February 11, 2002
Mr. Jeffrey K. Skilling Dear Mr. Skilling: Last week, at a hearing before the Subcommittee on Oversight and Investigations, you testified under oath that you were "not aware of any financing arrangements designed to conceal liabilities or inflate profitability"of Enron, and generally demonstrated incomplete knowledge of the related-party transactions. A document entitled: "LJM Investments, Annual Partnership Meeting, October 26, 2000" (copy attached) raises numerous questions about the nature and extent of your knowledge of these matters. This document sets out the presentations at the partnership meeting and lists you as a guest speaker. On Friday night, Amy Flores, the former office manager for LJM, who was present at that meeting in Palm Beach, Florida, appeared on ABC News and stated that she made your hotel reservations, that you were present and, according to Ms. Flores, you made a speech to the partners to "reassure them Enron was behind the venture." Subsequent to that, Bruce Hiler, your attorney, confirmed that you had attended the partnership meeting, but that you had made a speech and left shortly thereafter. According to Mr. Hiler, you were at the hotel for only about 45 minutes. The document presented to the LJM partners makes it clear that the acceleration of earnings recognition for Enron is one of the purposes of the partnership. Under a page entitled : "LJM Rationale: Why does Enron need private equity?", the purpose of constructing LJM was to "accelerate projected earnings and cash flow." This could not be done otherwise because "Energy and communications assets typically do not generate earnings or cash flow within the first 1-3 years" (p. 7). On page 9, also entitled "LJM Investments," two of the additional applications of private equity are listed as "Nature of earnings" and "Earnings generation." Several Enron employees also attended this meeting, but were listed in this document as LJM representatives: these include Andrew Fastow, Michael Kopper, Kathy Lynn, Anne Yaeger, and Joyce Tang. Additionally, this document reveals that 89 percent of LJM2’s investments are related to Enron (p. 23). The return for investors is projected at 69 percent (p. 18), and 63 percent of those investments were projected to pay out in less than one year (p. 25). One investment, Raptor III, was projected to have a 2,503 percent rate of return over a three-year period. This is an extraordinary document, supporting the Powers Report’s conclusion that "[t]hese transactions had a significant effect on Enron’s financial statements. Taken together, they resulted in substantial recognition of income, and the avoidance of substantial recognition of loss" (Report, p. 68). It also raises numerous questions (attached) that I ask you to answer for the record by no later than Monday, February 25, 2002. As they will be included in the record of the February 7, 2002, hearing, please treat your responses as made under oath. Thank you for your prompt attention to this matter. If you require further information regarding this request, please contact Edith Holleman, Minority Counsel, Committee on Energy and Commerce, at (202) 226-3400. Sincerely,
Attachments (.pdf file) cc: The Honorable W. J. "Billy" Tauzin, Chairman The Honorable James C. Greenwood, Chairman
Attachment 1 QUESTIONS FOR MR. JEFFREY R. SKILLING
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