Footnote 8

easons.” RBS 3141116 (quoted in Exam. IV, App. E at 71). Neither the Insiders nor RBS everdisclosed the verbal assurances in the ETOL I-III transactions.665. RBS relied on these verbal assurances in executing ETOL I-III. The verbalassurances were the only reason the ETOL I-III transactions made any sense for RBS – because itwould have taken 22 years for RBS to be repaid from the dividend flow from the asset beingmonetized. See RBS 3124953 (cited in Exam. IV, App. E at 77). In ETOL II and III, RBS did noteven bother to conduct due diligence to verify Insider representations of the value of the underlyingasset, underscoring the extent to which RBS was relying on the Insiders’ verbal assurances ofrepayment. See Exam. IV, App. E at 75. But RBS knew that it was in no danger of losing its“investment”: The bank’s previous experience with Sutton Bridge had taught it that the Insiderswould make good on their verbal assurances. As one RBS executive explained, “[p]reviousunderstandings with Enron have always been delivered upon and there is no reason to believe thatthis particular transaction will prove to be the exception to the rule.” RBS 3141117 (quoted inExam. IV, App. E at 71).666. RBS was well aware that it was helping the Insiders create false and misleadingfinancial statements by participating in the ETOL I-III transactions. RBS knew the Insiders wouldaccount for these transactions under FAS 140, despite the fact that the Insiders’ verbal assurancesof repayment rendered RBS’s equity without risk. RBS knew the ETOL transactions facilitated“financial engineering.” RBS 3121151 (quoted in Exam. IV, App. E at 78). Most succinctly of all,stRBS described the ETOL structure as “21 Century Alchemy.” RBS 3121150-51 (quoted in Exam.IV, App. E at 78-79).(4) The Nixon prepay.667. RBS participated in the Nixon prepay, a series of transactions at year-end 1999. TheNixon prepay purportedly was a commodity trade but, in substance, was a loan to Enron. In the604041v1/007457-229-