Footnote 8

523. Again, however, before CIBC agreed to purchase the 3% equity in Hawaii, it requiredFastow or another senior Insider’s assurances that the equity would be repaid. CIBC likewiseinsisted that the Insiders reaffirm their repayment commitment every time the facility wasrestructured or amended. Id. at 46-47. By the end of 2000, even CIBC’s most senior executiveswere conditioning the approval of FAS 140 Transactions on the express agreement – alwaysunwritten – of repayment.524. Once again, CIBC’s own documents demonstrate the fact of the agreement. Forexample, to obtain approval of a Hawaii credit application, one CIBC employee noted that theInsiders had fully repaid CIBC’s equity participation in Discovery. In a later credit memo CIBCnoted that in the past, the Insiders had seen to it that an early equity investment in Hawaii(McGarret N) had been fully repaid, even though the value of the underlying assets had declined.Id. at 47 (citing CIBC 1044570). In that particular case, Causey approved Enron’s repurchase ofCIBC’s equity at inflated prices. Id. In truth, Enron repaid CIBC’s equity in full on severaltransactions (including Hanover Compressor and Eli Lilly assets) where the value of the assets inthe SPE had declined substantially and, therefore, the purported equity value should have beencorrespondingly reduced.525. The FAS 140 transactions conducted through Hawaii continued well into 2001. Inevery one of them, CIBC engaged in virtually no due diligence on the values of any of theunderlying assets. This total absence of due diligence, or even any real negotiation over the priceto be “paid” for the assets being purchased from Enron, demonstrates more than anything else thatCIBC knew its equity was not at risk. Almost equally telling is how CIBC rated the debt and equityportions of these FAS 140 transactions internally. Despite their supposedly distinct nature, both debtand equity were treated as debt obligations of Enron. Id. at 59.604041v1/007457-171-