Footnote 8

CITI-B00393281 (quoted in Exam. III, App. D at 97) (emphasis added). After reviewing theNighthawk structure, Citigroup’s accountant concluded that “[i]t would therefore seem appropriate. . . for Enron to consolidate the Investor (SPV) as well as the JV.” CITI-B 00395282. TheCitigroup Managing Director responsible for the Nighthawk transaction reached a similarconclusion, stating that “[t]he Equity Collar effectively protects the Equity Participant from any risk. . . .” CITI-B 00573142 (quoting Exam. III, App. D at 101).308. Citigroup also knew that by designing, implementing, and arranging the financingfor Nighthawk, it was assisting the Insiders in manipulating Enron’s financial condition. Citigroupknew the Insiders intended to report the $500 million Enron received from Nighthawk as investmentin minority interests – not as debt. Indeed, one of the bases on which Citigroup marketed theNighthawk minority interest transaction to the Insiders was that it would not increase balance sheetdebt. A pro forma balance sheet Citigroup prepared as a part of its marketing presentation to Enronshowed that the $500 million from the Nighthawk transaction would increase investment in minorityinterests by $500 million and could potentially decrease debt by a like amount, if the Insiders usedthe Nighthawk proceeds to pay down existing company debt. Another purpose of the Nighthawktransaction was to satisfy rating agency concerns about Enron’s financial statements. As a Citigroupmemorandum described, the “key benefit to Enron from the transaction is that the financing willgenerate substantial tax deductible, nondilutive rating agency equity . . . .” CITI-B 00256319(emphasis added).309. As a result of the Nighthawk transaction, Enron received $500 million at year-end1997 without increasing its debt. Had this amount been reflected – as it should have – as debt onEnron’s balance sheet, Enron’s total debt would have increased by 8%.604041v1/007457-97-