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linked promissory notes to institutional investors, the proceeds of which were used to fund theprepaid amounts.284. Citigroup’s stated purposes for the first Yosemite structure were (i) to maintainEnron’s accounting and rating agency treatment, (ii) to increase the capacity of top tier banks so thatthey could take on more Enron debt, (iii) to reduce the top tier banks’ credit exposure to Enron,(iv) to give Enron the ability to change the prepay deals without refinancing, (v) to diversify theinvestor base, and (vi) to raise $1 billion. PSI Report Exhibit 160. Citigroup also wanted toaccommodate the Insiders’ desire to “confuse” the rating agencies and keep the nature and purposeof the prepay transactions secret from investors: “[Enron] does not wish to have to explain thedetails of many of the assets to investors or rating agencies . . . . Ideally, non-tier 1 participant banksin the deals will be unaware of the ‘sale’ of the existing positions of the tier 1 banks.” PSI ReportExhibit 160.285. Citigroup therefore initially created the credit-linked note device, in part, to off-loadcertain of its own Enron exposure into the bank market while earning substantial fees. This devicealso served the Insiders’ purposes, as they became concerned that some banks’ capacity limitationsfor Enron debt were being reached.286. In each Yosemite transaction, Citigroup created or directed the creation of a trust thatwas off Enron’s balance sheet. The trust offered credit-linked notes (notes linked to Enron’s credit)to “Qualified Institutional Buyers.” By funding the prepays in this fashion, Citigroup and theInsiders passed to institutional investors (not Citigroup) the risk that Enron would not or could notrepay the notes.286A. In each of the Yosemite transactions, the trust issued both debt and equity, the debtin the form of the credit-linked notes and equity in the form of certificates, which were in theaggregate amount of 3% of the value of the trust’s assets. In economic substance, the certificates604041v1/007457-87-