003,
Lead Plaintiff filed an opposition to the motion (Docket No. 1570), which argued against dismissal
because the Complaint’s allegations concerning Harrison were sufficient to state claims against him.
The Court denied Harrison’s motion to dismiss, because Harrison served on Enron’s Board for years
and during key periods of the alleged repetitive, fraudulent activity, and in light of the alleged
revamping of Portland General Electric (of which Harrison was the CEO) for the Enron Broadband
fraud. Also, the Court found that the FACC presented a strong inference of scienter against
Harrison, because of its allegations of Harrison’s exposure to the transactions of the alleged scheme.
The Court further noted that Harrison had signed several of Enron’s SEC filings. See 3/15/04 MTD
Order at 11-22.
(c) The Officer Defendants argued that the FACC had failed to feature new
allegations previously relied upon by the Court in denying a previous motion to dismiss; and had
failed to satisfy the pleading requirements of the PSLRA. On July 17, 2003, Lead Plaintiff filed an
opposition (Docket No. 1571), arguing that Lead Plaintiff had supplemented its complaint in
accordance with the orders of the Court; the Court had already rejected some of the defendants’
arguments; and Lead Plaintiffs’ new allegations strengthened its pleading of scienter. The Court
denied the motion filed by the Officer Defendants, in light of the Court’s prior rulings, and the
FACC’s allegations that each was a top executive of Enron and oversaw critical deals in the alleged
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scheme, and certain specific allegations in the FACC concerning Olson, McMahon and Whalley.
The Court also noted the filing of an indictment against Causey, and Lead Plaintiff’s supplemental
allegations against Buy. See 3/15/04 MTD Order at 22-25.
108. On June 18, 2003, defendants (and their related entities) JPMorgan (Docket No.
1498), Citigroup (Docket No. 1497), CSFB (Docket No. 1502), CIBC (Docket Nos. 1505 and 1682),
BofA (Docket No. 1514), Merrill Lynch (Docket No. 1499), Barclays (Docket No. 1512) and
Lehman Brothers (Docket No. 1526) also filed motions to dismiss the FACC. In response, Lead
Counsel filed a 115-page consolidated opposition on July 17, 2003 (Docket No. 1574); a Notice of
Recent Authority concerning Levitt v. Bear Stearns & Co., No. 02-7860, 2003 U.S. App. LEXIS
16539 (2d Cir. Aug. 13, 2003) on August 13, 2003 (Docket No. 1617); Lead Plaintiff’s Supplement
to Opposition to Motions to Dismiss Filed by JPMorgan, Citigroup and Merrill Lynch, which
submitted documents from government-initiated proceedings against those defendants, on September
23, 2003 (Docket No. 1685); Plaintiffs’ Memorandum of Law in Opposition to Motion to Dismiss
Filed by Defendant CIBC World Markets PLC on October 6, 2003 (Docket No. 1732); and
Plaintiff’s Response to Supplemental Submission in Further Support of the Motion to Dismiss of
Defendants Lehman Brothers Holdings Inc. and Lehman Brothers Inc. (Docket No. 1918), which
concerned these defendants’ reliance on the Final Report of Neal Batson, Court-Appointed
Examiner, on December 29, 2003. The parties contended, and the Court ruled, as follows:
(a) JPMorgan Chase & Co. and related entities argued that claims against certain
of them were time-barred, Lead Plaintiff had failed to plead certain claims with the requisite
specificity, Lead Plaintiff lacked standing for certain claims, the subject offerings were private, not
public, the FACC failed to adequately allege control person liability, and that the TSA claims failed
for lack of a primary violation. Lead Plaintiff’s opposition argued that its claims were timely
asserted and pled with the requisite specificity, Lead Plaintiff had standing, the subject offerings
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were public, and that the TSA claims adequately pled a primary violation. The Court ruled that the
claims were timely, the claims were pled with the requisite specificity, and that Lead Plaintiff had
standing. The Court also rejected the defendants’ contentions regarding the supposed private nature
of the offerings, ruling that it was a fact issue not properly decided on a motion to dismiss. Further,
the Court held that the FACC stated a claim for control person liability and under the TSA. The
Court thus denied the motion to dismiss. See 3/31/04 Order re JPMorgan Defendants’ Motion to
Dismiss (Docket No. 2052) at 15.
(b) Citigroup, Inc. and related entities (collectively, “Citigroup”) challenged new
claims under §§10, 12, 15 and 20(a) against them concerning the Foreign Debt Securities. The
defendants argued that the §§10 and 12 claims should be dismissed because Lead Plaintiff lacked
standing, the offerings were private not public, and certain claims were time-barred. Lead Plaintiff’s
opposition argued that the claims were timely asserted, Lead Plaintiff had standing, and the offerings
were private. The Court ruled that Lead Plaintiff had standing to prosecute the claims, and that the
claims were not time-barred. The Court also rejected the defendants’ contentions regarding the
supposed private nature of the offerings, ruling that it was a fact issue not properly decided on a
motion to dismiss. Accordingly, the Court denied the motion to dismiss. See 3/31/04 Order re
Citigroup Defendants’ Motion to Dismiss (Docket No. 2050) at 6.
(c) CSFB and related entities (Docket No. 1502) argued for dismissal because the
claims against it were time barred, the new §10 claims against it were not pled with the requisite
particularity, and the FACC failed to contain adequate allegations concerning certain of the Credit
Suisse entities. Credit Suisse also argued that, concerning the §12(a)(2) claims, Lead Plaintiff lacked
standing for failure to purchase the subject securities, and the offerings were not public, and with
regard to the §20(a) and §15 claims, that there was no predicate violation, and sufficient allegations
of control were absent. Lead Plaintiff’s opposition argued that its claims were not time-barred, were
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pled with the requisite particularity, Lead Plaintiff had standing, the offerings were public, and
predicate violations were adequately alleged. The Court ruled that certain of the §12(a)(2) and §15
claims were time-barred, but others could proceed. See 3/31/04 Order re CSFB Defendants’ Motion
to Dismiss (Docket No. 2044) at 7. The Court also ruled that Lead Plaintiff had pled its §10 claim
with the requisite particularity, and had stated a claim for relief under §20(a). The Court rejected the
defendants’ contentions regarding the supposed private nature of the offerings, ruling that it was a
fact issue not properly decided on a motion to dismiss. See id. at 15.
(d) CIBC World Markets Corp., Canadian Imperial Bank of Commerce and CIBC
World Markets plc (collectively, “CIBC”) (Docket Nos. 1505, 1682) contended that the claims
against them were time-barred, did not satisfy the pleading requirements of the PSLRA (including
that concerning the pleading of scienter) and Rule 9(b), Lead Plaintiff lacked standing, and the
subject offerings were private, not public. The defendants also challenged Lead Plaintiff’s control
person claims. Lead Plaintiff’s opposition argued that its claims were timely asserted and pled with
the requisite particularity, Lead Plaintiff had standing, the offerings were public, and control person
liability was adequately pled. The Court ruled that Lead Plaintiff’s claims concerning one offering
were time-barred, but that the others were not. It also ruled that Lead Plaintiff’s claims were pled
with the requisite specificity, that Lead Plaintiff had standing to sue, and rejected the defendants’
contentions regarding the supposed private nature of the offerings, ruling that it was a fact issue not
properly decided on a motion to dismiss. The Court further found that the FACC adequately alleged
claims for control person liability. Thus, the Court denied the motion to dismiss. See 3/31/04 Order
re CIBC Defendants’ Motion to Dismiss (Docket No. 2048) at 15.
(e) Bank of America and related entities (collectively, “BofA”) moved for
dismissal on the grounds that certain claims against it were time-barred, Lead Plaintiff lacked
standing to bring certain claims, the offerings were inactionable as private, not public, and Lead
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Plaintiff had failed to properly allege claims for control person liability. Lead Plaintiff’s opposition
argued that its claims were timely asserted, the offerings were public, and control person liability
was adequately alleged. The Court ruled that the claims were timely filed, Lead Plaintiff had
standing, and rejected the defendants’ contentions regarding the supposed private nature of the
offerings, ruling that it was a fact issue not properly decided on a motion to dismiss. The Court also
ruled that Lead Plaintiff had properly pled claims for control person liability. As such, the Court
denied the motion to dismiss. See 4/6/04 Order re Bank of America Defendants’ Motion to Dismiss
(Docket No. 2064) at 10-11.
(f) Merrill Lynch argued that Lead Plaintiff had not alleged facts establishing that
Merrill Lynch was a primary violator of the securities laws, and that Lead Plaintiff had not alleged
loss causation for the Nigerian Barges transaction. With regard to the primary violator issue, Merrill
Lynch argued that Lead Plaintiff’s claims were barred by Central Bank, claiming that Merrill Lynch
did not have any special relationship to Enron’s shareholders, did not make any purported
misstatements, did not direct or create the alleged fraudulent transactions, and did not participate in
Enron’s accounting. With regard to loss causation, Merrill Lynch argued that it was absent because
the details of the Nigerian Barges transaction were not publicly revealed until after the collapse of
Enron. Lead Plaintiff’s opposition argued that Lead Plaintiff’s claims were cognizable
notwithstanding Central Bank, and that loss causation was adequately pled. The Court denied
Merrill Lynch’s motion to dismiss, finding primary liability adequately alleged based on Lead
Plaintiff’s allegations that Merrill Lynch engaged in deceptive conduct in the Nigerian Barges
transaction, its issuance of analyst reports on Enron containing false and misleading statements, and
internal acknowledgment that the Nigerian Barges transaction was calculated to manipulate Enron’s
financial statements. Similarly, the FACC’s allegations about Merrill Lynch’s power trades with
Enron suggested conduct calculated to deceive investors. See 3/29/04 Memorandum and Order re
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Merrill Lynch and Deutsche Bank Entities (Docket No. 2036) at 5-13. The Court found loss
causation adequately pled because the FACC alleged that the fraud inflated the price of Enron
securities, and the plaintiffs’ loss was a direct and foreseeable result of conduct including Merrill
Lynch’s. See id. at 13-17.
(g) Barclays Bank and related entities (collectively, “Barclays”) argued that the
claims against them were time-barred, the claims under §12 failed for lack of standing, and also
because they concerned a private offering. Lead Plaintiff’s opposition argued that its claims were
not time-barred, Lead Plaintiff had standing, and the offerings were public. The Court ruled that
Lead Plaintiff’s claims were not time-barred, Lead Plaintiff had standing to sue, and that Lead
Plaintiff had stated a claim under §15. The Court rejected the defendants’ contentions regarding the
supposed private nature of the offerings, ruling that it was a fact issue not properly decided on a
motion to dismiss. See 3/30/04 Order re Barclays Defendants’ Motion to Dismiss (Docket No.
2042) at 1-6.
(h) Lehman Brothers argued for dismissal of claims under §§11 and 12(a)(2)
because they were time-barred; dismissal of the claim under §12(a)(2) because the plaintiffs lacked
standing as none of them purchased the subject securities and because the offerings were private, not
public; dismissal of the claim under §15 due to the absence of a predicate violation, and dismissal of
the claim under the TSA because of a lack of privity. Lead Plaintiff’s opposition argued that its
claims were not time-barred, plaintiffs had standing, the offerings were public, and predicate
violations were adequately alleged, as were the claims under the TSA. The Court ruled that the
claims were timely, Lead Plaintiff had standing to sue, the issue of whether the offerings were public
or private could not be resolved at the current stage of the litigation, and liability under §15 and the
TSA had been adequately pled. See 3/30/04 Order re Lehman Defendants’ Motion to Dismiss
(Docket No. 2043) at 8.
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109. On August 18, 2003, The Deutsche Bank Entities filed a motion to dismiss the FACC
(Docket No. 1620), which argued that, with regard to the Exchange Act claims, the FACC failed to
adequately plead scienter, reliance and loss causation, and that certain of the claims were time-
barred. On September 25, 2003, Lead Counsel filed Plaintiff’s Memorandum of Law in Opposition
to the Deutsche Bank Defendants’ Motion to Dismiss (Docket No. 1707) (and on December 11,
2003 filed Plaintiff’s Response to the Deutsche Bank Entities’ Notice of Supplemental Authority in
Support of Their Motion to Dismiss the First Amended Consolidated Complaint, which concerned
Deutsche Bank’s reliance on the Final Report of Neal Batson, Court-Appointed Examiner (Docket
No. 1887)). In its opposition, Lead Plaintiff argued that the FACC adequately pled reliance under
the fraud-on-the-market theory, that the allegations of the defendants’ structured tax deals with
Enron gave a false picture of Enron’s finances which inflated the price of its securities, and that the
defendants issued analyst reports concerning Enron which contained false and misleading
statements. Lead Plaintiff contended also that claims concerning the tax deals were not time-barred.
In the same motion, Deutsche Bank AG and Deutsche Bank Securities, Inc. argued for dismissal
because, with regard to the claims under the Securities Act of 1933 (“Securities Act”), the FACC
failed to identify false or misleading statements in the offering memoranda, and no action was
available regarding private placements. Lead Plaintiff countered that the offerings in question were
public, not private. The Court, although it agreed with Lead Plaintiff that it had sufficiently pled
reliance and loss causation, nevertheless dismissed Lead Plaintiff’s Exchange Act claims, because
claims concerning all but one of the tax deals were time-barred. As to the Securities Act claims, the
Court found that factual issues required resolution before it could rule whether the challenged
offerings were actionable as public, and accordingly denied the motion to dismiss these claims. See
3/29/04 Memorandum and Order re Merrill Lynch and Deutsche Bank Entities (Docket No. 2036) at
91.
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4. Motions to Intervene Additional Plaintiffs and Motions to Dismiss the WSIB Case
110. On August 27, 2003, Lead Counsel filed Imperial County Employees Retirement
System’s (“ICERS”) and IHC Health Plans, Inc.’s Motion to Intervene Under Fed. R. Civ. P.
24(b)(2) (Docket No. 1630). The motion sought to add intervenors as plaintiffs because they
purchased the Foreign Debt Securities, and thus would provide broader representation for the Class,
curing certain alleged standing defects. On September 30, 2003, the bank defendants filed an
opposition (Docket No. 1719), which argued that intervention should be denied because such cannot
remedy any standing deficiency, and the claims sought to be added were time-barred. On October 3,
2003, V&E filed an opposition (Docket No. 1729), incorporating by reference the arguments against
intervention advanced by the bank defendants. On October 31, 2003, Lead Counsel filed a reply in
support of the motion (Docket No. 1804), which argued that intervention was proper, and that the
claims were not time-barred. The Court ruled that the claims were timely, that ICERS had standing
for certain claims, and that intervention by ICERS would serve to protect the Class by strengthening
class representation; the Court granted ICERS’ motion to intervene as a named plaintiff (but denied
without prejudice as premature its motion to intervene as a class representative). See 2/24/04
Memorandum and Order re Imperial County Employees Retirement System’s Motion to Intervene
(Docket No. 1999) at 108-09.
111. In the Washington State Investment Board v. Lay case, on November 14, 2003,
defendants Citigroup, Deutsche Bank, JPMorgan, Lehman Brothers, the Officer and Director
Defendants, V&E, Andersen and certain individuals from Andersen filed motions to dismiss the
complaint (Docket Nos. 50-68, 75-76 in Case No. H-02-3401). The parties contended, and the Court
ruled, as follows:
(a) Citigroup: Citigroup argued for dismissal because the Court had dismissed
similar claims against other banks in the case; the complaint failed to allege primarily liability; the
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complaint did not comply with applicable pleading requirements; and the complaint failed to plead
loss causation. On December 30, 2003, Lead Counsel filed Plaintiffs’ Opposition to the Citigroup
Defendants’ Separate Memorandum of Law in Support of Their Motion to Dismiss (Docket No. 86
in Case No. H-02-3401), which argued that Citigroup’s conduct in the Nighthawk transaction
violated the securities laws, Citigroup made false and misleading statements, plaintiffs’ claims were
pled with the requisite particularity, and the complaint adequately pled loss causation.
(b) Deutsche Bank: Deutsche Bank argued for dismissal because the claims
against it were time-barred. On December 30, 2003, Lead Counsel filed Plaintiffs’ Opposition to
Deutsche Bank Entities’ Motion to Dismiss (Docket No. 85 in Case No. H-02-3401), which argued
that the defendant’s conduct in tax transactions violated the securities laws, and both reliance and
loss causation were properly pled. On January 29, 2004, Lead Counsel also filed Plaintiffs’ Sur-
Reply to Reply Memorandum of Law in Support of the Deutsche Bank Entities’ Motion to Dismiss
(Docket No. 125 in Case No. H-02-3401), arguing that the effect of the tax transactions was
unknown to investors and the transactions had no legitimate business purpose.
(c) JPMorgan and Lehman Brothers: JPMorgan argued that the complaint failed
to allege any act constituting primary liability; failed to plead scienter; and failed to adequately
allege control person liability. Lehman Brothers argued for dismissal because it was not subject to
control person liability. On December 30, 2003, Lead Counsel filed Plaintiffs’ Memorandum of
Law in Opposition to the Motions to Dismiss Filed by the JPMorgan Defendants and Lehman
Defendants (Docket No. 87 in Case No. H-02-3401), which argued that JPMorgan’s conduct in
prepays and other transactions violated the securities laws, and that the complaint’s allegations were
sufficiently pled.
(d) Officer Defendants Buy, Frevert, Kean, Koenig, McMahon, Olson, Rice,
Whalley, Hannon, Hirko and Causey; and Director Defendants Belfer, Blake, Chan, Duncan, Foy,
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Gramm, Jaedicke, LeMaistre, Meyer, Wakeham, Walker & Winokur and Urquhart. The Officer
Defendants argued for dismissal because the complaint failed to meet the particularized pleading
requirements for securities fraud; and the complaint failed to plead control person liability. The
Director Defendants argued for dismissal because the complaint failed to plead control person
liability; and certain directors were not properly served. On December 30, 2003, Lead Counsel filed
Plaintiffs’ Opposition to the Motions to Dismiss of the Officer and Director Defendants (Docket No.
89 in Case No. H-02-3401), which argued that the complaint adequately pled claims against the
officer defendants for engaging in a fraudulent scheme, that the defendants faced control person
liability, and that the Court should reject the defendants’ arguments of inadequate service.
(e) V&E: V&E argued for dismissal because the complaint failed to allege that
defendant committed any act which gave rise to primary liability. On 12/30/03, Lead Counsel filed
Plaintiffs’ Opposition to Vinson & Elkins’s Motion to Dismiss (Docket No. 83 in Case No. H-02-
3401), which argued that the complaint adequately alleged the primary liability of V&E.
(f) On November 17, 2003, Andersen, Thomas Bauer, Debra Cash, Stephen
Goddard, Gary Goolsby, Michael Lowther and David B. Duncan moved to dismiss for the same
reasons as the other moving defendants (Docket No. 75 in Case No. H-02-3401). On December 30,
2003, Lead Counsel filed Plaintiffs’ Opposition to Motions to Dismiss by Arthur Andersen LLP,
Thomas Bauer, Debra Cash, Stephen Goddard, Gary Goolsby, Michael Lowther and David B.
Duncan (Docket No. 84 in Case No. H-02-3401), which incorporated Lead Plaintiff’s
counterarguments to the arguments of the other moving defendants.
(g) In addition to the arguments discussed above, in the motions to dismiss
defendants Citigroup, JPMorgan, Barclays, Deutsche Bank, Lehman Brothers and the Officer and
Director Defendants challenged plaintiffs’ claims under the statute of limitations. In response, on
December 30, 2003, Lead Counsel filed Plaintiffs’ Opposition to Certain Defendants’ Motions to
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Dismiss Based on Statute of Limitations Arguments (Docket No. 88 in Case No. H-02-3401), which
argued that plaintiffs’ claims were timely under the extended statute of imitations provided by the
Sarbanes-Oxley Act of 2002.
(h) The Court ruled that Lehman Brothers’ motion was moot, because the Court
had granted preliminary approval to a proposed partial settlement with that defendant. See 2/16/05
Memorandum and Order of Partial Dismissal (Docket No. 146 in Case No. H-02-3401) at 5. As to
the other defendants, the Court ruled that all claims were barred by the statute of limitations. See id.
at 13-14.
VII. DISCOVERY
112. While formal discovery was stayed by the PSLRA, as noted above we sought
hundreds of witness interviews, reviewed millions of pages of public documents and sought
documents from other litigation. Nothing came easy. After motion practice, the Court ordered
Enron to produce documents it had provided to the government. Months later, when Enron refused
to produce documents as ordered by the Court, we filed a motion to compel compliance with the
order to produce. The sureties objected to Enron producing certain documents. We had to obtain
Enron’s formal consent to allow AWSC to produce documents to us. When we sought access to
materials produced in the Enron bankruptcy pursuant to Bankruptcy Rule 2004, Judge Gonzalez
denied our request.
1. Lead Counsel Serves Document Production Requests on the Financial Institutions and Seeks Other Relevant Documents
113. Before the Court’s December 2002 ruling on the financial institutions’ motions to
dismiss, in July 2002 Lead Counsel served its comprehensive document production requests on
defendants. The requests were prepared early on in the litigation to help speed the search for and
production of relevant evidence. The requests were prepared using, among other things, Lead
Counsel’s investigative materials, input from securities, accounting, banking, trading and energy
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professionals and experts, and attempted to maximize the amount of information covered, in part
because the fraud spanned years and involved hundreds of illicit transactions.
114. The detailed document production requests primarily concerned the banks’ Enron-
related banking business, including alleged illicit transactions, trading in Enron securities, analysts,
and internal communications among banking professionals concerning their client Enron. The
document production requests were an important component of a massive, multi-pronged discovery
plan that also sought sworn statements, SEC testimony, interrogatory responses, requests for
admission, together with Lead Counsel’s independent investigation concerning the Enron fraud.
115. After the PSLRA discovery stay was lifted, and before depositions began in summer
2004, a significant portion of Lead Counsel’s time was devoted to securing the documents. Lead
Counsel entered into negotiations with all the defendants concerning the production of relevant paper
and electronic evidence. The communications ultimately spanned years of negotiations, meet-and-
confers, arguments, and law-and-motion practice to secure relevant evidence to prove Lead
Plaintiff’s case as trial.
116. Lead Counsel had to repeatedly negotiate with experienced defense counsel to secure
the relevant evidence, a process that took many months, and as discovery progressed, the demands
for evidence spanned years. On occasion Lead Counsel successfully negotiated for the production of
relevant evidence. Other times, negotiations failed, necessitating motions to compel responses or
answers from defendants.
117. Lead Counsel was successful in obtaining crucial evidence from defendants. Key
electronic and documentary evidence and communications, together with sworn testimony, was used
extensively during the oral depositions that began in summer 2004. Notably, because Lead Counsel
took the lead in establishing a document depository for the receipt, storage and retrieval of the
evidence, all parties to the litigation had access to and were able to search the depository for relevant
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information to either support or defend against the allegations contained in the numerous complaints
and answers filed in the Enron litigation.
2. The Parties Establish a Document Depository for the Exchange of Information
118. Lead Counsel spearheaded efforts to establish a “document depository” to allow for
the uniform production of documents and electronic evidence used in all Enron-related proceedings.
The document depository minimized duplication of production efforts, significantly reduced the
aggregate costs of producing and maintaining documents, and permitted a centralized, uniform
method for identifying documents used during the litigation, including fact witness depositions,
expert depositions and summary judgment.
119. The document depository order was signed by the Court on October 30, 2002, and
also was signed by the parties to the litigation (Docket No. 1116). In addition to governing the
orderly flow of documentary and electronic information to the depository, the order also allocated
costs among the parties, contained provisions for production and access by third parties, provided for
the creation of privilege logs, and established production and retention dates to be followed by all
parties.
3. Lead Counsel Compels Enron Executives to Produce Particularized Discovery Concerning Financial Conflicts
120. During the discovery phase Lead Counsel pursued evidence from Enron’s Board and
high-level executives. The evidence included personal financial information showing financial
conflicts of interest, profiteering and personal communications outside the office. Lead Plaintiff
demanded the production of particularized information concerning the executives’ and Board
members’ personnel files, along with evidence concerning insider trading, business and financial
conflicts, and similar information showing the Board’s objectivity was compromised.
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121. On May 7, 2003, the Outside Directors moved for a protective order (Docket No.
1374). The Outside Directors argued their personal financial information was private, privileged,
irrelevant and not discoverable. The Outside Directors further argued disclosing some of the
personal information, such as phone numbers, individual account information and personally
identifying information, would endanger the personal safety of Enron executives, some of whom
purportedly had been threatened via email. The Outside Directors’ motion was joined by several
other Enron executives on May 15, 2003, and on May 27, 2003 (Docket Nos. 1390, 1426-1433,
1435).
122. On May 27, 2003, Lead Counsel opposed the Board’s and executives’ motion for
protective order (Docket No. 1434). Lead Counsel proffered evidence demonstrating Enron’s Board
and high-level executives were tainted by financial conflicts and insider trading. Lead Counsel
submitted evidence from investigators and congressional hearings highlighting the conflicts, and the
resultant need for the discovery. Lead Counsel persuasively argued the discovery protections
already in place would protect defendants from improper disclosure of their personal information,
and Lead Counsel reiterated its agreement to treat defendants’ information in accord with the Court’s
standing orders governing confidentiality. Finally, Lead Counsel showed by category why the
requested information should be produced, and even showed some of the information was already in
the public domain, contrary to the representations in defendants’ protective order motion.
123. Lead Counsel’s discovery efforts were successful. Lead Counsel already had an
initial discovery victory on March 27, 2003, when the Court ordered that Enron’s personnel files be
produced to the document depository. The Court reasoned the information was relevant and held the
Court’s general procedures for the safeguarding of confidential information, coupled with the
procedures governing the Enron document depository, were sufficient protection. The Court further
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ordered the information from “personnel files shall be deemed confidential and shall not be disclosed
by persons given access to the documents in the document depository.” 3/27/03 Order at 3.
124. On July 9, 2003, the Court denied the Outside Directors’ motion for protective order
(Docket No. 1548). The Court said it had “addressed the issue of protective orders on at least two
previous occasions.” Id at 6. The Court held in balancing the privacy interests of Enron’s
executives with the plaintiffs’ necessity, plaintiffs’ demonstrated need “outweighs the privacy
interests,” and held the privacy “procedures already in place” will “protect the use of personal
information.” Id. The Court ordered the requested documents be produced to plaintiffs, and
admonished the parties to refrain from placing social security numbers, account numbers and similar
personal information in public pleadings.
4. Lead Plaintiff Defeats Efforts to Establish a Blanket Protective Order
125. On behalf of all Enron Class members and the investing public, on September 24,
2002, Lead Plaintiff filed a motion to preclude the filing or production of documents subject to a
protective order (Docket No. 1039). Lead Plaintiff’s motion was made in response to Enron’s filing
a motion for protective order, seeking to conceal from the public key documents and evidence
concerning the securities fraud. Enron was joined by a number of defendants, including the financial
institutions.
126. Lead Counsel vigorously opposed Enron’s motion. Lead Counsel argued on behalf of
all Enron investors, “Plaintiffs seek this relief in the interest of providing full access to these
proceedings for absent Class members, the legal and financial communities, regulatory bodies and
the public at large.” Plaintiffs’ Memorandum of Law in Support of Motion to Preclude the Filing or
Production of Documents Subject to a Protective Order at 1.
127. Lead Plaintiff recognized the Enron litigation had far-reaching implications for
investors, pension funds, business, academics, policy makers and the government, and thus because
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of Enron’s prominence and magnitude, public access was critical. Lead Plaintiff argued the public
and Enron’s investors must be permitted to observe the factual and legal circumstances concerning
Enron’s rise, collapse, and the extent to which the federal securities laws were violated in the
process. Lead Plaintiff was joined by several national media organizations (e.g., The New York
Times, Dow Jones), who on October 25, 2002 filed a brief in support of Lead Counsel’s motion
(Docket No. 1110).
128. Lead Counsel defeated the blanket protective order. On December 18, 2002, the
Court granted Lead Plaintiff’s motion to preclude the filing of documents subject to a blanket
protective order. “It is incumbent upon the defendants . . . if they want parts of their discovery
protected, to move in good faith for a particularized protective order pursuant to Rule 26(c),” said
the Court. 12/19/02 Order on Plaintiffs’ Motion to Preclude the Filing or Production of Documents
Subject to a Protective Order (Docket No. 1192) at 7. “[T]he Court will not impose a blanket
protective order covering all discovery in the case.” Id. As discussed above, on March 27, 2003, the
Court ordered Enron to produce the documents to the document depository (Docket No. 1307). If
Enron desired confidential treatment for particular documents, the Court ordered Enron to identify
the document on a privilege log, and then share the log with both Lead Counsel and counsel for the
media organizations.
129. The defeat of the blanket protective order was particularly important to Enron’s
investors, the public markets, government regulators and academics. The Court’s order ensured
public and media access to the Enron proceedings and defeated attempts to conceal the facts about
Enron’s demise.
5. Discovery Propounded by Lead Plaintiff
130. The chart below chronicles the sources and volume of documents produced in the
litigation, which suggests the scope and magnitude of Lead Counsel’s efforts to review and analyze
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the documents for use during fact and expert discovery depositions, in summary-judgment-motion
oppositions, and for trial exhibits:
Defendant
Documents
Pages
Arthur Andersen Arthur Andersen LLP 1,292,830 9,009.313 Law Firms & Counsel Vinson & Elkins 438,025 5,528,316 Andrews Kurth, LLP 19,196 140,862 Kirkland & Ellis 40,485 464,627
Subtotal 497,706 6,133,805 Board of Directors Belfer, Robert 3,335 16,183 Blake, Jr., Norman 260 9,589 Chan, Ronnie 5 15 Duncan, John 776 5,299 Foy, Joe 87 804 Gramm, Wendy 1,379 8,148 Harrison, Ken 1,825 20,593 Jaedicke, Robert 285 2,004 Lay, Kenneth 9,660 37,872 LeMaistre, Charles 447 1,773 Meyer, Jerome 134 334 Skilling, Jeffrey 612 4,803 Urquhart, John 11,225 140,289 Wakeham, John 1,030 4,478 Walker, Charls 54 8,087 Whalley, Lawrence 235 1,710 Winokur, Herbert 578 6,469
Subtotal 31,927 268,450 Enron Executives Buy, Richard 383 5,076 Causey, Richard 544 1.905 Fastow, Andrew 1,169 16,590 Frevert, Mark 60 335 Hirko, Joseph 900 3,282 Horton, Stanley 303 1,952 Kean, Steven 442 5,836 Koenig, Mark 1,337 6,288 McMahon, Jeffrey 366 1,330 Olson, Cindy 66 154 Pai, Lou 3,128 15,035 Sutton, Joseph 1,090 6,677 Willison, Bruce 1 36
Subtotal 9,789 64,496 Financial Institutions Bank of America 7,730 77,344 Barclays 74,230 633,137 Canadian Imperial Bank of
Commerce
160,324
2,162,358 Citigroup 267,526 2,478,288 Credit Suisse First Boston 218,332 1,873,822 Deutsche Bank 121,756 986,210 Goldman Sachs 3,172 34,301 JP Morgan 354,760 4,184,949 Lehman 6,391 88,019 Merrill Lynch 61,594 940,999 Royal Bank of Canada 72,228 321,197 Toronto Dominion Bank 6,022 38,775 Alliance Capital Management 3,638 28,572
Subtotal 1,357,703 13,847,971 Additional Documents Reviewed
(Including documents produced by non-parties, Batson materials, materials from the several criminal trials, etc.)
8,273,508
44,482,264 TOTAL DOCUMENTS REVIEWED
11,463,463
73,806,299
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131. As part of discovery, Lead Counsel issued scores of subpoenas to third parties, which
involved the requisite meet-and-confer sessions, letters to memorialize those sessions, and
considerable follow-up to insure receipt of the requested documents. We sought documents from the
sureties, that is the insurance companies, in the Liberty Mutual case where JPMorgan Chase was
trying to collect on insurance policies purchased to cover default on the commodities trades, which
were really loans, underlying the prepay transactions. We subpoenaed documents from rating
agencies, such as Moody’s, to learn about the information they relied on to rate Enron’s debt and
how they determined the ratings issued. We subpoenaed stock analysts, such as David Fleischer,
and short-sellers to gather evidence relating to loss causation. We sought documents from
Innovision, which recorded Enron’s analyst and employee conferences. We sought trade data from
investment banks in order to support our allegation that debt prices reacted when there was a default
risk.
Third Parties and Defendants Date Subpoena Issued
Thomas H. Bauer 01/29/02 David B. Duncan 01/29/02 Michael C. Odom 01/29/02 Nancy Temple 01/29/02 Lehman Brothers Holdings Inc. 03/05/02 Citigroup Inc., Robertson Stephens & Co. Inc., JPMorgan Chase, Salomon Smith Barney, Inc., Credit Suisse First Boston, Banc of America Securities, CIBC World Markets, Morgan Stanley Dean Witter & Co., Prudential Securities, Deutsche Bank Securities Inc., Merrill Lynch & Co., Inc.
03/05/02
St. Paul Fire & Marine Insurance Co. 01/02/03 01/17/03 02/27/03
The Travelers Indemnity Co. 01/02/03 01/17/03 02/27/03
The Travelers Casualty & Surety Co. 01/02/03 01/17/03 02/27/03
Hartford Fire Insurance Co. 01/02/03 01/17/03 02/27/03
Safeco Insurance Co. of America 01/02/03 01/17/03 02/27/03
Lumbermens Mutual Casualty Co. 01/02/03 01/21/03 02/27/03
Fireman’s Fund Insurance Co. 01/02/03 01/17/03 02/27/03
National Fire Insurance Co. of Hartford 01/02/03
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Third Parties and Defendants Date Subpoena Issued
01/21/03 02/27/03
Continental Casualty Co. 01/02/03 01/17/03 02/27/03
Federal Insurance Co. 01/02/03 01/17/03 02/27/03
JPMorgan Chase Bank 01/03/03 01/17/03 02/27/03
Liberty Mutual Insurance Co. 01/21/03 02/27/03
Moody’s Corp. 08/22/03 Fitch, Inc. 08/22/03 Standard & Poor’s Corporation 08/22/03 Paul Deards 05/10/04 Jennifer Bishko 05/10/04 Otto Jager 05/10/04 John Meyer 05/10/04 Billy Bauch 05/10/04 Osmar Abib 05/10/04 Jim Ballentine 05/10/04 Martin Woodhams 05/10/04 Marc Shapiro 05/10/04 Elizabeth Tilney 05/11/04 Schuyler Tilney 05/11/04 Mark Wolf 05/12/04
06/11/04 Ian Schottlaender 05/12/04 Thomas W. Davis 05/12/04 Robert Furst 05/12/04
05/24/04 06/23/05
James A. Brown 05/12/04 08/28/06
Daniel Bayly 05/12/04 05/18/04 06/23/05
James Moran 06/11/04 Amanda Angelini 06/11/04 Amy Ripepi 06/11/04 Anatole Feygin 06/11/04 John Sullivan 06/11/04 Richard Williams 06/11/04 Roger Willard 06/11/04 Richard Corgel 06/11/04 Mercedes Arango 06/11/04 Jeffrey Dellapina 06/11/04 Jonathan Taylor 07/13/04 Henry Pullman 07/13/04 Mary Beth Mandanas 07/13/04 Benjamin Sullivan 07/13/04 Chris Lyons 07/13/04 Mark Webster 07/13/04 Craig Orchant 07/13/04 Collette Delaney 07/13/04 David Fleischer 07/14/04 Goldman, Sachs & Co. 07/14/04
09/14/05 Robert Jeffe 08/16/04
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Third Parties and Defendants Date Subpoena Issued
Larry Rieger 08/16/04 Richard Gordon 08/16/04 Robert Clemmens 08/16/04 Saul Bernstein 08/16/04 George Serice 08/16/04 Rick Walker 08/16/04 Gerry Beauclair 08/17/04 Dwight Scott 09/21/04 Dean Keller 09/21/04 Jamie Welch 09/21/04 James Lee 09/21/04 Karen Simon 09/21/04
10/26/04 Charles Freeman 09/21/04 Bob Abra 09/21/04
03/16/05 03/22/05
Paul Cambridge 09/21/04 Nicholas Bell 09/22/04 George McKean 09/29/04 Boyd Carano 09/29/04 Adebayo Ogunlesi 10/26/04 Dominic Capolongo 10/26/04 Debra Cash 10/26/04 Richard Ivers 10/26/04 Adam Kulick 10/26/04 Richard Caplan 10/26/04 Benoit DeVitry 10/26/04 Brian Smith 10/26/04 Michael Jakubik 10/26/04 Greg Crowley 10/26/04 John Olson 10/26/04
11/01/04 Michael Sabloff 11/12/04 Leslie Webster 11/12/04 Kimberly Scardino 12/08/04 Robert O’Brien 12/08/04 Lawrence Nath 12/08/04 Michael Nepveux 12/08/04 Sandra Aultman 12/08/04
04/07/05 William Ortner 12/15/04 Sal Esposito 12/15/04 Steve Wagman 12/20/04 Seth Rubin 12/21/04 Graham McGahen 12/27/04 Robert Traband 01/14/05 Pritesh Pahkania 01/18/05 Eric Chilton 01/18/05 Brian McCabe 01/18/05 Gery Sampere 01/18/05 Chris Wardell 01/18/05 Ian Jefferson 01/18/05 David Lund 01/18/05 David Sullivan 01/18/05 Bill Walsh 02/17/05 Ed Devine 02/17/05 David Koczan 02/17/05 Bill Repko 02/17/05 David Bushnell 02/17/05 Shawn Feeney 02/17/05
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Third Parties and Defendants Date Subpoena Issued
Raymond Troubh 02/18/05 Ono Ruding 02/28/05 Columbia Gulf Transmission Co. 03/01/05 Texas Eastern Transmission LP 03/01/05 Texas Gas Transmission LLC 03/01/05 Transcontinental Gas Pipe Line Corp. 03/01/05 Arco Pipeline Company 03/02/05 James Reilly 03/08/05 Elliot Conway 03/15/05 Curt Launer 03/15/05 Leon Kozak 03/15/05 Tennessee Gas Pipeline Co. 03/15/05 Spring Hollis 03/16/05 Helen Calvelli 03/16/05 Diane Butterfield 03/18/05 Claire O’Connor 03/18/05 Cynthia Ogden 03/18/05 David Pflug 03/31/05 Thomas Stott 04/01/05 Shirley Elliot 04/27/05 Ray Niles 04/27/05 Maureen Hendricks 04/27/05 Anne Clark-Wolff 04/27/05 Petrina Chandler 04/27/05 Andy Devries 04/27/05 David Maletta 04/27/05 Steven Herrup 04/27/05 Patrick O’Brien 04/27/05 Donald Layton 04/27/05 Julie Bieser 04/27/05 Richard Firth 04/29/05 Paul LeVersha 04/29/05 Fleet Corporate & Investment Banking 05/18/05 TXU Corp. 05/18/05 TXU Portfolio Management Co. L.P. 05/31/05 Steve Baillie 06/07/05 Joe Sclafani 06/07/05 Phil Levy 06/07/05 David Morris 06/07/05 Paul Glover 06/07/05 Bill Boyle 06/07/05 Brian Herman 06/07/05 Locke McMurray 06/07/05
09/29/05 Lucia Martinez 06/15/05
06/16/05 Daniel Gordon 06/23/05
07/07/05 William S. McKee 07/07/05 Jonathan Yellen 07/11/05 Nick Tjandramaga 07/11/05 Jill Sakol 07/11/05 Herb Allison 07/11/05 John P. Buser 07/11/05 Ronald Barone 07/29/05 Thomas Finley 08/18/05 Robert McCann 08/18/05 Phillip Salles 08/18/05 Carmen Marino 08/18/05 Steve Haratunian 08/18/05 Bear Stearns & Co. Inc. 08/24/05
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Third Parties and Defendants Date Subpoena Issued
09/14/05 Michael G. Barbis 08/24/05 A.G. Edwards & Sons, Inc. 08/24/05
09/14/05 Michael C. Heim 08/24/05
10/04/05 Robert K. Winters 08/24/05
09/27/05 Fulcrum Global Partners LLC 08/24/05 Akin Gump Strauss Hauer & Feld LLP 09/08/05
09/16/05 Lehman Brothers International Europe 09/14/05 Prudential Bache Securities (UK) 09/14/05 Prudential Securities, Inc. 09/14/05 Morgan Stanley Dean Witter 09/14/05 Morgan Stanley & Company Inc. 09/14/05
11/14/05 Dresdner Kleinwort Wasserstein 09/14/05 Dresdner Kleinwort Benson 09/14/05 Lazard LLC 09/14/05 Daiwa Securities America, Inc. 09/14/05 Banco Central Hispano 09/14/05 Credit Lyonnais 09/14/05 Credit Lyonnais Securities (USA) 09/14/05 BNP Paribas Corporation Service Co. 09/14/05 Banca Commericale Italiana 09/14/05 ABN Amro 09/14/05 Mizuho InterNational plc 09/15/05 Painewebber, Inc. 09/15/05 West LB AG 09/15/05 Daiwa Securities SB Capital Market 09/15/05 UBS Securities 09/15/05 Societe Generale 09/15/05 UBS Warburg LLC 09/15/05 Scotia Capital Inc. 09/15/05 Schroder Salomon Smith Barney Inc. 09/15/05 Salomon Brothers Inc. 09/15/05 Smith Barney, Inc. 09/15/05 Bancamerica Robertson Stephens 09/15/05 NatWest Capital Markets 09/15/05 Natwest Securities Corp. 09/15/05 Royal Bank of Scotland 09/15/05 Dynegy, Inc. 09/15/05 Paul Tice 09/16/05 Peggy Cappomagi 09/16/05 Marcus Tarkington 09/16/05 Ed Tirello 09/16/05 Kidder Peabody Group Inc. 09/16/05 Banco Santander International 09/16/05 Calli Hayes 09/29/05 Brian McGuire 09/29/05 Lehman 30(b)(6) 10/04/05 Innovision Communications, Inc. 10/21/05 Rosalee Fleming 10/26/05 Joannie Williamson 10/26/05 Karen Heathman 10/26/05 Sharron R. Westbrook 10/26/05 Bridget Maronge 10/26/05 Sheri L. Reinartz-Sera 10/26/05 Tori Wells 10/26/05 Lazard Capital Markets, LLC 11/07/05
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Third Parties and Defendants Date Subpoena Issued
Pricewaterhousecoopers 05/22/06 John Aitken 07/19/06 Jamie Cameron 07/19/06 Blair Fleming 07/19/06 Debra Giles 07/19/06 Bob Hall 07/19/06 Graeme Hepworth 07/19/06 Mark Hughes 07/19/06 Suzanne LaBarge 07/19/06 Pierre LaForest 07/19/06 Ian McArthur 07/19/06 Frank Piazza 07/19/06 John Roberts 07/19/06 Linda Stephens 07/19/06 Schuyler Tilney 07/19/06 McKinsey & Co. 08/08/06 Credit Suisse First Boston 08/08/06 Mark Easterbrook 08/15/06 J.J. Berney 08/18/06 Ira Cohen 08/18/06 Eric Madoff 08/18/06 Eric Grubman 08/18/06 Don Textor 08/18/06 David Leusden 08/18/06 Daniel Ryan 08/18/06 Steve Daniel 08/18/06 Steve Winegar 08/18/06 Santosh Sreenivasan 08/18/06 Rob Sweeney 08/18/06 Rebecca Fein 08/18/06 Pierre Lapeyre 08/18/06 Peter Brundage 08/18/06 Nick Giovanni 08/18/06 Michael Ryan 08/18/06 Karin Nee 08/18/06 Josh Goza 08/18/06 John Daly 08/18/06 J.P. Morgan Chase & Co. 08/21/06
132. One key piece of written discovery to defendants was our requests for admission
(“RFAs”), based on Batson, Powers Committee materials, and congressional exhibits and testimony,
as well as the millions of pages of documents we reviewed and analyzed pre-trial. Lead Counsel
propounded more than 345 RFAs to defendants Merrill Lynch, CIBC, Citigroup and Deutsche Bank,
in hopes of narrowing the evidence and issues that would need to be proven through trial testimony.
While defendants denied most of them, some of the answers helped us focus the issues that needed
further discovery and pre-trial work.
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133. Document requests and subpoenas to defendants and third parties, and interviews of
former Enron employees and others resulted in Lead Counsel receiving, coding and processing, and
analyzing terabytes of data – tens of millions of pages of documents (in hard-copy and electronic
format). The gargantuan volume of documents, millions produced on an ever-rolling basis, required
a massive and sustained effort led by the staff and lawyers in Houston, utilizing two shifts of coding
teams and analysts in the trial office. The document-review effort included work by forensic
experts, paralegals, consultants, and lawyers to literally sort, identify, cull, de-duplicate, extract data
from and then analyze, pertinent documents from electronic databases from all defendants and third
parties for more in-depth review and use in depositions and pre-trial preparation. The effort required
an organized approach to staff the coding and analytic teams, prepare for and receive the documents,
create the database and shepherd the coding process, and build hundreds of transaction and witness
binders – nine-inch volumes – for all potential deponents and trial witnesses. Our abilities, patience,
and perseverance were tested by unique, at first, and later, routine electronic complexities presented
by the colossal volume of documents we received, organized, reviewed, analyzed and utilized.
6. Lead Counsel’s Interrogatories and Motions to Compel Responses
134. Lead Counsel vigorously pursued interrogatory discovery. The first of several sets of
interrogatory discovery was served in May 2003. The interrogatories requested detailed information
from the financial institutions and others concerning the nature of their business relationship with
Enron, the names and positions of employees who participated in Enron-related transactions, and
fees earned from the transactions. The interrogatories also probed the affirmative defenses,
including reliance on advice of counsel and the assigning of liability to third parties.
135. Lead Counsel also held numerous meet and confer sessions with the financial
institutions to compel further responses, especially where defendants either delayed in responding to
questions pending the completion of discovery, or simply refused to answer the interrogatories.
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Most of the meet-and-confer sessions were fruitful, resulting in additional information being
disclosed to all parties, some of which was used during oral examination of defendant witnesses,
especially concerning due diligence, fees earned on allegedly fraudulent transactions, and the
participants to various transactions.
136. On several occasions, however, meet-and-confer sessions failed and Lead Counsel
was forced to compel defendants to meaningfully respond to the interrogatories. For example, on
November 3, 2004, Lead Counsel moved to compel Andersen to file complete responses to Lead
Plaintiff’s interrogatory concerning Andersen witnesses with knowledge of fraud by Enron, and to
compel production of Andersen separation/severance agreements (Docket No. 2548). The motion
was successful, and on September 29, 2005, the Court directed defendants to answer the
interrogatory and produce the severance agreements (Docket No. 3982).
137. On October 20, 2005, Lead Counsel filed a motion to compel against Deutsche Bank,
seeking interrogatory information concerning the bank’s understanding of the “financial statement
impact” of its transactions with Enron (Docket No. 4055). Shortly after the motion to compel was
filed, Deutsche Bank agreed to answer the interrogatory.
7. Motion to Compel Citigroup Documents
138. On February 11, 2004 Lead Counsel filed a motion to compel documents and
electronic evidence from defendant Citigroup (Docket No. 1980). The motion arose from Lead
Counsel’s initial document production requests served on Citigroup (and other financial institution
defendants). The document production requests demanded a significant amount of documentary and
electronic information concerning the banks’ Enron-related transactions and business relationship
with Enron, including structured finance transactions, underwriting, analysts, and investments in
Enron securities and derivatives.
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139. In responding to the document production requests, Lead Counsel argued Citigroup
had failed to comply with its discovery obligations because, among other reasons:
• Citigroup refused to search for or produce documents created after December 2, 2001, even though documents created after Enron’s bankruptcy were highly relevant to the litigation;
• Citigroup had identified a group of several hundred persons who had “significant
involvement” in its relationship with Enron, but refused to search for or produce all documents from these persons purportedly because it was too burdensome;
• Citigroup refused to restore and search e-mails stored on backup tapes or similar archival
media purportedly because it was too burdensome; and • Citigroup refused to produce documents in the possession of Delta Energy Corporation, an
SPE created, controlled and funded by Citigroup to accomplish $2.4 billion in bogus prepays with Enron.
140. Lead Plaintiff also initially sought the production of SEC transcripts and other
communications, along with corporate jet manifests, Enron-related expense documents, and other
information.
141. Though Lead Counsel’s document production requests sought a significant amount of
information, Lead Plaintiff argued any burden suffered in responding to the discovery was directly
proportional to Citigroup’s extensive involvement in the Enron fraud.
142. Citigroup opposed the request on March 2, 2004 (Docket No. 2011) (“Citi
Opposition”). Citigroup said it “welcomes discovery in the litigation,” but Lead Counsel’s requests
were “grossly” overbroad and would impose undue burden on Citigroup. Citi Opposition at 2, 5.
Citigroup argued it should not have to produce additional archived emails, other than what it had
already submitted to the Enron document depository, and further argued the costs of archived email
retrieval should be borne by Lead Plaintiff. Citigroup called the request for post-bankruptcy
documents an “open-ended demand” that was “patently unreasonable.” Id. at 19. Notably,
Citigroup agreed to produce the Delta-related documents and said the issue was now “moot.”
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143. A hearing was set on Lead Plaintiff’s motion to compel. Just days before the hearing,
the parties reached agreement on the disputed discovery, with Citigroup agreeing to produce many of
the requested categories of information. The parties met and conferred for several days concerning
Citigroup’s agreement to produce additional archived electronic information, including allowing
Lead Plaintiff to identify Citigroup employees from whom information would be produced.
Additionally, Citigroup agreed to pay for the additional restoration and production efforts.
8. Subpoenas and Moving to Compel Production of JPMorgan Documents
144. On September 3, 2004, Lead Counsel filed a motion to compel JPMorgan to produce
responsive committee meeting minutes, alleging the bank’s then-current production was inadequate
and the bank failed to provide adequate assurance that all responsive meeting minutes had been
produced from JPMorgan committees that met to discuss and review Enron-related transactions
(Docket No. 2378). After Lead Counsel filed its motion to compel against JPMorgan, the parties
met and conferred concerning the meeting minutes, resulting in the identification of relevant minutes
within the document depository. Because Lead Counsel’s motion was satisfactorily addressed by
counsel for the parties, on October 5, 2004 the motion to compel was voluntarily withdrawn (Docket
No. 2438).
145. Lead Counsel subsequently filed another motion to compel against JPMorgan. On
December 7, 2004, Lead Counsel demanded the production of internal telephone conference call
transcripts prepared by JPMorgan that were withheld from plaintiffs (Docket No. 2758). Lead
Counsel also moved to compel further responses to certain interrogatories, including questions about
Mahonia and related JPMorgan-Enron transactions. The motion to compel was also a success, and
on January 10, 2005 the Court ordered JPMorgan to produce the transcripts of the recorded
telephone conversations, identify participants to the telephone conversations, and produce relevant
documents concerning JPMorgan special purpose entities (Docket No. 2940).
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146. In addition to JPMorgan’s internal documents, Lead Counsel also successfully
secured documents, evidence, and testimony from JPMorgan and nearly a dozen sureties involved in
JPMorgan Chase Bank v. Liberty Mutual, No. 01-11523 (S.D.N.Y.). The JPMorgan Chase Bank
litigation concerned the bank’s attempt to recover monies from its underwriters on certain failed
Enron-related transactions; the sureties initially refused to pay the claims, arguing the underlying
transactions were fraudulent. Just days after that case was settled, and starting on January 3, 2003,
Lead Counsel served multiple rounds of document production requests and subpoenas to preserve
and obtain the documents, depositions and sworn testimony from the underlying litigation. Lead
Counsel moved swiftly to obtain the evidence because the documents were scheduled for disposal
due to the litigation’s termination.
147. Lead Counsel’s efforts were successful. Critical documents, depositions and sworn
testimony from JPMorgan Chase Bank v. Liberty Mutual were preserved and placed in the document
depository.
9. CIBC Is Forced to Deem Facts as Admitted
148. On December 22, 2003, bank defendant CIBC entered agreements with the DOJ, the
Federal Reserve Bank of New York, the Superintendent of Financial Institutions, Canada, and the
SEC. According to the agreement, in the DOJ’s view, “CIBC and its personnel have violated federal
criminal law” in the Enron fraud. As part of the agreement, “CIBC accepts responsibility for the
conduct of its employees giving rise to any violation in connection with” Enron-related transactions
involving CIBC, and CIBC further agreed to “not contradict the factual statements” set forth in a
factual statement detailing CIBC’s fraud. Pursuant to the agreement, CIBC agreed to cease engaging
in certain structured finance transactions with U.S. public companies, adopt internal governance and
compliance measures, and pay a fine of $80 million, among other things.
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149. On February 2, 2004, Lead Counsel served on CIBC nine RFAs, demanding CIBC
admit or deny the factual statements contained in CIBC’s December 22, 2003 agreement were true
and correct. The RFAs also demanded CIBC admit or deny its Enron-related transactions failed to
comply with GAAP and CIBC knew its transactions would falsify Enron’s financial statements.
CIBC responded on March 3, 2004, but in Lead Counsel’s view, failed to properly respond to the
RFAs by providing evasive responses.
150. On April 13, 2004, Lead Counsel filed a Motion to Compel Deemed Admissions by
CIBC (Docket No. 2080). Lead Plaintiff argued CIBC failed to admit or deny the facts, and instead
relied on pages of objections and definition “clarifications,” rendering CIBC’s purported
“admissions” incomprehensible and hollow. Lead Counsel also challenged CIBC’s convoluted
responses, evasive qualifications, and repeated cross-referencing of answers. Lead Counsel called
the response “unacceptable” and argued the RFAs would serve to reduce the factual issues in the
massive and complex Enron litigation. CIBC opposed on May 3, 2004, arguing its agreement with
the DOJ and others spoke for itself, and arguing its response was in accord with the Federal Rules
(Docket No. 2121).
151. On August 27, 2004, the Court ruled in Lead Plaintiff’s and Lead Counsel’s favor
(Docket No. 2367) (“8/27/04 Order”). The Court said CIBC’s objections “are not justified and its
cross-referencing and incorporating are confusing.” 8/27/04 Order at 3. The Court ordered that
eight of the nine RFAs “are deemed admitted” by CIBC, and CIBC was afforded ten additional days
to respond to the ninth RFA. Id. This was a significant ruling in Lead Plaintiff’s favor. The
Admissions circumscribed the factual dispute between the parties, curtailed evasive responses that
would have wasted judicial and litigant resources, and permitted focused discovery on the remaining
factual issues.
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10. Requests for Admission
152. In addition to CIBC, Lead Counsel also served RFAs on other defendants, including
Merrill Lynch, Citigroup and Deutsche Bank. The RFAs demanded admissions concerning
particular Enron-related transactions, the existence of documents or evidence concerning the
transactions, transaction approval, trustworthiness of particular documents, compensation resulting
from the transactions, and communications with Enron auditor Andersen, and many other topics.
The RFAs successfully narrowed factual disputes concerning the transactions and disputes about the
evidence supporting Lead Plaintiff’s allegations concerning the fraudulent nature of the underlying
deals.
11. Lead Plaintiff Succeeds in Obtaining SEC and Bankruptcy Deposition Transcripts
153. On October 31, 2003, Lead Counsel filed a motion to compel the financial institutions
to produce sworn statements and deposition transcripts given to Enron’s Bankruptcy Examiner
(Docket No. 1803). Lead Counsel explained the banks had recently filed a motion for protective
order with the bankruptcy court to keep the statements and transcripts hidden from Lead Plaintiff and
the Class.
154. Lead Plaintiff argued the district court, not bankruptcy court, was the proper forum to
determine whether the transcripts should be produced in the Enron securities litigation. Lead
Counsel had initially approached the Bankruptcy Examiner to obtain the transcripts, and Lead
Counsel followed up with document production requests to the financial institutions. The
Bankruptcy Examiner requested that Lead Plaintiff obtain the transcripts from the financial
institutions. The banks refused to produce the transcripts.
155. In its October 31, 2003 motion Lead Counsel argued the transcripts should be
produced because the sworn statements were relevant and neither privileged nor confidential. Lead
Counsel further argued the transcripts would streamline the oral depositions because “[t]here is no
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need to ask the same witnesses the same questions again. With this information we can streamline
the depositions that we take.” Lead Plaintiff’s Motion to Compel the Banks to Produce the Sworn
Statements and Deposition Transcripts of Their Employees at 2. And Lead Counsel argued the
sworn statements were prior testimony that was discoverable and also admissible at trial as
impeachment evidence.
156. Lead Counsel succeeded in obtaining the sworn testimony. On March 15, 2004, the
Court ordered that all bank defendants “produce to Lead Plaintiff copies of all deposition transcripts
and/or sworn statements relating to the investigation by the Court Appointed Bankruptcy Examiner
in the Enron Bankruptcy.” 3/15/04 Order on Motions to Compel the Banks to Produce the Sworn
Statements and Deposition Transcripts of Their Employees (Docket No. 2021) at 5. The Court
agreed having the transcripts and statements would allow oral examinations to be streamlined, and
the statements could be used as “impeachment tools.” Id. The Court further agreed with certain of
the Outside Directors, who had argued fairness dictates that all parties have access to nonprivileged
information. The sworn statements were produced to the document depository and used by the
parties to narrow the oral examination topics and to impeach witnesses.
12. The Parties Agree to a Deposition Protocol Order
157. In addition to the establishing a document depository, Lead Counsel also was
instrumental in establishing orderly procedures for the oral examination of fact witnesses in the
litigation. These procedures conserved judicial and litigant resources, significantly reduced
scheduling conflicts, and maximized the efficient use of the discovery days allotted by the Court.
158. On March 11, 2004, the Court entered an order approving Lead Counsel’s and
counsel for the various defendants’ agreed-upon protocol governing oral depositions of fact
witnesses in the litigation (Docket No. 2018). The Deposition Protocol Order established
depositions would begin on June 2, 2004 and continue through November 30, 2005. The Deposition
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Protocol Order provided for the orderly noticing and scheduling of depositions, the length of the
depositions, and limitation on deposition days
159. The Deposition Protocol Order also provided for the predesignation of deposition
content and documents, a key provision that facilitated the taking of myriad depositions involving
hundreds of thousands of exhibits. The Order further established protocols for the taking of Fifth
Amendment depositions by witnesses who intended to assert their right to not answer questions
under oath.
160. The Deposition Protocol Order was a remarkable achievement and an important
agreement and compromise among highly adversarial parties with, literally, billions of dollars at
stake. It conserved litigant resources, prevented the Court from being unnecessarily involved in
discovery disputes, and allowed for the orderly oral examination of hundreds of fact witnesses in the
litigation.
13. Compelling Knowledgeable Rule 30(b)(6) Witnesses to Appear for Deposition
161. On September 12, 2005, Lead Plaintiff and Lead Counsel joined other plaintiffs in a
motion to compel defendant Deutsche Bank to produce knowledgeable Rule 30(b)(6) deponents and
to refrain from improperly coaching witnesses during deposition (Docket No. 341 in Case No. H-02-
1446). Lead Counsel argued Deutsche Bank’s Rule 30(b)(6) designee concerning Enron transactions
had never worked at Deutsche Bank, did not work on the Enron-related transactions, had not
reviewed important documents concerning the transactions, and was unprepared to respond to
questions concerning the transactions. Lead Counsel also complained about the improper coaching
of witnesses, violating the Deposition Protocol Order as well as the federal discovery rules.
162. On November 2, 2005, the Court ruled in Lead Plaintiff’s and Lead Counsel’s favor
(Docket No. 364 in Case No. H-02-1446). The Court ordered Deutsche Bank to “designate and
present a knowledgeable 30(b)(6) witness on each and every one of the matters and transactions
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previously noticed.” Order on Plaintiffs’ Motion to Compel (Westboro #14) and Plaintiffs’ Motion
to Compel Deutsche Bank to Refrain from Instructing Witnesses During Questions (Docket No. 364
in Case No. H-02-1446) at 4. The Court also ordered Deutsche Bank to stop improperly coaching
witnesses during oral examination.
14. Lead Counsel Challenges the “Advice of Counsel” Defense
163. On May 20, 2005, Lead Counsel moved for an expedited order forcing defendants to
either (a) within five days, explicitly and unambiguously notify Lead Plaintiff in writing they waived
the advice of counsel defense, or (b) within ten days, produce all attorney-client communications
concerning Enron-related transactions for which they sought advice of counsel, answer Lead
Plaintiff’s interrogatories requesting the basis for the defense, and allow deposition questioning
concerning the legal advice at all future depositions (Docket No. 3502). Lead Counsel argued the
financial institutions avoided disclosing documents purportedly attorney-client privileged, yet at the
same time asserted an advice of counsel defense. Lead Counsel argued the defendants could not
have it both ways: assertion of advice of counsel defense operated as a subject-matter waiver of the
attorney-client privilege as to all communications with counsel.
164. The bank defendants filed a response on May 24, 2005, arguing expedited
consideration was unnecessary, a full briefing schedule was preferred because the issue was
complex, and arguing the court in WorldCom did not compel defendants to make an election or
waiver until just six weeks before trial (Docket No. 3506).
165. Lead Counsel’s motion was successful. On June 20, 2005, the Court signed a
stipulation among the parties that required defendants to inform Lead Plaintiff about any aspect of a
transaction, or complaint allegation, for which the financial institution intends to assert the defense
of reliance on its own counsel (Docket No. 3619). If asserting the reliance on counsel defense, the
financial institutions also agreed to produce all communications previously withheld on the basis of
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privilege. And the defendants agreed to supplement their interrogatory discovery responses
concerning the facts about the legal advice received, and agreed to permit oral examination of
witnesses concerning legal advice if the financial institution continued to rely on advice of its own
counsel as a defense.
15. Lead Plaintiff Compels Production of Trading Data by the Financial Institutions
166. Lead Counsel sought data about Enron’s publicly traded debt securities and preferred
stock. The trading data evidence showed Enron’s trading price reacted to changes in the likelihood
of Enron defaulting on its obligations. The trading data, including information about transaction
type and volume, was used by Lead Plaintiff’s and Lead Counsel’s experts to analyze damages and
to determine how Enron and Enron-related securities traded in the marketplace.
167. Lead Counsel sought and obtained Enron trading data from numerous defendants in
the litigation, including Merrill Lynch, CSFB and Barclays; defendant banks who settled with Lead
Plaintiff, including Citigroup, CIBC and JPMorgan; and numerous nonparty investment banks.
Goldman Sachs, from whom Lead Counsel sought Enron trading data, objected to producing
information on grounds the PSLRA stayed discovery against it. On November 23, 2005, Lead
Counsel moved to compel production (Docket No. 44 in Case No. H-04-0088). Lead Counsel
demonstrated to the Court the trading data discovery was both relevant and tailored. The discovery
against Goldman Sachs was not stayed. Lead Counsel’s motion to compel was successful, since
Goldman Sachs agreed to produce the trading data and the parties were able to resolve their
remaining discovery disputes. The motion was withdrawn on December 9, 2005 and relevant
information was produced to plaintiffs (Docket No. 48 in Case No. H-04-0088).
168. Additionally, Lead Counsel also filed a motion to compel against Goldman Sachs on
September 27, 2006, demanding Goldman Sachs answer interrogatory questions concerning persons
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who performed due diligence with an August 1999 securities offering (Docket No. 80 in Case No.
H-04-0088).
16. Depositions
169. During the course of the litigation, the Newby and consolidated parties took 420 fact
depositions. Fact depositions commenced in June 2004 and closed, for the most part, in November
2005 – each negotiated by the Deposition Scheduling Committee pursuant to the Deposition
Protocol Order – during that 18-month period:
Deponent Entity Date[s] Location Nom. By Lead Counsel Attorney
Duncan, David Andersen 02/18/02 Houston n/a J. Jaconette H. Hodges
Bauer, Thomas Andersen 02/19/02 Houston n/a J. Jaconette H. Hodges
Lowther, Michael Andersen 02/20/02 Houston n/a P. Howes J. Jaconette
Odom, Michael Andersen 02/21/02 Houston n/a P. Howes J. Jaconette
Goddard, Jr., Stephen Andersen 02/22/02 Houston n/a P. Howes J. Jaconette
Adlong, Shannon Andersen 03/05/02 Houston n/a P. Howes J. Jaconette
Luna, Michael Andersen 03/06/02 Houston n/a P. Howes J. Jaconette
Latham, Kimberly Andersen 03/07/02 Houston n/a P. Howes J. Jaconette
Thibaut, Sharon Andersen 03/13/02 Houston n/a P. Howes Temple, Nancy Andersen 03/22/02 Houston n/a J. Hardaway
P. Howes Swamy, Satish Regents 06/02/04 NYC Defs P. Howes Ballentine, James JPMorgan 06/02/04-06/03/04 NYC Plfs J. Jaconette
J. Hail Jager, Otto Citigroup 06/02/04-06/03/04 NYC Plfs/Defs M. Siben
B. Henssler Hulme, Ronald McKinsey (3rd Party) 06/03/04-06/04/04 Houston Defs Schwartz Junell Tilney, Schuyler Merrill Lynch 06/07/04 Houston Defs J. Hail Bauch, Billy CIBC 06/09/04-06/10/04 NYC Plfs P. Howes
J. Lowther Bishko, Jennifer Citigroup 06/10/04-06/11/04 NYC Plfs A. Box Meyer, John Barclays 06/14/04-06/15/04 NYC Plfs X. Bernay Deards, Paul Citigroup 06/15/04-06/16/04 NYC Plfs P. Howes
M. Siben Shapiro, Marc (Richard) JPMorgan 06/15/04-06/17/04 NYC Plfs J. Jaconette
J. Hail Abib, Osmar CSFB 06/16/04-06/17/04 NYC Plfs J. Lowther Kronthal, Jeffrey Merrill Lynch 06/16/04-06/17/04 NYC Defs S. Hays
B. Henssler
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Deponent Entity Date[s] Location Nom. By Lead Counsel Attorney
Swadba, John Merrill Lynch 06/21/04 NYC Plfs P. Howes Johnson, Claudia Enron 06/22/04 Portland Defs DNA12 Berardino, Joseph Andersen 06/22/04-06/23/04 NYC Plfs P. Howes Woodhams, Martin Barclays 06/22/04-06/23/04 London Plfs X. Bernay Sullivan, John Barclays 07/12/04-07/13/04 NYC Plfs J. Jaconette
X. Bernay Feygin, Anatol JPMorgan 07/13/04-07/14/04 NYC Defs J. Hail
P. Howes Wolf, Mark CIBC 07/14/04-07/16/04 NYC Plfs S. Hays
J. Lowther Angelini, Amanda Citigroup 07/19/04-07/21/04 NYC Plfs P. Howes Willard, Roger Andersen 07/19/04-07/22/04 Houston Defs H. Hodges Davis, Tom Merrill Lynch 07/20/04 NYC Plfs S. Hays
J. Lowther Moran, James CSFB 07/21/04-07/22/04 NYC Plfs J. Hail
J. Lowther Williams, Richard Barclays 07/21/04-07/22/04 NYC Plfs X. Bernay
R. Ames Arango, Mercedes CIBC 07/26/04-07/27/04 NYC Plfs A. Box Dellapina, Jeffrey JPMorgan 07/26/04-07/28/04 NYC Plfs J. Jaconette
M. Siben Corgel, Richard Andersen 07/27/04-07/29/04 NYC Plfs P. Howes Ripepi, Amy Andersen 07/28/04-07/29/04 Chicago Plfs Schwartz Junell Castleman, Kent Enron 08/09/04-08/10/04 Houston Defs P. Howes
J. Hardaway Orchant, Craig Deutsche Bank 08/10/04-08/11/04 NYC Plfs M. Siben Begley, Bryan McKinsey (3rd Party) 08/11/04-08/12/04 Houston Defs B. Henssler Taylor, Jonathan Barclays 08/11/04-08/12/04 London Plfs X. Bernay
R. Ames Schneider, Chip 30(b) RAC Enron 08/16/04-08/17/04 Houston Defs Hoffner & Bilek Gray, Jeff Enron 08/18/04-08/19/04 Houston Defs P. Howes Sullivan, Benjamin Merrill Lynch 08/18/04-08/19/04 NYC Plfs A. Box
B. Henssler Pullman, Henry Barclays 08/23/04 NYC Plfs X. Bernay
R. Ames Lyons, Chris Citigroup 08/23/04-08/24/04 NYC Plfs P. Howes
M. Siben Mandanas, Mary Beth CSFB 08/23/04-08/25/04 NYC Plfs J. Hail Murphy, Ted Enron 08/25/04 Cincinnati Defs A. Box Webster, Mark JPMorgan 08/25/04-08/26/04 NYC Plfs J. Jaconette
T. Smith Holm, Arild Regents 08/26/04-08/27/04 Des Moines Defs P. Howes Griebling, John Enron 09/07/04-09/08/04 Denver Defs A. Box Delaney, Colette CIBC 09/08/04-09/09/04 NYC Plfs S. Hays
J. Lowther Foster, Richard McKinsey (3rd Party) 09/09/04-09/10/04 NYC Defs B. Henssler
P. Howes Bloomer, John Enron 09/20/04-09/21/04 NYC Defs A. Box Rieger, Larry Andersen 09/21/04-09/22/04 Chicago Plfs Schwartz Junell Serice, George JPMorgan 09/21/04-09/22/04 NYC Plfs J. Jaconette
T. Smith Bernstein, Saul Citigroup 09/21/04-09/23/04 NYC Plfs P. Howes
M. Siben Plante, Everett Enron 09/27/04 San Antonio Defs P. Howes Collins, Bill Enron 09/27/04-09/28/04 Portland Defs P. Howes
12 Depositions which Lead Counsel did not attend are noted “DNA.”
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Deponent Entity Date[s] Location Nom. By Lead Counsel Attorney
Zisman, Stuart Enron 09/27/04-09/28/04 Houston Defs J. Jaconette Fallon, Jim Enron 09/28/04-09/30/04 Houston Defs P. Howes Clemmens, Bob Barclays 09/29/04-09/30/04 NYC Plfs X. Bernay
R. Ames Gordon, Richard Merrill Lynch 09/30/04 Houston Plfs J. Hail Schottlaender, Ian CIBC 09/30/04 NYC Plfs J. Lowther
S. Hays Bharati, Rakesh Enron 09/30/04-10/01/04 Houston Defs A. Box Baird, Robert 30(b)(6) V&E 10/05/04-10/06/04 Houston Defs M. Siben
P. Howes R. Ames
Jeffe, Robert CSFB 10/06/04-10/07/04 NYC Plfs P. Howes J. Lowther
Walker, Richard JPMorgan 10/12/04-10/15/04 NYC Plfs J. Jaconette K. Splan
Powers, William Enron 10/18/04-10/19/04 Austin Defs Schwartz Junell Lee, James JPMorgan 10/19/04-10/20/04 NYC Plfs J. Jaconette
K. Splan Carano, Boyd V&E 10/20/04-10/21/04 Houston Defs P. Howes McKean, George Barclays 10/20/04-10/22/04 Houston Plfs X. Bernay
R. Ames Sefton, Scott Enron 10/25/04-10/26/04
11/08/04-11/09/04 Boston Defs B. Henssler
Carson, Richard Enron 10/26/04-10/27/04 Houston Defs P. Howes Keller, Dean Citigroup 10/27/04-10/28/04 NYC Plfs M. Siben Scott, Dwight CSFB 10/27/04-10/29/04 NYC Plfs S. Hays
J. Lowther Cambridge, Paul Deutsche Bank 11/03/04-11/04/04 NYC Plfs M. Siben Freeman, Charles JPMorgan 11/04/04 NYC Plfs J. Hail
S. Hays Matteson, Gary Regents 11/04/04 Houston Defs P. Howes Bell, Nicholas Barclays 11/09/04 NYC Plfs X. Bernay Fleischer, David Goldman Sachs 11/09/04-11/10/04 NYC Plfs M. Siben Stampf, Steven PWC 11/09/04-11/10/04 NYC Defs A. Box Baker, Ron Enron 11/10/04-11/11/04 Houston Defs Schwartz Junell Welch, Jamie CSFB 11/10/04-11/11/04 NYC Plfs P. Howes Curry, Wanda Enron 11/15/04-11/16/04 Houston Defs A. Box Kulick, Adam Citigroup 11/22/04-11/23/04 NYC Plfs P. Howes Dickson, Glen Enron 11/30/04 Houston Defs Schwartz Junell Ivers, Rick CSFB 12/01/04-12/02/04 NYC Plfs J. Lowther
S. Hays Racicot, Paul Enron 12/02/04 Houston Defs Schwartz Junell Menchaca, Peggy Enron 12/06/04 Houston Defs Schwartz Junell Cash, Debra Andersen 11/30/04-12/03/04
12/06/04-12/07/04 Houston Defs J. Jaconette
Schwartz Junell Ogunlesi, Adebayo CSFB 12/06/04-12/07/04 NYC Plfs J. Lowther
S. Hays Olson, John Merrill Lynch 12/07/04-12/08/04 Houston Plfs A. Box Hanks, Stan Enron 12/08/04-12/09/04 NYC Defs Schwartz Junell Simon, Karen JPMorgan 12/09/04 NYC Plfs J. Jaconette
K. Splan Ewens, Peter McKinsey (3rd Party) 12/13/04-12/14/04 Dallas Defs B. Henssler Campbell, David McKinsey 12/14/04-12/15/04 Dallas Defs B. Henssler DeVitry, Benoit Barclays 12/14/04-12/15/04 London Plfs X. Bernay
R. Ames Jakubik, Mike Deutsche Bank 12/15/04 NYC Plfs M. Siben Caplan, Rick Citigroup 12/13/04-12/16/04 NYC Plfs P. Howes
M. Siben Alvino, Nicole Enron 12/16/04-12/17/04 NYC Defs A. Box Smith, Brian Barclays 12/16/04-12/17/04 London Plfs X. Bernay
R. Ames
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Deponent Entity Date[s] Location Nom. By Lead Counsel Attorney
Webster, Leslie JPMorgan 12/16/04-12/17/04 NYC Plfs J. Jaconette K. Splan
Capolongo, Dominic CSFB 01/06/05 NYC Plfs S. Hays J. Lowther
McGinnis, Stephanie Enron 01/11/05 Houston Defs Schwartz Junell Aultman, Sandra JPMorgan 01/12/05 NYC Plfs J. Jaconette
K. Splan Nepveux, Michael Citigroup 01/12/05 Houston Plfs A. Box Nath, Laurence CSFB 01/12/05-01/13/05 NYC Plfs S. Hays
J. Lowther Wagman, Steven Citigroup 01/12/05-01/14/05 NYC Plfs M. Siben Jordan, Kevin Enron 01/18/05 Houston Plfs DNA McGahen, Graham Barclays 01/18/05 NYC Plfs X. Bernay Mintz, Jordan Enron 01/18/05 Houston Defs DNA Peng, Gary Enron 01/18/05 Houston Defs DNA St. Clair, Carol Enron 01/18/05 Houston Defs DNA Savage, Frank Enron 01/18/05-01/21/05 Houston Defs J. Hail
P. Howes O’Brien, Robert CSFB 01/24/05- NYC Plfs J. Lowther
S. Hays Rubin, Seth Deutsche Bank 01/26/05 San Francisco Plfs M. Siben Crowley, James JPMorgan 01/26/05-01/27/05 NYC Plfs J. Jaconette
K. Splan Scardino, Kimberly Andersen 01/24/05-01/28/05
01/31/05 NYC Defs J. Jaconette,
Schwartz Junell Lian, Mark Enron 02/07/05 Houston Defs Schwartz Junell Steffes, Jim Enron 02/08/05 NYC Defs Schwartz Junell Mills, Scott Enron 02/09/05 Houston Defs Schwartz Junell Traband, Robert JPMorgan 02/08/05-02/10/05 NYC Plfs J. Jaconette
K. Splan Duncan, John Enron 02/07/05-02/10/05 Houston Defs Schwartz Junell Golden, Michael Enron 02/10/05-02/11/05 Sedona Defs R. Ames Kingerski, Harry Enron 02/15/05-02/16/05 Houston Defs Schwartz Junell Port, David Enron 02/15/05-02/16/05 NYC Defs B. Henssler Lund, David Merrill Lynch 02/16/05 NYC Plfs S. Hays Ortner, William Citigroup 02/16/05 NYC Plfs A. Box Pankhania, Pritesh Barclays 02/16/05 London Plfs X. Bernay Jefferson, Ian Barclays 02/17/05 London Plfs X. Bernay McCabe, Brian CSFB 02/17/05-02/18/05 NYC Plfs J. Lowther Diaz, John Moody’s 02/14/05-02/18/05 NYC Defs M. Siben Chilton, Eric Barclays 02/22/05 NYC Plfs R. Ames
X. Bernay Cox, David Enron 02/22/05 NYC Defs DNA Guenther, Todd C. 30(b)(6) Lehman 02/23/05 NYC Plfs DNA Sampere, Gery JPMorgan 02/24/05 NYC Plfs A. Box Bannantine, Jim Enron 02/24/05-02/25/05 Baltimore Defs DNA Urquhart, John Enron 02/22/05-02/25/05 Houston Defs J. Jaconette Jones, Robert 30(b)(6) Enron 02/28/05 Houston Defs Schwartz Junell Reed, Adrian McKinsey 03/02/05 Houston Defs R. Ames Sullivan, David Merrill Lynch 03/02/05 NYC Plfs S. Hays Wardell, Chris JPMorgan 03/02/05 NYC Plfs J. Jaconette Hetzel, Diane Enron 03/02/05-03/03/05 Atlanta Defs Schwartz Junell Eggleston, Meredith Enron 03/14/05-03/15/05 Houston Defs Schwartz Junell Vargas, Hope Enron 03/16/05 Houston Defs Schwartz Junell Repko, Bill JPMorgan 03/17/05 NYC Plfs A. Box Devine, Ed CSFB 03/17/05-03/18/05 NYC Plfs S. Hays Barone, Ron S&P 03/14/05-03/18/05 NYC Plfs J. Hail
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Deponent Entity Date[s] Location Nom. By Lead Counsel Attorney
Keller, Dean 30(b)(6) due diligence
Citigroup 03/17/05-03/18/05 03/21/05
NYC Plfs M. Siben
Keller, Dean 30(b)(6) zero coupon
Citigroup 03/22/05 NYC Plfs M. Siben
Feeney, Shawn Citigroup 03/23/05 NYC Plfs M. Siben Fuhs, Williams Merrill Lynch 03/24/05 Denver Plfs S. Hays Bushnell, David Citigroup 03/31/05-04/01/05 NYC Plfs M. Siben Troubh, Raymond Enron 03/31/05-04/01/05 NYC Defs DNA Coale, Carol Prudential 03/30/05-04/01/05 Houston Defs S. Hays McKillop, Gordon Enron 04/05/05 Wash., D.C. Defs DNA Belfer, Robert Enron 04/04/05-04/06/05 Houston Defs P. Howes Koczan, David CSFB 04/07/05 NYC Plfs S. Hays Walsh, Bill Deutsche Bank 04/07/05 NYC Plfs M. Siben Reilly, James Citigroup 04/04/05-04/07/05
04/11/05 NYC Plfs M. Siben
Ruding, Ono Citigroup 04/13/05-04/14/05 NYC Defs M. Siben Esposito, Sal Barclays 04/18/05 NYC Plfs R. Ames Butterfield, Diane JPMorgan 04/19/05 NYC Plfs A. Box Ferguson, Daniel CIBC 04/20/05 Toronto Defs J. Lowther Sabloff, Michael JPMorgan 04/21/05-04/22/05 NYC Plfs J. Jaconette LeMaistre, Charles Enron 04/20/05-04/22/05 Houston Plfs J. Hail Abra, Robert CIBC 04/22/05 NYC Plfs J. Lowther Beauclair, Gerry CIBC 04/22/05 NYC Plfs J. Lowther Ernst, Shannon CIBC 04/22/05 NYC Plfs J. Lowther Lydecker, Rick Enron 04/27/05-04/28/05 Houston Defs B. Henssler Winokur, Herbert Enron 04/27/05-04/29/05
05/02/05-05/04/05 NYC Defs J. Hail
Andrews, Kirkland 30(b)(6) Citigroup 04/28/05 NYC Plfs M. Siben Conway, Elliot Citigroup 04/28/05-04/29/05 NYC Plfs P. Howes Calvelli, Helen Barclays 05/03/05 NYC Plfs R. Ames O’Connor, Claire JPMorgan 05/03/05 NYC Plfs A. Box Sims-Vu, Jennifer Andersen 05/03/05 Houston Defs Schwartz Junell Ogden, Cynthia JPMorgan 05/05/05 NYC Plfs K. Splan Stott, Thomas Citigroup 05/05/05-05/06/05 NYC Plfs P. Howes Schwertner, Brian Joseph Enron 05/09/05 Houston Defs DNA Chan, Ronnie Enron 05/05/05-05/06/05
05/09/05-05/10/05 Houston Defs J. Hail
Cline, Wade Enron 05/10/05-05/11/05 Houston Defs K. Splan Chandler, Petrina V&E 05/10/05-05/12/05 NYC Plfs J. Lowther Launer, Curt CSFB 05/10/05-05/12/05 NYC Defs S. Hays Hollis, Spring Deutsche Bank 05/12/05 NYC Plfs X. Bernay Pflug, David JPMorgan 05/12/05 NYC Plfs J. Jaconette Warnier, Daniel JPMorgan 05/23/05 NYC Plfs A. Box Rue, Ken Anderson 05/24/05 Houston Defs B. Henssler Kozak, Leon Deustche 05/25/05 NYC Plfs M. Siben Montgomery, Russell Andersen 05/26/05 Houston Defs B. Henssler Blake, Norman Enron 05/23/05-05/27/05 Houston Defs J. Hail Devries, Andy CSFB 05/25/05 NYC Plfs S. Hays Elliot-Burrow, Shirley Citigroup 06/01/05 Houston Plfs P. Howes Lundstrom, Bruce Enron 06/01/05 Houston Defs K. Splan Layton, Donald JPMorgan 06/02/05-06/03/05 NYC Plfs J. Jaconette Herbold, Chris Andersen 06/06/05-06/10/05
06/13/05 Houston Defs B. Henssler
Bieser, Julie JPMorgan 06/08/05 Houston Plfs J. Jaconette Clarke-Wolf, Anne Citigroup 06/08/05 NYC Plfs P. Howes Herrup, Steven Deutsche Bank 06/08/05 NYC Plfs J. Lowther Reece, David Enron 06/13/05 Houston Defs K. Splan Metts, Mark Enron 06/13/05-06/14/05 Houston Defs R. Ames Niles, Ray Citigroup 06/13/05-06/14/05 NYC Plfs P. Howes Firth, Richard Barclays 06/14/05-06/15/05 London Plfs X. Bernay White, Warren Anderson 06/14/05-06/15/05 Houston Defs J. Lowther
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Deponent Entity Date[s] Location Nom. By Lead Counsel Attorney
Hendricks, Maureen Citigroup 06/15/05-06/16/05 NYC Plfs P. Howes LeVersha, Paul Barclays 06/16/05 London Plfs X. Bernay O’Brien, Patrick JPMorgan 06/16/05 NYC Plfs A. Box Maletta, David CSFB 06/16/05-06/17/05 NYC Plfs S. Hays Mendelsohn, John Enron 06/28/05-06/30/05 Houston Defs J. Hail Dilg, Joe V&E 06/28/05-07/01/05 Houston Plfs P. Howes Glover, Paul Deutsche Bank 06/29/05 NYC Plfs J. Lowther McKee, Eric Andersen 06/29/05-06/30/05 Houston Defs B. Henssler Baillie, Steve Citigroup 07/06/05 NYC Plfs DNA Willison, Bruce Enron 07/06/05 Houston Defs J. Hail Boots, Kelly Enron 07/11/05 Houston Defs DNA Mark-Jusbasche, Rebecca Enron 07/11/05-07/13/05 Houston Defs J. Hardaway Derrick, James Enron 07/11/05-07/14/05 Houston Defs P. Howes Herman, Brian CSFB 07/13/05-07/14/05 Louisville Plfs S. Hays Levy, Phil JPMorgan 07/13/05-07/14/05 NYC Plfs DNA Baird, Robert Enron 07/18/05-07/19/05 Houston Defs A. Box Martinez, Lucia CIBC 07/18/05-07/19/05 NYC Plfs K. Splan Jaedicke, Robert Enron 07/18/05-07/22/05
07/25/05 Houston Defs P. Howes
Vasconcellos, Brent Enron 07/19/05-07/20/05 San Fran Defs R. Ames Lowther, Michael Andersen 07/19/05-07/21/05 Houston Defs/Plfs B. Henssler Boyle, Bill Deutsche Bank 07/20/05 NYC Plfs M. Siben Morris, David NYC 07/21/05 JPMorgan Plfs DNA Buckley, Michael JPMorgan 07/22/05 NYC Plfs DNA Echols, John Enron 08/01/05 Houston Defs DNA Schnapper, Barry Enron 08/01/05 Houston Defs DNA Capolongo, Dominic 30(b)(6) CSFB 08/01/05-08/02/05 NYC Plfs S. Hays Astin, Ron V&E 08/01/05-08/05/05
08/08/05 Houston Plfs P. Howes
Meyer, Shawna Enron 08/02/05-08/03/05 Austin Defs J. Hail Mukherjee, Roshmi Anderson 08/03/05-08/04/05 Houston Defs B. Henssler Cook, Mary Enron 08/08/05 Houston Plfs DNA Gorte, David Enron 08/08/05 Houston Defs DNA Mellencamp, Lisa Enron 08/08/05 Houston Defs DNA Murray, Julia Enron 08/08/05 Houston Defs DNA Harrison, Ken Enron 08/08/05-08/09/05 Houston Defs J. Hail Grutzmacher, Patty Andersen 08/08/05-08/10/05
10/17/05-10/18/05 Houston Defs J. Jaconette
Daines, Robert 30(b)(6) Deutsche Bank 08/10/05-08/11/05 NYC Plfs M. Siben Osterberg, Ed V&E 08/10/05-08/11/05 Houston Defs A. Box Allison, Herb Merrill Lynch 08/15/05 Houston Plfs P. Howes DeSpain, Tim Enron 08/15/05 Houston Defs DNA Gibner, Stinson Enron 08/15/05 Houston Defs DNA Kanellopoulos, Drew Enron 08/15/05 Houston Defs DNA Gramm, Wendy Enron 08/15/05-08/19/05 Houston Defs J. Hardaway Tjandramaga, Nick CSFB 08/16/05 Houston Plfs J. Lowther Ellard, Bruce JPMorgan 08/18/05 NYC Plfs DNA Yellen, Jonathan CSFB 08/18/05 NYC Plfs J. Lowther Faldyn, Rodney Enron 08/22/05 Houston Defs DNA Furst, Robert Merrill Lynch 08/22/05 Dallas Plfs B. Henssler Gordon, Dan Merrill Lynch 08/22/05 NYC Plfs DNA Stubblefield, Wade Enron 08/22/05 Houston Defs DNA Jones, Michael AA 08/22/05-08/24/05 Houston Plfs J. Jaconette Feintech, Lynn Citigroup 08/24/05 NYC Plfs J. Jaconette Hendrick, Max V&E 08/24/05-08/26/05 Houston Defs P. Howes Sakol, Jill CSFB 08/25/05-08/26/05 San Francisco Plfs S. Hays Carlin, Clint Anderson 09/06/05-09/08/05 Houston Defs X. Bernay Kleiner, Margaret Transco 09/07/05 Houston Plfs DNA Schneider, Linette Transco 09/07/05 Houston Plfs DNA Donaldson, Berk Texas East 09/08/05 Houston Plfs DNA Leedy, Joel TEPPCO 09/09/05 Houston Plfs DNA
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Deponent Entity Date[s] Location Nom. By Lead Counsel Attorney
Roper, Teri TEPPCO 09/09/05 Houston Plfs DNA Brown, William Enron 09/12/05 Houston Plfs DNA Kim, James Moody’s 09/12/05-09/13/05 NYC Defs J. Hail Spradling, Mark V&E 09/12/05-09/16/05
09/19/05 Houston Defs P. Howes
Kirk, Kathleen Texas Gas 09/13/05 KY Plfs DNA Fox, Bill Citigroup 09/13/05-09/14/05 NYC Plfs DNA Salles, Philip CSFB 09/13/05-09/14/05 NYC Plfs S. Hays Bittell, Jeffrey Texas Gas 09/14/05 KY Plfs DNA Mann, Bobbi Texas Gas 09/14/05 KY Plfs DNA Blaine, Timothy J. Anderson 09/15/05 Houston Defs K. Splan Caruso, Janet JPMorgan 09/15/05 NYC Plfs DNA Haratunian, Stephen CSFB 09/16/05 NYC Plfs S. Hays Carter, Rebecca Enron 09/19/05 Houston Defs DNA Lynn, Kathy Enron 09/19/05 Houston Defs DNA Mueck, Heather Andersen 09/20/05-09/21/05 Houston Defs R. Ames Shipman, Todd S&P 09/20/05-09/22/05 NYC Defs S. Hays Finley, Thomas Deutsche Bank 09/21/05-09/22/05 NYC Plfs M. Siben Barber, Shelly V&E 09/21/05-09/23/05 NYC Defs A. Box McCann, Robert Merrill Lynch 09/22/05 NYC Plfs B. Henssler Stewart, John Andersen 09/23/05-09/27/05
09/29/05 Chicago Plfs/Defs J. Jaconette
Hansen, Michael Gulf Columbia 09/26/05 Houston Defs DNA Victorin, Steve Citigroup 09/26/05 NYC Plfs DNA Wakeham, John Enron 09/26/05-09/28/05 London Defs P. Howes Hartt, Steve Citigroup 09/28/05-09/29/05 NYC Plfs M. Siben James, Ian JPMorgan 09/28/05-09/29/05 NYC Plfs DNA Buser, John UBS 10/05/05-10/06/05 Houston Plfs M. Siben Arnold, John Enron 10/17/05 Houston Defs DNA Badeer, Robert Enron 10/17/05 NYC Defs DNA Colwell, Wesley Enron 10/17/05 Houston Defs DNA Dietrich, Janet Enron 10/17/05 Houston Defs DNA Muller, Mark Enron 10/17/05 Houston Defs DNA Walden, Clint Enron 10/17/05 Houston Defs DNA Fischer, Luitgard Enron 10/17/05-10/18/05 Houston Defs K. Splan Hayes, Calli Deutsche Bank 10/17/05-10/18/05 NYC Plfs M. Siben Meyer, Jerome Enron 10/18/05-10/19/05 Houston Defs R. Ames Mackel, John Enron 10/19/05 Houston Defs DNA Desalt, Michael K&E 10/19/05-10/20/05 NYC Defs X. Bernay Yates, Terry V&E 10/19/05-10/21/05 Houston Defs A. Box Marino, Carmen CSFB 10/20/05 NYC Plfs J. Lowther McKee, Bill Third Party 10/20/05 Wash., D.C. Plfs M. Siben Ephross, Joel Enron 10/24/05 Houston Defs DNA Hughes, James Enron 10/24/05 Houston Defs DNA Palmer, Jessica Citigroup 10/24/05 NYC Plfs DNA Carson, Rick 30(b)(6) Enron 10/25/05 Houston Defs P. Howes Butcher, Sharon Enron 10/25/05-10/26/05 Houston Defs DNA Petersen, Rick Andersen 10/25/05-10/26/05 Chicago Defs J. Jaconette Sutton, Joe Enron 10/26/05-10/27/05 Houston Defs A. Box Wulfe, Scott V&E 10/26/05-10/27/05 Houston Defs J. Lowther Mertensotto, Robert JPMorgan 10/27/05 Houston Plfs DNA Rogers, Josh JPMorgan 10/28/05 Houston Plfs DNA Blachman, Jeremy Enron 10/31/05 Houston Defs DNA Clark, Catherine Enron 10/31/05 Houston Defs DNA Galvan, Michael Enron 10/31/05 Houston Defs DNA McMurray, Locke Merrill Lynch 10/31/05 NYC Plfs B. Henssler Palmer, Mark Enron 10/31/05 Houston Defs DNA Sherman, Richard Enron 10/31/05 Houston Defs DNA Spitzer, Ronald 30(b)(6) CIBC 10/31/05 NYC Plfs J. Lowther Agnew, Kate Andersen 10/31/05-11/03/05 NYC Defs K. Splan Welch, Patrick 30(b)(6) Citigroup 11/01/05 NYC Plfs DNA
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Deponent Entity Date[s] Location Nom. By Lead Counsel Attorney
Tarry, Stephen V&E 11/02/05 Houston Plfs P. Howes McGuire, Brian Deutsche Bank 11/02/05-11/03/05 NYC Plfs M. Siben Teague, Christopher JPMorgan 11/02/05-11/03/05 NYC Plfs DNA Burnette, Cindy Columbia Gulf 11/03/05 Houston Defs DNA Charlton, Kevin JPMorgan 11/03/05 NYC Defs X. Bernay Jacobe, Lee 30(b)(6) Lehman 11/03/05 Houston Defs P. Howes Stier, Beth Innovision 11/03/05 Houston Defs A. Box Incontro, Stephen 30(b)(6) Citigroup 11/04/05 NYC Plfs DNA O’Connor, Mark CIBC 11/04/05 NYC Plfs X. Bernay Buy, Rick Enron 11/07/05 Houston Defs DNA Smailes, Geoffrey CSFB 11/08/05 London Plfs J. Hail Neuhausen, Ben Andersen 11/08/05-11/10/05 Chicago Defs J. Jaconette Biello, Jim JPMorgan 11/09/05 NYC Plfs DNA Oldfield, Richard Barclays 11/10/05 London Plfs J. Hail Brown, Jim Enron 11/14/05 Houston Defs DNA Heim, Michael 3rd Party 11/14/05 St. Louis Defs X. Bernay Mahoney, Peggy Enron 11/14/05 Houston Defs DNA Pai, Lou Enron 11/14/05 Houston Defs A. Box Whalley, Greg Enron 11/14/05 Houston Defs DNA Moore, Stephen Moody’s 11/14/05-11/16/05
11/22/05 NYC Defs S. Hays
Schuler, Lance Enron 11/15/05 Houston Defs DNA Tirello, Edward Deutsche Bank 11/15/05 NYC Defs M. Siben Harrison, William JPMorgan 11/16/05 NYC Plfs DNA Rowley, Russ 30(b)(6) Principal Global 11/16/05 Des Monies Plfs DNA Essex-Cater, Gareth JPMorgan 11/16/05-11/17/05 NYC Plfs DNA Ferrez-Pereira, Paulo Enron 11/16/05-11/18/05 NYC Defs X. Bernay Junek, Lydia Citigroup 11/17/05 Houston Plfs DNA Sclafani, Joe JPMorgan 11/17/05 NYC Plfs DNA Tice, Paul Deutsche Bank 11/17/05 NYC Defs M. Siben Champion, Jane Andersen 11/18/05 Houston Defs B. Henssler Bowen, Raymond Enron 11/21/05 Wash., D.C. Defs DNA Capomaggi, Peggy Deutsche Bank 11/21/05 NYC Defs M. Siben DiMichele, Rich Enron 11/21/05 Houston Defs DNA Freeland, Clint Enron 11/21/05 Wash., D.C. Defs DNA Hudler, Shirley Enron 11/21/05 Houston Plfs DNA Leff, Dan Enron 11/21/05 Wash., D.C. Defs DNA Malcolm, Rodney Enron 11/21/05 Wash., D.C. Plfs DNA Patel, Trushur Enron 11/21/05 Minneapolis Defs DNA Patel-Yaeger, Anne Enron 11/21/05 Minneapolis Defs DNA Reed, Andrea Enron 11/21/05 Houston Defs DNA Sanders, Richard Enron 11/21/05 Houston Defs DNA Siurek, Ryan Enron 11/21/05 Houston Defs DNA Smida, Edward Enron 11/21/05 Houston Defs DNA Sunde, Marty Enron 11/21/05 Wash., D.C. Defs DNA Goddard, Stephen Andersen 11/21/05-11/23/05
11/28/05 Houston Defs J. Jaconette
Backus, Marcia V&E 11/22/05 Houston Plfs J. Lowther Weill, Sandy Citigroup 11/22/05 NYC Plfs DNA Mialkowski, Krystian 30(b)(6) Deutsche Bank 11/23/05 NYC Plfs M. Siben Rogers, Rex Enron 11/23/05 Houston Defs DNA Sisneros, Phil Enron 11/23/05 Seattle Plfs DNA Proffitt, Timothy Enron 11/28/05 Houston Defs DNA Reddyhough, Julian 30(b)(6) Delta Energy 11/28/05 NYC Plfs DNA Walls, Rob Enron 11/28/05 Houston Defs DNA Hayslett, Rod Enron 11/28/05-11/29/05 Houston Defs DNA Billardello, John S&P 11/29/05 NYC Defs S. Hays Joyce, Mary Enron 11/29/05 Houston Defs DNA Goolsby, Gary Andersen 11/29/05-11/30/05 Houston Defs J. Jaconette Mehta, Dinsa JPMorgan 11/30/05 NYC Plfs DNA Tyler, Tracy Enron 11/30/05 Houston Defs DNA
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Deponent Entity Date[s] Location Nom. By Lead Counsel Attorney
Sargent, Patrick A&K 03/07/06-03/08/06 Dallas Defs J. Lowther Bailey, David 30(b)(6) Deutsche Bank 03/08/06-03/09/06 NYC Plfs M. Siben Sullivan, Daniel A&K 03/21/06-03/22/06 Dallas Defs J. Lowther McFarling, Muriel Cheri A&K 03/28/06 Dallas Defs S. Hays Popplewell, Thomas A&K 04/04/06 Dallas Defs J. Lowther Barbour, David A&K 04/11/06-04/12/06 Dallas Defs J. Lowther Odom, Michael Andersen 07/05/06-07/07/06 Houston Defs J. Jaconette LaForest, Pierre RBC 07/11/06-07/12/06 Toronto n/a S. Hays Giles, Debra RBC 07/18/06-07/19/06 NYC n/a A. Box Aitken, John RBC 07/20/06 Calgary n/a S. Hays Bass, Carl Andersen 07/17/06-07/21/06 Houston Defs J. Jaconette McArthur, Ian RBC 07/25/06 NYC n/a A. Box Hall, Bob RBC 07/26/06 Toronto n/a S. Hays Stevenson, Jennifer Andersen 07/24/06-07/26/06 Houston Defs J. Jaconette LaBarge, Suzanne RBC 07/27/06 Toronto n/a S. Hays Piazza, Frank RBC 08/03/06-08/04/06 Toronto n/a S. Hays Watkins, Sherron Enron 08/02/06-08/04/06 Houston Defs P. Howes Fleming, Blair RBC 08/09/06 NYC n/a A. Box
S. Burkholz Roberts, John RBC 08/10/06 Houston n/a K. Splan Tilney, Schuyler Merrill Lynch 08/17/06-08/18/06 Houston Defs B. Henssler
S. Hays Bauer, Thomas Andersen 08/21/06-08/25/06 Houston Defs J. Jaconette Stephens, Linda RBC 08/30/06-08/31/06 NYC n/a A. Box
S. Burkholz Hepworth, Graeme RBC 09/06/06 NYC n/a J. Hail Pulsifer, Natheniel Class Rep-Goldman 09/13/06 Boston n/a DNA Bayly, Daniel Merrill Lynch 09/29/06 NYC Plfs/Defs DNA Goza, Joshua Goldman 10/04/06 NTC n/a B. Henssler Easterbrook, Mark RBC 10/12/06 NYC n/a K. Splan Berney, Jeffrey Goldman 10/20/06 NYC n/a DNA Hintze, Martin 30(b)(6) Goldman 10/24/06 London n/a B. Henssler Textor, Donald Goldman 10/26/06 NYC n/a X. Bernay Begley, William 30(b)(6) PWC 11/02/06 Houston B. Henssler Ryan, Michael Goldman 11/10/06 NYC n/a S. Burkholz Brundage, Peter Goldman 11/15/06 Dallas n/a X. Bernay Sweeney, Robert Goldman 11/17/06 NYC n/a B. Henssler Hughes, Mark RBC 11/29/06-11/30/06 NYC n/a S. Burkholz
A. Box Duncan, David Enron 01/30/07 Houston Defs DNA Daniel, Steven Goldman 01/09/07 Houston n/a X. Bernay Rice, Kenneth Enron 02/26/07 Houston Plfs DNA Hannon, Kevin Enron 03/16/07 Houston Defs DNA
For each of these depositions where we participated, the Houston staff culled pertinent documents
from the millions of pages in our discovery database and compiled voluminous witness binders –
some witnesses had nine or ten volumes each, nine inches thick – which were used by our lawyers
for their examinations.
17. Lead Plaintiff’s Responses to Discovery
170. Concurrent with Lead Counsel’s pursuit of defendants’ evidence, Lead Counsel
responded to myriad discovery propounded by defendants. Lead Plaintiff and Lead Counsel
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promptly responded to all discovery. Where appropriate, Lead Counsel sought to curtail abusive
requests. Lead Plaintiff and Class representatives gathered, and Lead Counsel reviewed and
produced, tens of thousands of responsive documents. Lead Counsel responded to thousands of
document, interrogatory, admission, and similar discovery requests. And Lead Counsel defended
dozens of depositions noticed by defendants who sought to undermine plaintiffs’ claims at every
stage of the litigation. Responding to the numerous discovery requests and vigorously defending
Lead Plaintiff and class representatives were important steps in reaching agreement on the settled
claims.
a. Lead Counsel, Lead Plaintiff, Institutional Plaintiffs and Individuals Responded to Initial Class Certification Discovery
171. From the beginning, Enron’s directors, officers, lawyers and accountants, and its
financial institutions requested extensive information via multiple document production requests,
interrogatories, depositions and RFAs. Lead Counsel responded to each demand, and either
provided a timely and accurate response, or objected when necessary, to protect the rights of
plaintiffs and class representatives.
172. Defendants’ discovery demands began in mid-2002, before the motions to dismiss
were decided in December 2002. The financial institutions, along with Enron executives, including
Kenneth Lay, Jeffrey Skilling, Lou Pai, and others, sought information from Lead Plaintiff,
institutional plaintiffs and individual class representatives.
173. The discovery demands included scores of document production requests concerning
Enron-related investments and transactions, investment advice received or relied upon, decision to
serve as a plaintiff or Class representative, social contacts between representatives and Lead
Counsel, documents concerning the complaints’ allegations, damages suffered from Enron’s
collapse, insider trading data, expert testimony to be offered, and many other topics. These requests
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were followed by RFAs and interrogatories. Defendants sought detailed information from Lead
Plaintiff The Regents, including information about its investment procedures and guidelines,
relationship with Enron, Enron-related energy contracts, and similar documents.
174. Lead Counsel responded to all of the discovery propounded by defendants. For
example, in July and August 2002 Lead Counsel filed 15 separate document production request
responses. Lead Counsel served its document production request responses to the bank defendants
on August 2, 2002, and therein agreed to produce a significant amount of information, including
Lead Plaintiff’s trades in Enron-related securities, the institution’s tax returns, statements of net
worth, assets and liabilities, and similar financial information. Lead Plaintiff further agreed to
produce various documents concerning the allegations contained in the complaint, and nearly all
nonprivileged Enron-related documents held by Lead Plaintiff. Similarly detailed responses were
filed on behalf of the financial institution plaintiffs and individual Class representatives. Every
document gathered and produced was reviewed in detail by Lead Counsel to ensure no privileged
documents were inadvertently produced.
b. Lead Counsel, Lead Plaintiff and Class Representatives Respond to Interrogatories
175. Defendants such as Jeffrey Skilling, Lou Pai, and the financial institutions served
voluminous interrogatories on Lead Plaintiff, other institutional plaintiffs and Class representatives.
Among the information requested by defendants’ interrogatories was total losses suffered due to
Enron’s collapse, the Class each prospective plaintiff sought to represent, detailed insider trading and
disgorgement data for alleged violations of §20A of the Exchange Act, material nonpublic
information the defendants purportedly failed to disclose to the Class, facts demonstrating the
litigation was suitable for Rule 23 class action treatment, legal theories concerning plaintiffs’ causes
of action, questions concerning expert witnesses, whether “inducements” resulted in the purchase of
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Enron securities, and questions concerning brokers, advisers or other financial professionals who
may have participated in the decision to acquire Enron’s publicly traded securities.
176. Lead Plaintiff diligently responded to all of the interrogatories. In May 2003 Lead
Counsel filed 34 separate, certified responses on behalf of institutional and individual plaintiffs.
Each of the certified responses answered or objected to the hundreds of collective interrogatories
propounded by defendants, a significant undertaking.
c. Plaintiffs and Lead Counsel Answer Class Certification Requests for Admission
177. In August 2003, Lead Plaintiff and Lead Counsel responded to several defendants’
RFAs concerning class certification issues. The majority of the RFAs required Lead Plaintiff and
Lead Counsel to confirm, and admit the authenticity of, thousands of pages of documents, court
filings, press releases, and similar written and recorded statements by The Regents, institutions and
individuals concerning Enron-related matters. Additionally Lead Plaintiff answered questions
concerning Enron’s provision of electricity services to The Regents. Lead Plaintiff and Lead
Counsel promptly responded to all of the RFAs.
d. Lead Plaintiff Responds to Additional Discovery and Supplements Its Responses
178. After initial discovery was propounded and answered by Lead Counsel, Lead Plaintiff
and other plaintiffs, additional discovery was pursued by defendants during the litigation. For
example, in the first quarter of 2004 Lead Counsel produced additional documents and answered
questions by defendants such as Lehman Brothers, CSFB and others. On May 14, 2004, Lead
Counsel served verified interrogatory responses to five separate requests by Enron’s former officers.
These responses were supplemented in October and November of 2005 concerning the complaint’s
allegations. And additional supplementation was provided to defendants during expert discovery.
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179. Lead Plaintiff’s and Lead Counsel’s efforts to meet and confer with defendants were
not always successful. On May 24, 2004, officer defendants Pai, Frevert, Kean and Mark-Jusbasche
moved for an order compelling Lead Plaintiff to answer interrogatories concerning the identities of
alleged speakers and statements contained in the complaint. A similar motion to compel was filed
by CSFB shortly thereafter.
180. Lead Plaintiff opposed defendants’ motion, primarily because defendants had been
provided a list of witnesses from whom the allegations were generated. Lead Plaintiff further argued
several sources were confidential whistleblowers protected from disclosure due to privilege. On
September 30, 2005, the Court granted defendants’ motion to compel, ruling the identity of
witnesses was not protected work product. The Court further held defendants were entitled to the
identity of the alleged speakers. Lead Plaintiff was ordered to supplement its interrogatory responses
within 20 days. Lead Plaintiff and Lead Counsel promptly complied with the Court’s order.
e. Lead Counsel Defends Numerous Class Certification Depositions
181. As previously discussed, on August 13, 2002 Lead Counsel successfully moved for a
protective order curtailing an excessive number of plaintiff depositions. At the same time Lead
Plaintiff and Lead Counsel moved for a protective order, Lead Plaintiff also committed to providing
defendants with a large number of deponents, including a person most knowledgeable on behalf of
each institutional plaintiff, and depositions from individual named plaintiffs and class
representatives, thereby agreeing to scores of plaintiff depositions.
182. Lead Counsel assisted witnesses in preparing for their depositions and defended the
depositions. Starting in August 2003 and continuing through September 2003, 23 institutional and
class representative depositions were taken by defendants. Twenty-one of the depositions were
defended by Lead Counsel in states across the country. The plaintiff deponents responded to
detailed questions concerning the Enron fraud, Enron’s complex facts, investment in Enron
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securities, understanding of a representatives’ responsibilities, monitoring of the litigation, and
similar topics.
183. Defendants deposed all of the proposed class representatives and propounded
interrogatories and RFAs. The following is a list of all proposed class representatives who were
deposed:
Deponent Depo Date
Location of Depo
Entity Defending Attorney
Louis Sarno 9/5/03 NYC Amalgamated Bank Paul Howes Paula N. John VP/GC of Fund
9/11/03 Milwaukee, WI Archdiocese of Milwaukee Supporting Fund, Inc.
Paul Howes
Randall Atkins Business Agent/ Board of Trustees
9/9/03 Charleston, WV Employer-Teamsters Local Nos. 175 & 505 Pension Trust Funds
Paul Howes
Teresa Warren Administrative Services Inc.
9/3/03 Atlanta, GA Greenville Plumbers Paul Howes
Wayne Chun CEO/3rd party administrator
9/22/03 San Diego, CA Hawaii Laborers Pension Plan
Helen Hodges
Barbara McFetridge 9/24/03 San Diego, CA Imperial County Board of Retirement
James Jaconette
Jacque Millard 9/15/03 Salt Lake City, UT
IHC Health Plan Paul Howes
Nathaniel Pulsifer 9/5/03 Boston, MA Nathaniel Pulsifer Trustee of the Shooters Hill Revocable Trust
Thomas Shapiro
Carl Wilberg 8/29/03 San Francisco, CA
San Francisco City & County Employee’s Retirement System
Paul Howes
Don Bobbs, Director Credit Arbitrage
9/10/03 Milwaukee, WI Staro Asset Management, LLP
Paul Howes
Jeff Heil Head of Equity Investments
8/25/03 San Francisco, CA
The Regents of the University of California
Paul Howes
William P. Kennett Sr. Investment Officer
9/23/03 Seattle, WA Washington State Investment Board
Paul Howes
Michael Bessire 8/22/03 Dallas, TX Individual Paul Howes John Cassidy 9/4/03 San Diego Individual Jim Hail/John
Lowther Michael B. Henning 8/20/03 Ft. Myers, FL Individual Paul Howes Dr. Richard Kimmerling 8/21/03 Atlanta, GA Individual Paul Howes Dr. Fitzhugh Mayo
9/17/03 Virginia Beach, VA
Individual Paul Howes
George M. Placke 8/14/03 Corpus Christi, TX
Individual Paul Howes
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Deponent Depo Date
Location of Depo
Entity Defending Attorney
Ben Schuette 8/13/03 Corpus Christi, TX
Individual Paul Howes
Mervin H. Schwartz, Jr. 9/19/03 Hershey, PA Individual Paul Howes Stephen M. Smith 8/11/03 Houston, TX Individual Paul Howes Joseph C. Speck 8/19/03 Sarasota, FL Individual Paul Howes John Zegarski 8/29/03 San Diego, CA Individual James Jaconette/
John Lowther
f. Lead Plaintiff, Institutional Plaintiffs and Class Representatives Produce Tens of Thousands of Pages of Documents to Defendants
184. Beginning on May 9, 2003 Lead Plaintiff, institutional plaintiffs and individual Class
representatives began to produce responsive documents to the Enron document depository. A team
of experienced lawyers and staff was tasked with reviewing all of the gathered documents. Tens of
thousands of pages of documents were gathered, reviewed and produced in response to defendants’
discovery.
185. Production began on July 9, 2003, when thousands of pages of documents were
produced by The Regents, Amalgamated Bank, Staro Asset Management, Hawaii Laborers Pension
Plan, San Francisco City and County Employee’s Retirement System, and individual plaintiffs.
Lead Plaintiff and others produced Enron security trading confirmations, market reports, SEC filings
in their possession, news articles, emails, correspondence, notes and asset allocations, all of which
were responsive to defendants’ lengthy document production requests.
186. More documents were produced in September 2003. The original document
productions were supplemented with additional trading confirms, investment guideline documents,
meeting minutes, analyst reports and similar documents. And additional productions occurred in
March and November 2004, at which time Washington State Investment Board produced responsive
documents, and correspondence and transactional data from plaintiffs was produced. Each of these
document productions was in addition to the interrogatory and RFA answers Lead Plaintiff and Lead
Counsel provided during the discovery phase.
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187. Lead Counsel made further supplemental productions in March, July and November
2006. As Lead Plaintiff and Lead Counsel prepared for trial, a final January 2007 production of
documents was made to the Enron document depository, which consisted primarily of financial and
analyst reports prepared by third parties. Lead Plaintiff, institutional plaintiffs and individuals made
13 separate document productions to the Enron document depository in response to defendants’
discovery.
VIII. ADDITIONAL MOTION PRACTICE: ADDED DEFENDANTS AND RENEWED MOTIONS TO DISMISS
188. During the course of discovery we filed complaints against new defendants. Each of
them moved to dismiss. In addition, Newby defendants filed motions for reconsideration. On
February 3, 2004, defendants Toronto-Dominion Bank, Toronto Dominion Holdings (U.S.A.), Inc.,
TD Securities Inc., TD Securities (USA) Inc., and Toronto Dominion (Texas), Inc. (“TD”), filed a
motion to dismiss (Docket No. 17 in Case No. H-03-5528), which argued for dismissal because the
complaint failed to allege specific acts of fraud, a primary violation of the securities laws, scienter or
control person liability; and the claims alleged were time-barred. In response, on March 18, 2004
Lead Counsel filed Lead Plaintiff’s Opposition to Motion to Dismiss Filed by Defendants Toronto-
Dominion Bank, Toronto Dominion Holdings (U.S.A.), Inc., TD Securities Inc., TD Securities
(USA) Inc., and Toronto Dominion (Texas), Inc. (Docket No. 20 in Case No. H-03-5528), which
argued that the complaint stated claims for primary liability under the securities laws; the complaint
was pled in accordance with the Federal Rules of Civil Procedure and the PSLRA; Lead Plaintiffs’
claims were timely; and the complaint stated a claim for control person liability. This Court has not
yet ruled on this motion.
189. On February 3, 2004, defendants The Royal Bank of Scotland Group PLC, The Royal
Bank of Scotland PLC, National Westminster Bank PLC, Greenwich Natwest Structured Finance,
Inc., Greenwich Natwest Ltd. and Campsie, Ltd., filed a motion to dismiss (Docket No. 42 in Case
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No. H-03-5528), which argued for dismissal because Lead Plaintiff’s claims were time-barred and
the complaint failed to allege a primary violation and loss causation. In response, on March 18,
2004 Lead Counsel filed Lead Plaintiff’s Opposition to Motion to Dismiss Filed by Defendants The
Royal Bank of Scotland Group PLC, The Royal Bank of Scotland PLC, National Westminster Bank
PLC, Greenwich Natwest Structured Finance, Inc., Greenwich Natwest Ltd. and Campsie, Ltd.
(Docket No. 2032), which argued that the complaint stated claims for primary liability under the
securities laws; Lead Plaintiff’s claims were timely; and the complaint adequately alleged loss
causation. This Court had not yet ruled on this motion at the time the stay of these proceedings was
entered.
190. On March 15, 2004, defendants Goldman, Sachs & Co. and The Goldman Sachs
Group, Inc. filed a motion to dismiss (Docket Nos. 17-18 in Case No. H-04-0088), which argued for
dismissal because Lead Plaintiff’s allegations against other defendants negated those against
Goldman Sachs, and the complaint failed to adequately plead control person liability, and said claim
was time-barred. On April 16, 2004, Lead Counsel filed Lead Plaintiff’s Opposition to Motion to
Dismiss filed by Defendants Goldman, Sachs & Co. and The Goldman Sachs Group, Inc. (Docket
No. 23 in Case No. H-04-0088), which argued that Lead Plaintiff had pled a prima facie case for
liability against defendants; its claims were not time-barred; and it had properly pled a claim for
control person liability. The Court denied the motion, finding the §11 claim adequately pled, and
granted Lead Plaintiff leave to replead its control person claim. See 12/5/05 Opinion and Order
(Docket No. 46 in Case No. H-04-0088) at 67-69.
191. On March 15, 2004, defendant Andrews Kurth LLP (“A&K”) filed a motion to
dismiss (Docket No. 19 in Case No. H-04-0088), which argued for dismissal because the complaint
failed to allege that the defendant made a misleading statement or committed a manipulative act;
plaintiffs did not rely on the defendant’s conduct; and the complaint failed to plead scienter. On
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April 16, 2004, Lead Counsel filed Lead Plaintiff’s Opposition to Andrews Kurth LLP’s Motion to
Dismiss (Docket No. 22 in Case No. H-04-0088), which argued that A&K was liable for
participating in a fraudulent scheme and committing deceptive acts, notwithstanding its status as a
law firm; the complaint sufficiently pled reliance and scienter; and Lead Plaintiff’s claims were
consistent with the Court’s previous rulings. The Court granted the motion, because the complaint
alleged A&K to have played only a minor role in the Enron scheme; A&K’s conduct was protected
as legal services; the allegations of fraudulent conduct were too general; and A&K is not alleged to
have made public statements. See 9/12/05 Opinion and Order of Partial Dismissal (Docket No. 43 in
Case No. H-04-0088) at 16-17.
192. On March 15, 2004, defendants Royal Bank of Canada, Royal Bank Holding Inc.,
Royal Bank DS Holding Inc., RBC Dominion Securities Limited, RBC Dominion Securities, Inc.,
RBC Holdings (USA) Inc., and RBC Dominion Securities Corporation (“RBC”) filed a motion to
dismiss (Docket Nos. 16-17 in Case No. H-04-0087), which argued for dismissal because the claims
in the complaint were time-barred; the complaint failed to comply with applicable rules of pleading;
and the complaint failed to plead a primary violation, loss causation or control person liability. On
April 16, 2004, Lead Counsel filed Lead Plaintiff’s Opposition to Motion to Dismiss Filed by
Defendants Royal Bank of Canada, Royal Bank Holding Inc., Royal Bank DS Holding Inc., RBC
Dominion Securities Limited, RBC Dominion Securities, Inc., RBC Holdings (USA) Inc., and RBC
Dominion Securities Corporation (Docket No. 21 in Case No. H-04-0087), which argued that Lead
Plaintiff’s claims were not time-barred; the complaint stated a claim for primary liability under the
securities laws; Lead Plaintiff’s claims were pled in compliance with the Federal Rules of Civil
Procedure and the PSLRA; and the complaint adequately alleged loss causation and stated a claim
for control person liability. The Court denied the motion, finding that the claims were timely filed
and adequately pled, but due to the issuance of Dura Pharms., Inc. v. Broudo, 544 U.S. 336 (2005),
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the Court ordered that Lead Plaintiff file a supplemental statement pleading the basis for its
allegations of loss causation. See 12/22/05 Opinion and Order (Docket No. 43 in Case No. H-04-
0087) at 31-54. In response, on January 11, 2006, Lead Counsel filed a Supplemental Statement
Concerning Loss Causation Pursuant to Court’s Opinion and Order (Docket No. 44 in Case No. H-
04-0087).
193. On April 5, 2004, defendant Milbank Tweed Hadley & McCloy LLP (“Milbank”)
filed a motion to dismiss the complaint against it (Docket Nos. 19-20 in Case No. H-04-0088),
which argued for dismissal because Milbank was too far removed from the Enron fraud to be held
liable; the complaint failed to allege a primary violation or scienter; Milbank failed to make a false
statement, misleading omission, or perform a fraudulent act; and reliance was lacking. On June 7,
2004, Lead Plaintiff filed an 89-page opposition (Docket No. 29 in Case No. H-04-0088), which
argued that Milbank was liable as a primary violator; and the complaint adequately pled scienter.
The Court granted the motion, ruling that the complaint failed to identify with particularity any
material misrepresentations or omissions by Milbank, and failed to plead scienter adequately; and
Milbank’s alleged conduct was insufficient for liability under the securities laws. See 12/5/05
Opinion and Order re Motions to Dismiss (Docket No. 46 in Case No. H-04-0088) at 42-54.
194. On April 7, 2004, Lead Counsel filed Plaintiffs’ Motion for Reconsideration of Order
Dismissing Claims Against Canadian Imperial Bank of Commerce (Docket No. 2067), which argued
for reinstatement of claims against the defendant concerning a 1999 securities offering that were
dismissed as time-barred. On April 27, 2004, CIBC filed an opposition (Docket No. 2108) which
argued against reconsideration because the subject claims were time-barred. The Court granted the
motion, reinstating certain claims against a CIBC parent entity. See 6/21/05 Opinion and Order
(Docket No. 3626) at 15.
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195. On April 13, 2004, defendants Lehman Brothers Holdings Inc. and Lehman Brothers
Inc. filed a motion for reconsideration of their motion to dismiss (Docket No. 2079), which argued
that certain claims against the subsidiary entity were time-barred under the Court’s prior rulings and
that a derivative claim for control person liability against a parent entity was thus deficient. On
April 16, 2004, Lead Counsel filed Lead Plaintiff’s Opposition to Lehman Brothers Holdings Inc.’s
and Lehman Brothers Inc.’s Motion for Reconsideration of the Lehman Defendants’ Motion to
Dismiss (Docket No. 2094), which argued that Lead Plaintiff may still maintain a claim for control
person liability against a Lehman Brothers parent entity notwithstanding the fact that its claim for
primary liability against a subsidiary was time-barred. Lehman’s motion for reconsideration was not
ruled on at the time the parties settled the case.
196. On April 14, 2004, defendants Bank of America Corporation and Banc of America
Securities LLC filed a motion for reconsideration of the BofA defendants’ motion to dismiss
(Docket No. 2086), which argued that the Court overlooked its argument that certain claims against a
subsidiary were time-barred; and because they were time-barred, a derivative claim for control
person liability against a parent entity was thus deficient. On April 16, 2004, Lead Counsel filed
Lead Plaintiff’s Opposition to Bank of America Corporation’s and Banc of America Securities
LLC’s Motion for Reconsideration of the Bank of America Defendants’ Motion to Dismiss (Docket
No. 2093), which argued that Lead Plaintiff’s claims were not time-barred; and dismissal of a claim
for primary liability against a subsidiary does not preclude a claim for control person liability against
a parent entity. The Court dismissed the claims against the subsidiary, but sustained the control
person claim against the parent entity. BofA’s motion for reconsideration was not ruled on at the
time the parties settled the case.
197. On April 19, 2004, defendant JPMorgan filed a motion a Motion to Reconsider the
Court’s April 5, 2004 Order re: JPMorgan Defendants (Docket No. 2095), arguing that Lead
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Plaintiff’s §10 claim against JPMorgan Chase Bank was time-barred. On April 26, 2004, Lead
Counsel filed Lead Plaintiff’s Opposition to JPMorgan’s Motion to Reconsider the Court’s April 5,
2004 Order (Docket No. 2107) (and later a sur-reply (Docket No. 2127)), which argued that the
claims were not time-barred because plaintiffs were not on inquiry notice of claims against the
defendant prior to filing their complaint. For the reasons advanced by Lead Plaintiff, the Court
denied the motion. See 6/14/05 Opinion and Order re JPMorgan Motion for Reconsideration
(Docket No. 3597) at 7.
198. On April 20, 2004, Lead Counsel filed Lead Plaintiff’s Motion for Reconsideration of
Order Dismissing Claims Against The Deutsche Bank Defendants (Docket No. 2101), seeking
reconsideration of the Court’s dismissal of Lead Plaintiff’s claims, which rested on a conclusion that
claims concerning conduct in certain tax transactions were time-barred. Lead Plaintiff argued that
other allegations in the complaint that the defendant made false and misleading statements, and
underwrote securities offerings, sufficed to state a claim for violation of the securities laws. On May
19, 2004, Deutsche Bank filed an opposition (Docket No. 2145), which argued that Lead Plaintiff’s
motion was procedurally improper; the claims in the complaint were untimely; and certain claims
lacked subject matter jurisdiction. In response, on June 14, 2004 Lead Counsel filed Lead Plaintiff’s
Reply Brief in Further Support of Its Motion for Reconsideration of Order Dismissing Claims
Against the Deutsche Bank Defendants (Docket No. 2199), which argued that Lead Plaintiff’s
motion was procedurally proper; the claims were not time-barred; and the complaint adequately pled
scienter and subject matter jurisdiction. The Court granted the motion, reinstating the §10 claims
against the defendant, and ruling that it had the requisite subject matter jurisdiction. See 7/26/05
Opinion and Order re Deutsche Bank Motion for Reconsideration (Docket No. 3727) at 15.
199. On April 30, 2004, plaintiffs Investors Partner Life Insurance Company, John
Hancock Life Insurance Company and John Hancock Variable Life Insurance Company filed
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Plaintiffs’ Investors Partner Life Insurance Company, John Hancock Life Insurance Company, and
John Hancock Variable Life Insurance Company, Individually and on Behalf of All Others Similarly
Situated, Motion for Leave to File Amended Complaint (Docket No. 2368), which sought to join
certain Andersen entities as defendants. In response, on August 30, 2004 Lead Plaintiff filed a
notice (Docket No. 2370) objecting to these plaintiffs’ attempt to assert certain claims against certain
Andersen entities, because such claims would be duplicative of claims Lead Plaintiff pursued and
settled on behalf of the Class in connection with the Andersen Worldwide settlement. For this
reason, the Court ordered those plaintiffs’ claims against the Andersen entities stricken from their
amended complaint. See 10/25/04 Order re Andersen Claims (Docket No. 2494) at 2.
200. On May 7, 2004, Lead Counsel filed Lead Plaintiff’s Motion for Leave to Give
Notice to Certain Class Members Pursuant to Rule 23(d)(2) of the Federal Rules of Civil Procedure
(Docket No. 2129). The motion requested notice to inform absent Class members who purchased
the Foreign Debt Securities that they should step forward to act as class representatives, or risk
having their Class claims dismissed in accordance with the Court’s previous ruling. The Court
granted the motion. See 6/1/04 Order Granting Lead Plaintiff’s Motion for Leave to Give Notice to
Certain Class Members Pursuant to Rule 23(d)(2) of the Federal Rules of Civil Procedure (Docket
No. 2180) at 1.
IX. CLASS CERTIFICATION BRIEFING
201. In hindsight, class certification proceedings were one of the most important and, as it
turned out, life-threatening aspects of the litigation. Briefing regarding Lead Plaintiff’s motion for
class certification was extensive and complex. Lead Plaintiff filed its initial motion for class
certification on October 1, 2002 (Docket No. 1048). The Regents, with 19 other proposed class
representatives, sought certification of a Class of all persons who purchased Enron’s publicly traded
equity and debt securities between October 19, 1998 and November 27, 2001, and were injured
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thereby. On May 28, 2003, Lead Plaintiff filed an amended motion for class certification, which
mirrored in most respects the opening motion (Docket No. 1445). After Lead Plaintiff’s motions
were filed, defendants took extensive discovery related to class certification.
202. In October of 2003, oppositions to Lead Plaintiff’s amended motion for class
certification were filed. The following oppositions were filed by various defendants and other
plaintiffs:
• Defendant Stanley C. Horton’s Joinder in Certain Defendants’ Brief in Opposition to Class Certification of Plaintiffs’ Section 10(b) and Rule 10b-5 Claims (Docket No. 1796);
• Andrew Fastow’s Joinder in Certain Individual Defendants’ Opposition to Class Certification with Respect to Plaintiffs’ §20A claims (Docket No. 1794);
• Partial Objection by Putative Class Members to Lead Plaintiff’s Amended Motion for Class Certification and Memorandum of Law Thereon (Docket No. 1789);
• Response of Defendant Ken L. Harrison to Plaintiffs’ Motion for Certification of Class Claims (Docket No. 1798);
• Memorandum of Law of Bank of America Corporation and Banc of America Securities LLC in Opposition to Lead Plaintiff’s Amended Motion for Class Certification (Docket No. 1778);
• Certain Defendants’ Brief in Opposition to Class Certification of Plaintiffs’ Section 10(b) and Rule 10b-5 Claims (Docket No. 1780);
• Financial Institution Defendants’ Memorandum of Law in Opposition to Lead Plaintiff’s Amended Motion for Class Certification (Docket No. 1788);
• Certain Individual Defendants’ Opposition to Class Certification With Respect to Plaintiffs’ Section 20A Claims (Docket No. 1795);
• Outside Directors’ Amended Memorandum Concerning Certification of Class Claims Under Section 11 (Docket No. 1785);
• Defendant Rebecca Mark-Jusbasche’s Response to Lead Plaintiff’s Amended Motion for Class Certification (Docket No. 1792);
• Vinson & Elkins L.L.P.’s Opposition to Class Certification (Docket No. 1799);
• Andrew Fastow’s Joinder in Outside Directors’ Memorandum Concerning Certification (Docket No. 1769);
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• Outside Directors’ Memorandum Concerning Certification of Class Claims Under Section 11 [& Exhibits] (Docket No. 1767); and
• Conseco Annuity Assurance Company’s Memorandum of Law in Opposition to the Newby Lead Plaintiff’s Amended Motion for Class Certification (Docket No. 1770).
203. Each of these filings raised distinct legal and factual arguments regarding the
propriety of certifying a class. Just over a month after the oppositions to class certification were
filed, Lead Plaintiff filed a reply brief addressing the myriad complex issues raised by defendants
(and other plaintiffs) (Docket No. 1854). Also, on November 24, 2003, Lead Plaintiff filed a
response to Conseco’s opposition to class certification (Docket No. 1853).
204. In July 2004, Merrill Lynch filed a notice of supplemental authority in opposition to
Lead Plaintiff’s motion for class certification (Docket No. 2286). In that filing, Merrill Lynch
contended that the Fifth Circuit case Greenberg v. Crossroads Sys., Inc., 364 F.3d 657 (5th Cir.
2004), precluded class treatment as to claims against Merrill Lynch. Lead Plaintiff strenuously
opposed this motion on August 9, 2004 (Docket No. 2318), arguing, in part, that Greenberg did not
apply in a case alleging violations under subsections (a) and (c) of §10 of the Exchange Act. Merrill
Lynch filed a reply memorandum regarding Greenberg on August 24, 2004 (Docket No. 2361).
205. As a sideline to the primary briefing relating to defendants regarding class
certification, Lead Plaintiff was involved in significant briefing regarding claims brought by
Conseco. Conseco argued that it, rather than Lead Plaintiff, was entitled to represent purchasers of
certain Foreign Debt Securities. In February 2005, Lead Plaintiff opposed Conseco’s supplemental
memorandum in support of Conseco’s motion for appointment as lead plaintiff in the Conseco action
(Docket No. 3037). Significant briefing regarding issues related to the Foreign Debt Securities and
whether such claims were appropriate for class treatment occurred throughout the litigation. Lead
Plaintiff sought to pursue claims based on §12(a)(2) of the Securities Act. Imperial County
Employees Retirement System (“ICERS”) intervened to represent §12(a)(2) purchasers (Docket No.
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1999) (“ICERS Order”) (granting motion to intervene). Deutsche Bank then settled ICERS’ private
claim (Docket No. 2699). On June 23, 2005, Frankfurt Trust moved to intervene to be a named
plaintiff on §12(a)(2) claims (Docket No. 3639). While that motion was under submission, Deutsche
Bank settled Frankfurt Trust’s private claim also (Docket No. 4024) (withdrawal). Because no other
plaintiff who had a §12(a)(2) claim against a non-settling defendant moved to intervene, the Court
eventually dismissed Lead Plaintiff’s §12(a)(2) claims.
206. In November 2005, Lead Plaintiff filed a notice of supplemental authority (Docket
No. 4135) alerting the Court to the Fifth Circuit’s decision in Feder v. Electronic Data Sys., Inc., No.
05-40636 (5th Cir. Oct. 24, 2005). On November 7, 2005 the Court issued an Order (Docket No.
4134) seeking a summary of outstanding issues related to class certification. Lead Plaintiff filed a
response to the Court’s Order on November 30, 2005 (Docket No. 4224). In that summary Lead
Plaintiff reiterated that all the prerequisites for class treatment had been met and that a class could
and should be certified.
207. After the Fifth Circuit’s rulings in the Bell and Unger cases regarding the factors a
court must weigh in determining whether an efficient market exists, Lead Plaintiff submitted the
Declaration of Blaine Nye (Docket No. 4390) in support of Lead Plaintiff’s motion. That declaration
examined each of the factors laid out in Bell and Unger and concluded that Enron’s common stock,
bonds and other securities all traded on an efficient market. In response to the Nye Declaration, on
February 14, 2006 defendants filed various supplemental memoranda in opposition to Lead
Plaintiff’s amended motion for class certification. Those filings were supported by declarations of
experts hired by defendants and raised numerous arguments of law and fact. On March 3, 2006,
Lead Plaintiff filed responses to the various oppositions (Docket Nos. 4528, 4529). Lead Plaintiff
also submitted on that date the rebuttal declaration of Dr. Nye (Docket No. 4527). That document
addressed and refuted many of defendants’ arguments.
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208. A two-day hearing was held regarding class certification on March 7-8, 2006. At the
hearing defendants and Lead Plaintiff questioned and cross-examined witnesses, including Dr. Nye
and Dr. Sundaresan. Shortly after the hearing, Lead Plaintiff submitted the declaration of
Christopher M. Patti (Docket No. 4551). Mr. Patti, counsel for The Regents, explained in his
declaration the extensive and hand’s-on role The Regents played in the prosecution of the action.
209. In April 2006, the bank defendants filed a notice of supplemental authority (Docket
No. 4596) alerting the Court to the Eighth Circuit’s decision in Charter Communications, Inc. Just
days later Lead Plaintiff filed an extended response to defendants’ filing (Docket No. 4621), arguing
that the Charter decision was not applicable to the claims in the Newby litigation for numerous
reasons. The bank defendants filed an extensive reply memorandum on April 27, 2006 (Docket No.
4629).
210. On June 5, 2006, the Court issued an Order regarding class certification (Docket No.
4735). In that Order, the Court conditionally granted Lead Plaintiff’s motion for class certification,
dismissed claims related to §12(a)(2), dismissed Deutsche Bank from the action, dismissed claims
based on analysts’ statements and ordered Lead Plaintiff to amend the Class definition. Prior to the
Court’s order regarding class certification, the Court, on May 26, 2006, ordered Lead Plaintiff to file
a trial plan demonstrating how it would organize and try the legal claims at issue. Lead Plaintiff
amended the Class definition on June 14, 2006 (Docket No. 4765) and filed its Trial Plan on June 5,
2006 (Docket No. 4729). The bank defendants objected to the amended order and filed an objection
on June 19, 2006 (Docket No. 4798). Lead Plaintiff responded to that motion on June 21, 2006
(Docket No. 4804). The Court issued its Order granting class certification on July 5, 2006 (Docket
No. 4836). Two weeks later, defendants filed petitions in the Fifth Circuit pursuant to Rule 23(f) for
leave to appeal from the Court’s Order. Lead Plaintiff opposed that motion on July 28, 2006. The
Fifth Circuit granted the Rule 23(f) petition and ordered expedited briefing. A hearing before the
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Fifth Circuit occurred on February 5, 2007. The Fifth Circuit issued its Order reversing certification
on March 19, 2007, virtually on the eve of trial.
X. EXPERT DISCOVERY AND DISCLOSURES
211. Lead Plaintiff submitted seven expert reports in January 2006: by Dr. Blaine Nye on
damages; CPA Saul Solomon on Enron’s accounting; CPA Charles Drott on Andersen’s role;
Professor Claire Hill on credit-rating agencies; Joel Finard on investment-banking policies; Craig
Shenkman on tax issues; and Professor Bernard Black on disclosure and valuation issues.
212. In response, in March 2006, defendants submitted 40 expert reports that attacked our
experts’ opinions:
Expert Entity Area of Opinion Comment, Robert Alliance Capital Mgmt. Damages, Enron Zero Coupon Note due 2021, challenges
Nye Gilson, Ronald J. Alliance Capital Mgmt. Propriety of Frank Savage of Alliance sitting on Enron’s
Board Lacey, John Alliance Capital Mgmt. Reliance on Andersen Foster, John M. Andersen GAAP for Andersen 1997-2Q01; effect of concealed
information McEachern, Stephen M. Andersen GAAS for Andersen 1997-2Q01; effect of concealed
information Gabaldon, Theresa A. Barclays Conduct and advice of V&E Gibbons, Michael R. Barclays Market efficiency, materiality, loss causation and
damages, challenges Nye Greenspan, Ronald F. Barclays Solvency, challenges Black Isaac, William M. Barclays Banking, challenges Finard Lorsch, Jay W. Barclays Responsibilities of BOD, Enron Board’s conduct Miller, Geoffrey Barclays Barclays relationship with V&E Murovitz, Mark I. Barclays Auditing Ronen, Joshua Barclays Accounting Cornell, Bradford CSFB Damages, challenges Nye and Black Hamada, Robert S. CSFB Responsibilities of BOD, Enron Board’s conduct Johnson, Larry CSFB Financial reporting and the role of Andersen Leisner, Richard M. CSFB Practices and procedures of outside counsel; role of V&E Rock, Robert J. CSFB Accounting and financial reporting Schwert, G. William CSFB Damages, challenges Nye’s methods and models Thakor, Anjan V. CSFB Banking Barclay, Mike Deutsche Bank Damages, challenges Nye Erickson, Merle Deutsche Bank Accounting for structured tax transactions Graves, Frank Deutsche Bank Fraud on the market, market efficiency, challenges Nye Haft, Robert Deutsche Bank Due diligence Kearns, Chris Deutsche Bank Solvency, challenges Black Myers, Stewart Deutsche Bank Banking, Marlin and Osprey Share-Trusts Sundaresan, Suresh Deutsche Bank Market efficiency, challenges Nye Burchett, Shannon Lou Pai EES, retail energy market, retail energy products and
services and risk management services, business purpose of moving EES into wholesale trading
Dewey, Lee M. Lou Pai Accounting regarding EES and disclosures of EES and New Power
Tabak, David Lou Pai Loss causation, market efficiency and damages, challenges Nye
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Expert Entity Area of Opinion Dorris, Gary Merrill Lynch ML’s participation in Energy Trades Dunbar, Fred Merrill Lynch Damages, challenges Nye, ML’s research coverage of
Enron, ML’s role as investor in LJM2 Coates, IV, John C. V&E Disclosure documents, role of V&E, challenges Black Fischel, Daniel R. V&E Solvency, challenges Black Glazer, Donald W. V&E Opinion Letters prepared by V&E Hazard, Jr., Geoffrey C. V&E Legal Ethics, conduct of V&E lawyers who worked on
matters for Enron Ide III, R. William V&E Professional conduct of V&E lawyers McFadden, Frank H. V&E Reliance on outside counsel, V&E’s role in drafting
disclosures Schwarcz, Steven L. V&E Structured finance transactions Wolfram, Charles W. V&E Legal Ethics, activities of V&E and certain of its lawyers
who worked on matters for Enron For each of these, our team of lawyers prepared a summary of the expert’s opinions for use in our
deposition preparation.
213. In April 2006, we submitted 11 expert rebuttal reports:
Expert Area of Opinion Bernard Black Disclosures, Insolvency Saul Solomon Accounting Blaine Nye, Ph.D. Damages and Market Efficiency Joel Finard Investment Banks Scott Hakala Damages Israel Shaked Valuations, Insolvency Mark Sargent Lawyer Ethics and Conduct Susan Koniak Lawyer Ethics and Conduct George Cohen Lawyer Ethics and Conduct Claire Hill Credit Rating Agencies Craig Shenkman Tax Transactions
214. All experts were deposed as set forth below after the Court denied defendants’ motion
to postpone the depositions.
DEPONENT NAME DATE OF DEPOSITION
DESIGNATING PARTY
LOCATION ATTORNEYS PRESENT
Barclay, Michael 05/17/06-05/18/06 Deutsche Bank NYC Anne Box Black, Bernard 04/20/06-04/21/06 Lead Plaintiff Houston Jaime Baskin, Paul Howes Burchett, Shannon 05/22/06 Lou Pai Houston Xan Bernay Coates, John 05/18/06-05/19/06 Vinson & Elkins New York Jaime Baskin Cohen, George 05/22/06-05/23/06 Lead Plaintiff Washington, D.C. John Pierce Comment, Robert 05/02/06 Alliance Capital Houston Anne Box, Kate Splan Cornell, Bradford 05/10/06 CSFB Houston Jaime Baskin Dewey, Lee 05/08/06-05/09/06 Lou Pai Houston Anne Box, Kate Splan Dorris, Gary 05/10/06 Merrill Lynch Houston Bobby Henssler Drott, Charles 04/25/06-04/26/06,
04/28/06 Lead Plaintiff Houston James Jaconette
Dunbar, Frederick 05/22/06 Merrill Lynch NYC Paul Howes Erickson, Merle 05/18/06-05/19/06 Deutsche Bank NYC Matt Siben Finard, Joel 04/27/06-04/28/06 Lead Plaintiff Houston Shawn Hays, John Lowther Fischel, Daniel 05/24/06 Vinson & Elkins Houston Patrick Coughlin Foster, John 05/15/06-05/17/06 Andersen New York James Jaconette Gabaldon, Theresa 05/04/06 Barclays Houston Xan Bernay
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DEPONENT NAME DATE OF DEPOSITION
DESIGNATING PARTY
LOCATION ATTORNEYS PRESENT
Gibbons, Michael 05/23/06 Barclays New York Jaime Baskin Gilson, Ronald 04/20/06 Alliance New York James Hail Glazer, Donald 05/23/06 Vinson & Elkins Houston Jerri Hardaway Graves, Frank 05/08/06 Deutsche Bank Houston Shawn Hays Greenspan, Ronald 04/27/06 Barclays Houston Jamie Baskin Haft, Robert 05/16/06-05/17/06 Deutsche Bank NYC Matt Siben Hakala, Scott 05/08/06-05/09/06 Lead Plaintiff Houston Paul Howes Hamada, Robert 05/04/06 CSFB Santa Monica James Hail Hazard, Geoffrey 05/18/06-05/19/06 Vinson & Elkins Houston John Pierce Hill, Claire 04/21/06 Lead Plaintiff Houston John Pierce, Paul Howes,
Matt Siben Ide, William 05/23/06-05/24/06 Vinson & Elkins Houston John Lowther Isaac, William 05/10/06 Barclays NYC Xan Bernay Johnson, Larry 05/23/06-05/25/06 CSFB Houston Roger Greenberg Kearns, Chris 05/23/06 Deutsche Bank NYC Anne Box Koniak, Susan 05/15/06-05/16/06 Lead Plaintiff Boston Jerri Hardaway Lacey, John 05/23/06 Alliance Houston James Hail Leisner, Richard 05/10/06 CSFB Houston Shawn Hays Lorsch, Jay 05/11/06-05/12/06 Barclays Houston James Hail McEachern, Stephen 05/17/06-05/19/06 Andersen New York James Jaconette McFadden, Frank 05/03/06-05/04/06 Vinson & Elkins Houston John Pierce Miller, Geoffrey 05/01/06 Barclays Houston John Pierce, Xan Bernay Murovitz, Mark 05/23/06-05/25/06 Barclays Houston James Jaconette Myers, Stewart 05/25/06 Deutsche Bank NYC Matt Siben Nye, Blaine 05/03/06-05/05/06 Lead Plaintiff Houston Patrick Coughlin, Helen
Hodges, Shawn Hays Rock, Robert 05/17/06-05/18/06 CSFB Houston Paul Howes Ronen, Joshua 05/10/06 Barclays NYC Paul Howes Sargent, Mark 05/08/06 Lead Plaintiff Houston John Pierce Schwarcz, Steven 05/11/06-05/12/06 Vinson & Elkins Houston John Pierce Schwert, William 05/23/06, 05/25/06 CSFB NYC Shawn Hays Shaked, Israel 05/22/06-05/23/06 Lead Plaintiff Houston Helen Hodges Shenkman, Craig 05/02/06-05/03/06 Lead Plaintiff Houston Matt Siben Solomon, Saul 05/02/06-05/04/06 Lead Plaintiff Houston Paul Howes, Xan Bernay Sundaresan, Suresh 05/23/06 Deutsche Bank NYC Matt Siben Tabak, David 05/25/06 Lou Pai Houston Paul Howes Thakor, Anjan 05/11/06 CSFB Houston John Lowther Wolfram, Charles 04/26/06-04/27/06 Vinson & Elkins Houston John Pierce
215. Following is a brief description of each of our experts and their testimony. Dr. Blaine
Nye is President of Stanford Consulting Group and is a financial economist. Dr. Nye received his
M.B.A. and Ph.D. in Finance from Stanford, and is an expert on market efficiency, materiality,
causation and damages. Dr. Nye provided detailed expert opinions concerning loss causation and
materiality, and Dr. Nye also submitted expert opinions on the damages suffered by Enron security
purchasers during the Class Period, including Enron’s common stock, options on Enron’s common
shares, six issues of preferred securities, and Enron’s debt securities. Dr. Nye testified that the
markets for Enron securities were efficient; this evidence supports the fraud-on-the-market theory
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and is the basis for a presumption of reliance in a securities fraud case. He stated, “Defendants’
scheme to defraud and the resulting material misrepresentations and omissions by Defendants in the
Class Period regarding Enron’s financial and operating performance, financial condition, and
prospects did have a significant effect on prices of Enron securities, and served to inflate their prices
until the truth began to emerge and the prices fell.” 1/17/06 Expert Report of Blaine Nye, Ph.D. at
32. Thus his testimony supported the elements of loss causation and economic loss. In response, the
defendants fielded eight experts to attack Dr. Nye’s analyses. Defendants’ experts claimed Dr.
Nye’s damages analysis was flawed in numerous ways. Some of them “corrected” his “mistakes”
and generated aggregate damages of $17 billion and lower amounts. They also asserted that the
banks did nothing wrong and in any event, the defendants’ actions did not cause any investor losses.
In rebuttal, Dr. Nye stated, “The cause of investors’ economic losses was the inflation caused by the
concealment of Enron’s true risk, financial condition, performance, and prospects, resulting in
inflated prices of Enron securities, followed by the disclosure of the truth about these subjects,
events and disclosures which caused the prices of Enron’s securities to decline precipitously.”
4/13/06 Expert Rebuttal Report of Blaine F. Nye, Ph.D. at 5. In addition to these reports, Dr. Nye
prepared an expansive expert declaration in support of Lead Plaintiff’s Amended Motion for Class
Certification, and Dr. Nye also prepared an expert rebuttal declaration in response to expert opinions
submitted by defendants opposed to certifying a class. Dr. Nye testified at the hearing on class
certification in March 2006 and he was deposed for three days in May 2006.
216. Mr. Saul Solomon is a licensed CPA in Texas, Alabama and Mississippi. Mr.
Solomon also is a Certified Fraud Examiner, Certified Valuation Analyst and a Diplomat on the
American Board of Forensic Accounting. He currently is a Managing Director of UHY Mann
Frankfort Stein & Lipp Advisors, LP. Mr. Solomon provided a comprehensive expert report and
supplemental report concerning the accounting treatment of myriad Enron-related transactions, and
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opined the transactions improperly manipulated Enron’s publicly filed financial statements by
materially overstating income, understating debt, overstating cash provided by operating activities,
overstating equity, and understating financing cash flow. He opined Enron’s publicly reported
financial statements were not in accordance with GAAP and the SEC’s requirements for full and fair
disclosure. Mr. Solomon further opined Enron’s financial strength, as represented in its publicly
filed financial statements, was materially misstated. Mr. Solomon also provided a detailed 306-page
appendix to his expert report, providing detailed accounting analyses of Enron’s prepay, FAS
125/140, minority interest, and share trust transactions. Mr. Solomon was deposed for three days in
May 2006. He testified that the structured finance transactions the banks did with Enron falsified
Enron’s financial statements. He detailed the complex structures of dozens of the transactions and
provided the impact of the transactions on Enron’s financial statements. The banks’ structured
finance transactions disguised billions of debt and thereby allowed Enron to maintain an investment
grade credit rating essential to its trading operations. The transactions caused Enron’s cash flow
from operations to be materially overstated. Simply put, the transactions made Enron appear able to
generate huge amounts of cash from its business operations, when in fact, the cash was being
borrowed. No less than six experts for defendants attacked Solomon’s report. In rebuttal, Mr.
Solomon held firm in his opinion that the substance of a transaction should be reflected in the
financial statements and that the banks knew very well that the transactions they designed had the
intended effect on Enron’s reported financial condition.
217. Professor Bernard Black is Professor of Law with the University of Texas Law
School and Professor of Finance with the University of Texas, McCombs School of Business.
Professor Black holds a J.D. from Stanford Law School and has extensive experience with, among
other things, corporate finance, the federal securities laws, and compliance with the securities laws’
disclosure requirements. Professor Black submitted expert and rebuttal reports concerning the true
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nature of Enron’s financial condition during the Class Period, how Enron-related transactions were
structured by defendants to distort Enron’s financial results, and generally how investors were
deceived by the Enron-related transactions and resultant material omissions and misstatements.
Professor Black was deposed for two days in May 2006. His testimony addressed the true nature of
Enron’s financial condition, when Enron likely became insolvent, what investors would want to
know about Enron, and the disclosures Enron provided (or failed to provide) about its financial
results. He opined that “many of Enron’s disclosures were grossly and often intentionally
incomplete and misleading” (1/17/06 Expert Report of Bernard Black at 6) and that Enron was cash-
flow insolvent by 1999 and perhaps as early as 1998. Professor Black’s rebuttal report was filed in
response to ten defense expert reports challenging Professor Black’s expert opinions about Enron’s
true financial condition, material omissions, and misleading disclosures resulting from the Enron-
related transactions. Two of them asserted he was not qualified to and had not performed any valid
insolvency analysis. He held firm that if the truth had been told, Enron would not have maintained
its investment grade credit rating and investors would have known early on that Enron was not
generating enough cash from its operations to pay the interest on its debt.
218. Professor Claire Hill is a Professor of Law and Norman and Edna Freehling Scholar
with Chicago-Kent College of Law, and is a Visiting Professor of Law at the University of
Minnesota Law School. Professor Hill received her J.D. from American University, Washington
College of Law and her LLM and JSD degrees from Columbia University School of Law. Professor
Hill submitted an expert report concerning Enron’s interactions with the national credit rating
agencies. Professor Hill opined on what the credit rating agencies did in response to their dealings
with Enron, and further opined on how Enron security purchasers and sellers were affected by the
interactions. Professor Hill testified about rating agencies, how they set ratings and how Enron
misled them when it hid its true debt level and reported inflated cash flows from operations. She
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also addressed how important an investment grade credit rating was to Enron. She opined that if the
rating agencies had not been deceived, they would have rated Enron’s debt as “junk.” In her rebuttal
to three experts for defendants, she concluded that Enron’s true financial results warranted a below-
investment grade rating as of year-end 1998, disclosure of Enron’s financial machinations would
have caused its credit rating to be downgraded in 1999 and that the downgrade would have
precipitated a death spiral.
219. Mr. Charles Drott is a Certified Public Accountant and a Certified Fraud Examiner
with over 40 years of experience. Mr. Drott has formerly served as an audit engagement partner and
served as a professional standards review partner for two major public accounting firms. Mr. Drott
submitted an expert report opining on the significance to independent auditors of concealed
agreements or undisclosed understandings, including concealed agreements in certain Enron-related
transactions such as LJM1, Nile, 1999 Electricity Trades, Nigerian Barges and J.T. Holdings, among
others. Mr. Drott testified that there was persuasive evidence that material information was
concealed from Andersen. Had Andersen known about the concealed information, it would not have
approved Enron’s accounting for certain transactions. His testimony supported our effort to rebut
the banks’ attempt to blame Andersen for Enron’s false financial statements.
220. Dr. Scott Hakala is a Chartered Financial Analyst and is a director of CBIZ Valuation
Group, LLC, a national business valuation and consulting firm. Dr. Hakala holds a Doctor of
Philosophy degree in Economics and a B.A. in Economics from the University of Minnesota. Dr.
Hakala submitted an expert rebuttal report concerning loss causation, damages, and further opined
on the validity of Dr. Nye’s analyses, methodologies, and conclusions concerning loss causation and
damages. Additionally, Dr. Hakala provided expert rebuttal opinions to the expert reports filed by
numerous defense experts, including Messrs. Tabak, Dunbar, Gibbons, Barclay, Cornell, Schwert,
Fischel, Kearns and Greenspan. Dr. Hakala concluded that Dr. Nye’s analysis provided an
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economically valid method and framework to properly measure economic loss and that the criticisms
of Dr. Nye’s report were either immaterial, conceptually wrong or inconsistent with the facts of the
case. Dr. Hakala was deposed for two days in May 2006.
221. Mr. Joel Finard is a Chartered Financial Analyst and was an economics teacher with
the Columbia Graduate School of Business. Mr. Finard has more than 19 years of experience
working with the world’s leading institutions in the financial services industry. Mr. Finard has
significant experience and expertise in management oversight, and has operational expertise in
managing credit, market and operations risk at multinational financial institutions. Mr. Finard
opined whether, in consummating the Enron-related transactions, certain defendant financial
institutions violated government regulations and deviated from industry and internal standards.
Among the transactions Mr. Finard examined were the LJM1/Rhythms transaction, the 1999
Electricity Trades, the Yosemite III transaction and the SO2 transaction. Mr. Finard also submitted
an expert rebuttal report in response to numerous defense expert reports challenging his conclusions
about the propriety of defendants’ conduct in creating, funding and executing Enron-related
transactions. Mr. Finard was deposed in May 2006.
222. Dr. George Cohen is a Professor of Law at the University of Virginia School of Law.
He earned a J.D. and Ph.D. in Economics from the University of Pennsylvania. Dr. Cohen is a
recognized expert on legal ethics and professional responsibility, and has previously rendered expert
opinions on legal malpractice matters and has testified before Congress about the regulation of
corporate lawyers. Dr. Cohen expertly opined V&E violated professional standards and committed
fraud in Enron-related transactions, and opined V&E committed fraud by engaging in the
whitewashed Watkins’ “investigation,” an investigation V&E should never have undertaken because
it was hopelessly conflicted. He further opined V&E lawyers, through their expertise, experience
and interaction, either understood or recklessly failed to understand the basic fraudulent nature of the
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Enron-related transactions – yet for years these V&E lawyers continued to provide advice and
opinions, crafted SEC disclosures, and provided other legal services in support of the transactions.
Dr. Cohen also provided expert rebuttal testimony to defense expert opinions submitted by Messrs.
McFadden and Schwarcz. Dr. Cohen was deposed in May 2006.
223. Professor Susan Koniak is a Professor of Law with Boston University School of Law,
and has been a visiting professor at Cornell Law School, Harvard Law School and Yale’s School of
Management. Professor Koniak is a recognized expert on professional responsibility and legal
ethics. Professor Koniak submitted an expert rebuttal report opining V&E lawyers acted unethically
by recklessly or knowingly working with Enron and its agents to create fraudulent transactions and
to conceal fraudulent conduct, in deliberate disregard of the law. Professor Koniak was deposed in
May 2006.
224. Professor Mark Sargent is Dean and Professor of Law with Villanova University
School of Law. Professor Sargent is a current member of the board of directors of New York Stock
Exchange Regulation, Inc., the independent self-regulatory organization for the New York Stock
Exchange. He also is a current member of the boards of directors of two mutual fund complexes
registered under the Investment Company Act of 1940. Professor Sargent also has more than 25
years of scholarly work with corporate law, securities regulation and other areas. Professor
Sargent’s expert report and opinion concerned whether V&E properly provided advice on
disclosures in documents to be filed under the Exchange Act, and Professor Sargent also analyzed
the advice V&E gave to Enron’s Board. Professor Sargent opined V&E failed to meet its
obligations, committed malpractice, and knowingly and recklessly participated in Enron’s fraudulent
schemes. Professor Sargent was deposed in May 2006.
225. Mr. Craig Shenkman is a Managing Director of UHY Mann Frankfort Stein & Lipp
Advisors, LP, and is a licensed CPA in Texas. Mr. Shenkman opined on various tax transactions
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primarily involving Deutsche Bank, including the Teresa, Steele, Tomas, Cochise and Condor
transactions. Among other things, Mr. Shenkman examined the transaction structures, opined on
relevant tax law issues, their impact on tax reporting, and related matters. Mr. Shenkman concluded
the tax transactions inflated Enron’s financial results during the Class Period by improperly
exploiting the difference between tax accounting under the Internal Revenue Code and GAAP,
resulting in fabricated financial accounting benefits. Mr. Shenkman also prepared an expert rebuttal
report in response to defense expert Erickson’s report concerning the purported validity of the tax
transactions. Mr. Shenkman was deposed in May 2006.
226. Professor Israel Shaked is a Professor of Finance and Economics with Boston
University’s School of Management. He also is a co-founder and director of the Institute of
Chartered Pension Professionals, and for 19 years served as a director of the Boston Chartered
Financial Analysts Examination Review Program. Professor Shaked has served as a consultant to
the SEC, the IRS, the Department of Labor and the Pension Benefit Guarantee Corporation.
Professor Shaked prepared an expert rebuttal report, opining on the fair market value of Enron and
its subsidiaries as of October 19, 1998 and December 31, 1999. Professor Shaked prepared
numerous valuation analyses and methodologies in examining Enron, its assets and its subsidiaries,
including a detailed valuation analysis of Enron’s individual business units. Professor Shaked also
prepared a summary of Enron’s debt and capital adequacy. Professor Shaked further provided
rebuttal opinions and critiques of the reports by defense experts Kearns and Greenspan. Professor
Shaked was deposed in May 2006. He testified that if the market had known Enron’s true financial
condition, as of October 19, 1998 Enron would have been valued at approximately $1.8 billion (far
below its market capitalization at that time) and as of December 31, 1999 Enron was insolvent by
approximately $4.3 billion. His opinion supported Dr. Nye’s assumption under one damages
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scenario that if the truth were told, Enron was insolvent by year-end 1999 and that fact would have
been revealed no later than March 30, 2000, when Enron filed its Form 10-K.
227. To efficiently conduct discovery and prepare the trial evidence for a simple, but
compelling presentation, we spent considerable time working with our experts and consultants, to
identify the types of information that best proved defendants’ wrongdoing, and to help our experts
form their opinions, based on the hundreds of thousands of documents reviewed to establish
evidence of defendants’ knowing participation or severe recklessness in the alleged fraud.
Moreover, proving damages in a securities case is always a complicated matter, but especially so
here because of the number of securities involved, the wide disparity in the experts’ view, the
complex financial vehicles, and the novel legal issues. The range of damages by the experts
presented us with not only the task of simplifying the discussion for a jury, but also the issue of how
to rebut the considerable efforts by the banks to demonstrate that the Company’s stock-price decline
in 2001 was an energy-sector-wide effect not attributable to their Enron transactions or conduct –
they were just doing banking business. In addition, we gathered and analyzed evidence to prove
loss causation while defendants argued that we could not prove loss causation because their fraud
was not revealed until after Enron’s stock price had fallen and Enron was in bankruptcy.
228. Lead Counsel’s work with its experts, in preparing their substantive reports, and in
pretrial preparation, entailed culling from an overwhelming amount of relevant data the most telling
evidence and then repeatedly simplifying it in understandable diagrams, and comparatively few
documents and persuasive bullet points for the jury.
XI. REPRESENTING THE CLASS IN ENRON’S AND LJM2’S BANKRUPTCY CASES
229. In December 2001, I reviewed Enron’s bankruptcy docket and oversaw preparation of
our pleadings for filing there. I coordinated those efforts with attorneys from our New York office.
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We filed a notice of request for service of pleadings and reviewed the multiple filings of other parties
there in an effort to be informed and proactive on behalf of the securities plaintiffs.
230. In March 2002, our bankruptcy counsel, Craig Rieders of Genovese Joblove &
Battista, P.A., was busy negotiating an order for the appointment of an examiner. The order
appointing the examiner was an outgrowth of our motion for the appointment of a trustee.
Bankruptcy Judge Gonzalez entered the order for appointment of an examiner on April 8, 2002.
231. On June 11, 2002, I and others met with Neal Batson, the newly-appointed Enron
Bankruptcy Examiner. Batson, who was charged with examining Enron’s special purpose entities,
took our Consolidated Complaint as his roadmap, and since he could subpoena documents and take
depositions while our discovery was stayed, he proceeded to obtain evidence not then available to us.
We moved to lift the stay of discovery as to Enron to obtain documents Enron had already provided
to government agencies. Through our motion practice first before Judge Gonzalez and then before
Judge Harmon, by mid-August 2002, we had orders allowing us access to documents Enron had
previously provided to government agencies. Many more months passed before we actually
received any such documents.
232. Craig Rieders filed a motion to grant us access to certain discovery that was available
to parties in Enron’s bankruptcy case. Judge Gonzalez denied us access to the so-called Rule 2004
discovery.
233. In September 2002, we drafted and reviewed pleadings for filing a Class proof of
claim in the Enron bankruptcy and the motion to lift the stay of discovery against Enron; we also
reviewed documents from and discussed strategy for the LJM2 bankruptcy.
234. In January 2003, I prepared for and appeared with Craig Rieders before Judge
Gonzalez on our motion to lift the stay as to Enron. We argued the automatic bankruptcy stay
should be lifted as to Enron so that Lead Plaintiff could add Enron as a defendant in Newby. We
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believed it would be beneficial to the Class for Enron to be a defendant not because we could collect
from Enron, but because the PSLRA allows a plaintiff to collect an “up-charge” from other
defendants found liable in the event a defendant is unable to meet the judgment. For example, if
Enron and the banks were defendants at trial and the jury found Enron’s proportionate fault was 25%
and the banks’ share was 65% of a $20 billion judgment, investors could collect $5 billion from the
banks (in addition to the $13 billion attributable to the banks) because Enron is unable to pay the $5
billion judgment. Enron argued that if a single bank were found to be a “knowing” violator,
investors could collect the entire judgment from that bank; therefore, there was no need to add Enron
as a defendant. After a second hearing and further letter briefs, Judge Gonzalez denied the motion
without prejudice to renewal when the deadline for adding defendants was set in Newby.
235. Late in October 2003, the banks filed a motion in Enron’s bankruptcy proceeding to
prevent us from having access to the sworn statements (i.e., depositions) of bank employees obtained
by the Bankruptcy Examiner. We not only opposed their motion, within days we filed a motion to
compel the production of the sworn statements, which the banks and Enron had, in our case in
Houston. The banks expected that Judge Gonzalez would grant their motion and that Judge Harmon
would follow his lead. They won the first round, but we ultimately won that battle. We argued
before Judge Gonzalez that we should not be barred from access to the Bankruptcy Examiner’s
discovery which was in the possession of the banks in our case. He granted the banks’ motion for a
protective order to prevent investors from having access to the discovery obtained by the Bankruptcy
Examiner. Judge Harmon noted that she would ordinarily “defer to his ruling,” but that granting
access would streamline the discovery in the civil case and “fairness dictates that all parties to the
litigation should have access to the non-privileged information concerning the lawsuit.” 3/16/04
Order on Motions to Compel the Banks to Produce the Sworn Statements and Deposition Transcripts
of Their Employees (Docket No. 2021) at 4.
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236. Bankruptcy Examiner Batson himself filed a motion in November to “protect” his
investigation; he sought permission to destroy evidence he had gathered in his investigation. We
opposed and ultimately an order regarding disposition of evidence was agreed on. We worked to
ensure that none of the evidence was lost. Batson received “immunity” from discovery aimed at
him.
237. Craig Rieders filed a proof of claim on behalf of the Class in the LJM2 bankruptcy.
In early 2004 in connection with discussions to resolve the proof of claim, we explored an agreed
resolution of the Class’s claim and Enron’s claim in the LJM2 estate. The Class and Enron were the
primary claimants in the estate. Ultimately, after substantial negotiations with counsel for the Enron
estate and LJM2, we agreed that the LJM2 assets would be divided between the Class and Enron
with the Class receiving two-thirds and Enron receiving one-third. I participated in drafting the
documentation of the agreement and in seeking approval from the LJM2 bankruptcy judge. As part
of the resolution, Enron and LJM2 agreed that the Class of investors in publicly-traded Enron
securities would be certified and we gave notice to the Class. There were no objections, and on July
7, 2004, Judge Felsenthal approved of the resolution of the class proof of claim. To date, the Class
has received $51.9 million from the LJM2 estate.
XII. SETTLEMENT NEGOTIATIONS
238. The early Court-ordered mediation sessions with Andersen led by Professor Eric
Green were long and difficult. There were multiple plaintiffs involved: Lead Plaintiff, the Tittle
(ERISA) Plaintiffs and the Enron bankruptcy estate. Due to the criminal case, Andersen LLP
quickly went out of business and the settlement discussions were for naught. After the conviction of
Andersen LLP, AWSC restarted the discussions on behalf of the Andersen foreign entities. Those
discussions, aided by Professor Eric Green, were fruitful and Lead Plaintiff and the Tittle Plaintiffs
joined to settle with AWSC for $40 million. The funds were transferred to an account under the
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control of Lead Counsel on August 30, 2002, and have drawn interest for the benefit of the Class
since then. While the amount was agreed upon in August 2002, completing the documentation was
time-consuming primarily because AWSC was going into liquidation.
239. At the status conference held May 28, 2003, the Court ordered us to mediation with
the banks. Our team gathered and reviewed information for the upcoming mediation. We had to
evaluate not only our case against the banks, but also the other plaintiffs’ like the Tittle (ERISA)
plaintiffs and the Enron estate. We consulted experts for the purpose of estimating and
substantiating the investors’ losses. In addition, we gathered information about the banks’ financial
condition and relative ability to meet a judgment. For purposes of the mediation we thought there
was no question but that we had a solid case on liability based on the investigation to date. We had
no formal discovery from the banks at that time. Judge Connor held a planning session for the
mediation on June 30 in his courtroom in White Plains, New York.
240. Our mediation statement was finalized in August 2003 after countless drafts and
revisions to hone it in to a persuasive explanation for why the banks should pay billions to investors.
As soon as ours was shipped out, we began to read the mediation statements of other plaintiffs and
the defendants, which practically filled a banker’s box.
241. We responded to Judge Connor’s questions regarding investors’ damages and
submitted a supplement to our mediation statement at his request. Judge Connor presided over the
first substantive mediation on September 29, 2003.
242. We prepared for and attended the continued mediation with Judge Connor in White
Plains in February 2004; those Court-ordered mediation sessions were not fruitful. However, within
a few months, counsel for BofA and for Lehman contacted us regarding private mediation. We
scheduled a mediation before Judge Daniel Weinstein (Ret.) at JAMS in San Francisco, and the
initial meeting was May 26, 2004. In preparation for the mediation, we gathered and reviewed data
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regarding the §11 claims, which were the only claims remaining against BofA and Lehman. We
drafted a demand letter and the mediation statement with input from Chris Patti, University Counsel
for The Regents. With Judge Weinstein’s assistance we negotiated an agreement with BofA quickly,
and the $69 million settlement began earning interest for the benefit of the Class in late May. The
agreement to settle with Lehman required more lengthy discussions and meetings over several
months. After months of hard-fought negotiations and further review of the remaining claims, we
reached an agreement to settle with Lehman for $222.5 million, which began to earn interest on
October 27, 2004. We worked with counsel for the banks to memorialize the agreements in
stipulations of settlement. Both of these settlements are excellent results for the Class. At the time
these settlements were negotiated, the only claims remaining were §11 claims, which, against
underwriters, are limited to the amount of the securities they sold. Lehman and BofA sold notes and
holders of the notes were entitled to receive a recovery in Enron’s bankruptcy. Consequently,
Lehman and BofA argued that their exposure was reduced due to the bankruptcy recovery, at that
time estimated to be about 17%. In addition, private plaintiffs had sued these same banks and the
banks argued those private plaintiffs’ claims should reduce their exposure to the Class. We believed
that the settlements with Lehman and BofA were in excess of 50% of their exposure to the Class.
The Class also benefited from the early settlement of these claims (before depositions) so that we
could focus our resources on pursuing the banks who had §10(b) liability.
243. Kathy Patrick, counsel for the Outside Directors, contacted Professor Eric Green in
October 2004 to set up a mediation. We gathered and reviewed the directors and officers’ (“D&O”)
insurance policies at issue and we promptly convened with Professor Green in Boston. At the same
time we had reached an agreement with Lehman with Judge Weinstein’s diligent efforts and we
drafted the memorandum of understanding regarding Lehman. Settlement discussions with the
Outside Directors were complicated because in order to secure the insurance proceeds for the benefit
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of the Class, we necessarily had to cut off the further payment of defense costs for other insureds. At
the time our discussions with Kathy Patrick began, the insurance policies had been drained of $150
million out of the $350 million available. Since the Court had dismissed the Class’ §10(b) claims
against the Outside Directors, the only Class claims remaining against them were the §11 claims on
four Enron notes.
244. With Professor Green’s assistance, we reached an agreement with Kathy Patrick’s
clients that called for the Outside Directors to personally pay 10% of their gains on the sale of Enron
stock, plus their agreement to secure the remaining $200 million in insurance. That agreement was
reached only after hard-fought negotiations overseen by Professor Green, and it was just the starting
point for achieving an agreement that we could get approved.
245. First, Enron and its Creditors Committee stood in the way. Since the insurance
policies were arguably assets of the bankrupt entity, the Enron estate would object to payment of the
proceeds to the Class unless the estate received a cut. In order to obtain the remaining $200 million
for investors and to implement the agreement with the Outside Directors, the carriers would have to
ask Judge Gonzalez to lift the stay as to the balance of the excess coverage. Since the insurance
provided for entity coverage, Enron had an interest in obtaining some of the proceeds for the
creditors. Thus, Enron and the Creditors Committee could object to the motion to lift the stay and
thereby hold up payment of the insurance for the settlement. After more negotiations overseen by
Professor Green, we and counsel for Enron and the Creditors Committee reached an agreement for
the allocation of the insurance proceeds: 82.8% to the Class and 17.2% to Enron/Creditors
Committee.
246. Second, the non-settling insureds were unhappy that their ability to defend themselves
using the D&O insurance was coming to an abrupt halt. Since they were insureds and were not
receiving a release from our case, they arguably had a right to object to the use of the insurance
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proceeds for our settlement. Thus, when counsel for some of the non-settling insureds approached
Lead Counsel, more negotiations followed. We conceived the idea of a “set aside” of some amount
of the remaining insurance for the non-settling insureds so as to obviate objections from Lay,
Skilling and others as had occurred in the Tittle settlement. Counsel for Enron and the Creditors
Committee and Coughlin Stoia then spent weeks hammering out the particulars of the concept,
which, so far as we know, was unprecedented. Ultimately, the agreement among Lead Plaintiff,
Enron/Creditors Committee and the non-settling insureds was memorialized in the Agreement
Regarding Insurance Proceeds and Interpleader Action; it provided that the non-settling insureds
would receive approximately $13 million out of the $200 million in remaining insurance. The
agreement among Lead Plaintiff, Enron/Creditors Committee and the Outside Directors was
memorialized in the Stipulation of Settlement. We negotiated and drafted those agreements in the
fall of 2004 and in January 2005; the negotiations required several face-to-face meetings and
countless telephone calls with counsel for the diverse group of insureds, including Lay, Skilling, Pai,
and other former Enron officers.
247. While we were wrestling with Enron and the non-settling insureds on how to divide
the insurance proceeds, the Outside Directors, again represented by Kathy Patrick, filed an action
against certain of the insurance carriers and sought a temporary restraining order to preserve the
proceeds for purposes of the settlement. The Court granted the request for the TRO. Shortly after
the entry of the TRO, Harrison filed a case against the carriers in New York. We then engaged in
discussions with counsel for Harrison to address the Class’ claims against him and his claim on the
insurance. Ultimately, an agreement was reached with Harrison as well. He agreed to pay 10% of
his stock sales gains to settle the §11 claim with the Class and we agreed to drop the §10(b) claim
which the Court had upheld against him.
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248. Concurrently with the negotiations and drafting associated with the Outside Director
and Harrison settlement in 2004, we were finalizing the memorandum of understanding and
stipulation of settlement with Lehman. In November 2004 we also participated in a settlement
meeting with counsel for CIBC and prepared for and drafted a mediation statement for a mediation
with Goldman Sachs, which was overseen by Judge Weinstein in December 2004.
249. Early in January 2005, we finalized the Stipulation of Settlement with the Outside
Directors and Harrison, which contained our agreement not only with those defendants, but also with
Enron/Creditors Committee and the non-settling insureds. The stock sales proceeds and the
insurance proceeds were transferred to an account under the control of Lead Counsel and have
earned interest for the benefit of the Class since February 2005. Just after we filed that agreement
and a motion for preliminary approval, we turned to the motion for preliminary approval of the BofA
settlement and finalizing the Lehman stipulation of settlement because those banks wanted to get on
the same schedule as we had for approval of the Outside Director settlement. The Court granted our
request to expedite the motion to set a hearing for preliminary approval. We prepared for and
attended the hearing on preliminary approval of the settlements with the Outside Directors, Harrison,
BofA and Lehman on February 4, 2005. Thereafter we read objections to the settlements and
reviewed our draft responses. We also addressed the concerns of State Street, the then fiduciary for
the Enron ERISA Plans, as raised by its counsel, Paul Hastings, as well as objections by Lawrence
Schonbrun and John Davis regarding the settlements and the notice to the Class.
250. I attended the hearing on final approval of the Outside Director, Harrison, BofA and
Lehman settlements on April 11, 2005. Kevin Hannon objected to the use of the remaining D&O
insurance to fund the Outside Director settlement. Because he had pled guilty, he was not a party to
our agreement with some non-settling insureds for an allocation of the remaining insurance. He did
everything he could to hold up the Outside Director settlement. He moved to compel arbitration
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regarding the policies and he moved for summary judgment in the interpleader action, in addition to
filing a formal objection to the settlement. Consequently, while the BofA and Lehman settlements
were soon approved by the Court, the Outside Director settlement was not approved until after the
Court denied his motion for arbitration and he appealed that denial. Eventually, after negotiations
overseen by Professor Green, we reached an agreement with Hannon, his objection was withdrawn,
and the Court approved the Outside Director settlement. But that required more of our time and
attention through March 2006.
251. In May 2005 the ongoing settlement discussions between our lawyers and Citigroup’s
lawyers intensified. We closely evaluated the Class’ claims against Citigroup. After working
through a number of issues, by early June we were exchanging term sheets. Both The Regents and
Citigroup are extremely sophisticated and experienced litigants. In these negotiations both sides
were represented by top lawyers who had the utmost respect for each other. As directed by The
Regents, we pushed to maximize the investors’ recovery. Of course, Citigroup’s counsel at Paul
Weiss was charged by their client with minimizing the payment. After months of tough
negotiations, the result was one of the largest payments ever by a single defendant in a securities
class action. On June 9, the parties and counsel signed a term sheet calling for a settlement for
investors of $2 billion; Lead Counsel also insisted that the funds begin earning interest for the
benefit of the Class from the day the term sheet was signed. This was not only a tremendous
recovery for the Class in itself, but it also was a catalyst – and a benchmark – for settlements with
more bank defendants.
252. On June 10, 2005, the day the Citigroup agreement was announced, we had a
previously-scheduled meeting with lawyers for JPMorgan Chase in New York. We met with
lawyers from Simpson Thacher. JPMorgan Chase, too, is a sophisticated litigant represented by
excellent counsel. The Regents insisted that JPMorgan Chase pay more than Citigroup did so as to
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give other banks an incentive to settle sooner rather than later. Of course, Simpson Thacher argued
forcefully that their client had less exposure than Citigroup did and therefore it made no sense for
JPMorgan to pay more. However, JPMorgan did want to put Enron behind it and within days, its
General Counsel and the Simpson Thacher lawyers flew to San Diego for more face-to-face
meetings. With James Holst, General Counsel for The Regents, Chris Patti, and Judge Irving
present, Coughlin Stoia led the negotiations for The Regents. After a few intense days, we executed
a term sheet to settle with JPMorgan for $2.2 billion. This, too, was a stunning settlement – one of
the largest ever – and the trend for settlements with the banks was set. Here again Lead Counsel
insisted that the funds begin earning interest for the benefit of the Class from the date the term sheet
was signed.
253. While initial settlement discussions with CIBC were not fruitful, after the Citigroup
and JPMorgan Chase settlements were announced, counsel for CIBC contacted us and suggested that
engaging a mediator might be helpful. We contacted Professor Green and he quickly made time for
us. Mediation sessions began in July 2005. We met first in Boston and then at The Regents’ offices
in Oakland. As with Citigroup and JPMorgan, liability and damages were vigorously disputed. In
addition, CIBC argued that it simply did not have the wherewithal to pay at the same level as
Citigroup and JPMorgan. James Holst, Chris Patti, Judge Irving and Coughlin Stoia lawyers each
had a significant role in these negotiations for The Regents. They insisted that CIBC must pay more
than JPMorgan. Ultimately, CIBC agreed to pay $2.4 billion – stunning not only because of the
shear magnitude of this amount, but also because CIBC is a fraction of the size of Citigroup and
JPMorgan. At Lead Counsel’s insistence, CIBC agreed to pay interest on the funds for the benefit of
the Class from the day the term sheet was signed.
254. In preparation for and during each of the negotiations leading to $6.6 billion in
recoveries for the Class, we gathered and analyzed information and worked to synthesize it for our
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team; for example, we reviewed information regarding the securities that the banks insisted on
including in the settlement class, financial information about the banks to assess the ability to pay
and the “hot” documents on liability. We also drafted the term sheets for JPMorgan and CIBC and
worked on negotiating and drafting of the stipulations of settlements for all the settlements. Drafting
the stipulations of settlement to document the agreements required many days of our time; here
again, the banks were represented by excellent lawyers and they were very careful about forking
over $6.6 billion. They wanted extremely broad releases and “claw-back” provisions that we had not
agreed to in prior settlements. The “clawback” meant that if more than a certain percentage of the
Class members opted out, the settlement amount would be reduced. At Chris Patti’s suggestion, we
insisted on a “claw-in” which provided that to the extent private action plaintiffs dropped their cases
and joined in the Class settlement, the banks would pay some additional amount to the Class.
255. As the documentation of the three large bank settlements proceeded, we were
approached by Miles Ruthberg, who represented Andersen LLP, regarding settlement. The Regents’
concern, as expressed by Chris Patti, was that if we settled with Andersen, any judgment against the
remaining banks would be reduced by Andersen’s proportion of culpability as set by the jury and
that amount could be substantial. Because Andersen was no longer operating and it had limited
insurance for the Class’ claim, it was impossible for the amount it could pay to offset the risk of a
large judgment reduction. Miles Ruthberg and his client representatives were cognizant of our
concern about settling with Andersen. After several face-to-face meetings with Andersen in the fall
of 2005, Chris Patti came up with the idea of a “sunset” provision such that if we went to trial
against the banks, the settlement with Andersen would be terminated. With that provision, we could
settle with Andersen. We then negotiated to maximize the recovery for the Class based on
Andersen’s ability to pay. Ultimately, Andersen agreed to pay $72.5 million to the settlement class
and it also agreed that if we went to trial against the banks, the settlement would be terminated.
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Crafting the stipulation of settlement was time-consuming because, once again, we were breaking
new ground in the settlement of a PSLRA case. As with all the prior settlements, the funds quickly
started earning interest for the benefit of the class. Andersen’s settlement funds began earning
interest on December 13, 2005.
XIII. MOTIONS AT THE CLOSE OF DISCOVERY AS THE LAW SHIFTS – DURA AND LOSS CAUSATION
256. On June 3, 2005, Citigroup filed a motion for partial judgment on the pleadings
(Docket Nos. 3563, 3564), which argued that the FACC failed to adequately allege loss causation in
conformity with Dura, 544 U.S. 336, and scienter in conformity with Southland Sec. Corp. v.
INSpire Ins. Solutions, Inc., 365 F.3d 353 (5th Cir. 2004). On June 7, 2005, JPMorgan also filed a
motion for partial judgment on the pleadings (Docket No. 3573), which made the same arguments
regarding JPMorgan. The Court ruled the motions moot, because the parties had requested Court
approval of a settlement. See 6/22/05 Order re Mooting Citigroup and JPMorgan Motions (Docket
No. 3642) at 1-2.
257. On June 16, 2005, defendant Barclays filed a motion for partial judgment on the
pleadings (Docket No. 3615), which sought judgment on Lead Plaintiff’s claims under §§10(b) and
20(a) for failure to plead loss causation in conformity with Dura, 544 U.S. 336. On July 6, 2005,
Lead Counsel filed Lead Plaintiff’s Opposition to Defendant Barclays PLC, Barclays Bank PLC and
Barclays Capital Inc.’s Motion for Partial Judgment on the Pleadings (Docket No. 3682), which
argued that Lead Plaintiff had adequately pled loss causation concerning Barclays. On August 2,
2005, Lead Counsel filed Lead Plaintiff’s Motion to File Sur-Reply and Sur-Reply in Opposition to
Barclays’ Motion for Partial Judgment on the Pleadings (Docket No. 3751), to address argument
raised in Barclays’ reply. The Court, in ruling on the motion addressed not only loss causation, but
the issue of whether the FACC stated a primary violation of the securities laws against Barclays. See
7/20/06 Opinion and Order re Barclays Judgment on the Pleadings (Docket No. 4874) at 42. The
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Court ruled that Lead Plaintiff failed to state a claim for a primary violation against Barclays, and
accordingly granted the motion. Id. at 63, 66.
258. On July 27, 2005, Merrill Lynch filed a motion for judgment on the pleadings
(Docket No. 3734), which argued for judgment because the FACC failed to plead loss causation and
scienter. On August 16, 2005, Lead Plaintiff filed Lead Plaintiff’s Opposition to Merrill Lynch’s
Motion for Judgment on the Pleadings (Docket No. 3820), which argued that Merrill Lynch was
liable because it made false and misleading statements with scienter; Merrill Lynch faced joint and
several liability; and Lead Plaintiff adequately alleged loss causation as to Merrill Lynch. In further
support of its motion, on July 21, 2006, Merrill Lynch filed supplemental authority (Docket No.
4887), viz., the Court’s recent decision dismissing Barclays; on August 1, 2006, a supplemental
memorandum concerning loss causation; and on August 3, 2006 a notice of supplemental authority
(Docket No. 4911) concerning the decision filed on August 1, 2006 by the United States Court of
Appeals for the Fifth Circuit in United States v. Brown, which reversed certain convictions of former
Merrill Lynch employees based on Merrill Lynch’s participation in the barge transaction. In
response, on August 23, 2006, Lead Counsel filed Lead Plaintiff’s Response to Merrill Lynch’s
Supplemental Memoranda Filed in Support of Motion for Judgment on the Pleadings (Docket No.
4976), totaling 126 pages, which argued that Merrill Lynch committed acts of deception and
manipulation; criminal and regulatory proceedings against Merrill Lynch and its executives provided
evidence of deceptive and manipulative conduct; and Lead Plaintiff’s loss causation allegations
continued to be sufficient as to Merrill Lynch. For the same reason the Court granted Lead
Plaintiff’s Motion for Reconsideration, or in the Alternative, Clarification of Order Granting
Barclays’ PLC Motion for Summary Judgment on the Pleadings, the Court mooted Merrill Lynch’s
motion for judgment on the pleadings. See 12/4/06 Opinion and Order (Docket No. 5242) at 11-12.
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259. On August 3, 2005, Lead Counsel filed Lead Plaintiff’s Motion for Partial Summary
Judgment Against Defendant Merrill Lynch for Knowingly Committing Deceptive Acts in
Furtherance of a Scheme to Defraud (Docket No. 3772), which argued for partial summary judgment
because the convictions of Merrill Lynch’s employees established the charges against them and thus
established Lead Plaintiff’s allegations against Merrill Lynch. On September 22, 2005, Merrill
Lynch filed an opposition (Docket No. 3937), which argued against summary judgment because the
motion was procedurally improper; Lead Plaintiff had failed to establish a violation of the securities
laws; and Merrill Lynch was not subject to joint and several liability. On October 31, 2005, Lead
Counsel filed Lead Plaintiff’s Reply in Support of Motion for Partial Summary Judgment Against
Defendant Merrill Lynch (Docket No. 4105), which reasserted that partial summary judgment was
procedurally proper and warranted. The Court denied the motion, finding that the convictions of the
Merrill Lynch employees failed to provide a proper basis for summary judgment because they were
on appeal. See 7/31/06 Order re Lead Plaintiff’s Partial Summary Judgment re Merrill Lynch
(Docket No. 4904) at 2-3.
260. On August 9, 2005, Deutsche Bank filed The Deutsche Bank Entities’ Memorandum
in Support of (1) Motion for Partial Reconsideration and Dismissal or (2) Motion to Require a
Second Amended Complaint Before a Response by the Deutsche Bank Entities (Docket No. 3791).
The motion argued that Lead Plaintiff had failed to satisfy the scienter pleading requirements of
Southland, 365 F.3d 353; the loss causation pleading requirements of Dura, 544 U.S. 336; and also
that aspects of Lead Plaintiff’s claims, as articulated in briefing, were not pled in the FACC. The
motion requested that either Lead Plaintiff’s Exchange Act claims be dismissed; or that Lead
Plaintiff be required to plead its claims in full. On August 29, 2005, Lead Counsel filed its Motion
for Leave to File an Amended Complaint as to Deutsche Bank, Motion for Entry of an Order
Requiring Deutsche Bank to Answer Lead Plaintiff’s Amended Complaint and Lead Plaintiff’s
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Opposition to Deutsche Bank’s Motion for Partial Reconsideration and Dismissal (Docket No.
3850). Lead Plaintiff argued that its scienter and loss causation allegations were adequate; and that
because it filed an amendment to the FACC containing additional allegations against Deutsche Bank,
that defendant’s request that Lead Plaintiff replead its claims was moot. The Court dismissed the
claims, ruling that Lead Plaintiff lacked standing to bring claims under §12(a)(2); Lead Plaintiff’s
claims concerning the Foreign Debt Securities did not qualify for a presumption of reliance under
Greenberg, 364 F.3d 657; Lead Plaintiff failed to allege loss causation; claims concerning analyst
statements failed to adequately allege scienter; and Lead Plaintiff’s scheme liability allegations were
insufficient to present a claim for primary liability. See 6/5/06 Opinion and Order re Class
Certification (Docket No. 4735) at 175-83.
261. On January 17, 2006, TD filed a corrected motion to dismiss (Docket No. 56 in Case
No. H-03-5528) which argued for dismissal because the complaint failed to plead loss causation in
conformity with Dura, 544 U.S. 336, and failed to plead a primary violation of the securities laws.
On January 25, 2006, Lead Counsel filed an opposition (Docket No. 57 in Case No. H-03-5528),
which argued that Lead Plaintiff had pled loss causation in conformity with Dura and that the
defendant committed a primary violation of the securities laws. This Court has not yet ruled on this
motion.
262. On January 27, 2006, RBC filed a motion requesting certification of the Court’s order
denying its motion to dismiss pursuant to 28 U.S.C. §1292(b) (Docket No. 55 in Case No. H-04-
0087). On February 21, 2006, Lead Counsel filed Plaintiffs’ Opposition to the RBC Defendants’
Memorandum of Law and Motion for Certification Pursuant to 28 U.S.C. §1292(b) (Docket No. 61
in Case No. H-04-0087), which argued that interlocutory appeal was inappropriate, because RBC
identified no controlling question of law; no substantial ground for difference of opinion exists; and
an immediate appeal would not materially advance the termination of the litigation. The Court
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denied the motion, agreeing with certain arguments advanced by Lead Counsel. See 11/21/06
Opinion and Order re Motion for Class Certification (Docket No. 1071) at 5-6.
263. On April 13, 2006, V&E filed a 117-page motion for summary judgment (Docket No.
4590). The motion argued for summary judgment because defendant did not create any of Enron’s
false and misleading statements; certain proxy statements did not violate the securities laws;
defendant could not be held liable for structuring Enron’s transactions; defendant could not be held
liable for legal opinions that were not communicated to the market; no V&E lawyer acted with
scienter; loss causation was lacking; and claims for some conduct were time-barred. On June 13,
2006, Lead Counsel filed Lead Plaintiff’s Opposition to Motion for Summary Judgment Filed by
Vinson & Elkins L.L.P. (Docket No. 4771), which totaled 267 pages. The opposition argued against
the grant of summary judgment because evidence of the defendant’s extensive involvement with
Enron’s financial transactions, securities offerings and SEC disclosures established that it committed
a primary violation of the securities laws; expert testimony confirmed that the defendant had
knowing and/or reckless involvement in Enron’s contrived financial deals, fraudulent securities
offerings, manipulated financial statements and false SEC filings; defendant’s false and misleading
Item 404 disclosures violated §10(b) and Rule 10b-5; and the existence of factual issues as to loss
causation, damages and the defendant’s state of mind precluded summary judgment. The opposition
cited to 298 deposition exhibits, 17 core exhibits, 134 Bates-range documents, 30 deposition
transcripts and 14 expert reports. V&E was dismissed from the case before the Court issued a ruling
on the motion.
264. On April 24, 2006, TD filed a second supplemental memorandum of law in support of
their motion to dismiss (Docket No. 62 in Case No. H-03-5528), which argued for dismissal on the
ground that Lead Plaintiff had not adequately alleged the defendant’s commission of a primary
violation of the securities laws in light of the Eighth Circuit’s decision in In re Charter Commc’ns
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Sec. Litig., 443 F.3d 987 (8th Cir. 2006). On May 15, 2006, Lead Counsel filed Plaintiffs’ Response
to Second Supplemental Memorandum of Law of Toronto Dominion Defendants in Support of Their
Motion to Dismiss in Light of New Authority (Docket No. 65 in Case No. H-03-5528), which
argued that Charter did not warrant dismissal because it was non-binding, inapposite, and the
complaint stated a claim for a primary violation of the securities laws against the defendant.
265. On June 21, 2006, Lead Counsel filed Lead Plaintiff’s Motion for Reconsideration of
the Court’s Order Dated June 5, 2006 as It Pertains to Deutsche Bank (Docket No. 4806), which
argued that the Court failed to consider all of Lead Plaintiff’s briefing opposing Deutsche Bank’s
motion for reconsideration; Lead Plaintiff’s claims should not be dismissed for lack of standing;
Lead Plaintiff stated claims for primary violations of the securities laws against the defendant; the
FACC adequately alleged loss causation and scienter; and Lead Plaintiff’s allegations did not fail
Greenberg, 364 F.3d 657. On July 19, 2006, Deutsche Bank filed Deutsche Bank’s Opposition to
Lead Plaintiff’s Motion for Reconsideration of the Court’s Order Dated June 5, 2006, as It Pertains
to Deutsche Bank (Docket No. 4864), which argued that the Court considered Lead Plaintiff’s briefs;
Lead Plaintiff failed to allege a primary violation of the securities laws; Lead Plaintiff has failed to
allege scienter; and the Court correctly ruled that Lead Plaintiff’ claims should be dismissed under
Greenberg and for standing considerations. On September 1, 2006, Lead Counsel filed Lead
Plaintiff’s Reply Brief in Support of its Motion for Reconsideration of the Court’s Order Dated June
5, 2006 as It Pertains to Deutsche Bank (Docket No. 5006), which reasserted Lead Plaintiff’s
arguments for reconsideration. The Court denied the motion for reconsideration, reasoning that it
had considered Lead Plaintiff’s briefing; Lead Plaintiff had failed to remedy standing defects; the
FACC failed to allege a primary violation of the securities laws against defendant; the FACC’s
allegations concerning defendant failed to meet the pleading standards of the PSLRA and Rule 9(b),
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and failed to allege loss causation or reliance under Greenberg. See 7/7/06 Opinion and Order re
Motion for Reconsideration (Docket No. 5391) at 44-45.
266. On June 26, 2006, Barclays filed a motion for summary judgment (Docket Nos. 4817,
4818), which argued for judgment because there was no evidence that Barclays committed a primary
violation of §10(b) and Rule 10b-5; plaintiffs’ scheme theory was not supported by the evidence and
was inconsistent with Central Bank and the PSLRA; plaintiffs’ damages theories were invalid as a
matter of law; plaintiffs could not maintain a §10(b) and Rule 10b-5 claim against Barclays PLC or
Barclays Capital Inc.; and plaintiffs could not maintain a §20(a) control person claim against
Barclays PLC. On January 19, 2007, Barclays filed a supplemental memorandum in support of their
motion (Docket No. 5333), which argued for judgment because there was no evidence that Barclays
committed a primary violation of the securities laws. On February 8, 2007, Lead Counsel filed Lead
Plaintiff’s Opposition to the Barclays Defendants’ Motion for Summary Judgment and Supplemental
Memorandum in Support of Motion for Summary Judgment (Docket No. 5385), which totaled 166
pages. The opposition argued against judgment because there existed triable issues of fact
concerning whether: Barclays committed primary acts of deception under Rule 10b-5(a) and (c);
Barclays violated Rule 10b-5(b); Barclays acted with scienter; Barclays’ deceptive conduct was in
connection with a purchase or sale of securities; there was loss causation present; and whether
reliance was present. The opposition also argued against summary judgment because Lead Plaintiff
had viable claims as to all the Barclays entities sued. The Court had not issued a ruling on the
motion by the time the case was stayed.
267. On June 26, 2006, Merrill Lynch filed a motion for summary judgment (Docket No.
4816), which argued for judgment because plaintiff could not prove reliance, loss causation or a
primary violation of the securities laws with regard to it, and because Merrill Lynch was not subject
to joint-and-several liability under the law. On November 13, 2006, Lead Counsel filed Lead
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Plaintiff’s Opposition to Motion for Summary Judgment (Docket No. 5197) filed by defendants
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Co., Inc., which argued
against summary judgment because Merrill Lynch committed a primary violation of the securities
laws; Lead Plaintiff was entitled to a presumption of reliance; the evidence establishes loss
causation; and there existed a triable issue of fact that Merrill Lynch was subject to joint and several
liability. The opposition cited to 52 deposition exhibits, 4 core exhibits, 102 Bates-range documents,
44 deposition transcripts and 10 expert reports. On January 26, 2007, Merrill Lynch filed the
Supplemental Submission of Defendants Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Merrill Lynch & Co., Inc. in Support of their Motion for Summary Judgment (Docket No. 5359),
which argued for summary judgment because plaintiff’s evidence failed to demonstrate a primary
violation of the securities laws; Merrill Lynch did not cause the losses plaintiff sought to recover;
Merrill Lynch was not jointly and severally liable for transactions in which it did not participate; and
plaintiff did not rely on Merrill Lynch’s conduct. In response, on March 2, 2007, Lead Counsel filed
Lead Plaintiff’s Response to “Supplemental Submission” of Merrill Lynch Defendants in Support of
Motion for Summary Judgment (Docket No. 5465), which argued against summary judgment
because Merrill Lynch committed a primary violation of the securities laws; the issue of Merrill
Lynch’s joint-and-several liability was a jury question; and loss causation and reliance were present.
The Court had not issued a ruling on the motion by the time the case was stayed.
268. On June 26, 2006, Credit Suisse filed a motion for summary judgment (Docket Nos.
4824, 4825), which argued for summary judgment because the FACC’s allegations concerning
CSFB’s structuring of Enron transactions were false; discovery had disproved other allegations
concerning CSFB’s work for Enron; the Court’s class certification order disposed of other claims
against CSFB; CSFB did not commit a primary violation of the securities laws; loss causation was
absent; and the claim for control person liability could not be maintained. On July 7, 2006, CSFB
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filed a notice of new authority (Docket No. 4845) in support of its motion, concerning Simpson v.
AOL Time Warner Inc., 452 F.3d 1040 (9th Cir. 2006). On July 25, 2006, CSFB filed a
supplemental memorandum in support of their motion (Docket No. 4893) which concerned the
Court’s July 20, 2005 Order dismissing Barclays. In response to all of these filing, on November 13,
2006, Lead Counsel filed Lead Plaintiff’s Opposition to the CSFB Defendants’ Motion and
Memorandum of Law in Support of Their Motion for Summary Judgment (Docket No. 5217), which
totaled 289 pages. The opposition argued against summary judgment because there existed a
genuine issue of material fact concerning whether CSFB committed a primary violation of Rule 10b-
5(a) and (c); there existed a genuine issue of material fact concerning whether CSFB committed a
primary violation of Rule 10b-5(b); CSFB’s conduct was “in connection with” the purchase and sale
of Enron securities; there was a genuine issue of material fact concerning loss causation; and CSFB
(USA) is liable as a control person. The Court had not issued a ruling on the motion by the time the
case was stayed.
269. On July 7, 2006, the Financial Institution Defendants filed an Opposition to Lead
Plaintiff’s Motion for Reconsideration of the Court’s Order Dated June 5, 2006 as It Pertains to
Deutsche Bank; and Cross Motion for Reconsideration of the Court’s Opinion and Order re Class
Certification, dated June 5, 2006, as It Pertains to Affiliated Ute (Docket No. 4844). The Financial
Institution Defendants argued that the Court correctly ruled that the Foreign Debt Securities
purchasers were not part of the Newby class; and sought reconsideration of the Court’s ruling that
plaintiffs were entitled to a presumption of reliance on their claims under Rule 10b-5(a) and (c),
arguing that the presumption was inapplicable to the case. On July 27, 2006, Lead Counsel filed
Lead Plaintiff’s Response to the Financial Institution Defendants’ (1) Opposition to “Lead Plaintiff’s
Motion for Reconsideration of the Court’s Order dated June 5, 2006 as It Pertains to Deutsche Bank”
and (2) Cross-Motion for Reconsideration of the Court’s Opinion and Order re Class Certification,
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dated June 5, 2006 as It Pertains to Affiliated Ute (Docket No. 4898). The Response argued that
Lead Plaintiff had standing to pursue claims concerning the Foreign Debt Securities, and that Lead
Plaintiff were entitled to the presumption of reliance under Affiliated Ute. As mentioned above, the
Court denied Lead Plaintiff’s motion for reconsideration. With regard to the financial institutions
defendants’ submission, the Court denied the cross-motion, preserving its ruling on the application
of Affiliated Ute for a presumption of reliance on claims under Rule 10b-5(a) and (c). See 2/8/07
Opinion and Order re Motion for Reconsideration (Docket No. 5391) at 44-45.
270. On July 17, 2006 and July 18, 2006, defendants Credit Suisse, V&E, Barclays and
Merrill Lynch filed petitions in the Fifth Circuit Court of Appeals seeking interlocutory review under
Rule 23(f) of the Court’s order granting class certification. In the petitions, Credit Suisse argued that
an appeal was warranted because it would resolve the controlling and unsettled question of a
secondary actor’s primary liability, provide guidance on the issue of joint and several liability and
the Court erred in applying the Affiliated Ute presumption of reliance; V&E argued for appeal
because the Court’s application of the fraud-on-the-market presumption of reliance rested on a
flawed theory of liability, later review was threatened by the amount of damages claimed, and Lead
Plaintiff lacked standing to sue the defendant for Enron’s statements; Barclays argued for appeal
because the Court’s class certification decision was based on an incorrect interpretation of Central
Bank and the PSLRA, the Court erroneously held that two presumptions of reliance were applicable,
and the Court misinterpreted the scope of joint-and-several liability; Merrill Lynch argued for appeal
to review the Court’s ruling on the question of primary liability, because the Affiliated Ute
presumption did not apply, the requirements of Greenberg were not met, and addressing the
application of joint-and-several liability would resolve a novel question of law fundamental to class
certification. On July 28, 2006, Lead Counsel filed Plaintiffs’ Combined Answer in Opposition to
Credit Suisse’s, Merrill Lynch’s, Vinson & Elkins’ Petitions for Permission to Appeal (Fed. R. Civ.
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P. 23(f)), which argued against the grant of permission to appeal because the merits issues raised by
petitioners could be addressed on direct appeal; the grant of class certification would not force any of
the remaining defendants to settle; and the issues raised in the petitions were substantive questions of
liability and damages not cognizable under Rule 23(f).
271. On August 2, 2006, Royal Bank of Canada filed a motion for judgment on the
pleadings (Docket No. 81 in Case No. H-04-0087), which argued for judgment because the
complaint failed to state a primary violation against it. On September 29, 2006, Lead Counsel filed
the Response of The Regents of the University of California to The Royal Bank of Canada
Defendants’ Motion and Memorandum of Law in Support of Their Motion for Judgment on the
Pleadings (Docket No. 94 in Case No. H-04-0087), which argued against judgment because Lead
Plaintiff had pled, or was able to plead, claims that satisfy the standard of primary liability adopted
by the Court. The Court had not issued a ruling on the motion at the time the case was stayed.
272. On August 3, 2006, Lead Counsel filed Lead Plaintiff’s Motion for Reconsideration,
or in the Alternative, Clarification of Order Granting Barclays’ PLC Motion for Summary Judgment
on the Pleadings (Docket No. 4915). The motion argued that the grant of Barclays’ motion was
procedurally erroneous, because it retroactively applied refined rules of liability to previous
pleadings. The motion requested the Court either vacate or stay its recent ruling on Barclays and
revisit the issue in the course of deciding the bank defendants’ motions for summary judgment, or
specify that the dismissal of Barclays was without prejudice, allowing Lead Plaintiff leave to amend
its complaint. On August 23, 2006, Barclays filed an opposition (Docket No. 4975), which argued
that the Court’s decision was procedurally proper, and that the Court properly determined that Lead
Plaintiff could not state a claim against Barclays as a matter of law. On September 12, 2006, Lead
Counsel filed Lead Plaintiff’s Reply Memorandum in Support of Its Motion for Reconsideration, or
in the Alternative, Clarification of Order Granting Barclays Plc’s Motion for Summary Judgment on
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the Pleadings (Docket No. 5019). On November 17, 2005, Lead Counsel filed Lead Plaintiff’s
Supplemental Memorandum in Support of Its Motion for Reconsideration, or in the Alternative,
Clarification of Order Granting Barclays Plc’s Motion for Summary Judgment (Docket No. 5203) on
the pleadings, which argued that Barclays was an integral part of the scheme to defraud investors;
and Barclays and the transactions it did with Enron were part of the scheme to defraud investors.
The Court agreed with Lead Plaintiff’s argument regarding the procedural impropriety of granting
the motion, and thus vacated the dismissal of Barclays, allowing for repleading. See 12/5/06
Opinion and Order re Barclays Motion for Reconsideration (Docket No. 5242) at 11-12.
273. On November 1, 2006, the Fifth Circuit Court of Appeals granted the defendants’
petitions for appeal seeking interlocutory review under Rule 23(f) of the Court’s order granting class
certification. On December 4, 2006, Credit Suisse filed its 60-page Brief of Appellants Credit Suisse
First Boston (USA), Inc., Credit Suisse First Boston LLC and Pershing LLC, which argued for
reversal of the class certification order because the Court’s class certification decision relied on an
erroneous primary violator test; the liability theory adopted by the Court in order to certify the Class
was contrary to the law and eliminated loss causation; and the Court erred in ruling that the Class
may proceed under both an Affiliated Ute and a fraud-on-the-market presumption of reliance. On
December 4, 2006, V&E filed its 37-page Brief of Appellant Vinson & Elkins LLP, which argued
for reversal of the class certification order because the Court’s application of the fraud-on-the-market
presumption relied on a flawed interpretation of liability; and plaintiffs lacked standing to sue
defendant for statements made by Enron. On December 4, 2006, Merrill Lynch filed its 60-page
Brief of Merrill Lynch Appellants, which argued for reversal of the class certification order because
by it, the Court violated the prohibition against aiding and abetting liability; there was no distinction
between the plaintiff’s scheme theory and conspiracy liability; there was a failure of proof of
reliance under Central Bank, Greenberg, and Affiliated Ute; there was noncompliance with the
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requirements of loss causation codified in the PSLRA; and the extension of joint and several liability
contravened the PSLRA. Defendant Barclays had withdrawn its petition for appeal shortly after it
was filed because the Court had dismissed it from the action. The Court, however, subsequently
allowed Lead Plaintiff leave to replead its case against Barclays. See 12/4/06 Opinion and Order
(Docket No. 5242) at 11-12. Thus, on December 8, 2006, Barclays filed its Motion (With Consent)
of Barclays PLC, Barclays Bank PLC and Barclays Capital Inc. to Join the Appeal Briefs Filed by
the CSFB and Merrill Lynch Appellants. The motion argued for reversal of the Court’s class
certification decision because the decision was based on an incorrect interpretation of Central Bank
and the PSLRA; the Court erroneously held that two presumptions of reliance were applicable; and
the Court misinterpreted the scope of joint-and-several liability.
274. On December 29, 2006, Lead Counsel filed Appellees’ Brief Responding to Vinson
& Elkins Appeal, which argued against reversal of the class certification order because the issues
presented were not the proper subject of Rule 23(f) appeal; the Court chose a correct legal standard
in adopting the “creator” test; and Lead Plaintiff and the Class have standing to pursue their claims
against V&E. On January 25, 2007, V&E filed a motion in the Fifth Circuit to withdraw its appeal,
which that court granted on January 26, 2007.
275. In accordance with the Fifth Circuit’s accelerated briefing schedule, on December 29,
2006, Lead Counsel filed Appellees’ Brief Responding to Merrill Lynch and Credit Suisse Appeals
which argued against reversal of the class certification order and that the appeal should be dismissed
because the issues raised were outside the jurisdiction and scope of review under Rule 23(f); the
Court committed no abuse of discretion in finding that the requirements for class certification were
satisfied; the Court correctly held that the standard for primary liability under Rule 10b-5(a) and (c)
was satisfied on the facts presented; the Court properly found that reliance can be presumed; and
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joint-and-several liability for knowingly engaging in a scheme to defraud does not defeat the loss-
causation requirement.
276. In January 2007, we prepared for oral argument before the Fifth Circuit, which was
set for February 5, 2007.
277. On March 19, 2007, the Fifth Circuit issued an order which reversed and remanded
the Court’s class certification decision. See Regents of the Univ. of Cal. v. Credit Suisse First
Boston, 482 F.3d 372 (5th Cir. 2007).
278. On April 5, 2007, Lead Counsel filed a Petition for Writ of Certiorari in the Supreme
Court of the United States. The Petition requested issuance of the writ because review was needed
to resolve a clear conflict in the circuits and other lower courts; the Fifth Circuit’s decision was
wrong and dramatically misreads statutory language and the Supreme Court’s precedents; and the
case was a suitable companion to Stoneridge Investment Partners v. Scientific-Atlanta, Inc., which
the Supreme Court recently accepted for review.
279. On June 1, 2007, Merrill Lynch, Credit Suisse and Barclays filed a brief in opposition
to the Petition, which argued against issuance of the writ because review of this case would not aid
in disposition of Stoneridge; the case was a poor vehicle for resolution of the issues; and the Fifth
Circuit correctly applied Central Bank.
280. On June 11, 2007, Lead Counsel filed Petitioner’s Reply to Brief in Opposition to
Petition for a Writ of Certiorari. The Reply argued for issuance of the writ because the case was a
preferred vehicle for consideration of the scheme/conduct liability issue; the Fifth Circuit’s class-
certification denial was based on its ruling that scheme liability does not exist under §10(b)/Rule
10b-5; and respondents’ substantive arguments regarding scheme or conduct liability merely confirm
the need for the Supreme Court to resolve the issue.
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281. The Supreme Court has not yet ruled on the Petition, but heard oral argument in
Stoneridge on October 9, 2007.
XIV. DRAFTING THE PLAN OF ALLOCATION
282. After the settlements with Citigroup, JPMorgan Chase and CIBC were approved by
the Court in 2006, we alerted our damages consultants at Stanford Consulting that we needed to start
gathering the information necessary to formulate a plan of allocation which would govern how the
amounts recovered would be distributed to eligible claimants. Meanwhile we were preparing for
trial against the non-settling banks, which was then set for the fall of 2006. We had hoped that the
case would be resolved globally so that the distribution of all funds recovered could be made at once.
However, the trial was continued to April 2007 and the case was stayed when the Fifth Circuit, in
essence, rejected our theory of liability against the banks. Shortly after the Fifth Circuit reversed
class certification, we began to consider the process for generating a plan of allocation of the
settlement proceeds which we had already obtained. Initially we conferred with Chris Patti,
University Counsel for The Regents, and with consultants Robert Fairbank and Rock Hankin, who
had been engaged by The Regents. Our goal was to create a plan of allocation that was fair to all
settlement Class members.
283. Drafting the plan of allocation was complicated for a number of reasons. The banks
who paid $6.6 billion (as well as other settling defendants) had insisted on getting a release for over
100 securities; those securities were listed in the stipulations of settlement with Citigroup, JPMorgan
and CIBC and they are identified in the proposed notice to the Class regarding the plan of allocation.
Most of the securities were issued by companies that were related to Enron, but many of the
securities were not issued via registration statements. Despite the fact that we went to great lengths
in our search, we and our consultants could not find any pricing data for some securities. Not only
did we not have pricing data, we had no trade volume data for most of the securities. Without
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pricing or trade volume data, estimating damages is very problematic. We pressed our consultants to
scour every available source for information about the long list of securities. Using the information
that was gathered, our consultants estimated damages for as many securities as possible.
284. We also considered whether and how to increase the recovery for claimants with §11
claims. We recognized that the named plaintiffs and those they represented with §11 claims
arguably should receive a higher percentage of loss as compared to those with only §10(b) claims.
The reason for this is that a plaintiff need not prove reliance or scienter in order to prevail on a §11
claim, in contrast to a §10(b) claim. We also took into account that on the facts of this case, because
the fraud was so pervasive and, in our view, the defendants knew very well they were falsifying
Enron’s reported financial condition, scienter would not be exceptionally difficult to prove and thus
the added “burden” of the §10(b) fraud claim was not that great. We also considered that plaintiffs
had initially alleged that all defendants in Newby violated §10(b) and when certain banks settled,
they insisted on receiving a release of both §11 and §10(b) claims. Given all these considerations,
we concluded that it was appropriate to increase the §11 claimants’ percentage recovery as compared
to §10(b) claimants’. We asked Stanford Consulting to estimate a “multiplier” for the §11 claims.
We discussed various assumptions for those estimates. We reviewed numerous versions of these
estimates using various assumptions.
285. After many discussions amongst ourselves and with Stanford Consulting, we had an
overview of how to do the plan of allocation. Then we had to put our ideas on paper. Over the
course of the summer of 2007 we reviewed countless drafts of the plan of allocation. We met with
Chris Patti, Bob Fairbank, Rock Hankin and Stanford Consulting to discuss a draft in June. We also
met several times with Stanford Consulting and Roman Weil, who has prepared a declaration
supporting the plan of allocation.
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286. In consultation with Chris Patti, we decided to publish a draft of the plan of allocation
for public comment. To our knowledge, this is unprecedented in securities class actions. We wanted
to do everything possible to generate a plan that was fair to all. In July we published the draft plan
of allocation and made it available on the website www.enronfraud.com. We solicited comments
from the public and we also sent the draft plan to interested persons who had contacted us in the past
regarding the plan of allocation.
287. We reviewed the comments received. We answered questions and provided
information to those who asked about the plan. We made a few adjustments to the plan to address
some comments received. In addition, we continued to review the plan amongst ourselves, with
Stanford Consulting and with Roman Weil.
288. The time and attention we devoted to generating the plan of allocation was
extraordinary. Two of my partners and I spent many days on this project over the last six months.
The proposed plan of allocation reflects our evaluation of the strengths and weaknesses of the claims
of Class members and fairly allocates the recovery among Class members in accordance with Lead
Plaintiff’s theories of damages in the case. Thus, a claimant’s Recognized Claim is based upon Lead
Plaintiff’s contention of the estimated artificial inflation in the price paid for Enron securities. The
estimated inflation equals the excess amount that Class members allegedly paid over fair market
value for the securities, less any inflation that existed at the time of sale.
289. In addition to Lead Plaintiff’s, Coughlin Stoia’s lawyers’ and Stanford Consulting’s
input and review, we retained Roman Weil to opine on the fairness of the proposed plan of
allocation. See Declaration of Roman Weil submitted herewith. In In re Cendant Corp. Litig., No.
98-1664 (WHW) (D.N.J.), Mr. Weil evaluated the methods used in the plan of allocation to decide
whether it was fair, reasonable and adequate and he opined on whether the court should reject
plaintiffs’ proposed plan of allocation in favor of an objector’s proposal. His opinion was accepted
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by the court and cited in In re Cendant Corp. Sec. Litig., 109 F. Supp. 3d 235 (D.N.J. 2000), aff’d,
264 F.3d 201 (3d Cir. 2001). In Enron, after his review of the initial plan of allocation published in
July, the comments received and the proposed plan of allocation that was presented to the Court for
preliminary approval, Mr. Weil opined that the proposed plan is fair, reasonable and adequate.
XV. THE FEE REQUEST IS REASONABLE
290. Because the requested fee percentage was negotiated by The Regents at the inception
of the case, because of the tremendous risks to obtaining any recovery, let alone a record recovery,
and because of the lawyers’ outstanding advocacy on behalf of the Class throughout this litigation,
the fee requested is reasonable. The requested fee is appropriate under both the percentage of fund
methodology and analysis of the Johnson factors for the reasons stated above in this Declaration and
in the Memorandum of Law in Support of Fee Award and Reimbursement of Plaintiffs’ Expenses.
291. To assist the Court in evaluating the requested fee, I have prepared an analysis of the
fee awards granted in connection with the Top Securities Settlements (Ex. 5). I provide the
following information for each of the Top Securities Settlements: (1) the settlement amount; (2) the
reported lodestar; (3) the fee awarded in terms of dollars and stated as a percentage of the settlement
amount; and (4) the amount of discovery taken in the litigation and the stage of the litigation when
the case settled.
292. I have also calculated and included aggregate and average figures for the Top
Securities Settlements. I have included for comparison purposes at the bottom of the Top Securities
Settlements Chart, the statistics that would accompany the 9.52% fee request in this case. See Ex. 5.
293. As reflected on the Top Securities Settlements Chart, the fee request falls below the
middle of the range of the other percentage awards, which range from 1.73% to 21.4%, in these post-
PSLRA cases with settlements at or above $400 million. On average the fee award in the Top
Securities Settlements is 11.61%, which is higher than the 9.52% requested here.
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294. The fee requested here would also compare favorably with awards in non-securities
class action settlements. The following is a chart of the top settlements in non-securities class
actions and the attorney fees awarded in those cases:
Case Common Fund
Amount Fee Award
Amount Fee Award % of Fund
Price v. Philip Morris, Inc., No. 00–112, 2003 WL 22597608 (Ill. Cir. 2003), rev’d on other grounds, 219 Ill. 2d 182, 848 N.E.2d 1 (Ill. 2005)
$7,100,500,000 $1,775,125,000 25.00%
In re Visa Check/MasterMoney Antitrust Litig., 297 F. Supp. 2d 503 (E.D.N.Y. 2003), aff’d sub nom, Wal–Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96 (2d Cir. 2005)
$3,383,400,000 $220,290,160.44 6.51%
Shaw v. Toshiba Am. Info. Sys., Inc., 91 F. Supp. 2d 942 (E.D. Tex. 2000)
$2,100,000,000 $147,500,000 7.02%
Allapattah Services, Inc. v. Exxon Corp., 454 F. Supp. 2d 1185 (S.D. Fla. 2006)
$1,038,450,000 $325,380,997 31.33%
In re Vitamins Antitrust Litig., No. Misc. 99–197, MDL 1285, 2001 WL 34312839 (D.D.C. Jul. 16, 2001)
$1,055,137,127 $123,188,032 11.68%
In re NASDAQ Market–Makers Antitrust Litig., 187 F.R.D. 465 (S.D.N.Y. 1998)
$1,027,000,000 $143,780,000 14.00%
In re Brand Name Prescription Drugs Antitrust Litig., No. 94–897, 2000 WL 204112 (N.D. Ill. 2000)
$696,667,000 $175,000,000 25.12%
In re Zyprexa Prods. Liab. Litig., 424 F. Supp. 2d 488 (E.D.N.Y. Feb. 10, 2006)
$690,000,00013 $250,000,000 (approximation)
No more than 35%14
295. Attached hereto as Ex. 1 is a chart which summarizes the time devoted by attorneys
and para-professionals at Coughlin Stoia to the litigation of this case. Coughlin Stoia has devoted
248,803.91 hours resulting in a firm lodestar of $113,251,049.
13 This case was a mass, as opposed to class, action in which approximately 8,000 lawsuits were settled. See In re Zyprexa Prods. Liab. Litig., 433 F. Supp. 2d 268 (E.D.N.Y. 2006).
14 The court set a cap on legal fees at 35% and gave to a special master the power to adjust fee caps upward to a maximum of 37.5% and downward to 30% in individual cases based on special circumstances. See Zyprexa, 424 F. Supp. at 496.
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296. Attached hereto as Ex. 2 is a lodestar summary chart, which summarizes the time
spent by plaintiffs’ counsel litigating this case, as well as each firm’s total lodestar. As reflected
therein, plaintiffs’ counsel have collectively devoted 289,593.35 hours resulting in an overall
lodestar of $131,971,583.20 over the six years of this case.15 Thus, the average hourly rate for
plaintiffs’ counsel is $456 per hour.
297. To compensate for the delay plaintiffs’ counsel have experienced in receiving any
compensation for their work in this case, it is appropriate to use their current billing rates. In
calculating the lodestar and determining whether the rates are reasonable, the Court should take into
account the attorneys’ reputation and experience. No more need be said than to note that Professor
Coffee has stated that Coughlin Stoia is the plaintiffs’ firm most feared by defense firms in the
securities class action field. Clearly, the experience and reputation of plaintiffs’ counsel support the
hourly rates charged. The Class received the highest quality representation in this case.
15 Hours and lodestar information that appear elsewhere in this declaration, the memorandum of law and the expert declarations use Lead Counsel’s time and lodestar through September 30, 2007 (and does not include the time of one of plaintiffs' law firms). Since that time, substantial additional work on, among other things, the Plan of Allocation, has been done. The charts at Exs. 1 and 2 reflect time and lodestar through December 15, 2007 (and include the time of the firm previously omitted), the day after the hearing for preliminary approval of the Plan of Allocation. It should be noted that the lodestar figures do not include time which counsel has expended in preparing the fee motion.
CERTIFICATE OF SERVICE
I hereby certify that a copy of the foregoing DECLARATION OF HELEN J. HODGES IN SUPPORT OF LEAD COUNSEL’S MOTION FOR AN AWARD OF ATTORNEY FEES document has been served by sending a copy via electronic mail to [email protected] on January 4, 2008.
I also certify that a copy of the above-mentioned document has been served via U.S. MAIL
on the parties listed on the attached “Additional Service List” on this 4th day of January, 2008.
DEBORAH S. GRANGER
ADDITIONAL SERVICE LIST
Stuart Yoes THE YOES LAW FIRM, LLP 3535 Calder Avenue, Suite 235 Beaumont, TX 77726-7584 409/833-2352 409/838-5577 (fax)
Frank H. Tomlinson PRITCHARD, McCALL; & JONES, LLC 505 N. 20th Street, Suite 800 Birmingham, AL 35203 205/328-9190 205/458-0035 (fax)
Edward W. Cochran 20030 Marchmont Rd. Shaker Heights, OH 44122 216/751-5546 216/751-6630 (fax)
N. Albert Bacharach Jr. 115 N.E. Sixth Avenue Gainesville, FL 32601-6592 352/378-9859 352/338-1858 (fax)
Paul S. Rothstein 626 N.E. First Street Gainesville, FL 32601 352/376-7650 352/374-7133 (fax)
Maureen McGuirl FENSTERSTOCK & PARTNERS LLP 30 Wall Street, 9th Floor New York, NY 10005 212/785-4100 212/785-4040 (fax)
Lawrence W. Schonbrun LAW OFFICES OF LAWRENCE W. SCHONBRUN 86 Eucalyptus Road Berkeley, CA 94705 510/547-8070 SERVICE VIA UPS OVERNIGHT
Richard C. Bauerle 30 Greenbriar Ottumwa, IA 52501
Arnold Gregg 4445 Forest Glen Road Anaheim Hills, CA 92807
Steven F. Helfand HELFAND LAW OFFICES 582 Market Street, Suite 1400A San Francisco, CA 94104 415/397-0007 415/397-0009 (fax)
Mr. Stanley Majors 22868 Beaverhead Drive Diamond Bar, CA 91765 909/860-8150
Stephen Neuwirth QUINN EMANUEL URQUHART OLIVER & HEDGES, LLP 51 Madison Avenue, 22nd Floor New York, NY 10010
EXHIBIT 1
Name Title Hours Rate LodestarBandman, Randi D. (P) 116.50 600 69,900.00 Box, Anne L. (P) 7,867.00 600 4,720,200.00 Bull, Joy A. (P) 164.00 600 98,400.00 Burkholz, Spencer A. (P) 1,732.50 600 1,039,500.00 Ciccarelli, Michelle (P) 1,545.00 535 826,575.00 Collins, Chris (P) 63.00 515 32,445.00 Coughlin, Patrick J. (P) 1,610.00 725 1,167,250.00 Daley, Joseph D. (P) 270.00 510 137,700.00 Daniels, Patrick W. (P) 1,381.50 505 697,657.50 Dowd, Michael (P) 27.75 700 19,425.00 Doyle, William J. (P) 167.25 505 84,461.25 Drosman, Daniel S. (P) 89.75 535 48,016.25 Egler, Thomas E. (P) 13.50 515 6,952.50 Hodges, Helen J. (P) 11,218.25 600 6,730,950.00 Howes, G. Paul (P) 14,920.25 650 9,698,162.50 Isaacson, Eric (P) 1,770.75 650 1,150,987.50 Jaconette, James (P) 14,433.01 515 7,433,000.15 Karam, Frank (P) 895.75 465 416,523.75 Lerach, William S. (P) 8,513.60 900 7,662,240.00 Park, Keith F. (P) 3,325.00 675 2,244,375.00 Rice, John J. (P) 56.00 600 33,600.00 Robbins, Darren J. (P) 1,037.00 650 674,050.00 Rudman, Samuel H. (P) 107.50 395 42,462.50 Saxena, Maya (P) 24.75 360 8,910.00 Seidman, Peter (P) 360.75 335 120,851.25 Steinmeyer, Randall H. (P) 117.75 510 60,052.50 Stoia, John J. (P) 136.25 725 98,781.25 Svetcov, Sandy (P) 656.00 700 459,200.00 Walton, David C. (P) 841.75 600 505,050.00 Weaver, Lesley (P) 52.50 505 26,512.50 Abel, Lawrence A. (A) 197.00 500 98,500.00 Acevedo, Elizabeth A. (A) 17.00 295 5,015.00
ENRON
COUGHLIN STOIA GELLER RUDMAN & ROBBINS LLPTime from Inception through December 15, 2007
Name Title Hours Rate LodestarAlpert, Matthew (A) 168.25 325 54,681.25 Ames, Regina M. (A) 6,172.50 385 2,376,412.50 Beige, Stephanie (A) 516.50 265 136,872.50 Bernay, Alexandra (A) 10,781.50 460 4,959,490.00 Blasy, Mary K. (A) 153.75 460 70,725.00 Bowman, Elisabeth A. (A) 156.00 500 78,000.00 Burnside, Fred B. (A) 178.75 245 43,793.75 Dailey, Shannon M. (A) 115.00 335 38,525.00 Glynn, Thomas E. (A) 126.25 295 37,243.75 Gmitro, Jennifer (A) 200.75 290 58,217.50 Hail, James R. (A) 10,903.75 505 5,506,393.75 Hennick, Tami (A) 80.50 420 33,810.00 Henssler, Robert (A) 10,624.85 445 4,728,058.25 Kaplan, Stacey (A) 215.25 325 69,956.25 Largent, Laurie L. (A) 49.00 600 29,400.00 Lindell, Nathan R. (A) 168.75 290 48,937.50 Lowther, John A. (A) 10,183.25 485 4,938,876.25 Mallison, Stan S. (A) 340.25 335 113,983.75 Minahan, Ted (A) 68.50 295 20,207.50 Mueller, Maureen (A) 35.50 275 9,762.50 Niehaus, Eric I. (A) 198.50 325 64,512.50 Nwanna, Udoka (A) 23.50 295 6,932.50 Oliver, James (A) 69.00 445 30,705.00 Olts, Lucas F. (A) 61.00 270 16,470.00 O'Reardon, Thomas (A) 85.75 290 24,867.50 Rado, Andrei (A) 15.50 290 4,495.00 Rosemond, G. Erick (A) 21.75 265 5,763.75 Rosenfeld, David A. (A) 98.00 265 25,970.00 Royce, Christina (A) 101.50 275 27,912.50 Shinnefield, Jessica T. (A) 142.95 360 51,462.00 Siben, Matthew P. (A) 7,784.00 460 3,580,640.00 Smith, Trig (A) 459.00 460 211,140.00 Splan, Katherine C. (A) 6,123.20 270 1,653,264.00 Suriel, Christie (A) 37.00 420 15,540.00 Swick, Michael A. (A) 42.50 295 12,537.50 Thorpe, David (A) 93.75 445 41,718.75 Williams, Andrea N. (A) 240.50 385 92,592.50 Adelman, Roger M. (OC) 1,724.30 700 1,207,010.00 Baskin, James (OC) 4,906.75 625 3,066,718.75 Georgiou, Byron S. (OC) 1,483.75 650 964,437.50
Name Title Hours Rate LodestarMeyerhoff, Albert (OC) 304.00 525 159,600.00 Pierce, John (OC) 3,316.65 650 2,155,822.50 Schrieber, Sol (OC) 50.00 575 28,750.00 Alexander, Susan K. (SC) 64.25 550 35,337.50 Byrd, Kristin (CA) 1,937.75 275 532,881.25 Dawson, Dee (CA) 1,920.75 400 768,300.00 Edmiston, Laura (CA) 2,901.25 275 797,843.75 Ekelof, Charlotta (CA) 2,749.75 275 756,181.25 Essa, Farzeen (CA) 86.50 280 24,220.00 Fuller, Krista (CA) 2,819.25 275 775,293.75 Greer, John (CA) 3,094.00 275 850,850.00 Hardaway, Jerrilyn (CA) 12,316.75 425 5,234,618.75 Hays, Shawn (CA) 6,109.75 500 3,054,875.00 Hobbs, Allen (CA) 2,072.50 300 621,750.00 Hurst, Lamonika (CA) 2,426.00 295 715,670.00 Ibironke, Caroline (CA) 2,350.75 275 646,456.25 Karnavas, Stephanie (CA) 2,388.25 275 656,768.75 Lewis, M. Colby (CA) 2,952.75 275 812,006.25 Mandlekar, Rajesh A. (CA) 2,603.25 400 1,041,300.00 Mitchell, Jennifer (CA) 422.25 235 99,228.75 Stephens, Jennifer K. (CA) 459.75 195 89,651.25 Triplett, Sara (CA) 2,661.25 275 731,843.75 Forensic Accountant 7,147.50 125 - 450 2,955,863.75 Economic Analyst 3,531.75 240 - 315 1,011,807.50 Investigator 1,977.00 200 - 360 581,500.00 Law Clerk 620.50 165 - 260 140,273.75 Summer Associate 254.00 220 - 260 59,530.00 Paralegal, I, II & III 22,239.90 160 - 270 5,417,714.25 Document Clerk 8,346.20 165 - 210 1,619,368.25 Total 248,803.91 113,251,049.40 (P) Partner(A) Associate(OC) Of Counsel(SC) Special Counsel(CA) Contract Attorney
EXHIBIT 2
ENRON - SUMMARY OF PLAINTIFFS' FIRMS' HOURS AND LODESTAR
January 2, 2008
FIRM NAME HOURS LODESTARCoughlin Stoia Geller Rudman & Robbins LLP 248,803.91 113,251,049.40 Berger & Montague, P.C. 1,535.30 715,920.00 Joseph A. McDermott, III 90.75 21,375.00 Beirne, Maynard & Parsons, LLP 219.40 55,595.00 Law Offices of Bernard M. Gross, P.C. 65.00 36,050.00 Schwartz, Junell, Greenberg & Oathout, LLP 9,604.04 3,173,492.25 Scott + Scott LLP 7,752.65 3,470,460.50 The Bilek Firm 4,438.50 2,326,887.50 Cuneo Gilbert & LaDuca 6,423.70 3,226,100.25 Genovese Joblove & Battista 9,155.80 4,821,703.30 Wolf Popper 883.20 536,794.50 Shapiro Haber & Urmy LLP 621.10 336,155.50
TOTAL: 289,593.35 131,971,583.20$
EXHIBIT 3
EXHIBIT 4
EXHIBIT 5
TOP SECURITIES SETTLEMENTS
Case Name Settlement
Amount Lodestar Fee Award
Fee Award
%
Stage of Case Upon Settlement
Pages of Documents Reviewed Depos
WorldCom $6,133,000,000 $83,183,238.70 $336,100,000.00 5.48% Various 10,000,000 41 Tyco $3,200,000,000 $172,069,355.65 $464,000,000.00 14.5% Class Cert
stage 83,500,000 220
Cendant $3,186,000,000 $8,000,000.00 $55,000,000.00 1.73% Class Cert stage
1,000,000 0
AOL/Time Warner
$2,650,000,000 $39,973,056.76 $147,500,000.00 5.57% Merits discovery
15,500,000 0
Nortel I $1,142,000,000 $16,655,971.00 $34,283,259.29 3.00% Class Cert stage
2,000,000 12
Nortel II $1,039,811,504 $17,429,370.30 $83,184,920.32 8.00% Class Cert stage
10,000,000 0
Royal Ahold $1,088,732,241 $50,858,606.25 $130,647,868.95 12.00% Class Cert stage
15,000,000 0
McKesson $960,000,000 $31,160,000.00 $74,784,000.00 7.79% Merits discovery
2,000,000 65
Cardinal Health
$600,000,000 $18,378,123 $107,580,000 18% Merits discovery
7,200,000 0
Lucent $517,000,000 $20,244,296.58 $87,890,000.00 17.00% Class Cert stage
3,000,000 0
Bankamerica $484,551,469 $28,805,990.75 $86,416,085.14 17.83% expert disc. completed
1,500,000 75
Dynegy $474,000,000 $10,162,041.75 $41,359,818.00 8.73% expert disc. completed
1,200,000 19
Raytheon $460,000,000 $13,160,578.00 $41,400,000.00 9.00% Trial 1,000,000 45 Waste Mgmt. II
$457,000,000 $6,842,457.00 $36,240,100.00 7.93% Motion to Dismiss
700,000 12
Adelphia $455,000,000 $33,686,468.00 $97,370,000.00 21.40% Amended Complaint
1,500,000 0
Global Crossing
$448,000,000 $28,242,915.18 $72,470,000.00 16.04% Merits Discovery
270,000 0
Freddie Mac $410,000,000 $35,353,394.50 $82,000,000.00 20.00% Class Cert stage
6,700,000 78
Qwest $400,000,000 $18,547,453.65 $60,000,000.00 15.00% Class Cert stage
9,000,000 60
Totals $24,105,095,214 $632,753,317 $2,038,226,051 171,070,000 627 Average $1,339,171,956 $35,152,962 $113,234,781 11.61% 9,503,888 37
Enron (Proposed)
$7,227,390,000 $127,000,000.00 $688,000,000.00 9.52% Various 70,000,000 370
S:\Settlement\Enron.Set\2007 Fee Application\TOP SETTLEMENTS CHART.doc
Exhibit Listings and Notes regarding Top Settlements Calculations
WorldCom In re WorldCom, Inc. Sec. Litig., 388 F. Supp. 2d. 319 (S.D.N.Y 2005).
Tyco In re Tyco Int’l, Ltd. Multidistrict Litig., No. 02-md-1355-PB, Memorandum and Order (D.N.H. Dec. 19, 2007), attached hereto as Exhibit A.
Cendant In re Cendant Corp. Litig., 243 F. Supp. 2d 166 (D.N.J. 2003). The one million pages of documents reviewed is an estimate and is found in the Joint Declaration of Jay Eisenhofer and others in In re Tyco Int’l, Ltd. Multidistrict Litig., No. 02-md-1355-PB (D.N.H.)
AOL/Time Warner
In re AOL Time Warner, Inc. Sec. and ERISA Litig., No. 1500, 02 Civ. 5575 (SWK), 2006 U.S. Dist. LEXIS 78101 (S.D.N.Y. Sept. 28, 2006); In re AOL Time Warner, Inc. Sec. and ERISA Litig., No. 1500, 02 Civ. 5575 (SWK), Memorandum in Support of Lead Securities Counsel’s Application for an Award of Attorneys’ Fees and Reimbursement of Expenses (S.D.N.Y.), relevant pages of the memorandum are attached hereto as Exhibit B.
Nortel II In re Nortel Networks Corp. Sec. Litig., No. 05 MD 1659 (LAP), Order and Final Judgment (S.D.N.Y. Dec. 26, 2006); In re Nortel Networks Corp. Sec. Litig., No. 05 MD 1659 (LAP), Memorandum of Law in Support of Lead Counsel’s Application for an Award of Attorneys’ Fees and Reimbursement of Litigation Expenses (S.D.N.Y.), relevant pages of the order and memorandum are attached hereto as Exhibit C.
Nortel I In re Nortel Networks Corp. Sec. Litig., No. 01-CV-1855 (RMH), Order and Final Judgment (S.D.N.Y. Jan. 29, 2007); In re Nortel Networks Corp. Sec. Litig., No. 01-CV-1855 (RMH), Memorandum of Law in Support of Plaintiffs’ Counsel’s Application for an Award of Attorneys’ Fees and Reimbursement of Expenses (S.D.N.Y.), relevant pages of the order and memorandum are attached hereto as Exhibit D.
Royal Ahold In re Royal Ahold N.V. Securities and ERISA Litig., No. 03-MD-1539, Order (D. Md. Nov. 2, 2006); In re Royal Ahold N.V. Securities and ERISA Litig., No. 03-MD-1539, Lead Plaintiffs’ Memorandum of Law in Support of Led Counsel’s Application for an Award of Attorneys’ Fees and Reimbursement of Expenses (D. Md.), relevant pages of the order and memorandum are attached hereto as Exhibit E.
Exhibit Listings and Notes regarding Top Settlements Calculations
McKesson In re McKesson HBOC, Inc. Sec. Litig., No. 99-CV-20743 RMW (PVT), Order Awarding Attorneys’ Fees and Reimbursement of Expenses (N.D. Cal. Feb. 24, 2006); In re McKesson HBOC, Inc. Sec. Litig., No. 99-CV-20743 RMW (PVT), Notice of Motion, Motion, and Memorandum of Points and Authorities in Support of Lead Counsel’s Application for an Award of Attorneys’ Fees and Reimbursement of Expenses (N.D. Cal.), relevant pages of the order and memorandum are attached hereto as Exhibit F.
Cardinal Health
In re Cardinal Health, Inc. Sec. Litig., No. C2-04-575, Opinion and Order (S.D. Ohio Dec. 31, 2007), attached hereto as Exhibit G.
Lucent In re Lucent Techs., Inc. Sec Litig., No. 00-cv-621 (JAP), Amended Final Order Approving Counsel’s Joint Petition for an Award of Attorney’s Fees and Reimbursement of Expenses (D.N.J. July 23, 2004); , In re Lucent Techs., Inc. Sec Litig., No. 00-cv-621 (JAP) Memorandum of Law in Support of Application of Lead Counsel for an Award of Attorneys’ Fees and Reimbursement of Expenses (D.N.J.), relevant pages of the order and memorandum are attached hereto as Exhibit H.
Bankamerica In re Bankamerica Corp. Sec. Litig., 228 F. Supp. 2d. 1061 (E.D. Mo. 2002).
Dynegy In re Dynegy, Inc. Sec. Litig., No. H-02-1571, Order Awarding Attorneys’ Fees and Reimbursement of Expenses (S.D. Tex. July 8, 2005); In re Dynegy, Inc. Sec. Litig., No. H-02-1571, ,Lead Plaintiff’s Counsel’s Memorandum of Law in Support of Application for an Award of Attorneys’ Fees and Reimbursement of Expenses (S.D. Tex.), relevant pages of the order and memorandum are attached hereto as Exhibit I.
Raytheon In re Raytheon Co. Sec. Litig., No. 99-12142-PBS, Order and Final Judgment (D. Mass. Dec. 6, 2004); In re Raytheon Co. Sec. Litig., No. 99-12142-PBS, Memorandum of Law in Support of Plaintiff’s Counsel’s Application for an Award of Attorneys’ Fees and Reimbursement of Expenses (D. Mass.), relevant pages of the order and memorandum are attached hereto as Exhibit J.
Waste Management
In re Waste Management, Inc. Sec. Litig., No. H-99-2183, Findings of Fact and Conclusions of Law (S.D. Tex. May 10, 2002), relevant pages are attached hereto as Exhibit K.
Exhibit Listings and Notes regarding Top Settlements Calculations
Adelphia In re Adelphia Comms. Corp. Sec. & Deriv. Litig., No. 03-MD-1529 (LMM), Order Awarding Attorneys’ Fees and Reimbursement of Expenses in Connection with the Deloitte & Touche Settlement (S.D.N.Y. Nov. 17, 2006); In re Adelphia Comms. Corp. Sec. & Deriv. Litig., No. 03-MD-1529 (LMM), Order Awarding Attorneys’ Fees and Reimbursement of Expenses in Connection with the Banks Settlement (S.D.N.Y. Nov. 17, 2006); In re Adelphia Comms. Corp. Sec. & Deriv. Litig., No. 03-MD-1529 (LMM), Plaintiffs’ Memorandum in Support of the Proposed Settlements, Plans of Allocation, Final Certification of the Class for Settlement Purposes and for an Award of Attorneys’ Fees and Reimbursement of Expenses (S.D.N.Y.), relevant pages of the orders and memorandum are attached hereto as Exhibit L.
Global Crossing
The information provided is taken from the Joint Declaration of Jay Eisenhofer and others in In re Tyco Int’l, Ltd. Multidistrict Litig., No. 02-md-1355-PB (D.N.H). Relevant pages of the First Amended Stipulation of Settlement are attached hereto as Exhibit M.
Freddie Mac Ohio Pub. Emps. Ret. Sys., et al. v. Freddie Mac a.k.a. Federal Home Loan Mortgage Corp. et al., No. MDL-1584, Order and Judgment (S.D.N.Y. Oct. 27, 2006); Ohio Pub. Emps. Ret. Sys., et al. v. Freddie Mac a.k.a. Federal Home Loan Mortgage Corp. et al., No. MDL-1584, Notice of Lead Plaintiffs’ Motion for Final Approval of Settlement and Plan of Allocation and Application of Lead Counsel and Co-lead Counsel for an Award of Attorneys’ Fees and Reimbursement of Litigation Expenses (S.D.N.Y.), relevant pages of the order and memorandum are attached hereto as Exhibit N.
Qwest In re Qwest Commc’ns. Int’l, Inc. Sec. Litig., No. 01-cv-01451-REB-CBS, 2006 U.S. Dist. LEXIS 71267 (D. Colo. Sept. 28, 2006); In re Qwest Commc’ns. Int’l, Inc. Sec. Litig., No. 01-cv-01451-REB-CBS, Lead Counsel’s Motion for Award of Attorneys’ Fees and Reimbursement of Expenses (D. Colo.), relevant pages of the memorandum are attached hereto as Exhibit O.
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