In re Enron [Part One: The Allegations]

Brief Fact Summary. The court reviews the allegations against Enron and named co-defendant law firms, both of which were alleged to have assisted what it calls the “elaborate Ponzi scheme” that led to the largest corporate collapse in American history.

Synopsis of Rule of Law. This section of the opinion is primarily a recounting of the factual allegations made against Enron and the two law firms retained as corporate counsel during the time that the alleged crimes were ongoing.

Facts. Two law firms were joined as defendants in this massive case:
Vinson & Elkins L.L.P: Vinson & Elkins worked closely with Enron executives to plan, fund, and structure some of the most question elements of their operations, as well as many of the alleged securities violations. V+E also assisted in the production of a series of public announcements regarding Enron’s financial situation that their attorneys had good reason to know was false or misleading. (This blatant securities violation would ultimately leave them liable as defendants as this case progressed.)

Kirkland & Ellis: was alleged to have assisted Enron in “off balance sheet transactions” designed to give the company the appearance of a healthy financial outlook. They were not as directly involved in structuring Enron’s more questionable transactions, however, and never assisted in any official public statements. While the activities described here are highly unethical, they are ultimately dismissed from the case. (See Part Three.)

Issue. See Part Two of this opinion.

Held. See Part Three of this opinion.

Discussion. This lengthy summary is a useful postmortem for anyone wishing to understand how Enron ended as it did. It also demonstrates how throroughly even the largest and most respected law firms can get caught up in corporate scandal if proper ethical safeguards are ignored.