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262. Citigroup’s participation in SPE transactions with Enron has been thoroughlyreviewed and criticized by federal and state regulators, a subcommittee of the United States Senate,and the court-appointed Enron Examiner, all of whom concluded that Citigroup knowinglyfacilitated the Insiders’ misstatement of Enron’s financial condition.263. Following a multi-month investigation, the SEC instituted an administrativeproceeding against Citigroup based upon its role in the manipulation of Enron’s financial conditionin the prepay transactions, the Nahanni minority interest transaction, and the Bacchus transactioninvolving Enron’s forest products business. With respect to these transactions, the SEC found thatCitigroup assisted Enron in “enhancing artificially [its] financial presentations through a series ofcomplex structured financings whose purpose and effect, among other things, was to allow [Enron]to report proceeds of financings as cash from operating activities on their statements of cash flows.In these transactions, Enron . . . received cash upfront and repaid that cash on terms that includeda negotiated return in the nature of interest.” SEC Order Instituting a Public AdministrativeProceeding in In the Matter of Citigroup, Inc., Administrative Proceeding 3-11192, July 28, 2003(“SEC Citigroup Order”) at 2 (emphasis added). Citigroup settled the SEC proceeding by payingover $101 million.264. Manhattan District Attorney Morgenthau’s 18-month investigation of the prepaytransactions between Enron and Citigroup concluded that the Citigroup prepayswere never designed to constitute trading in the commodities markets. Despite thebanks’ efforts to make these transactions look like commodities trades, they weretrades on paper only. In substance, they were loans. Structuring these transactionsas commodities trades, however, enabled Enron unfairly to account for the funds itreceived as cash flow from operations, rather than as the proceeds of bank or creditfinancing.Morgenthau Letter at 2 (emphasis added). The Morgenthau investigation also concluded thatCitigroup knowingly participated in the misstatement of Enron’s financial condition: “Citibank604041v1/007457-77-