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een held in LJM1, and RBS’s total return swap with AIG using that Enron stock enabled RBS tomake its additional capital contribution to LJM1 – which Fastow was promptly able to profit from.See Exam. IV, App. E at 56. Neither Fastow nor any other Insider disclosed the RBS escrow or theRBS total return swap to the Enron Board. See Exam. IV, App. E at 55-56.647. In addition, RBS’s participation in the restructuring of LJM1 circumvented anothercondition on which the Enron Board had relied in approving the LJM1 related-party transaction.The Enron Board had approved LJM1 based, in part, on Fastow’s representation that PWC wouldprovide a fairness opinion in which PWC would conclude that the value of the put option and money(LJM1’s contribution) would exceed the value of the Enron shares (Enron’s contribution). To reachthat view in its fairness opinion, PWC applied an “illiquidity discount” to the Enron shares basedon the restrictions Enron had placed on LJM1’s ability to transfer or pledge the shares. Theserestrictions prohibited LJM1 from hedging the Enron stock it received for two years, and fromselling or otherwise transferring that stock for four years. However, RBS’s total return swaps withAIG effectively circumvented the restrictions, thus vitiating the conditions on which PWC basedits fairness opinion. See Exam. IV, App. E at 44-45, 85-86, 95.648. The participants in LJM1 profited handsomely from the restructuring. Fastowultimately distributed $17.9 million to himself from LJM1. RBS and CSFB each received additional$5.9 million distributions. See Exam. IV, App. E at 59. In addition, RBS made over $22 millionin profit on its total return swap with AIG. As the Examiner concluded, RBS’s total return swapwith AIG “circumvented certain restrictions in the Amended Partnership Agreement, contravenedrepresentations made by Fastow to the Enron Board when he sought [its] approval for LJM1, andfacilitated increased distributions to Fastow and other Enron insiders.” Exam. IV, App. E at 33.604041v1/007457-223-