Footnote 8

cash flow for that year. Through Sundance Industrial, the Insiders improperly kept $375 million ofdebt off Enron’s balance sheet and improperly generated $20 million of income.(5) Citigroup offloaded its Enron exposure.331. By 1999, Citigroup’s “obligor exception” for Enron – the amount by whichCitigroup’s total exposure to Enron exceeded the internal lending limit – had grown to overone billion dollars. In January 1999, Citigroup’s primary relationship manager for Enron warnedcolleagues that the bank likely would not approve a new cash management facility for Enron, notingthat “our exposure predicament is legend.” CITI-B 00440585 (quoted in Exam. III, App. D at 24-25). A Vice-Chairman of Citigroup described Citigroup’s exposure to Enron as “huge” andsubsequently refused to approve any additional exposure until proceeds received by Enron from theYosemite-funded prepays were received and used to pay down existing exposure. CITI-B 0046533(quoted in Exam. III, App. D at 25). “[U]ntil the moment that we have received the debt repaymentresulting from the Yosemite transaction, I am not willing to approve another incremental exposureon Enron.” Id.332. Citigroup thus was clearly motivated to help Enron complete new financings thatwould bring in cash to reduce Citigroup’s exposure to Enron. In fact, Citigroup designed theYosemite credit-linked note structure to assist Enron in generating prepay proceeds to be used to paysome of Enron’s existing bank exposure – including exposure to Citigroup. Testifying before theUnited States Senate, Richard Caplan, the designer of Citigroup’s Yosemite prepay structures, saidthe purpose of the Yosemite deals “was to shift risk from the bank market,” and that the Insidersultimately laid off $2.4 billion through the Yosemite transactions. Much of that exposure wasCitigroup’s, and Citigroup structured Yosemite so it could reduce that exposure in secret: “Ideally,nontier 1 participant banks in the deals will be unaware of the ‘sale’ of the existing position of the604041v1/007457-108-