<DOC>
[107 Senate Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:83050.wais]
S. Hrg. 107-618
THE ROLE OF THE FINANCIAL INSTITUTIONS IN ENRON'S COLLAPSE--VOLUME 2
=======================================================================
HEARINGS
before the
PERMANENT SUBCOMMITTEE OF INVESTIGATIONS
of the
COMMITTEE ON
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED SEVENTH CONGRESS
SECOND SESSION
__________
JULY 23 AND 30, 2002
__________
Printed for the use of the Committee on Governmental Affairs
U.S. GOVERNMENT PRINTING OFFICE
83-050 WASHINGTON : 2002
____________________________________________________________________________
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COMMITTEE ON GOVERNMENTAL AFFAIRS
JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan FRED THOMPSON, Tennessee
DANIEL K. AKAKA, Hawaii TED STEVENS, Alaska
RICHARD J. DURBIN, Illinois SUSAN M. COLLINS, Maine
ROBERT G. TORRICELLI, New Jersey GEORGE V. VOINOVICH, Ohio
MAX CLELAND, Georgia THAD COCHRAN, Mississippi
THOMAS R. CARPER, Delaware ROBERT F. BENNETT, Utah
JEAN CARNAHAN, Missouri JIM BUNNING, Kentucky
MARK DAYTON, Minnesota PETER G. FITZGERALD, Illinois
Joyce A. Rechtschaffen, Staff Director and Counsel
Richard A. Hertling, Minority Staff Director
Darla D. Cassell, Chief Clerk
------
PERMANENT SUBCOMMITTEE ON INVESTIGATIONS
CARL LEVIN, Michigan, Chairman
DANIEL K. AKAKA, Hawaii, SUSAN M. COLLINS, Maine
RICHARD J. DURBIN, Illinois TED STEVENS, Alaska
ROBERT G. TORRICELLI, New Jersey GEORGE V. VOINOVICH, Ohio
MAX CLELAND, Georgia THAD COCHRAN, Mississippi
THOMAS R. CARPER, Delaware ROBERT F. BENNETT, Utah
JEAN CARNAHAN, Missouri JIM BUNNING, Kentucky
MARK DAYTON, Minnesota PETER G. FITZGERALD, Illinois
Elise J. Bean, Acting Staff Director and Chief Counsel
Robert L. Roach, Counsel and Chief Investigator
Kim Corthell, Minority Staff Director
Mary D. Robertson, Chief Clerk
C O N T E N T S
------
Opening statements:
Page
Senator Levin.............................................. 1, 161
Senator Collins............................................ 5, 165
Senator Lieberman (ex officio)............................. 9, 167
Senator Thompson (ex officio)................................ 11
Senator Bunning.............................................. 12
Senator Carper............................................... 23
Senator Fitzgerald........................................ 45, 195
Senator Cleland.............................................. 49
Senator Dayton............................................... 169
Senator Durbin............................................... 199
WITNESSES
Tuesday, July 23, 2002
Robert L. Roach, Counsel and Chief Investigator, Permanent
Subcommittee on Investigations; accompanied by Gary M. Brown,
Special Counsel, Committee on Governmental Affairs............. 14
Lynn E. Turner, former Chief Accountant, Securities & Exchange
Commission, Broomfield, Colorado............................... 26
Pamela M. Stumpp, Managing Director, Chief Credit Officer,
Corporate Finance Group, Moody's Investors Service, New York,
New York; accompanied by John C. Diaz, Managing Director, Power
& Energy Group, Moody's Investors Service, New York, New York.. 29
Ronald M. Barone, Managing Director, Utilities, Energy & Project
Finance Group, Corporate and Government Ratings, Standard &
Poor's, New York, New York; accompanied by Nik Khakee,
Director, Structured Finance Group, Standard & Poor's, New
York, New York................................................. 31
Jeffrey W. Dellapina, Managing Director, JPMorgan Chase Bank, New
York, New York; accompanied by Donald H. McCree, Managing
Director, J.P. Morgan Securities, Inc., New York, New York; and
Robert W. Traband, Vice President, JPMorgan Chase Bank,
Houston, Texas................................................. 58
David C. Bushnell, Managing Director, Global Risk Management,
Citigroup/Salomon Smith Barney, New York, New York............. 92
Richard Caplan, Managing Director and Co-Head, Credit Derivatives
Group, Salomon Smith Barney North American Credit/Citigroup,
New York, New York............................................. 94
Maureen Hendricks, Senior Advisory Director, Salomon Smith
Barney/Citigroup, New York, New York........................... 96
James F. Reilly, Jr., Managing Director, Global Power & Energy
Group, Salomon Smith Barney/Citigroup.......................... 97
Tuesday, July 30, 2002
Robert Furst, former Managing Director, Merrill Lynch & Co.,
Dallas, Texas.................................................. 171
Schuyler Tilney, Managing Director, Global Energy & Power, Global
Markets & Investment Banking, Merrill Lynch & Co., Houston,
Texas.......................................................... 172
G. Kelly Martin, Senior Vice President and President of
International Private Client Division, Merrill Lynch & Co., New
York, New York................................................. 173
Alphabetical List of Witnesses
Barone, Ronald M.:
Testimony.................................................... 31
Prepared statement with attachments.......................... 282
Brown, Gary M.:
Testimony.................................................... 14
Bushnell, David C.:
Testimony.................................................... 92
Prepared statement........................................... 316
Caplan, Richard:
Testimony.................................................... 94
Prepared statement........................................... 323
Dellapina, Jeffrey W.:
Testimony.................................................... 58
Prepared statement........................................... 312
Diaz, John C.:
Testimony.................................................... 29
Prepared statement with an attachment........................ 278
Furst, Robert:
Testimony.................................................... 171
Prepared statement........................................... 337
Hendricks, Maureen:
Testimony.................................................... 96
Prepared statement........................................... 330
Khakee, Nik:
Testimony.................................................... 31
Prepared statement........................................... 282
Martin, G. Kelly:
Testimony.................................................... 173
Prepared statement........................................... 339
McCree, Donald H.:
Testimony.................................................... 58
Prepared statement........................................... 312
Reilly, James F., Jr.:
Testimony.................................................... 97
Prepared statement........................................... 334
Roach, Robert L.:
Testimony.................................................... 14
Prepared statement with attachments.......................... 215
Stumpp, Pamela M.:
Testimony.................................................... 29
Prepared statement with an attachment........................ 278
Tilney, Schuyler:
Testimony.................................................... 172
Prepared statement........................................... 338
Traband, Robert W.:
Testimony.................................................... 58
Prepared statement........................................... 312
Turner, Lynn E.:
Testimony.................................................... 26
Prepared statement........................................... 265
EXHIBITS
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Page
VOLUME 1
Exhibits for July 23, 2002
101. GEnron Prepays, chart prepared by the Permanent Subcommittee
on Investigations.............................................. 351
102. GFinancial Institution Knowledge of Enron Prepays, chart
prepared by the Permanent Subcommittee on Investigations....... 352
103. GFinance Related Asset Sales, Prepays and 125 Sales ($MM)
(Source: August 2001, Enron Corp. Finance Committee
Presentation.)................................................. 353
GASF--Detail on Prepays, chart prepared by Enron Corp........ 354
104. GImpact On Year 2000 Enron Credit Ratios from 1) Adding
Outstanding Prepays to Debt, and 2) Deducting Prepays from
``Funds Flow From Operations,'' chart prepared by the Permanent
Subcommittee on Investigations................................. 355
GImpact On October 2001 Enron Valuation from Adding
Outstanding Prepays to Debt, chart prepared by the Permanent
Subcommittee on Investigations................................. 356
105. GChase/Mahonia, chart prepared by the Permanent Subcommittee
on Investigations.............................................. 357
106. GChase/Mahonia Collapsed into Loan, chart prepared by the
Permanent Subcommittee on Investigations....................... 358
107. GYosemite I (Citigroup), chart prepared by the Permanent
Subcommittee on Investigations................................. 359
108. GYosemite I (Citigroup) Collapsed into Loan, chart prepared
by the Permanent Subcommittee on Investigations................ 360
109. GEnron Corp. Bank Presentation, November 19, 2001, Waldorf
Astoria, New York, NY, Debt Issues: Commodity Transactions with
Financial Institutions,........................................ 361
110. GProject 10, Due Diligence Findings, November 7, 2001,
Prepays, prepared by Citigroup................................. 363
111. GWhat Are Prepays? Why Does Enron Enter Into Prepays?,
presentation charts prepared by Enron Corp..................... 365
112. GPrepaid Transactions Discussion, presentation materials
prepared by Arthur Andersen.................................... 367
113. GPrepay Transaction, memo prepared for Enron Corp. by Arthur
Andersen, June 1999............................................ 375
114. GAndersen email, December 1998, re: Cash vehicles........... 379
115. GWhy Enron Prepays Were Sham Transactions, chart prepared by
the Permanent Subcommittee on Investigations................... 380
116. GEnron Corp. Credit Conference, Credit Profile, January 29,
2000, presentation charts prepared by Enron Corp............... 381
117. GThe Ownership of Mahonia Limited, chart provided by
JPMorgan Chase................................................. 393
118. GCorrespondence between Mourant du Feu & Jeune (``Mourant'')
and Jersey Financial Regulators, re: establishment of Mahonia;
and Jersey incorporation documents............................. 394
119. GMourant email, November 2001, re: Mahonia et al--Enron
trades......................................................... 410
120. GMourant--JPMorgan Chase email, March 2002, re: mahonia
pipeline imbalances............................................ 411
121. GJPMorgan Chase email, July 2002, re: Restructuring existing
prepays........................................................ 412
122. GMourant--JPMorgan Chase email, September 2001, re: Prepay
Docs........................................................... 413
123. GJPMorgan Chase email, November 1998, re: Pre-pays.......... 414
124. GJPMorgan Chase email, June 1998, re: Enron Forward Sale
Transaction.................................................... 415
125. GJPMorgan Chase call memo, June 1999, re: RED ALERT......... 416
126. GJPMorgan Chase email, June 1999, re: Enron (. . . the
business purpose underpinning the current $500MM prepay
exercise is simply that of efficiently priced funding.)........ 417
127. GJPMorgan Chase email, May 2000, re: Enron (. . . pricing of
an amortizing swap.)........................................... 418
128. GJPMorgan Chase email, July 1998, attaching copy of Prepay
pitch presentation............................................. 419
129. GJPMorgan Chase email, December 2000, attaching Description
of Enron Prepay Transaction.................................... 433
130. GEnron Corp. email, September 2001, re: Chase Prepay (We
need your help to come up with a custom amortization schedule/
volume schedule that looks like a ``normal commodity swap.'').. 435
131. GEnron Corp.-JPMorgan Chase email, September 2001, re:
Prepay with copy of Chase $350 Million Prepay diagram.......... 436
132. GJPMorgan Chase email, October 2001, re: Enron ($5B in
prepays!)...................................................... 438
133. GJPMorgan Chase email, November 2001, re: Enron Exposure.... 439
134. GCorrespondence from JPMorgan Chase to the Permanent
Subcommittee on Investigations, dated July 18, 2002, regarding
names of J.P. Morgan Chase & Co. clients and counterparties
that engaged in commodity prepaid forward transactions with a
special purpose vehicle........................................ 441
135. GSecurity Agreement between Mahonia Limited and The Chase
Manhattan Bank, December 1997.................................. 442
136. GExcerpts of Enron Corp 10K for 2000........................ 465
137. GJPMorgan Chase email, November 2000, re: Call Report for
Enron North America Corporation................................ 474
138. GStructuring Summary, Enron Corp.--1996 Prepay.............. 476
139. GStructuring Summary, Enron Corp.--1997 Prepay.............. 482
140. GStructuring Summary, Enron Corp.--1998 Prepay.............. 490
141. GJPMorgan Chase, October 1997, re: Enron Exposure $350MM
Prepaid........................................................ 491
142. GJPMorgan Chase email, December 2000, re: Enron Prepay
Transaction (. . . need to form Mahonia III . . .)............. 492
143. GCorrespondence from JPMorgan Chase to four Members of the
U.S. House of Representatives, dated March 27, 2002, regarding
Enron and Mahonia.............................................. 493
144. GGlobal Loans Approval Memorandum, December 21, 1998,
prepared by Citicorp........................................... 513
145. GCitigroup email, September 2000, re: My take on how to
explain ECLN................................................... 523
146. GCitibank presentation, Enron: Yosemite funded prepaid...... 524
147. GEnron Interoffice Memorandum from Tax Planning Department,
January 10, 2000, re: Yosemite I Withholding................... 529
148. GWalk Through of Prepay, charts prepared by Enron Corp...... 537
149. GYosemite Funds Flow Diagram, chart prepared by Enron Corp.. 543
150. GFacsimile from Maples and Calder to Citibank, dated
November 2, 1999, re: Delta Energy Corporation (the
``Company'')................................................... 544
151. GNew Account Information, Delta Energy Corporation,
September 1994, prepared by Citicorp........................... 545
152. GCorrespondence from The Givens Hall Bank to Citibank, N.A.,
February 1999, re: Delta Energy Corporation and Vega Energy
Corporation fee notes.......................................... 548
153. GDelta Energy Corporation Resolutions, June 26, 2001........ 550
154. GCitibank email, May 2001, re: prepaid script between
Citibank/Enron/Delta........................................... 552
155. GGlobal Loans Approval Memorandum, September 19, 1999,
prepared by Citibank (Truman).................................. 553
156. GEnron Corp. email, November 2001, re: an investor spoke to
someone at citi and received info on delta. . . . We need to
shut this down................................................. 559
157. GYosemite Update; Optional Use as Prepay Funding Vehicle,
Enron presentation charts...................................... 562
158. G``Credit-Linked Notices (`CLNs'),'' May 2001, Derivatives
Capital Markets, Citibank/Salomon Smith Barney presentation... 564
159. GYosemite, Issues/Timeline, chart prepared by Enron Corp.... 580
160. GCitibank Memorandum to Project Yosemite Working Group,
February 1999, re: Initial thoughts on structures.............. 581
161. GCitigroup, Inc. list of clients or counterparties that
engaged in pre-paid forward transactions with a special purpose
vehicle........................................................ 582
162. GCitigroup, Inc. email, April 1999, re: Enron/Project
Roosevelt...................................................... 584
163. GCitigroup email, April 1999, re: Enron/Consent to Amendment
to Roosevelt Transaction....................................... 586
164. GGlobal Loans Short Form Approval Memorandum, April 26,
1999, prepared by Citibank (Roosevelt)......................... 588
165. GCitigroup email, April 1999, re: Enron/Roosevelt Update.... 591
166. GSalomon Smith Barney Presentation to Enron on
Capitalization, September 20, 1999............................. 592
167. GSalomon Smith Barney High Yield Commitment Committee
Memorandum, April 2001, Enron--$1 Billion--Credit Linked Note.. 603
168. GSalomon Smith Barney Investment Grade Commitment
Committee--New York Memorandum, April 2001, ECLN II............ 604
169. GSalomon Smith Barney Investment Grade Commitment
Committee--Europe Memorandum, November 1999, Yosemite II....... 611
170. GSalomon Smith Barney Investment Grade Commitment
Committee--New York, October 1999, Yosemite I.................. 619
171. GSalomon Smith Barney Investment Grade Commitment
Committee--New York, August 2000, Yosemite III, CLN I.......... 629
172. GCitigroup email, September 2001, re: Enron (. . . better
breakdown of where they make their money . . .)................ 636
173. GYosemite Securities Trust I, Supplement (to Offering
Memorandum dated November 4, 1999)............................. 637
174. GEnron Corp. 10-Q, June 30, 1999............................ 644
175. GCiticorp email, October 2001, re: Enron (``relationship''). 651
176. GYosemite Securities Trust I Financing, December 22, 1999-
2000, chart provided by Enron Corp............................. 653
177. GCitigroup email, June 2001, re: Prepaid Overview, attaching
chart, Summary of Pre-Paid Accounting and Tax.................. 654
178. GCitigroup email, April 2001, re: Enron Credit Approval..... 656
179. GCitigroup email, October 2001, re: Enron (. . . do we have
incremental debt capacity . . .)............................... 657
180. GCitigroup email, November 1999, re: Yosemite II (Europe) (.
. . I have been encouraged, from a risk point of view, to try
to stay in compliance in the near term;)....................... 658
181. GCitigroup email, November 1999, re: Yosemite II (Europe) (.
. . we still have an exposure issue . . . limits are limits . .
.)............................................................. 660
182. GCitigroup email, September 1999, re: Yosemite (. . .
terminate the price risk . . .)................................ 662
183. GCitigroup email, August 2000, re: Citibank and Delta
relationship (. . . Delta is not controlled by Enron, . . .
Citi had it set up several years ago.)......................... 664
184. GTranscripts of JPMorgan Chase audio tapes:
a. GTranscripts of JPMorgan Chase audio tapes dated September
13, September 20, and October 3, 2001.......................... 665
b. GJPMorgan Chase audio tapes dated September 13, September
20, and October 3, 2001........................................ *
c. GTranscripts of selected JPMorgan Chase audio tapes....... 668
d. GTranscripts of selected JPMorgan Chase audio tapes....... *
185. GAdditional JPMorgan Chase/Enron Corp. Documents in Support
of July 23, 2002, Testimony (and Appendices) of Robert Roach,
Chief Investigator, Permanent Subcommittee on Investigations:
a. GThe Chase Manhattan Bank Facsimile, October 1996, re:
Enron 96--4 Term Sheets, Draft sheets for prepaid sale options
2001........................................................... 979
b. GDocuments related to fees paid Mourant, Mahonia and
JPMorgan Chase in relation to prepay transactions:
1. GLetter from Mourant & Co. to Chase Investment Bank
Limited regarding fees due to Mahonia Limited for its
participation in the ``Enron V'' (Prepay) transaction, December
1996........................................................... 984
2. GFee Letter from JPMorgan Chase to Enron North America
Corp., September 2001.......................................... 985
3. GMourant & Co. invoice sent to The Chase Manhattan
Bank for reimbursement of expenses related to Mahonia Limited,
October 2001................................................... 986
c. GJPMorgan Chase email, December 1996, re: Enron Natural
Gas Marketing (Mahonia Limited)................................ 987
d. GJPMorgan Chase email, November 1997, re: Heads-Up memo;
Upsize to previously approved Enron Prepay..................... 988
e. GJPMorgan Chase Memorandum, September 1998, re: Enron
Prepays (1996 & 1997). Includes detail on use of surety bonds
to provide credit enhancement for prepay structures............ 989
f. GEnron Corp.-JPMorgan Chase email, June 2000, re: June
2000 gas prepay. Includes detail on pricing methodology for
prepay transactions............................................ 991
g. GJPMorgan Chase-Mourant email, June 2000, re: Enron-
Mahonia-Chase Transaction. Includes instructions from JPMorgan
Chase attorney that documents are acceptable and may be
executed by Mahonia............................................ 992
h. GMourant-JPMorgan Chase email, September 2000, re: Mahonia
Limited. Includes detail on fee arrangement for certain prepays 993
i. GJPMorgan Chase email, November 2000, re: Call Report for
ENRON NORTH AMERICA CORPORATIO (sic)........................... 999
j. GJPMorgan Chase email, December 2000, re: Prepay Update #2
12/18.......................................................... 1001
k. GJPMorgan Chase email, September 2001, re: Enron Prepay (.
. . clearly they will take any money they can get now . . .)... 1002
l. GDocuments related to Arthur Andersen's request to Enron
Corp. for representations as to the nature of the relationship
between Mahonia and JPMorgan Chase:
1. GEnron Corp. email, September 2001, re: Rep Letter for
Mahonia........................................................ 1003
2. GLetter from Enron Corp. to Mahonia Limited, September
2001........................................................... 1005
3. GLetter from Mahonia Limited to Arthur Andersen LLP,
September 2001................................................. 1006
m. GLetter from Mahonia Limited to The Chase Manhattan Bank,
September 2001, re: Mahonia's appointment of JPMorgan Chase as
its agent...................................................... 1007
n. GMourant-JPMorgan Chase email, October 2001, Fwd: Enron
Swap Transaction. Includes attached Mourant-JPMorgan Chase
emails from December 2000-September 2001....................... 1009
o. GAmended Complaint, United States District Court, Southern
District of New York. JPMorgan Chase Bank, Plaintiff, against
Liberty Mutual Insurance Company, et al., Defendants, June
2000, with attachments......................................... 1016
p. GLetters between JPMorgan Chase and the Permanent
Subcommittee on Investigations, July 2002, re: details of
prepay transactions between JPMorgan Chase and Enron Corp...... 1087
q. GLetter from JPMorgan Chase to the Permanent Subcommittee
on Investigations, July 2002, re: names of JPMorgan Chase's
clients or counterparties, in addition to Enron, that engaged
in prepaid forward transactions with a special purpose vehicle
(``SPV'')...................................................... 1099
r. GLetters between JPMorgan Chase and the Permanent
Subcommittee on Investigations, July 2002, re: relationship and
dealings of JPMorgan Chase to Mahonia Limited.................. 1100
s. GFacsimile from JPMorgan Chase to the Permanent
Subcommittee on Investigations, April 2002, re: JPMorgan Chase/
Enron transactions and fees.................................... 1111
186. GAdditional Citigroup/Enron Corp. Documents in Support of
July 23, 2002, Testimony (and Appendices) of Robert Roach,
Chief Investigator, Permanent Subcommittee on Investigations:
a. GGlobal Loans Approval Memorandum, October 19, 1999,
prepared by Citibank (Yosemite I).............................. 1122
b. GEnron Corp. Finance Committee Meeting, August 13, 2001,
Chief Financial Officer Report, Interest Rate Exposure, Finance
Related Asset Sales, Outstanding Financings and Debt, ASF-
Detail on Outstanding Fundings, and ASF-Detail on Prepays...... 1131
c. GEnron presentation charts, Yosemite Update, Evolution, of
Yosemite, Optional Use as Prepay Funding Vehicle, Yosemite Cost
Analysis, Yosemite Prepay Analysis, and Conclusions &
Recommendations................................................ 1139
d. GEnron Corp. documents on details of Yosemite/ECLN
structures..................................................... 1152
e. GEnron Corp. charts, What are Prepays, Why Does Enron
Enter into Prepays, Actual Prepay Synopsis Overview, Actual
Prepay Synopsis................................................ 1166
f. GCitigroup email, November 1999, re: Yosemite II (Europe). 1170
g. GFacsimile from Maples and Calder to Schroders, September
2001, re: Delta Energy Corporation............................. 1182
h. GFacsimile from Maples and Calder to Milbank Tweed, Hadley
& McCloy, November 1999, re: Delta Energy Corporation (the
``Company'')................................................... 1184
i. GEnron Corp. email, June 2001, re: Delta Letter, attaching
. . . sample letter with the representations that Andersen
would like Delta to confirm.................................... 1187
j. GFacsimile, re: remittance of funds to Bank of Bermuda and
payment instructions for the account of Schroder Cayman Bank
and Trust Company Limited, Reference to Delta Energy
Corporation.................................................... 1189
k. GCorrespondence from The Givens Hall Bank to Citibank,
N.A., February 1999, re: Delta Energy Corporation and Vega
Energy Corporation fee notes................................... 1191
l. GEnron/Delta Swap Confirmation; Enron/Citibank Swap
Confirmation; and Delta/Citibank Swap Confirmation, all dated
December 22, 1999.............................................. 1194
m. GEnron/Delta Swap Confirmation and Citibank/EnronSwap
Confirmation Drafts, dated November 2, 1999.................... 1231
n. GCitigroup email, November 2001, re: Citibank Unwind
Amounts........................................................ 1251
o. GCitigroup email, December 2001, re: Ene [Enron] (Want to
make sure swaps are terminated first thing and that delta
terminates simultaneously so that we don't have any mismatch.). 1253
p. GCorrespondence from Citigroup to the Permanent
Subcommittee on Investigations, dated May 2, 2002, regarding
Citigroup/Enron transactions and fees.......................... 1254
q. GEnron Corp. Project Yosemite, January 1999 presentation.. 1263
r. GReport of Independent Public Accountants, To the
Trustholders of Yosemite Securities Trust I, April 2001, draft
financial statements and notes for 2000 and 1999............... 1276
s. GYosemite Securities Trust Ltd., Notes to Financial
Statements, December 31, 2000.................................. 1284
t. GArthur Andersen LLP Memorandum, dated August 18, 2000,
re: $500,000,000 8% Enron Credit Linked Notes due 2005
Authorization to Sign.......................................... 1287
u. GEnron Corp. letter to Arthur Andersen LLP, dated August
25, 2000, regarding Andersen's ``comfort'' letter issued in
connection with the issue and sale of Enron Credit Linked Notes 1288
187. GAdditional Documents Related to JPMorgan Chase Prepays:
a. GJPMorgan Chase email, August 1996, re: Prepaid Forwards--
Loans Vs Derivatives (Please arrange to report the prepaid
forwards as loans effective as of August 31, 1996.)............ 1290
b. GJPMorgan Chase email, September 1996, re: Loans/
Borrowings Documented as Derivatives........................... 1294
c. GJPMorgan Chase email, October 1997, re: Loans/Borrowings
Documented as Derivatives...................................... 1299
d. GJPMorgan Chase email, October 1997, re: Sampoerna Deal (I
understand the form of the transaction, rather than its
economic substance, will govern in this case.)................. 1300
e. GJPMorgan Chase email, November 1997, re: Loans/Borrowings
Documented as Derivatives (Based on our discussions, it was
concluded that such transactions which are confirmed with the
counterparty as derivatives should be reported in Trading
Assets/Liabilities--Risk Management Instruments and marked to
market.)....................................................... 1303
f. GJPMorgan Chase email, July 1999, re: DISGUISED LOANS (We
are making disguised loans, usually buried in commodities or
equities derivatives (and I'm sure in other areas).)........... 1304
g. GJPMorgan Chase email, June 1999, re: Prepaid Forwards
(All of us have been grappling for years with the issue of
determining when a structured transaction is more a kin to a
loan or a derivative. There are no easy answers.).............. 1306
h. GJPMorgan Chase Memorandum, August 1999, re: DBF's (Loans
disguised as derivatives are now known as Derivatives Based
Funding. (DBF's)).............................................. 1312
i. GJPMorgan Chase email, March 2000, re: Accounting for
Compound Instruments........................................... 1317
j. GJPMorgan Chase email, March 2000, re: Prepaid Forwards
(Pat O'Brien's group has entirely dropped their proposal to
change the accounting of Prepaid Forwards. This is good news.). 1319
k. GJPMorgan Chase email, March 2000, re: Prepaid Forwards... 1321
l. GJPMorgan Chase email, January 1999, re: Enron CLO
Discussion (Rating agency knowledge of existing deals. Some
deals that are less know (sic) to the agencies may come to
light if they are placed in newly formed rated vehicles. This
could well cause some heartburn for Enron)..................... 1323
m. GJPMorgan Chase email, June 2000, re: Enron prepays....... 1326
n. GJPMorgan Chase email, July 2000, re: Restructuring
existing prepays............................................... 1328
o. GJPMorgan Chase email, March 1998, re: Enron Natural Gas
Marketing/Mahonia/Parco........................................ 1330
p. GJPMorgan Chase Memorandum, April 2002, re: PARCO Secured
Loan to Mahonia................................................ 1331
q. GJPMorgan Chase email, November 2000, re: Call Report for
Enron North America Corporatio (sic)........................... 1332
r. GJPMorgan Chase email, December 2000, attaching JPMorgan
Chase Memorandum re: Project Mahonia--$330 Million Forward Sale
Natural Gas Contract Enron Financing Objectives................ 1338
s. GJPMorgan Chase email, April 1999, re: Mahonia Ltd........ 1340
t. GMourant email, November 1997, re: Mahoniia (sic) /New
Enron Transaction.............................................. 1343
u. GJPMorgan Chase-Mahonia correspondence, December 1992,
attempting to identify a Jersey company to serve as SPC in
prepay......................................................... 1344
v. GMahonia Limited, Minutes of the First Meeting of Board of
Directors, December 29, 1992................................... 1347
w. GMahonia Limited, Certificate of Incorporation (States of
Jersey), December 1992......................................... 1355
x. GMourant & Co.-Chase Investment Bank Limited
correspondence, November 1993, attaching invoices for prepay
transactions with Chase........................................ 1360
y. GMourant Memorandum, November 1995, re: Chase-Mahonia
transaction.................................................... 1366
z. GMourant List of The Chase Manhattan Bank SPV Group
(``Stoneville'' Companies)..................................... 1367
aa. GThe Chase Manhattan Bank description of ownership/
purpose of The Eastmoss Trust and Mahonia Limited.............. 1368
bb. GThe Chase Manhattan Bank-Mahonia Facsimile, December
2000, re: Stoneville Aegean Board of Directors Minutes in
connection with Enron-Mahonia transaction...................... 1371
cc. GMourant & Co. Limited Annual Review on Mahonia Limited,
ending 22/5/01................................................. 1379
dd. GJPMorgan Chase-Enron email, September 2001, re: Rep
Letter for Mahonia............................................. 1384
ee. GMourant-Enron email, September 2001, re: Mahonia Confirm 1386
ff. GMahonia Limited letter to Arthur Andersen LLP, September
2001, re: representing the nature of Mahonia's operations...... 1388
gg. GChase Memorandum, August 1996, re: list of Chase prepays 1389
hh. GChase-Mahonia-Occidental Petroleum prepay............... 1391
ii. GChase email, May 1999, re: accounting for Ocean Energy,
Inc. prepay.................................................... 1398
jj. GChase presentation, December 22, 1999, on Hunt Oil
Company prepay................................................. 1399
kk. GJPMorgan Chase email, August 2000, re: Columbia Prepay,
attaching copy of Columbia Energy Group Structuring Summary.... 1414
ll. GChase correspondence to Michael Kopper, Director, Enron
Capital and Trade Resources, October 1994, re: Prepaid Crude
Oil Forward Sale............................................... 1424
mm. GChase-Enron correspondence, May 1999, regarding Chase
review of Enron on and off-balance sheet capital structure..... 1431
nn. GChase presentation, Commodity Prepay Exposure
Discussion, January 27, 2000................................... 1438
oo. GChase handwritten note, undated, re: Pre-paids (Mahonia
lends Enron $ in exchange for a promise that Enron will deliver
. . . to Mahonia).............................................. 1447
pp. GChase memorandum, December 2000, re: Project Mahonia--
$330 Million Forward Sale Natural Gas Contract Enron Financing
Objectives..................................................... 1448
qq. GFleet-Chase email, December 2000, re: Mahonia Forward
Sale........................................................... 1453
rr. GChase email, February 2001, re: MTM for Prepays......... 1456
ss. GChase email, October 2001, re: Enron Prepaids........... 1458
VOLUME 2
188. GAdditional Citigroup/Enron documents related to Projects
``Roosevelt,'' ``Truman,'' and ``Nixon'':
a. GEnron Corp. Facsimile to Citicorp, December 1998, re:
Prepay structure............................................... 1461
b. GCitigroup email, December 1998, re: Call Report--Project
Roosevelt (Enron).............................................. 1462
c. GCitigroup Credit Memorandum (Enron), December 1998
(Roosevelt).................................................... 1466
d. GCitigroup Facsimile, December 1998, Project Roosevelt,
Overview of Major Issues....................................... 1473
e. GCitigroup Facsimile, December 1998, Project Roosevelt,
Status Report.................................................. 1475
f. GCitigroup Facsimile, December 1998, Enron--Project
Roosevelt, Issues.............................................. 1478
g. GCMAC Minutes, June 22, 1999, Prepaid Oil Transaction..... 1482
h. GCitigroup email, September 1999, re: Enron-Roosevelt (. .
. our expectation was now that the deal would not be repaid
until December). Our approval to extend deliveries was done
verbally.)..................................................... 1484
i. GEnron Corp. email, November 1999, re: Truman financial
prepay diagram, attaching Crude Prepay 9/29/99 (. . . TD
[Toronto Dominion] provides the commodity swap . . .).......... 1485
j. GEnron Corp. email, November 1999, re: Y2 [Yosemite II]... 1487
k. GGlobal Loans Approval Memorandum, December 7, 1999,
prepared by Citibank (Nixon)................................... 1491
l. GCitigroup email, December 1999, re: Yosemite 2--Interim
Solution, attaching Derivative Credit Form..................... 1496
189. GAdditional Documents Related to Yosemite and Enron Credit
Linked Note (CLN) Transactions:
a. GYosemite and CLN Payment Structures...................... 1500
b. GProject Yosemite, Enron Corp. presentation............... 1501
c. GCitigroup Transaction Memorandum, Enron: Project
Yosemite, April 1999, (This purpose of this memorandum is to
obtain preliminary approval to seek a mandate to provide
Enron's top tier banks with $500MM to $1,500MM of Enron default
protection.)................................................... 1506
d. GCitigroup email, August 1999, re: Rating Agency
Discussions.................................................... 1511
e. GCitigroup Transaction Memorandum, Project Yosemite,
$[1.0] Billion Credit Default Swap Structure Referencing Enron
Corp., 10-21-99................................................ 1513
f. GSalomon Smith Barney Interoffice Memorandum, October 26,
1999, re: Follow-up to Yosemite CMAC meeting................... 1519
g. GCitigroup Memorandum, October 29, 1999, Yosemite
Securities Trust I, Linked Enron Obligations (LEOs), Frequently
Asked Questions................................................ 1523
h. GMoody's Investors Service letter to Yosemite Securities
Trust I, November 18, 1999, re: $750,000,000 8.25% Series 1999-
A Linked Enron Obligations due 2004............................ 1526
i. GStandard & Poor's letter to Solomon Smith Barney Inc.,
November 18, 1999, re: Yosemite Securities Trust I,
$750,000,000 8.25% Series 1999-A Linked Enron Obligations
(LEOs) due November 15, 2004................................... 1527
j. GCitigroup email, November 1999, re: Project Yosemite (. .
. I am afraid that if we ever had to defend this we would
either (a) embarrass the client or (b) lose the accounting
argument.)..................................................... 1529
k. GCitigroup email, November 1999, re: Enron--Various
(Yosemite: . . . A portion of the proceeds will be used to
repay our Project Roosevelt (Delta).).......................... 1532
l. GCitigroup email, November 1999, re: Enron Credit (. . . I
am not willing to approve another incremental exposure on
Enron, . . .).................................................. 1533
m. GEnron Debt Security [Series 1999-A], November 18, 1999... 1534
n. GCitigroup email, November 1999, re: Enron-Yosemite II,
Citigroup purchase of Yosemite II certificates................. 1541
o. GCitigroup email, December 1999, re: Enron Failure to Pay
on Prepaid..................................................... 1543
p. GCitigroup Chart, Derivative Transactions Associated With
The Yosemite Structure, January 2000........................... 1545
q. GCitibank Memorandum, March 29, 2000, re: Project
Yosemite--Yosemite Co. Structured Credit Derivative Transaction 1546
r. GCitigroup email, April 2000, re: Project Yosemite--
Revenue Recognition............................................ 1551
s. GCitigroup email, April 2000, re: Enron................... 1556
t. GCitigroup Memorandum, August 13, 2000, Enron Credit
Linked Notes Trust (``Enron CLN''), Frequently Asked Questions. 1560
u. GCitigroup Script document, undated, detailing Enron
Credit Linked Notes (CLN) Swaps................................ 1564
v. GCitigroup email, October 2000, re: Enron Follow-up (Royal
Bank of Canada as holder of $50 million Enron Credit Linked
Notes)......................................................... 1566
w. GCitigroup email, October 2000, re: Enron Follow-up....... 1569
x. GCitigroup email, October 2000, re: Enron Follow-up (. . .
upon a credit event we can legally deliver the prepaid swap to
be used to pay the noteholders.)............................... 1571
y. GCitigroup email, October 2000, re: Enron (. . . we ended
up consolidating the trust . . . and we treated the prepaid
swaps as a loan . . . for RBC purposes.)....................... 1574
z. GCitigroup email, November 2000, re: Enron CLN
Transaction--SFAS 133 Accounting for Prepaid Swaps............. 1575
aa. GCitigroup Memorandum, May 2, 2001, Enron Credit Linked
Notes Trust II Senior Notes Offering (``Enron CLN II''),
Frequently Asked Questions..................................... 1579
bb. GSolomon Smith Barney Memorandum, May 2, 2001, Enron
Sterling Credit Linked Notes Trust Senior Notes Offering
(``Enron CLN II''), Frequently Asked Questions................. 1588
cc. GCitigroup email, June 2001, re: Prepay Diagram,
attaching chart, $250 Million Prepay........................... 1593
dd. GCitigroup email, June 2001, re: Enron (. . . there is an
earnings impact, except that it is neutralized by offsetting
trades . . .).................................................. 1595
ee. GEnron Corp. Memorandum, September 20, 2001, re:
Citibank/Delta Prepay Transactions (. . . some concerns with
respect to the structure of the prepay transactions . . .)..... 1596
ff. GCitigroup email, November 2001, re: ene [Enron] prepaid
update (. . . let enron out of paying half of the libor
breakage (about 250k) on the early termination of the prepaid.
. . .)......................................................... 1597
gg. GEnron email, December 2001, re: AXA Enron Credit Linked
Note........................................................... 1598
hh. GCitigroup email, November 2002, re: Enron II
Documentation (CLN II)......................................... 1599
ii. GSummary of Enron CLN Accounting Treatment............... 1612
jj. GEnron Credit Linked Notes Trust Certificates, SFAS 133
Fair Value Hedge Documentation (Citibank/Royal Bank of Canada
Total Return Swap)............................................. 1613
190. GAdditional Documents Related to Citigroup/Delta
Relationship:
a. GMilbank Tweed email, November 1999, re: Delta............ 1618
b. GDelta Energy Corporation letter to Enron Corp., November
18, 1999, representing the nature of Delta's operations........ 1622
c. GEnron Corp. email, June 2001, re: Sample Swap Co Letter.. 1623
d. GEnron-Citigroup email, June 2001, re: Delta Letter....... 1624
e. GDelta Energy Corporation letter to Enron Corp., June
2001, re: Delta Energy Corporation............................. 1626
f. GCitigroup email, June 2001, re: reps (lydia got on and
stated that the reps are facts that we believe are true, and
the rationale for the letter is to confirm that Delta is not a
spv that needs to be consolidated on the b/s).................. 1627
g. GCitigroup email, August 2000, re: questions regarding
Delta.......................................................... 1628
h. GCitigroup email, undated, re: Prepaid Transaction........ 1629
191. GAdditional Documents Related to Transfer of Yosemite
Certificates to Whitewing:
a. GLJM, December 1999, Benefits to Enron Summary (At year-
end 1999, Enron sold LJM2 the equity in Yosemite structure.)... 1630
b. GSE Raptor L.P. Letter of Understanding to LJM2 Co-
Investment, L.P., Attn: Andrew S. Fastow, December 30, 1999,
re: . . . proposed acquisition by SE Raptor L.P. . . . of the
Yosemite Certificates . . ..................................... 1631
c. GLJM Approval Sheet, February 8, 2000, Deal Name: Yosemite 1635
d. GEnron Corp. Interoffice Memorandum, February 23, 2000,
re: LJM2 Investment in Certificates of Beneficial Interest in
Yosemite Securities Trust I.................................... 1638
e. GEnron Global Finance email, February 2000, re:
calculation (Yosemite Certificates)............................ 1639
f. GEnron Corp. email, undated, re: Yosemite Certificates.... 1641
g. GWire Transfer Requests, February 28, 2000, re: SE
Acquisition, L.P., LJM2 Co-Investment, L.P., Enron Corp. and
Whitewing...................................................... 1642
h. GEnron Corp. letter to LJM2 Co-Investment, L.P., Attn:
Andrew S. Fastow, March 8, 2000, (. . . Enron agrees to pay
LMJ2 $100,000.)................................................ 1645
i. GGeneral Partner, LJM2 Co-Investment, L.P. draft letter to
Limited Partners, describing LJM2 purchase and sale of Yosemite
Trust Certificates............................................. 1646
j. GEnron Corp., Yosemite Equity Sale Project ``Yes'',
November 10, 2000.............................................. 1649
k. GEnron Corp. Whitewing Investment Proposal, Yosemite
Securities Company Ltd, December 12, 2000...................... 1659
l. GDewey Ballantine LLP Memorandum, December 13, 2000, re:
Osprey Consent-Yosemite (Consent in connection with the
Whitewing's acquisition of Yosemite Trust Certificates)........ 1665
m. GEnron Corp./Citigroup/Milbank email, February 2001, re:
Yosemite Securities Company Ltd. (Yosemite Certificate holders) 1673
n. GEnron Corp. email, November 2001, attaching Yosemite I
Transaction and Credit and Subordination Agreement between SE
Acquisition and LJM2........................................... 1677
o. GCitigroup email, December 2001, re: Ene [Enron]
settlements.................................................... 1680
192. GAdditional Citigroup Documents:
a. GCitibank/Solomon Smith Barney reprint of a December 6,
1999, Investment Dealers' Digest regarding Enron/Yosemite...... 1681
b. GCitigroup/GCIB Checkings on Michael Kopper/LJM........... 1682
c. GCitigroup Internal Memorandum, January 24, 2001, re:
Review of LJM2 (Enron Fund) and Recommendations for LJM3 (. . .
LJM2 principals argue that Enron would make the Fund whole
should it suffer losses because the vehicles that the Fund
invest in are critically important to Enron's ability to manage
its earnings.)................................................. 1683
d. GCitigroup, Enron Credit Review, August 2001.............. 1684
e. GPresentation of Enron Corp., Direct and Indirect
Liability Schedule, October 24, 2001........................... 1692
f. GSummary of Enron's Capital Market Exposure with
Citigroup, October 29, 2001.................................... 1704
g. GCitigroup, Project 10, Due Diligence Findings [Enron],
November 7, 2001............................................... 1706
h. GLetters between Citigroup and the Permanent Subcommittee
on Investigations, July 2002, regarding prepay transactions
between Citigroup and Enron Corp.; names of Citigroup's clients
or counterparties, in addition to Enron, that engaged in
prepaid forward transactions with a special purpose vehicle
(``SPV''); Citigroup's relationship with Delta Energy
Corporation, etc............................................... 1825
i. GLetters between Citigroup and the Permanent Subcommittee
on Investigations, July 2002, regarding Citigroup's
relationship with Delta Energy Corporation..................... 1841
j. GCitigroup letter to the Permanent Subcommittee on
Investigations, August 7, 2002, regarding steps Citigroup is
taking to ensure that the balance sheet effect of structured
financing is transparent to investors.......................... 1850
193. GAdditional Enron Corp. Documents Related to Prepay
Transactions:
a. GEnron Capital & Trade Resources Interoffice Memorandum,
August 1997, re: Prepaid Hydrocarbon Companies (The purpose of
the Prepaid Contract is to provide cash flow to Enron Corp. in
order to meet its cash flow objectives.)....................... 1853
b. GEnron Corp Bank Presentation, November 19, 2001, Waldorf
Astoria, New York, New York, (selected pages of presentation).. 1858
c. GEnron prepay guarantee coverage, Off Balance Sheet Debt.. 1930
d. GEnron Surity Bonds Summary, March 10, 2002............... 1931
e. GEnron Corp. Interoffice Memorandum, re: Enron Annual
Reviews for Doug McDowell, 1999 and 2000....................... 1932
f. GEnron email, June 2001, re: Citibank Prepay, attaching
presentation entitled Enron North America, $250 Million Prepay. 1941
g. GDraft Enron Letter to Milbank, Tweed, January 2001, re:
Tax Forms and Administrative Matters for Delta Energy Corp..... 1948
h. GEnron Corp. Interoffice Memorandum, November 2001, re:
$750 Million Yosemite Debt--Recourse v. Nonrecourse............ 1949
i. GEnron Corp. Letter to the Permanent Subcommittee on
Investigations, July 2002, re: accreditation records of Delta
Energy and Mahonia............................................. 1953
j. GEnron Risk Assessment and Control Deal Approval Sheet,
APEA Tax Exempt Prepay, April 29, 1999......................... 1954
k. GEnron Corp. Memorandum, June 30, 1999, re: Federal Income
Tax Treatment of Prepayments................................... 1961
l. GEnron Corp. (Tax Planning Department) Interoffice
Memorandum, April 2000, re: Yosemite I Withholding for Year
2000........................................................... 1974
m. GEnron Corp. (Corporate Tax Planning Department)
Interoffice Memorandum, April 2001, re: Enron Credit Linked
Notes Due 2005................................................. 1976
n. GEnron Corp. (Global Finance Tax Department) Interoffice
Memorandum, November 2001, re: $750 Million Yosemite Debt--
Recourse v. Nonrecourse........................................ 1981
194. GDocuments Related to Additional Financial Institutions
Involved in Enron Corp. Prepays:
a. GCredit Suisse First Boston email, December 2000, re:
Prepaid Swap (The net effect for ENE [Enron] is raising $150mm
. . . and not treated as debt. . . .).......................... 1985
b. GCredit Suisse First Boston email, December 2000, re:
URGENT/decision required-status on Eneron [sic] oil linked loan
(I have raised issues to date on reputational risk. . . .)..... 1986
c. GCredit Suisse First Boston email, December 2000, re:
Enron-Prepaid Oil Swap (Further, I want to clarify the
reputational risk of this transaction. . . .).................. 1987
d. GCredit Suisse First Boston email, December 2000, re:
docs/guarantee approval (. . . DO NOT include any
representations on accounting driven transactions)............. 1988
e. GCredit Suisse First Boston email, September 2001, re:
Enron Oil Trade (. . . special request/favor from Ben
[Glisan].)..................................................... 1989
f. GCredit Suisse First Boston email, September 2001, re:
PLEASE CALL ME IMMEDIATELY/ENRON-RELATED CREDIT ISSUE (. . .
emergency request for a $150 million prepaid facility . . . in
return for the left pole position on a $1B benchmark bond deal.
. . .)......................................................... 1990
g. GCredit Suisse First Boston letter to the Permanent
Subcommittee on Investigations, April 24, 2002, regarding
Enron-related transactions and fees involving Credit Suisse
First Boston or Donaldson, Lufkin & Jenrette Securities
Corporation.................................................... 1991
h. GFleet Bank email, December 2000, attaching copy of
Project Mahonia Memorandum..................................... 2007
i. GJPMorgan Chase email, December 2000, re: Fee Letter on
December 2000 Prepay........................................... 2009
j. GEnron Corp. email, July 2001, attaching copy of Project
Camelot (Barclays) presentation................................ 2013
k. GEnron Corp., EGM Inventory Financing, August 2001,
Transaction Structure, (EGM sells inventory to SwapCo (a third
party entity controlled by but NOT affiliated to Barclays . .
.)............................................................. 2019
l. GSullivan & Cromwell (on behalf of Barclays Capital)
letters to the Permanent Subcommittee on Investigations, May
and November, 2002, attaching list of transactions involving
Barclays Capital and Enron Corp. and its affiliates............ 2023
195. GThe Wall Street Journal Editorial, July 29, 2002, Enron's
Enablers....................................................... 2043
196. GClarifications for the record of Mr. John C. Diaz and Ms.
Pamela M. Stumpps, Moody's Investors Service, dated August 15,
2002........................................................... 2044
Exhibits for July 30, 2002
201. GWhat Merrill Knew, chart prepared by the Permanent
Subcommittee on Investigations................................. 2046
202. GNigerian Barge Chronology, prepared by the Permanent
Subcommittee on Investigations................................. 2047
203. a. GNigerian Barge Transaction, chart prepared by the
Permanent Subcommittee on Investigations....................... 2049
b. GNigerian Barge Transaction, Enron Guarantee/LJM2's
Purchase, chart prepared by the Permanent Subcommittee on
Investigations................................................. 2050
204. a. GFactors Leading to Non-Recognition of Revenue in a Sales
Transaction Under Generally Accepted Accounting Principles,
chart prepared by the Permanent Subcommittee on Investigations. 2051
b. GHow Nigerian Barge Deal Failed to Meet Generally Accepted
Accounting Principles, chart prepared by the Permanent
Subcommittee on Investigations................................. 2052
205. GMerrill Lynch Analysts' Relationship With Enron And Impact
On Fees, chart prepared by the Permanent Subcommittee on
Investigations................................................. 2053
206. a. GTranscript of excepts from a videotaped presentation
about LJM2 made by Andrew S. Fastow and Michael J. Kopper of
Enron Corporation on or about September 16, 1999, for Merrill
Lynch's Private Equity Group representatives................... 2054
b. GVideotape of excepts from a videotaped presentation about
LJM2 made by Andrew S. Fastow and Michael J. Kopper of Enron
Corporation on or about September 16, 1999, for Merrill Lynch's
Private Equity Group representatives........................... *
c. GFull videotaped presentation about LJM2 made by Andrew S.
Fastow and Michael J. Kopper of Enron Corporation on or about
September 16, 1999, for Merrill Lynch's Private Equity Group
representatives................................................ *
207. GMerrill Lynch Appropriation Request Cover Page for Enron
Nigerian Barge Equity, 1999.................................... 2059
208. GMerrill Lynch Interoffice Memorandum, December 1999, re:
Enron Corp. (Jeff McMahon, EVP and Treasurer of Enron Corp. has
asked ML to purchase $7MM of equity. . . .), with attached
Nigeria Barge Project Sell Down................................ 2064
209. GMerrill Lynch email, January 2002, attaching Americas
Credit Flash Report: Week ending 12/23/99 and 12/17/99......... 2068
210. GDraft Merrill Lynch Agreement Letter to Jeff McMahon of
Enron Corp., December 23, 1999, re: Enron Nigeria Barge Ltd.... 2071
211. GMerrill Lynch Agreement Letter to Andrew S. Fastow of Enron
Corp., December 29, 1999, re: Enron Nigeria Barge Ltd.......... 2074
212. GPreliminary Information Memorandum re: Enron Nigeria Barge
Ltd., December 1999, with handwritten notes, . . . reputational
risks i.e. aid/abet Enron income stmt. manipulation............ 2079
213. GNotes of Paul J. Wood, Director of Corporate Credit,
Merrill Lynch, re: Nigerian Barge Equity (Brown hates deal).... 2105
214. GLimited Liability Company Agreement of Ebarge, LLC, dated
December 29, 1999.............................................. 2107
215. GShare Transfer Forms from Enron Nigeria Barge Limited to
Ebarge, LLC, dated December 30, 1999........................... 2114
216. a. GEnron Nigeria Power Holding, Ltd. and Ebarge, LLC, Loan
Agreement, dated December 29, 1999............................. 2117
b. GEnron Nigeria Barge Holding Ltd. and Ebarge, LLC and
Enron Nigeria Barge Ltd., Shareholders' Agreement, dated
December 29, 1999.............................................. 2136
217. GBenefits to Enron Summary, Deal Name: Bargeco, 6/29/00 (. .
. promising that Merrill would be taken out by sale to another
investor by June, 2000.)....................................... 2157
218. GMerrill Lynch email, June 2000, re: Ebarge LLC (. . .
getting questions concerning Ebarge, LLC. It was our
understanding that Merrill Lynch IBK positions would be repaid
its equity investment as well as a return on its equity by this
date. Is this on schedule to occur?)........................... 2158
219. GMerrill Lynch email, June 2000, re: Ebarge Letter-Enron,
attaching draft letter to Enron Corp. from Merrill (Enron has
agreed to purchase the shares from Ebarge by June 30, 2000).... 2159
220. GMerrill Lynch email, January 2002, re: eBarge (. . . the
arrangement called from them to pay interest of 15% per annum
on such investment.)........................................... 2161
221. GMerrill Lynch email, May 2000, re: Ebarge LLC (. . .
calculation of the income accrual for Ebarge LLC. . . .)....... 2163
222. GShare Purchase Agreement between LJM2-Ebarge, LLC and ML
IBK Positions, Inc., dated June 29, 2000....................... 2164
223. GMerrill Lynch email, January 2002, re: Ebarge LLC
confirmation of 15% equity return rate. (. . . could not locate
anything on the 15% equity return.)............................ 2173
224. GMerrill Lynch email, January 2002, re: Ebarge (What
happened is 15% or $525,000 was the equity return. . . .)...... 2174
225. GMerrill Lynch email, January 2002, re: Ebarge (the interest
on the loan was to be paid by Enron. . . .).................... 2175
226. GMerrill Lynch email, January 2002, re: Ebarge LLC (Poor
poor Kira and Joe!!!!)......................................... 2176
227. a. GMerrill Lynch LJM2 Investment Summary (Ebarge LLC), June
2000........................................................... 2177
b. GEnron Risk Assessment And Control Deal Approval Sheet on
Nigeria Power Holding, Ltd. Divestiture, dated November 2000... 2182
228. GNotes of Kevin Jordan, Enron Accountant, re: Nigerian Barge
transaction.................................................... 2191
229. GMerrill Lynch email, June 2000, re: Ebarge and LJM2 (It
appears that the way we are getting out of the Enron investment
on MLIBK Positions books ($7.0m + interest) is having LJM2 Co-
Investment LP buy us out through LP Capital Calls, in which
MLIBK is also a limited partner.).............................. 2192
230. GTimeline of Pertinent Information, Ebarge, LLC............. 2193
231. GSummary of Merrill Lynch Enron-Related Investment Banking
Compensation (By Business Segment), chart prepared by Merrill
Lynch.......................................................... 2194
232. GMerrill Lynch email, June 2000, re: LJM2 (The Committee
(Debt Markets Commitment Committee) is being asked to consider
$10MM share of a $65MM 364-day liquidity facility for the LJM2
Co-Investment LP. . . . Please respond with your Yes/No vote at
your earliest convenience). Follow-up Merrill Lynch email...... 2195
233. GMerrill Lynch Interoffice Memorandum, July 2000, re:
Request for an Exception to Policy for a $10MM Loan commitment
to LJM II...................................................... 2200
234. GMerrill Lynch email, November 2001, re: LJM--updated
summary (They all committed to this loan, as did we, because of
the Andy Fastow/Enron relationship. . . .)..................... 2201
235. GMerrill Lynch Interoffice Memorandum, February 2001, re:
Enron (ML recently lost the mandate to underwrite $1.25 billion
of zero coupon convertible debt because Enron does not believe
ML is a financial partner. . . . Merrill Lynch has decided to
help Enron underwrite and syndicate these types of deals.)..... 2202
236. GMerrill Lynch email, July 2001, re: Enron--rawhide (I just
heard back from James and he told me that Enron will definitely
not tie our loss to new business.)............................. 2203
237. GMerrill Lynch email, July 2001, re: LJM2/Enron (. . . we
took a substantial P/L hit for selling Zephyrus, not something
we want to repeat. . . .)...................................... 2204
238. GMerrill Lynch email, December 2001, re: Structured loan
transactions (. . . a snapshot of the structured loans in the
portfolio are as follows. . . .)............................... 2205
239. GMerrill Lynch Interoffice Memorandum, April 1998, re: Enron
Common Stock Offering, Background, Merrill Lynch's analyst
relationship with Enron........................................ 2206
240. GMerrill Lynch email, January 1999, re: Enron Account Update
(. . . regarding our difficult relationship in Research . . .
two significant mandates by Enron.)............................ 2209
241. GMerrill Lynch email, February 1999, re: Enron Mandate/Lay
Letter (. . . it might be appropriate for you to send a note to
Ken Lay at Enron thanking him for a recent mandate to serve as
a co-manager on a 12 million share common stock offering
($775MM).)..................................................... 2210
242. GMerrill Lynch Interoffice Memorandum, December 1998, re:
Andy Fastow (SVP & CFO of Enron) visit on December 4th)........ 2211
243. GMerrill Lynch Calling List for the Enron Corp. common stock
offering, dated April 28, 30, and May 4, 1998.................. 2212
244. GMerrill Lynch Interoffice Memorandum, March 2001, re: $40.0
million participation request from Enron Corp. . . . in funding
a five-year Senior Secured Credit Facility for Zephyrus
Investments, LLC............................................... 2225
245. GCommitment Committee Information, Zephyrus Investments,
LLC/Enron Corp., March 2001.................................... 2233
246. GMerrill Lynch Interoffice Memoranda, October 1999, re:
Skilling (Enron) Questions on LJM2............................. 2235
247. GMerrill Lynch LMJ2 Co-Investment LP, Fee Calculation....... 2237
248. GMerrill Lynch email, November 2001, re: LMJ2, attaching
Investor Status Summary, as of 9/30/01......................... 2238
249. GMerrill Lynch LJM2 Co-Investment, L.P., Private Placement
Memorandum..................................................... 2240
250. GLJM2 Co-Investment, L.P., Limited Partner Groups........... 2289
251. GLJM2 Co-Investment, L.P., Schedule II, Information
Regarding Limited Partners, As of November 12, 2001............ 2292
252. GLJM Investments, Annual Partnership Meeting, October 26,
2000, presentation............................................. 2293
253. GMerrill Lynch LJM3 Appropriation Request................... 2337
254. GMerrill Lynch email, November 2000, re: ML investment in
LJM III (. . . there will probably be substantial interest in
re-doing the employee vehicle early next year.)................ 2340
255. GMerrill Lynch email, December 2001, re: ML/LJM2 Co-
Investment, L.P. Capital Call ($140K Commit) (YOU MUST BE
JOKING. . . .)................................................. 2342
256. GMerrill Lynch Interoffice Memorandum, December 1998, re:
Enron Corp. Loan Commitment (The loan commitment is required by
Enron's accountants to insure that the structure receives off-
balance sheet treatment.)...................................... 2344
257. GMerrill Lynch email, May 2000, re: Enron Net Works (. . .
Enron not worried about debt on the balance sheet, as they can
structure around it.).......................................... 2346
258. GMerrill Lynch email, May 2000, re: Enron Net Works (Off
Balance sheet debt--Not a primary driver because Enron believes
they can structure anything to be off balance sheet.).......... 2348
259. GMerrill Lynch email, April 2001, re: Enron meetings (. . .
they do a bunch of balance sheet deals similar to your barge
deal. . . .)................................................... 2349
260. a. GMerrill Lynch email, December 1999, re: New Account
Opening (Delaware LLC to Cayman Island--Tax Reasons.).......... 2350
b. GMerrill Lynch email, March 2000, re: Ebarge LLC (. . . we
have converted the entity to the Cayman Islands . . ........... 2351
261. GList of Merrill Lynch employees investing in LJM2.......... 2352
262. GEnron Corp. draft letter/edits on Enron Nigeria Barge Ltd.
sale........................................................... 2354
263. GBargeco Encomics, LJM2 document............................ 2359
264. GEnron Risk Assessment and Control Deal Approval Sheet,
Nigeria Barges Equity Sell Down, January 13, 2000.............. 2360
265. GDan O Boyle, 2000 Deals and Accomplishments................ 2364
266. GLJM Investments, Benefit Summaries......................... 2367
267. GLJM2 Co-Investment, L.P. Facsimile, May 2001, to Price
Waterhouse Coopers, re: Enron Nigeria Barge Ltd................ 2374
268. GMerrill Lynch letter to the Permanent Subcommittee on
Investigations, April 2002, regarding Merrill Lynch
Transactions with Enron-Related Entities (1997 to Present)..... 2379
269. GLetters between Merrill Lynch and the Permanent
Subcommittee on Investigations, August-November 2002, regarding
follow-up questions from July 30, 2002 Subcommittee hearing.... 2390
* May be found in the files of the Subcommittee
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THE ROLE OF THE FINANCIAL INSTITUTIONS IN ENRON'S COLLAPSE--VOLUME 2
Exhibits (continued from Volume 1)
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