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prepays, two FAS 140s, and one tax transaction. Together, these transactions provided Enronwith billions in financing and allowed the Insiders to understate debt on Enron’s balance sheetby billions.336. Like Citigroup, Chase’s participation has been investigated and roundly criticizedby at least Manhattan District Attorney Morgenthau, the PSI of the Committee on GovernmentalAffairs for the United States Senate, and the Enron Examiner. All concluded that Chase knowinglyfacilitated the Insiders’ scheme to misstate Enron’s financial statements.337. Morgenthau’s 18-month investigation into the Enron prepays actually “focused moreclosely on the particulars of the Chase transactions” than on Citigroup’s. Morgenthau Letter at 2.According to Morgenthau, that was because unlike Citigroup, Chase neither cooperated fully withhis investigation nor, in the beginning, acknowledged that the prepays were anything other thanlegitimate arm’s-length commodity trades. As he had with Citigroup, Morgenthau concluded thatthe prepays between Enron and Chase “were trades on paper only. In substance, they were loans.”Id. He found that by structuring the loans as commodity trades, Enron “unfairly” accounted for cashflow from financing as cash flow from operations. He concluded that Chase knew the effect of theprepays on Enron’s financial statements – and specifically knew that the prepays were being usedboth to “fill liquidity gaps” and to hide debt capital as price risk management liabilities. He alsoacknowledged that Chase knew the ultimate goal of the prepays was “fraudulent accounting” and“to make [Enron’s] financial statements less transparent.” Id. at 8.338. When the investigation ended, Morgenthau commented that despite its initialhostility, Chase – like Citigroup – had subsequently “renounced the policies and procedures whichled to [its] involvement in the Enron debacle and [had] adopted reforms to see that nothing similarhappens again.” Id. Or, as J.P. Morgan Chase & Co. wrote to Morgenthau on July 28, 2003, “Wehave made mistakes. We cannot undo what has been done, but we can express genuine regret and604041v1/007457-111-