LJM (Lea Jeffrey Michael) - LJM1

LJM1

In 1999, the early days of the Dot-com boom, Enron invested in a Broadband Internet start-up, Rhythms NetConnections. In a desire to hedge this substantial investment (they owned at one point 50% of Rhythms' stock) and several others, Fastow met with Kenneth Lay and Jeffrey Skilling on June 18 to discuss the establishment of an SPE called LJM Cayman L.P. (LJM1) that would perform specific hedging transactions with Enron. At a board meeting on June 28, Fastow announced that he would serve as the general partner and would invest $1 million. Also at this meeting, Fastow introduced the structure of LJM, stated he would collect certain "management fees", and got Lay to approve the partnership pursuant to Enron's Code of Conduct (Fastow's participation as the managing partner of LJM1 was not judged to "adversely affect the interests of Enron"). Later, Fastow raised $15 million and started LJM1 on its raison d'être, the Rhythms "hedge" (see below).