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debt by 39% and changed Enron’s debt to capital ratio from 40.9% to 49.1%. As the EnronExaminer concluded, “Reduced operating cash flow and increased debt levels in these amountswould almost certainly have resulted in credit ratings lower than those enjoyed by Enron at theapplicable times.” Exam. II at 61.197. In their testimony to Congress, representatives from Moody’s and S&P’s agreed.Ms. Stumpp from Moody’s testified,Based on our limited knowledge, these transactions appear to have been a form offinancing. If such transactions had been accounted for as a loan, Enron’s operatingcash flow would have been reduced and its debt would have been greater. Thedisclosure of these transactions as loans would have exerted downward pressure onEnron’s credit rating.Of course, knowing all that we do know today about the true nature of Enron’scorporate enterprise, it is clear that Enron had not been an investment gradecompany for several years. The compounded impact of these [prepay] transactionsalone on Enron’s financial framework may have resulted in the lower rating andperhaps an earlier downgrade to below investment grade status.Stumpp Testimony at 30 (emphasis added). Mr. Barone from S&P’s explained: “In hindsight, andwithout full information, it is difficult to assess the effect full disclosure about these transactionswould have had on our ratings analysis; but the sheer volume of the transactions suggests that itwould likely have been significant.” Barone Testimony at 33.(3) The Insiders used FAS 140 transactions improperly to hide andmove debt off Enron’s balance sheet and to increase cash flow.198. The Insiders found other ways to raise financing without reporting debt. In general,Enron could generate cash immediately from an asset by monetizing the asset through a structuredfinance transaction involving an SPE. By 1998, the Insiders were raising money by monetizingEnron’s assets through “FAS 140 transactions.” FAS 140 is a financial accounting standard that604041v1/007457-54-