UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION In re ENRON CORPORATION SECURITIES § Civil Action No. H-01-3624 LITIGATION § (Consolidated) § § CLASS ACTION 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. § § MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTION TO DISMISS BY BARCLAYS PLC TABLE OF CONTENTS Page I. INTRODUCTION AND FACTUAL OVERVIEW ................... 1 A. Year-End 97 Crisis................................ 2 B. The 97-00 Successes – Enron's Stock Soars................... 4 C. The Partnerships and SPEs............................ 8 D. Enron's Access to the Capital Markets...................... 8 E. The Impending Collapse............................. 9 F. The End......................................10 II. SUMMARY OF BARCLAYS INVOLVEMENT AND LEGAL LIABILITY .....15 III. DETAILED ALLEGATIONS REGARDING INVOLVEMENT OF BARCLAYS . 27 IV. BARCLAYS CAN BE LIABLE UNDER 1934 ACT §10(b) AND RULE 10b-5 (i) FOR MAKING FALSE STATEMENTS, OR (ii) FOR PARTICIPATING IN A FRAUDULENT SCHEME OR COURSE OF BUSINESS THAT OPERATED AS A FRAUD OR DECEIT ON PURCHASERS OF ENRON'S SECURITIES, OR (iii) FOR EMPLOYING ACTS OR MANIPULATIVE DEVICES TO DECEIVE........................................33 V. BARCLAYS ACTED WITH SCIENTER, I.E., WITH "THE REQUIRED STATE OF MIND" AND HAD MOTIVES AND THE OPPORTUNITY TO DEFRAUD ENRON INVESTORS, AS IT MADE FALSE STATEMENTS, EMPLOYED DECEPTIVE ACTS AND MANIPULATIVE DEVICES AND CONTRIVANCES TO DECEIVE AND PARTICIPATED IN A FRAUDULENT SCHEME OR COURSE OF BUSINESS THAT OPERATED AS A FRAUD OR DECEIT ON PURCHASERS OF ENRON SECURITIES...............54 VI. CONCLUSION......................................69 - i - TABLE OF AUTHORITIES CASES Page A. T. Brod & Co. v. Perlow, 375 F.2d 393 (2d Cir. 1967) ............................19, 40 Aaron v. SEC, 446 U.S. 680 (1980) ............................19, 35, 42, 46 Adam v. Silicon Valley Bancshares, 884 F. Supp. 1398 (N.D. Cal. 1995) ........................passim Affiliated Ute Citizens v. United States, 406 U.S. 128 (1972) ................................passim American Standard Credit, Inc. v. National Cement Co., 643 F.2d 248 (5th. Cir. 1981) ...........................64, 66 Azrielli v. Cohen Law Offices, 21 F.3d 512 (2d Cir. 1994) .............................48, 49 Basic Inc. v. Levinson, 485 U.S. 224 (1988) ..............................20, 37, 47 Black Law Enforcement Officers Assoc. v. Akron, 824 F.2d 475 (6th Cir. 1987) ..............................28 Blackie v. Barrack, 524 F.2d 891 (9th Cir. 1975) ............................44, 55 Blumenthal v. United States, 332 U.S. 539 (1947) ..................................56 Bryant v. Avado Brands, Inc., 187 F.3d 1271 (11th Cir. 1999) .............................1 Burzynski v. Aetna Life Ins. Co., Civ No. H-89-3976, 1992 U.S. Dist. LEXIS 21300 (S.D. Tex. Mar. 31, 1992) ...............................66 Calliott v. HFS, Inc., No. 3:97-CV-0924-I, 2000 U.S. Dist. LEXIS 4368 (N.D. Tex. Mar. 31, 2000) ................................1 Camacho v. Bowling, 562 F. Supp. 1012 (N.D. Ill. 1983) ...........................65 Central Bank, N.A. v. First Interstate Bank, N.A., 511 U.S. 164 (1994) ................................passim Chiarella v. United States, 445 U.S. 222 (1980) ..................................41 - ii - Page Competitive Assocs., Inc. v. Laventhol, Krekstein, Horwath & Horwath, 516 F.2d 811 (2d Cir. 1975) ..........................19, 44, 47 Conley v. Gibson, 355 U.S. 41 (1957) ..................................1, 27 Cooper v. Pickett, 137 F.3d 616 (9th Cir. 1998) ............................passim Dasho v. Susquehanna Corp., 380 F.2d 262 (7th Cir. 1967) ..............................57 Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976) ............................18, 20, 35, 42 Fine v. American Solar King Corp., 919 F.2d 290 (5th Cir. 1990) ..............................20 Finkel v. Docutel/Olivetti Corp., 817 F.2d 356 (5th Cir. 1987) ............................20, 35 Fitzgerald v. Henderson, 251 F.3d 345 (2d Cir. 2001) ..............................28 Flecker v. Hollywood Entm't Corp., No. 95-1926-MA, 1997 U.S. Dist. LEXIS 5329 (D. Or. Feb. 12, 1997) ...............................24, 49 Harris v. United States, 48 F.2d 771 (9th Cir. 1931) ..............................46 Hellenic Inc. v. Bridgeline Gas Distrib. LLC, 252 F.3d 391 (5th Cir. 2001) ..............................65 Heller v. Am. Indus. Props. Reit, Civ. No. SA-97-CA-1315-EP, 1998 U.S. Dist. LEXIS 23286 (W.D. Tex. Sept. 25, 1998) ...............................36 Hill v. Hanover Energy, Inc., Civ. No. 91-1964 (JHG), 1991 U.S. Dist. LEXIS 18566 (D.D.C. Dec. 16, 1991) .................................45 Hundahl v. United Ben. Life Ins. Co., 465 F. Supp. 1349 (N.D. Tex. 1979) ........................52, 53 In re Boeing Sec. Litig., 40 F. Supp. 2d 1160 (W.D. Wash. 1998) .........................1 In re Commonwealth Oil/Tesoro Petroleum Sec. Litig., 484 F. Supp. 253 (W.D. Tex. 1979) ........................52, 53 In re Health Mgmt. Inc. Sec. Litig., 970 F. Supp. 192 (E.D.N.Y. 1997) .........................36, 55 - iii - Page In re Landry's Seafood Restaurants, Inc. Sec. Litig., No. H-99-1948 (S.D. Tex. Feb. 20, 2001) .....................passim In re Livent, Inc. Noteholders Sec. Litig., 174 F. Supp. 2d 144 (S.D.N.Y. 2001) .......................passim In re Nissan Motor Corp. Antitrust Litig., 430 F. Supp. 231 (S.D. Fla. 1977) ...........................57 In re Sec. Litig. BMC Software, Inc., 183 F. Supp. 2d 860 (S.D. Tex. 2001) ...................22, 38, 45, 55 In re Software Toolworks Sec. Litig., 50 F.3d 615 (N.D. Cal. 1995) .............................57 In re Union Carbide Corp. Consumer Prods. Bus. Sec. Litig., 676 F. Supp. 458 (S.D.N.Y. 1987) ...........................46 In re Waste Mgmt., Inc. Sec. Litig., Civ. No. H-99-2183 (S.D. Tex. Aug. 16, 2001) ..................22, 38 In re ZZZZ Best Sec. Litig., 864 F. Supp. 960 (C.D. Cal. 1994) .....................37, 46, 55, 57 Inland Freight Lines v. United States, 191 F.2d 313 (10th Cir. 1951) .............................65 Lawal v. British Airways, PLC, 812 F. Supp. 713 (S.D. Tex. 1992) ..........................1, 27 Lemmer v. Nu-Kote Holding, Inc., Civ. No. 3:98-CV-0161, 2001 U.S. Dist. LEXIS 13978 (N.D. Tex. Sept. 6, 2001) ............................55, 58, 59 Lipton v. Documation, Inc., 734 F.2d 740 (11th Cir. 1984) .............................47 Little v. United States, 73 F.2d 861 (10th Cir. 1934) ..............................28 McNamara v. Bre-X-Minerals Ltd., No 5:97-CV-159, 2001 U.S. Dist. LEXIS 4571 (E.D. Tex. Mar. 30, 2001) .............................24, 51 Meason v. Bank of Miami, 652 F.2d 542 (5th Cir. 1981) ............................23, 39 Murphy v. Hollywood Entm't Corp., No. 95-1926-MA, 1996 U.S. Dist. LEXIS 22207 (D. Or. May 9, 1996) ................................24, 49 Nathenson v. Zonagen Inc., 267 F.3d 400 (5th Cir. 2001) ............................27, 55 - iv - Page Paul F. Newton & Co. v. Texas Commerce Bank, 630 F.2d 1111 (5th Cir. 1980) ...........................23, 39 Richardson v. MacArthur, 451 F.2d 35 (10th Cir. 1971) ............................44, 55 Riss & Company v. United States, 262 F.2d 245 (8th Cir. 1958) ..............................65 Rubinstein v. Collins, 20 F.3d 160 (5th Cir. 1994) ...............................1 SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180 (1963) ................................40, 56 SEC v. First Jersey Sec. Litig., 101 F.3d 1450 (2d Cir. 1996) ...........................passim SEC v. National Bankers Life Ins. Co., 324 F. Supp. 189 (N.D. Tex.), aff'd, 448 F.2d 652 (5th Cir. 1971) .........................55, 57 SEC v. Seaboard Corp., 677 F.2d 1301 (9th Cir. 1982) .............................44 SEC v. U.S. Envtl., Inc., 155 F. 3d 107 (2d Cir. 1998) ............................25, 51 STI Classic Fund v. Bollinger Indus., Inc., No. 3-96-CV-823-R, 1996 U.S. Dist. LEXIS 21553 (N.D. Tex. Oct. 25, 1996) ...............................27 Santa Fe Indus., Inc. v. Green, 430 U.S. 462 (1977) ................................passim Scheuer v. Rhodes, 416 U.S. 232 (1974) .................................1, 27 Schlick v. Penn-Dixie Cement Corp., 507 F.2d 374 (2d Cir. 1974) ..............................57 Scholnick v. Continental Bank, 752 F. Supp. 1317 (E.D. Mich. 1990) .......................25, 51 Schreiber v. Burlington Northern, Inc., 568 F. Supp. 197 (D. Del. 1983) ..........................52, 53 Shores v. Sklar, 647 F.2d 462 (5th Cir. 1981) ............................passim Standard Oil Co. v. United States, 307 F.2d 120 (5th Cir. 1962) ............................64, 65 - v - Page Steere Tank Lines, Inc. v. United States, 330 F.2d 719 (5th Cir. 1964) ............................65, 66 Summit Props. v. Hoechst Celanese Corp., 214 F.3d 556 (5th Cir. 2000), cert. denied, 531 U.S. 1132 (2001) ...........................20 Superintendent of Ins. v. Bankers Life & Cas. Co., 404 U.S. 6 (1971) ..................................passim Tuchman v. DSC Communs. Corp., 818 F. Supp. 971 (N.D. Tex. 1993), aff'd, 14 F.3d 1061 (5th Cir. 1994) ............................1 U.S. Quest, Ltd. v. Kimmons, 228 F.3d 399 (5th Cir. 2000) ............................19, 35 United States