Footnote 8

substantially assisted the Insiders in manipulating Enron’s financial statements, secured enormousprofits for itself, and helped Fastow and other Insiders personally profit from LJM1 transactions atEnron’s expense.(3) The RBS FAS 140 transactions.653. RBS also helped the Insiders structure and execute four FAS 140 transactions, whichthe Insiders used to manipulate Enron’s financial statements. The RBS FAS 140 transactions wereSutton Bridge and ETOL I-III. In addition, RBS participated in two others – Ghost and Hawaii.654. RBS knew the accounting requirements that governed FAS 140 transactions,including specifically that FAS 140 accounting was only appropriate if the equity RBS contributedto the SPE in the transaction was at risk. Despite this knowledge, RBS secured verbal assurancesof repayment from the Insiders, so its equity was not actually at risk in any of the RBS FAS 140transactions. RBS relied on these verbal assurances in entering into the transactions. RBS wouldnot – and did not – participate in FAS 140 transactions without first getting the Insiders to agree thatits equity investment would be repaid.655. RBS knew the transactions in which it participated did not qualify for FAS 140treatment because its equity was not at risk. But RBS also knew the Insiders would report thetransactions as if they did. Without RBS’s equity piece, these FAS 140 transactions would not haveoccurred. Consequently, by participating in these transactions, RBS aided the Insiders’ scheme toreport cash flow improperly as arising from operations and disguise Enron’s true debt. RBS knewexactly what the Insiders were doing with these transactions: It referred to the Insiders’ booking ofstgains and cash flow from the FAS 140 transactions as “21 Century Alchemy.” RBS 3121150(quoted in Exam. IV, at 72 n.122). However, neither RBS nor the Insiders ever disclosed the natureor existence of these verbal assurances.604041v1/007457-225-