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d. The Insiders engaged in a scheme that used SPEs improperly to prop upEnron’s credit rating.173. Enron is not complaining simply that the Insiders and the Bank Defendants managedEnron’s business with SPE structures. Just as there is nothing inherently wrong with MTMaccounting, there is nothing inherently improper about using structured finance and SPEs to achieveand report legitimate business results. As the Chief Credit Officer of the Corporate Finance Groupof Moody’s testified during the PSI Hearings, “It should be stressed that structured financing is acommon risk management tool available globally to corporations, financial institutions, and stateand local governments. It is a recognized method, for example, of enhancing liquidity and oftransferring credit risk when appropriately implemented.” Testimony of Pamela M. Stumpp, the PSIHearings, July 23, 2002 at 28 [hereinafter “Stumpp Testimony”].174. However, in the case of Enron, the Insiders and the Bank Defendants used structuredfinance to report results Enron never achieved. Again, as Moody’s testified at the PSI Hearings:“The problem was that the actual Enron risk was different from that portrayed by Enron’sincomplete and misleading financial disclosures.” Id. at 31. Obviously, reporting results that werenever achieved is improper, especially because the whole point of reporting the incorrect results isto fool rating agencies and others – including Enron’s creditors and its own Board of Directors – intobelieving that Enron was living up to its credit rating.175. Companies registered with the Securities and Exchange Commission (“SEC”) arerequired to file their financial statements in conformance with GAAP. If a structure is used, thefinancial impact of that structure must – at a bare minimum – be captured in the company’s financialstatements in accordance with the requirements of GAAP. In addition to technical compliance withGAAP’s specific rules, the accounting must also satisfy the principle of “fairly presents.” That is,even if a structure is reported in a manner that complies with individual, technical rules of GAAP,604041v1/007457-45-