Footnote 8

epay Citigroup’s “equity” contribution. Citigroup’s approval memo for the Bacchus transactionstated that “Enron’s CFO, Andrew S. Fastow, has given his verbal commitment to Bill Fox . . . thatEnron Corp. will support the 3% equity piece of this transaction” quoted in Exam. III, App. Dat 123. Other Citigroup documents described Fastow’s promise as “verbal support” and “verbalguarantees” Id. Accordingly, Citigroup treated the entire amount it committed to the transaction asa loan.321. In the course of its independent investigation, the SEC found that “Citigroup obtainedoral representations from Enron that Citigroup would not lose money in connection with its threepercent equity investment,” and, as a result, concluded: “In economic reality, Bacchus was a$200 million financing structured as a sale for the sole purpose of allowing Enron to characterizethe proceeds as cash flow from operating activities and to record a gain of $112 million.” SECCitigroup Order at 3, 9. For this reason, Citigroup made its decision to “invest” $6 million inBacchus without considering the merits of the underlying investment. Moreover, Citigroup wasaware that to at least one of the Insiders, a reason for engaging in the transaction was “writing up”the value of the assets sold.322. Citigroup well understood the significance of keeping Fastow’s assurance unwritten.The SEC concluded that “Citigroup understood that reducing this representation to a writtencontractual term would have negated Enron’s accounting treatment.” SEC Citigroup Order at 3.When receiving analogous oral commitments in conjunction with the Roosevelt prepay transactions,Citigroup noted that while “Enron has agreed, . . . the papers cannot stipulate that as it would requirerecategorizing the prepays as simple debt.” CITI-B 00032147. Had Fastow’s oral assurances beenincluded in the transaction documents, Andersen would not have been able to approve theaccounting for the Bacchus transaction. The PSI Report on Bacchus (at 19) stated it this way:604041v1/007457-104-