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Amalgamated Bank, Et Al. V. Lay, Et Al. Amalgamated-Class Action

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Amalgamated Bank, Et Al. V. Lay, Et Al. Amalgamated-Class Action UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION AMALGAMATED BANK, as Trustee for the § Civil Action No. LONGVIEW COLLECTIVE INVESTMENT § FUND, LONGVIEW CORE BOND INDEX § CLASS ACTION FUND and CERTAIN OTHER TRUST § ACCOUNTS, Individually and On Behalf of All § Others Similarly Situated, § § Plaintiff, § § vs. § § KENNETH L. LAY, JEFFREY K. SKILLING, § ANDREW S. FASTOW, RICHARD A. § CAUSEY, JAMES V. DERRICK, JR., J. § CLIFFORD BAXTER, MARK A. FREVERT, § STANLEY C. HORTON, KENNETH D. RICE, § RICHARD B. BUY, LOU L. PAI, ROBERT A. § BELFER, NORMAN P. BLAKE, JR., RONNIE § C. CHAN, JOHN H. DUNCAN, WENDY L. § GRAMM, ROBERT K. JAEDICKE, § CHARLES A. LEMAISTRE, JOE H. FOY, § JOSEPH M. HIRKO, KEN L. HARRISON, § MARK E. KOENIG, STEVEN J. KEAN, § REBECCA P. MARK-JUSBASCHE, § MICHAEL S. MCCONNELL, JEFFREY § MCMAHON, CINDY K. OLSON, J. MARK § METTS, JOSEPH W. SUTTON and ARTHUR § ANDERSEN, LLP, § § Defendants. § DEMAND FOR JURY TRIAL CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS TO THE HONORABLE UNITED STATES DISTRICT COURT JUDGE: COMES NOW, Plaintiff Amalgamated Bank, as Trustee for the LongView Collective Investment Fund, LongView Core Bond Index Fund and Certain Other Trust Accounts, individually and on behalf of all others similarly situated, by its undersigned attorneys, for its complaint, alleges as follows: NATURE OF THE ACTION 1. This is a securities class action on behalf of persons who purchased the publicly traded securities of Enron Corp. ("Enron" or the "Company") between October 19, 1998 and November 27, 2001, inclusive (the "Class Period"), seeking to pursue remedies under the Securities Exchange Act of 1934 (the "Exchange Act") and the Securities Act of 1933 (the "Securities Act"). Defendants include senior Enron officers and directors and its outside auditors. 2. Enron is engaged in the businesses of natural gas, electricity and communications to wholesale and retail customers. During the Class Period, defendants engaged in massive insider trading while issuing false financial statements and making false and misleading statements about the Company's purportedly "record" results and strong operating performance. As a result of these false statements, the Company's stock traded as high as $90.75,1 allowing defendants to dump 17.3 million of their own Enron shares for proceeds of $1.1 billion. 3. Beginning in late 2001, it was revealed that the Company would be incurring losses of $1 billion for certain of its divisions and that Enron would be restating its results for 1997, 1998, 1999 and 2000, and the first two quarters of 2001, to correct for errors which had inflated Enron's net income by $591 million in those years. The impact of the restatement was enormous: 1 All share and per share amounts are adjusted to reflect Enron's 2-for-1 stock split in August 1999. - 1 - 1997 1998 1999 2000 Recurring Net Income Amount of Overstatement $96,000,000 $113,000,000 $250,000,000 $134,000,000 Debt Amount of Understatement $711,000,000 $561,000,000 $685,000,000 $628,000,000 Shareholders' Equity Amount of Overstatement $313,000,000 $448,000,000 $833,000,000 $1,164,000,000 4. Upon these disclosures, Enron's stock dropped to as low as $8.20 before closing at $8.41 on November 8, 2001, some 91% below the Class Period high of $90.75. Then, on November 28, 2001, it was revealed that the attempted acquisition of Enron by Dynegy Inc. would be scuttled. Thereafter, Enron's debt was cut to junk bond status and its stock dropped to just $0.26 per share. Then, on December 2, 2001, Enron filed for Chapter 11 bankruptcy protection. JURISDICTION AND VENUE 5. The claims asserted herein arise under and pursuant to §§10(b), 20(a) and 20A of the Exchange Act [15 U.S.C. §§78j(b), 78t(a) and 78t-1] and Rule 10b-5 promulgated thereunder by the Securities and Exchange Commission ("SEC") [17 C.F.R. §240.10b-5] and under §§11 and 15 of the Securities Act [15 U.S.C. §§77k and 77o]. 6. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. §§1331 and 1337 and §27 of the Exchange Act [15 U.S.C. §78aa] and §22 of the Securities Act [15 U.S.C. §77v]. 7. Venue is proper in this District pursuant to §27 of the Exchange Act, and 28 U.S.C. §1391(b). Enron maintains its principal place of business in this District and many of the acts and practices complained of herein occurred in substantial part in this District. 8. In connection with the acts alleged in this complaint, defendants, directly or indirectly, used the means and instrumentalities of interstate commerce, including, but not limited to, the mails, interstate telephone communications and the facilities of the national securities markets. - 2 - PARTIES 9. Plaintiff Amalgamated Bank, as Trustee for the LongView Collective Investment Fund, LongView Core Bond Index Fund and Certain Other Trust Accounts, purchased the publicly traded equity and debt securities of Enron at artificially inflated prices during the Class Period, as described in the attached certification, and has been damaged thereby. 10. Enron is not named as a defendant in this action as it has filed for protection pursuant to Chapter 11 of the U.S. Bankruptcy Code. 11. (a) Defendant Kenneth L. Lay ("Lay") served at all times relevant hereto as a director of the Company and Chairman of the Board of Directors. Lay also served as Enron's Chief Executive Officer from 1986 until February 2001. During the Class Period, while defendants were causing Enron to make false statements and issue false financial results, Lay sold 1,810,793 shares of his Enron stock for insider trading proceeds of $101 million. Lay also received bonus payments of $14.1 million, in addition to his salary, for 1998, 1999 and 2000 based on Enron's false financial reports. (b) Defendant Jeffrey K. Skilling ("Skilling") served at all times relevant hereto as a director of the Company. Skilling also served as the Company's President and Chief Operating Officer until February 2001, when he became Chief Executive Officer. Skilling resigned as President and Chief Executive Officer in August 2001. During the Class Period, while defendants were causing Enron to make false statements and issue false financial results, Skilling sold 1,119,958 shares of his Enron stock for insider trading proceeds of $66.9 million. Skilling also received bonus payments of $10.8 million, in addition to his salary, for 1998, 1999 and 2000 based on Enron's false financial reports. (c) Defendant Andrew S. Fastow ("Fastow") served as the Chief Financial Officer of the Company from 1998 until he was fired in October 2001. During the Class Period, while defendants were causing Enron to make false statements and issue false financial results, Fastow sold 561,423 shares of his Enron stock for insider trading proceeds of $30.4 million. (d) Defendant Richard A. Causey ("Causey") was, at all relevant times, Executive Vice President and Chief Accounting Officer of the Company. Causey signed each Form 10-K and - 3 - Form 10-Q issued during the Class Period. During the Class Period, while defendants were causing Enron to make false statements and issue false financial results, Causey sold 197,485 shares of his Enron stock for insider trading proceeds of $13.3 million. (e) Defendant James V. Derrick, Jr. ("Derrick") has been Executive Vice President and General Counsel of the Company since July 1999, and prior to that was Senior Vice President and General Counsel. During the Class Period, while defendants were causing Enron to make false statements and issue false financial results, Derrick sold 230,660 shares of his Enron stock for insider trading proceeds of $12.6 million. (f) Defendant J. Clifford Baxter ("Baxter") has been Vice Chairman of the Company since October 2000 and Chief Strategy Officer since June 2000. Baxter also served as Chairman and Chief Executive Officer of Enron North America Corp. from June 1999 until June 2000, and Senior Vice President, Corporate Development from January 1997 until June 1999. During the Class Period, while defendants were causing Enron to make false statements and issue false financial results, Baxter sold 577,436 shares of his Enron stock for insider trading proceeds of $35.2 million. (g) Defendant Mark A. Frevert ("Frevert") has been Chairman and Chief Executive Officer of Enron Wholesale Services since June 2000, and Chairman and Chief Executive Officer of Enron Europe from March 1997 to June 2000. During the Class Period, while defendants were causing Enron to make false statements and issue false financial results, Frevert sold 830,620 shares of his Enron stock for insider trading proceeds of $50.2 million. Frevert also received bonus payments of $4.3 million, in addition to his salary, for 1998, 1999 and 2000 based on Enron's false financial reports. (h) Defendant Stanley C. Horton ("Horton") was, at all relevant times, Chairman and Chief Executive Officer of Enron Transportation Services. During the Class Period, while defendants were causing Enron to make false statements and issue false financial results, Horton sold 734,444 shares of his Enron stock for insider trading proceeds of $45.4 million. Horton also received bonus payments of $2.9 million, in addition to his salary, for 1998, 1999 and 2000 based on Enron's false financial reports. - 4 - (i) Defendant Kenneth D. Rice ("Rice") has been Chairman and Chief Executive Officer of Enron Broadband Services, Inc. since June 2000. Prior to that, Rice was Chairman and Chief Executive Officer of Enron Capital & Trade ("ECT")-North America from March 1997 until June 1999. During the Class Period, while defendants were causing Enron to make false statements and issue false financial results, Rice sold 1,138,370 shares of his Enron stock for insider trading proceeds of $72.7 million.
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