Fastow, who was ousted as chief financial officer in October, created LJM2 to hold or sell Enron assets in energy and communications.
In one transaction, LJM2 bought fiber-optic cable from Enron in June 2000 and resold it six months later to another partnership he controlled.
In a meeting in Fastow's Houston office in early 2000, Long said the CFO suggested LJM2 would make money by buying assets from Enron at a discount, enriching partnership investors at the expense of Enron shareholders. The prospectus said LJM2 would invest mainly in companies owned or controlled by Enron.
Long said that Fastow tried to encourage the Houston fund to invest by saying, "Look, Calpers has looked at us and they think we're sophisticated investors and can make money."
Danny Bowers, chief investment officer of the US$1.7 billion Houston Firefighters' Relief and Retirement Fund, said Fastow and Kopper brought up Jedi when they came to his office in January 2000 seeking money for LJM2. Fastow suggested LJM2 investors could expect to double their money, Bowers said.
Neither Houston pension fund invested in LJM2. Long and Bowers both cited the same reason as Calpers not to take part -- Fastow's conflict of interest as both the manager of LJM2 and Enron CFO Enron.
Calpers put US$250.5 million into Jedi I, which invested US$2.1 billion in more than 60 transactions. Encouraged by its success, Enron decided to form Jedi II to expand its trading business into areas such as fiber optic cable capacity. Calpers agreed on the condition that Enron buy its stake in Jedi I, which it did for US$383 million in 1997.
Calpers committed US$500 million to Jedi II, of which just US$156.6 million was tapped because investments were suspended last summer during California's energy crisis.
Jedi II invested US$810 million in more than 30 transactions. Calpers has gotten back US$171 million from Jedi II, which is being liquidated.
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