TEACHING ENRON

Milton C. Regan, Jr.

INTRODUCTION..................................................................................................................................... 2
ENRON .................................................................................................................................................... 4
ENRON’S ATTORNEYS.......................................................................................................................... 14
Inside Counsel........................................................................................................................................... 14
Outside Counsel ....................................................................................................................................... 15
STRUCTURED FINANCE TRANSACTIONS .......................................................................................... 15
Background............................................................................................................................................... 15
Enron’s Financial Assets ............................................................................................................................ 17
The “Sales” That Weren’t .......................................................................................................................... 18
Issue One: True Sale vs. True Issuance Opinions......................................................................................... 19
Questions and Discussion ........................................................................................................................... 24
Issue Two: Andrews & Kurth Opinions....................................................................................................... 30
Questions and Discussion .......................................................................................................................... 33
PROJECT NAHANNI............................................................................................................................... 37
Background............................................................................................................................................... 37
The Structure of Project Nahanni ................................................................................................................ 39
Enron’s Attorneys...................................................................................................................................... 42
Questions and Discussion .......................................................................................................................... 44
SUNDANCE INDUSTRIAL TRANSACTION .......................................................................................... 46
Background .............................................................................................................................................. 46
ENA Sale of Sonoma Class A Interest to Salomon ...................................................................................... 47
Enron’s Attorneys ..................................................................................................................................... 50
Questions and Discussion ........................................................................................................................... 53
RELATED PARTY TRANSACTIONS...................................................................................................... 56
Background............................................................................................................................................... 56
Issue One: The “Hedges” That Weren’t....................................................................................................... 56
RhythmsNet ............................................................................................................................................. 58
Questions and Discussion ........................................................................................................................... 63
Raptors...................................................................................................................................................... 65
Questions and Discussion ........................................................................................................................... 69
Issue Two: Disclosure of Fastow’s LJM Compensation............................................................................... 72
Questions and Discussion ........................................................................................................................... 76
Issue Three: 3% Outside Equity in Raptors ................................................................................................. 80
Questions and Discussion ........................................................................................................................... 81
Issue Four: Cuiaba Transaction................................................................................................................... 82
Questions and Discussion ........................................................................................................................... 86
CHEWCO ................................................................................................................................................ 87
Background............................................................................................................................................... 87
Issue One: Enron Officer Involvement in Chewco....................................................................................... 87
Questions and Discussion ........................................................................................................................... 88
Issue Two: 3% Outside Equity.................................................................................................................... 88
Questions and Discussion ........................................................................................................................... 90
CONCLUSION......................................................................................................................................... 91