Footnote 8

years over which to amortize the credit. Exam. III, App. G at 30. Amortizing this tax benefitgenerated $121.8 million of “operating income.”483. Enron’s accounting treatment of the Steele transaction was misleading and did notcomply with GAAP. Among other things, the amortization of the deferred credit into pre-taxincome and the selection of the five-year period of the corporate bonds over which to amortize thedeferred credit did not comply with GAAP. BT/Deutsche Bank understood this accountingtreatment was aggressive. In fact, on September 10, 1997, Peggy Capomaggi, a Bankers Trustemployee, expressed doubts in an internal e-mail that Enron’s acquisition of assets from the bankproperly constituted a “business combination” – a necessary requirement of a legitimate taxtransaction. Exam. III, App. G at 34.484. Both the Insiders and BT/Deutsche Bank knew that the accounting literature requiredthat the amortization period be chosen through a rational, systematic method. They also knew thatthe deferred tax assets could only be attributed to REMIC Residual Interests with an estimated lifeof 27 years. Still, the Insiders had Enron amortize the deferred credit over five years. As allinvolved knew, the five-year period related to the life of the corporate bonds, not the REMICResidual Interests.(b)Cochise485. A common approach BT/Deutsche Bank used for tax transactions – vitally clear inCochise – was to make a series of transactions look like, and claim that they functioned like,transactions discussed in accounting literature, when actually they did not. For example,BT/Deutsche Bank would find in the accounting literature a conclusion that a particular historicaltransaction had to be reported in a particular manner in order to fairly present the entity’s financialposition. BT/Deutsche Bank would then concoct a series of transactions mirroring those in theliterature, carefully weave them together, and then claim the accounting rules “required” its604041v1/007457-156-