Footnote 8

RBS executives expressed concern about the “absolute level of manipulation” in Enron’s financialstatements. RBS 3118880 (quoted in Exam. IV, App. E at 25).634. RBS also knew the Insiders were manipulating Enron’s financial statements so theydid not reflect Enron’s real financial condition. In March 2000, when an RBS credit manager wrotethat “[t]he scale of financial period manipulation” was “exceedingly worrying,” he continued:I can see from a relationship/business perspective that there is a temptation to writeanother income generating transaction on the basis of the comfort we are drawingfrom it being very short term, but the concern must obviously be that if lots ofcounterparties are doing this then any bad news (or shortage for whatever reason ofcounterparty capacity) will cut refinance ability dramatically and/or end Enron’sability to manipulate thus leading to a horrendous on-balance sheet position whichwould further exacerbate the position. The question is when do we stop [?]RBS 3118862 (quoted in Exam. IV, App. E at 25-26). As it considered participation in Ghost, anRBS official informed colleagues of his “concern” about what was being done “to massage[Enron’s] Balance Sheet.” RBS 3112212 (quoted in Exam. IV, App. E at 24).635. RBS even had access to the Insiders’ own views on Enron’s true financial condition.In a series of meetings with Glisan and others, RBS learned:In terms of internal RBS treatment of these structures, while Enron mayachieve off-balance sheet treatment, we should consider these direct Enron exposureas their operation and off-take is so closely related to Enron. Additionally, whateverthe tax and accounting treatment, Enron’s senior management are consistent instrongly representing verbally that Enron will do everything in their power to protectthe investors and lenders involved.RBS 3120723 (quoted in Exam. IV, App. E at 27) (emphasis in original).636. In its dealings with Enron and the Insiders, RBS and its subsidiaries functioned asa single business unit. Employees of RBS and its subsidiaries were able to speak on behalf of oneanother and cause one another to participate in transactions with Enron and LJM1. For example,RBS’s relationship manager for Enron was also a Campsie representative; he signed an amendmentto the hedging prohibition in the stock held by LJM1 on Campsie’s behalf. See Exam. IV, App. E604041v1/007457-218-