Footnote 8

Nixon prepay, RBS and Barclays each loaned $110 million to Enron, and Citigroup loaned another$104 million, with Toronto Dominion serving as the pass-through entity for all three lenders. Inexchange for its $110 million, RBS received a forward commitment from Enron to pay the marketprice on a certain quantity of crude oil on a certain date. RBS simultaneously entered into a swapagreement with Toronto Dominion whereby RBS agreed to pay the same market price for the samequantity of oil on the same date in exchange for $110 million plus an additional amount that waseffectively an interest payment. Toronto Dominion, at the same time, entered into a swap withEnron. By concurrently entering into these fixed-floating and floating-fixed agreements, neitherRBS nor Enron retained any forward price risk associated with the underlying quantity of crude oil.668. RBS knew full well that the Nixon prepay was, in substance, a loan. It knew thestructure was circular, describing it as “set up to remove the commodity risk for all parties, [so] allpayments against commodity price moves are exactly off-set by receipts from the party on the otherside.” RBS 3118966 (quoted in Exam. IV, App. E at 81). Internal RBS documents candidlydescribed Nixon as a “loan.” See, e.g., RBS 53118965 (cited in Exam. IV, App. E at 81 n.326).RBS also knew the Insiders’ accounting for the Nixon prepay was misleading because it wasinconsistent with the transaction’s economic substance. As the Examiner concluded, RBS knew“that Enron booked the repayment obligation in the transaction as price risk management activitiesrather than debt and that the proceeds of loan transactions such as Nixon were booked by Enron ascash flow from operating activities.” Exam. IV, App. E at 81.669. RBS also knew, more generally, that the Insiders wanted to execute the Nixon prepayso they could camouflage Enron’s true financial condition. RBS knew the Insiders wanted to useNixon to book cash and reduce debt on Enron’s financials at a “critical year-end period.” RBS3118972 (quoted in Exam. IV, App. E at 79 n.319). RBS’s senior research analyst described Nixonas “little more than a ‘window dressing’ request” that “raises issues over the absolute level of604041v1/007457-230-