Footnote 8

the three parties to the transaction. It also included, in quotation marks, the slogan: “Let the circlebe unbroken.”186. In 2003, the District Attorney of New York County completed an 18-monthinvestigation into Enron’s prepay transactions with JP Morgan Chase and Citigroup. In a July 28,2003 letter to Alan Greenspan, Chairman of the Board of Governors of the Federal Reserve System,and others, the District Attorney explained the nature of his investigation:In the course of our investigation, which began shortly after Enron filed itsbankruptcy petition, we have interviewed hundreds of witnesses from throughout thecountry and abroad and analyzed more than one million documents. In addition,testimony was taken from 46 witnesses and more than 2,700 exhibits wereintroduced before a New York Grand Jury, which sat for six months.R. Morgenthau letter to The Honorable Alan Greenspan, July 28, 2003 [hereinafter “MorgenthauLetter”] at 2.187. Based on this extensive, independent investigation, District Attorney Morgenthaureached the same conclusion as the Enron Examiner and the SEC:Id.Prepaid commodities transactions, which involve the present sale of a commodityin exchange for future delivery, are routine and serve legitimate economic ends incommodities trading. As our investigation disclosed, however, the prepaids Chaseand Citibank engaged in with Enron were never designed to constitute trading in thecommodities markets. Despite the banks’ efforts to make these transactions look likecommodities trades, they were trades on paper only. In substance, they were loans.188. The Insiders used the prepay device because accounting rules for commodity tradesare different than accounting rules for debt. Prepay transactions were simply a means of obtainingsignificant amounts of cash pursuant to a structure that allowed Enron to report favorable financialstatement results. Had the financial institutions simply loaned Enron money, the Insiders wouldhave been required to record the loan amount on Enron’s balance sheet as debt. Instead, by falselyclassifying the repayment obligation as generated by a commodity sales contract, the Insiders604041v1/007457-50-