Footnote 8

participate in Hawaii but decided to do so because of the possibility that Hawaii would lead to futureEnron-related business: An RBC document admits that the bank would not “do this deal [Hawaii]in isolation but have 5 other deals in the pipeline with Enron where we can earn substantial fees.”RBC 0133696 (quoted in ENA Exam. at 126). RBC knew CIBC had obtained verbal assurancesfrom the Insiders that CIBC’s equity in the Hawaii transaction would be fully repaid, in violationof the 3% equity test, which caused the accounting for the structure to be misleading.Notwithstanding this knowledge, RBC assisted the Hawaii structure by lending money to it.(4) RBC limited its Enron exposure.686. As early as 1999, RBC’s credit risk management group conducted extensive internalreviews of Enron’s financials, including its off-balance sheet vehicles, in a concentrated effort tounderstand the extent of Enron’s true debt. In September 2000, shortly after RBC internallyestimated Enron’s off-balance sheet obligations at $16 billion, an RBC executive received adocument that caused him to write: “[T]he implications of that document for Enron are absolutelyenormous. If Bob [Hall, Senior Vice President of Risk Management Group] read it he’d cut the[credit] limit [of Enron] in half.” RBC NY 0102526 (quoted in ENA Exam. at 101-02). Also inSeptember 2000, an RBC executive wrote that another RBC executive might have concerns aboutthe “transparency of [Enron’s] financial statements (the integrity of the accounting principals [sic]behind the financial statements).” RBC NY 0099068 (quoted in ENA Exam. at 102). At the timethese concerns were being voiced within RBC, the bank’s efforts to protect itself were alreadyunderway: As of September 1, 2000, RBC had reduced its overall Enron credit exposure byapproximately Can$240 million.687. RBC’s Risk Management Group was still concerned in October 2000 about Enron’sfinancial condition. RBC planned to reduce its exposure to Enron by syndicating or underwritingmore transactions, focusing on more lucrative off-balance sheet structured financings so it could604041v1/007457-238-