Enron Corp. - University of California | Office of The President

797.25 Project Tomas was structured to increase the tax basis of a portfolio of leased assets
that Enron liquidated. The increased basis of the assets eliminated approximately $270 million of
taxable gain for Enron on the disposition of the property. The transaction involved the assumption,
and repayment, of debt to increase the basis of the assets without an economic outlay. Bankers Trust
made this possible by forming a partnership with an Enron subsidiary and contributing, along with
Enron, other assets to the partnership which resulted in the basis of certain assets being duplicated
and then shifted to the leased assets.
797.26 In short, through Project Tomas, Enron and Bankers Trust sold Enron assets that had
appreciated without paying taxes on that appreciation – and booked earnings in the process. All by
shuffling assets and debt around in a maze of transactions that served no other purpose but to defraud
investors and the Internal Revenue Service.
797.27 Like in each of the other fraudulent transactions, Bankers Trust was an essential and
primary actor in the Project Tomas fraud. As stated by the Joint Committee Report: "To dispose
of the leased assets with a stepped-up basis without incurring tax, Enron formed a partnership with
Bankers Trust, which in essence served as an accommodation party in the transaction. Without a
willing though unrelated third party to hold the leased assets through a partnership for at least two
years before selling them off, the tax savings and financial statement benefits claimed through the
use of this structure would not have been possible."
797.28 Enron, through its legal counsel, represented to Congressional investigators that it
reported financial statement benefits from Project Tomas of $18.1 million in 98 and $18.4 million
in 00. The Joint Committee Report, however, estimates that Enron's financial statements included
income from Project Tomas of $55.99 million in 98, $9.85 million in 99 and $51.29 million in 00.
- 538 -