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unless independent third parties make an equity investment in the SPE equal to at least 3% of the fairvalue of the entity’s assets, and the equity investment is at risk during the entire term of the SPE.205. In substantially all of the FAS 140 transactions involving the 3% equity requirement,the Insiders promised the equity owner verbally that Enron would repay the equity investment. TheBank Defendants to whom these promises were made often documented the promise in their records.The Insiders who made the promises routinely honored them. Where repayment was promised,equity was not at risk, and accounting for the transaction pursuant to FAS 140 thus violated GAAP.206. Some of the Bank Defendants called the Insiders’ promises to repay the equityinvestments “trust me” equity. “Trust me” equity eliminated risk and, therefore, also eliminatedthe Bank Defendants’ incentive for analyzing FAS 140 deals, before investing, as real investments.When the CFO or Treasurer of one of the world’s largest corporations assures repayment of aninvestment, determining whether the economics of the underlying asset will support the investmentis superfluous. Likewise, when the CFO or Treasurer knows the investor is not scrutinizing theeconomics of the underlying asset, he is not constrained when he values that asset. Eliminatingequity risk therefore makes it relatively easy to record the “sale” at an inflated value, and therebyavoid reporting any loss in value on Enron’s financial statements. That is what the Insiders did. Inthis way, the Bank Defendants knowingly facilitated the Insiders’ abuse of MTM accounting byparticipating in FAS 140 (and other) transactions in which they received unwritten promises ofrepayment of their equity investments.207. Although the Enron Examiner did not report on every FAS 140 transaction, heconcluded that for every FAS 140 transaction he did report on, the transaction should be recharacterizedas a loan. By failing to report the transaction as a loan in the first instance, the Insiders(with the support and assistance of the Bank Defendants) were able at least to604041v1/007457-57-