Footnote 8

discussion on this about 6 weeks ago. We had begun to focuss [sic] on itfrom the point of view of trying to free up capacity in the bank market. Isthat the goal here or is this another hide the debt structure?”JPMBKR-E 0020290 (quoted in Exam. III, App. E at 16-17).• In litigation in June 2002, Chase asked a court to require surety bondproviders to make payment on bonds that related to certain prepays. In afiling, Chase asserted that the sureties “knew that the [prepays] were part ofa structured financing transaction for Enron’s general corporate benefit.”The same filing claimed that “the surety bonds were part of financingtransactions in which the funds advanced by JP Morgan Chase to Mahoniawere ultimately used by Enron for general corporate purposes, not to securefuture sources of the oil and gas to be delivered.” Amended Complaint, JPMorgan Chase Bank v. Liberty Mutual Insurance Co., Case No. 01-Civ.11523 (S.D.N.Y) at 18, 19.352. Consistent with their understanding of the true purpose of the prepays, the partiesroutinely used language of financing when discussing them. For example, Chase documents showthat in conversations about the prepays, Chase and Enron typically discussed fees in terms of theLondon Interbank Offered Rate (LIBOR) plus a basis point spread, terms generally used to refer topricing on loans. See, e.g., JPMC-H-0111470, JPM-6-04204, Senate-MAH 02296.353. Chase clearly considered the prepays’ central benefit to be the fact that the structurefacilitated treating debt as something other than debt on a balance sheet. In 1998, Chase actuallydeveloped a “pitch book” to sell other companies on the Enron prepay structure. In it, Chase notedthe structure was “balance sheet ‘friendly’” and offered an “[a]ttractive accounting impact byconverting funded debt to ‘deferred revenue,’ or long-term trade payable.” PSI Ex. 128; SenateMAH-02604-17. In a written statement to Congress, Chase admitted that it succeeded in sellingseven companies besides Enron on the Enron-style prepays. PSI Ex. 185q.354. Chase also knew the rating agencies did not understand the prepay transactions.Chase acknowledged in internal documents that “[m]ost users of the prepay structure believe thetransaction to be ‘rating agency friendly,’” and that “[f]unded debt ratios will likely improve asdeferred revenue is not included in debt/capital ratios.” JPMC BKR 0015716-746 (quoted in604041v1/007457-117-