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

emaining from Bankers Trust to Enron and substantial tax advantages to Bankers Trust arising from
the exploitation of tax rules concerning financial asset securitization investment trusts. For its part,
Enron received a million dollar fee that it used to artificially inflate its earnings and – more
importantly – Enron was able to further reward Bankers Trust/Deutsche Bank for being its partner
in the fraudulent tax schemes detailed above.
797.32 Like Renegade, Project Valhalla resulted in earnings and substantial tax benefits to
Deutsche Bank, which paid substantial fees to Enron for its involvement. Indeed, Enron's fees were
based upon the amount of benefit to Deutsche Bank. In effect, Project Valhalla took advantage of
differing tax treatment under German and U.S laws. Put simply, Deutsche Bank received a stream
of income from Enron that was not taxable under German law, but Deutsche Bank financed this
income stream by making payments to Enron for which it took tax deductions on the interest portion
under U.S. tax laws. For its part in this fraudulent transaction, Enron "earned" and artificially
inflated its reported net income by $7 million in 00 and $9 million in the first three quarters of 01.
Recognizing that the transaction would likely draw fire from regulators if it were exposed in Enron's
bankruptcy, Deutsche Bank substantially ended the arrangement shortly before Enron filed for
bankruptcy protection.
798. During the Class Period, Deutsche Bank knew that Enron was falsifying its publicly
reported financial results and that its true financial condition was much more precarious than was
publicly known. It obtained this knowledge due to its access to Enron's internal business and
financial information as Enron's lead lending bank, as well as its intimate interaction with Enron's
top officials which occurred virtually on a daily basis.
799. Thus, Deutsche Bank is directly liable to the Class for making false and misleading
statements in Registration Statements and Prospectuses utilized by Enron and Deutsche Bank to raise
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