[Senate Hearing 107-871]
[From the U.S. Government Publishing Office]
S. Hrg. 107-871
OVERSIGHT OF INVESTMENT BANKS' RESPONSE TO THE LESSONS OF ENRON--VOL.
II
=======================================================================
HEARING
before the
PERMANENT SUBCOMMITTEE OF INVESTIGATIONS
of the
COMMITTEE ON
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED SEVENTH CONGRESS
SECOND SESSION
__________
DECEMBER 11, 2002
__________
Printed for the use of the Committee on Governmental Affairs
U. S. GOVERNMENT PRINTING OFFICE
86-375 WASHINGTON : 2003
____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512-1800
Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001
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
Senator Collins.............................................. 7
Senator Bennett.............................................. 10
WITNESSES
Wednesday, December 11, 2002
Charles O. Prince III, Chairman and Chief Executive Officer,
Citigroup Global Corporate and Investment Bank, New York, New
York........................................................... 12
David C. Bushnell, Managing Director, Global Risk Management,
Citigroup/Salomon Smith Barney, New York, New York............. 15
Richard Caplan, Managing Director and Co-Head, Credit Derivatives
Group, Salomon Smith Barney North American Credit/Citigroup,
New York, New York............................................. 16
William T. Fox III, Managing Director, Global Power and Energy
Group, Citibank/Citigroup, New York, New York.................. 16
Michael E. Patterson, Vice Chairman, J.P. Morgan Chase and
Company, New York, New York.................................... 44
Robert W. Traband, Vice President, J.P. Morgan Chase and Company,
Houston, Texas, accompanied by Eric N. Peiffer, Vice President,
J.P. Morgan Chase and Company, New York, New York.............. 46
Andrew T. Feldstein, Managing Director, Co-Head Structured
Products and Derivatives Marketing, J.P. Morgan Chase and
Company, New York, New York.................................... 49
Muriel Siebert, President and Chair, Muriel Siebert and Company,
Inc., New York, New York....................................... 66
Richard Spillenkothen, Director, Division of Banking Supervision
and Regulation, The Federal Reserve, Washington, DC............ 71
Douglas W. Roeder, Senior Deputy Comptroller for Large Bank
Supervision, Office of the Comptroller of the Currency,
Washington, DC................................................. 73
Annette Nazareth, Director, Division of Market Regulation, U.S.
Securities and Exchange Commission, Washington, DC............. 75
.................................................................
Alphabetical List of Witnesses
Bushnell, David C.:
Testimony.................................................... 15
Prepared statement........................................... 101
Caplan, Richard:
Testimony.................................................... 16
Prepared statement........................................... 103
Feldstein, Andrew T.:
Testimony.................................................... 49
Joint prepared statement..................................... 107
Fox, William T. III:
Testimony.................................................... 16
Prepared statement........................................... 104
Nazareth, Annette:
Testimony.................................................... 75
Prepared statement........................................... 134
Patterson, Michael E.:
Testimony.................................................... 44
Prepared statement........................................... 105
Peiffer, Eric N.:
Testimony.................................................... 46
Joint prepared statement..................................... 107
Prince, Charles O. III:
Testimony.................................................... 12
Prepared statement........................................... 91
Roeder, Douglas W.:
Testimony.................................................... 73
Prepared statement........................................... 123
Siebert, Muriel:
Testimony.................................................... 66
Prepared statement........................................... 113
Spillenkothen, Richard:
Testimony.................................................... 71
Prepared statement........................................... 117
Traband, Robert W.:
Testimony.................................................... 46
Joint prepared statement..................................... 107
APPENDIX
Permanent Subcommittee on Investigations Staff Report on
``Fishtail, Bacchus, Sundance, and Slapshot: Four Enron
Transactions Funded and Facilitated by U.S. Financial
Institutions,'' December 11, 2002.............................. 150
EXHIBITS
VOLUME I
301. a. Bacchus, The appearance is a sale, chart prepared by the
Permanent Subcommittee on Investigations....................... 185
b. Bacchus, The reality is a loan, chart prepared by the
Permanent Subcommittee on Investigations................... 186
302. a. Sundance, The appearance is a joint investment, chart
prepared by the Permanent Subcommittee on Investigations....... 187
b. Sundance, [The appearance is a joint investment,] The
reality is a sham investment by Citigroup, chart prepared
by the Permanent Subcommittee on Investigations............ 188
c. Sundance, The agreement included these provisions, chart
prepared by the Permanent Subcommittee on Investigations... 189
303. a. $1 Billion Cash Flow, June 22, 2001, chart prepared by
the Permanent Subcommittee on Investigations................... 190
b. $1 Billion Cash Flow, June 22, 2001, chart prepared by
the Permanent Subcommittee on Investigations............... 191
c. Flagstaff-Hansen $1.4 Billion, Share Subscription/
Assumption/Payment Set Off, chart prepared by the Permanent
Subcommittee on Investigations............................. 192
d. $1 Billion Cash Flow, June 22, 2001, chart prepared by
the Permanent Subcommittee on Investigations............... 193
304. Enron Guarantees Citigroup's ``Equity'' Investment In
Bacchus, chart prepared by the Permanent Subcommittee on
Investigations................................................. 194
Project Fishtail Transaction:
305. Fishtail deal structure, dated January 21, 2002, prepared by
Deloitte & Touche.............................................. 195
306. LJM2 Investment Summary for Fishtail, dated December 20,
2000........................................................... 196
307. Investment Return Summary for Fishtail prepared by LJM2..... 199
308. Benefits to Enron Summary, Deal Name: Ampato (Fishtail),
dated December 20, 2000, prepared by LJM2...................... 200
309. Enron's LJM2 Approval Sheet for Fishtail, dated December 18,
2000........................................................... 201
310. Project Fishtail/125 Structure.............................. 205
311. Structuring Summary, Project Grinch, dated December 18,
2000, prepared by Chase........................................ 206
312. Project Grinch LP, summary memorandum prepared by Chase,
December 16, 2000.............................................. 208
313. Enron Corporate Development Asset Inventory, Tentative and
Preliminary, EIM, updated 11/25/01............................. 211
314. Enron Corp. email, December 2000/January 2001, re: 2000
Accomplishments, attaching document, Mike Patrick 2000
Accomplishments................................................ 212
315. Chase fee letter to Enron Corp. signed by both parties,
December 20, 2000, re: Fishtail (. . . an advisory fee in an
amount equal to $500,000. . . .)............................... 214
Project Bacchus Transaction:
316. Project Bacchus, deal structure chart prepared by Enron Corp 216
317. Transaction Descriptions: Project Bacchus, Summary and
Structure Description, prepared by Enron Corp.................. 217
318. Global Loans Approval Memorandum, December 6, 2000, prepared
by Citibank, re: Project Bacchus............................... 219
319. Citibank email, April 2001, re: Enron Credit Approval
($200mm--Bacchus: SPV where we have a total return swap from
Enron for $180 mm and verbal support for the balance . . .).... 223
320. Executive Summary, including Bacchus/Caymus Trust Facility,
prepared by Citibank........................................... 224
321. Project Bacchus, 3% Test and Gain Calculation, prepared by
Enron Corp..................................................... 225
322. a. Citibank email, November 2000, re: Enron update (Enron's
motivation in the deal now appears to be writing up the asset
in question from a basis of about $100MM to as high as $250MM,
thereby creating earnings.).................................... 226
b. Citibank email, November 2000, re: Enron update (. . .
but it will be major appropriateness issue as will the
first two)................................................. 228
c. Citibank email, November 2000, re: Enron/Bacchus Summary
(They [Enron] have offered to have the CFO discuss this at
whatever level of our [Citibank] organization we think
necessary to obtain the right comfort)..................... 229
d. Citibank email, December 2000, re: ENE/Bacchus Update (It
is possible, but not certain, that there will be an
earnings impact. . . .).................................... 232
e. Citibank email, December 2000, re: ENE/Bacchus (There are
``technical'' issues with NetWorks which MAY make Bacchus
unworkable. . . .)......................................... 233
f. Citibank email, December 2000, re: Enron ([H]owever, the
$200 million represents 16.3% and 22.4% of operating cash
flow and net income . . .), attaching estimated Enron
figures.................................................... 234
g. Citibank email, December 2000, re: Enron (Based on 1999
numbers would appear that Enron significantly dresses up
its balance sheet for year end; . . .)..................... 237
h. Citibank email, December 2000, re: Enron/Bacchus (The
equity component has been approved on the basis of verbal
support verified by Enron CFO, Andy Fastow.)............... 239
i. Citibank email, December 2000, re: Enron/Bacchus (Sounds
like we made a lot of exceptions to our standard policies.
. . .)..................................................... 242
j. Citibank email, May 2001, re: Bacchus Unwind (. . .
sufficient for the Trust to prepay the notes in full plus
break costs.).............................................. 243
323. Capital Markets Approval Committee, New Project/Complex
Transaction Description Guidelines, Enron Corp., Project
Bacchus FAS 125 Transaction, 12/11/00 draft, prepared by
Citibank....................................................... 244
324. Arthur Andersen LLC Memorandum, December 2000, re: Fishtail
LLC Formation/Securitization................................... 246
325. Arthur Andersen email, November 1999, re: Total Return Swaps 250
Project Sundance Transaction:
326. Description of the Sundance Transaction, 10/29/01, prepared
by Citibank.................................................... 253
327. Capital Markets Approval Committee (CMAC), Minutes to
Meeting, May 16, 2001, Project Sundance (Enron Corp.), prepared
by Citibank.................................................... 255
328. a. Chart prepared by Enron Corp., Sundance Steps, Updated
May 16, 2001, 5pm.............................................. 257
b. Sundance Steps, Updated May 11, 2001, 5:44 pm............ 259
c. Sundance Steps, Updated June 1, 2001..................... 260
329. Enron Corp. Presentation, Enron Industrial Markets Finance
Presentation of Sundance Industrial Partners, June 1, 2001..... 261
330. Enron Corp. Presentation, Enron Industrial Markets--Finance,
Presentation of Sundance Industrial Partners to Salomon Smith
Barney, NY, August 2001........................................ 264
331. Enron Corp. Presentation, Enron Industrial Markets--Finance,
Potential paper mill acquisition presentation to Salomon Smith
Barney, September 2001......................................... 271
332. First cut at questions re Sundance, prepared by Citibank.... 280
333. a. Citibank email, April 2001, re: sundance ([T]he argument
for why it is debt even if we take a partnership interest that
it is more debt like than equity.)............................. 282
b. Citibank email, May 2001, re: Enron Slapshot Structure... 283
c. Citibank email, May 2001, re: Materials for CMAC meeting,
attaching copy of Capital Markets Approval Committee, New
Project/Complex Transaction Description Guidelines, Enron
Corp., Project Sundance Transaction, prepared by Citibank.. 285
d. Citibank email, May 2001, re: cmac memo ([P]erwein wanted
to say that this is a funky deal (accounting-wise.))....... 290
e. Citibank email, May 2001, re: sundance (. . . is a
structure that insures, insofar as possible, that it will
never get drawn.).......................................... 291
f. Citibank email, May 2001, re: sundance (. . . I do not
understand why we are proposing to do this transaction.)... 292
g. Citibank email, May 2001, re: Sundance................... 294
h. Citibank email, May 2001, re: Treatment for Project
Sundance, includes a handwritten comment that contingent
capital commitment cannot be drawn since SBHC will dissolve
partnership if draws triggers are being approached.)....... 295
i. Citibank email, May 2001, re: Enron/Sundance (Still an
equity investment of sorts (acctg and tax basis for
partnership) but is structured in such a way that the 670
bps is guaranteed or we blow the deal. Also our ``invest''
is so subordinated and controlled that it is
``unimaginable'' how our principal is not returned.)....... 296
j. Citibank email, May 2001, re: Sundance/Firm Investment (.
. . it does appear that we will need to have approval at
some point from Mike Carpenter . . .)...................... 297
k. Citibank (Eleanor Wagner) email, May 2001, re: Project
Sundance, including draft memo for Michael Carpenter,
expressing Risk Management's Concerns...................... 298
l. Citibank email, May 2001, re: sundance (We do still need
Barbara Yastine and Mike Carpenter to approve before we
close?).................................................... 300
m. Citibank email, May 2001, re: Sundance (Approval sits in
front of Carpenter waiting for signature.)................. 301
n. Citibank email, May 2001, re: Memo on Enron-Project
Sundance (We (Bill Fox and I) share Risk's view and if
anything, feel more strongly that suitability issues and
related risks when coupled with the returns, make it
unattractive.), attaching May 2001 Dave Bushnell Memorandum
to Mike Carpenter.......................................... 302
o. Citibank email, May 2001, re: sundance ([A]ny word? am
getting a significant amount of pressure from enron to
execute.).................................................. 305
p. Citibank email, June 2001, re: Sundance Closing.......... 306
q. Citibank email, June 2001, re: Sundance Approvals (No . .
. was given a verbal go ahead . . . Understand signed is to
follow.)................................................... 307
r. Citibank email, June 2001, re: Sundance (Mike then had a
conversation with Dave Bushnell, who shared with us Mike's
feedback.)................................................. 308
s. Citibank email, October 2001, re: Sundance Revenues...... 309
t. Citibank email, October 2001, re: sundance redux,
attaching Description of the Sundance Transaction.......... 310
u. Citibank email, October 2001, re: Enron Exposure on NA
Credit Derivs (Note that these equity partnerships, are
designed to act as debt exposure . . .).................... 313
v. Citibank email, October 2001, re: ene transactions
(Sundance . . . allows Enron to manage its paper and pulp
physical assets and trading business off-balance sheet.)... 315
w. Citibank email, October 2001, re: sundance (According to
Enron, our $28.5MM is being held in bank deposits.)........ 316
x. Citibank email, November 2001, re: Sundance Paper (ENE
wants to ``discuss'' I have not reiterated the imperative
nature of request, did NOT waive the BoD stick. . . .)..... 317
y. Citibank email, November 2001, re: Enron Sundance--the
paper trading partnership (Last night we came to terms with
Enron for the purchase of our interest in the Sundance
partnership.).............................................. 318
334. Citibank/SolomonSmithBarney Interoffice Memo, May 2001, re:
Enron Corp.--Project Sundance (Transactions Overview,
Description of the Assets, Economics).......................... 319
335. Accounting for Investments in Limited Partnerships and Other
Joint Ownership Entities, prepared by Enron Corp............... 324
336. Arthur Andersen email, August 2000, re: 4 to 1 test......... 334
Project Slapshot Transaction:
337. Flagstaff Funding Flows, diagram prepared by Enron Corp..... 347
338. Transaction Summary, Flagstaff/Enron Transaction, prepared
by JPMorgan Chase.............................................. 348
339. Slapshot Savings, diagram prepared by Enron Corp............ 354
340. Project Slapshot, Transaction Diagram--@ Closing, June 2001,
prepared by Enron Corp......................................... 355
341. Structuring Summary, Flagstaff Capital Corporation, February
2001, (partial) prepared by JPMorgan Chase..................... 356
342. Enron Corp. Stadacona, JPMorgan Chase presentation.......... 362
343. Proposal to Enron Industrial Markets, Structured Canadian
Financing Transaction (Project ``Slapshot''), January 11, 2001,
JPMorgan Chase presentation.................................... 379
344. Structured Canadian Financing Transaction, Organizational
Meeting, February 8, 2001, JPMorgan Chase presentation......... 396
345. Slapshot Transaction Diagram................................ 416
346. Project Slapshot, Transaction Components, June 2001, Enron
Corp. presentation............................................. 422
347. J.P. Morgan Securities Inc./Enron Corp. correspondence, June
2001, re: Tax Comfort Letter--Enron Structured Financing....... 426
348. J.P. Morgan Securities Inc./Enron Corp. correspondence, June
2001, re: U.S. Tax Matters--Enron Structured Financing......... 428
349. 206.(f) Agreement between Flagstaff Capital Corporation and
Hanson Investments Co., June 2001.............................. 431
350. Credit Agreement between Hansen Investments Co., Flagstaff
Capitol Corporation and The Chase Manhattan Bank, June 2001.... 434
351. Project Slapshot, Discussion Session, March 2001,
presentation prepared by JPMorgan Chase........................ 514
352. Tax opinion letter from Blake, Cassels & Graydon LLP to
Enron Corp., June 2001, re: Canadian Tax Consequences of
Proposed Financing............................................. 525
353. Tax opinion letter from Blake, Cassels & Graydon LLP to
Chase Securities, Inc., November 2000, re: Canadian Tax
Consequences of Proposed Financing............................. 544
354. Tax opinion memorandum from Skadden, Arps, Slate, Meagher &
Flom LLP to Enron Wholesale Services, August 2001, re: Project
Slapshot....................................................... 565
355. Project Slapshot Structured Financing Fee Letter (Arranger),
June 2001...................................................... 593
356. Fee Agreement, between J.P. Morgan Securities Inc. and
Compagnie Papiers Stadacona, June 2001......................... 596
357. a. JPMorgan Chase email, February 2001, re: Some Good News
(Slapshot) (Bruce and Eric run the Slapshot product.).......... 600
b. JPMorgan Chase email, February 2001, re: Project Slapshot
(The lawyers have slammed on the brakes until we confirm
that the net accounting for the twist we're contemplating
will work.)................................................ 601
c. JPMorgan Chase email, February 2001, re: Slapshot (As
discussed, the lawyers (especially the tax lawyers) are
hesitant to state explicitly Chase's intention to set-off .
. . as they wish to keep the documents as ``arm's length''
as possible . . .)......................................... 607
d. JPMorgan Chase email, May 2001, re: Wed conf call--
discussion points, attaching Enron Discussion Points (May
9, 2001)................................................... 608
e. JPMorgan Chase emails, February and May 2001, re: Project
Rio Grande (a.k.a. Flagstaff Capital Corporation)--HEADS UP
MEMO (Club Bank Target Hold: $60MM . . )................... 611
f. JPMorgan Chase email, June 2001, re: Flagstaff I.D. #'s
(The $1.1 billion will be repaid same day.)................ 613
g. Citibank email, June 2001, re: Additional Daylight
Overdraft Request from Enron (Enron will require additional
daylight overdraft protection on Friday 6/22/2001 . . .)... 614
h. JPMorgan Chase email, October 2001, re: Flagstaff
Syndication Update ([L]ets make sure we lock up Citi and
Boa on confidentiality agreements, for what they're worth.) 621
i. JPMorgan Chase email, October 2001, re: Enron Flagstaff
(The message from Enron to them is ``you have to do
this.'')................................................... 622
j. JPMorgan Chase email, November 2001, re: Enron--Flagstaff
(The papers were signed with a $56.25MM target hold to be
achieved by 9/30.)......................................... 623
k. Eric Peiffer/JPMorgan Chase email, October 2001, re:
enron responsibilities (Eric did an outstanding job and
took on serious responsibilities.)......................... 624
358. Bill W. Brown, Accomplishments for the First Half of 2001... 626
359. Doug McDowell resume........................................ 627
360. Project Slapshot brief, Project Slapshot Scores!, prepared
by Enron Corp.................................................. 629
361. Sundance Transaction, Slapshot Financing, prepared by
Citigroup...................................................... 630
362. Enron Corp. email, December 2000, re: Canadian Financing
Proposal (. . . it is a similar version of an arrangement that
Morris and I have independently been developing with our
Canadian counsel . . .)........................................ 632
363. Enron Corporation Closing Funds Flows for Slapshot, Closing
Date: Friday, 6/22/00, Final................................... 633
364. Memorandum prepared by Tim Edgar, Faculty of Law, The
University of Western Ontario, to the Permanent Subcommittee on
Investigations, December 9, 2002, re: Canadian Income Tax
Consequences of Flagstaff/Enron Transaction.................... 638
365. Enron Industrial Markets Finance Presentation of Sundance
and Slapshot, March 21, 2001, prepared by Enron Corp........... 646
366. Citicorp/Citibank Credit Approval, Enron Corporation,
December 2000, indicating ``verbal guarantees'' of Project
Bacchus ``equity'' (see page Bates #CITI-SPSI 0128921)......... 655
367. Accounting Schedules for Projects Fishtail and Sundance,
prepared by Enron Corp......................................... 680
368. Letter from Skadden, Arps, Slate, Meagher & Flom LLP
(attorneys for Enron Corp.) to the Permanent Subcommittee on
Investigations, December 10, 2002, regarding status of the
loans, assets, and entities involved in the Slapshot
transaction.................................................... 684
369. JPMorgan Chase email, July 1998, attaching copy of Prepay
pitch presentation............................................. 687
370. JPMorgan Chase email, March-July 1999, re: Prepaid Forwards
and Disguised Loans............................................ 701
VOLUME II
371. Enron Net Works Partners: Valuation Analysis of Contributed
Assets, Chase Securities Inc., November 20, 2000............... 1
372. Fishtail LLC, Enron Corp. draft document summarizing Project
Fishtail (undated)............................................. 19
373. Amended and Restated Limited Liability Company Agreement of
Fishtail LLC, December 19, 2000................................ 22
374. Summary of Project Fishtail, prepared by Deloitte & Touche,
LLP, for the Powers Report, dated January 21, 2002............. 74
375. Data Sheet Report, Caymus Trust (c/o Wilmington Trust) as of
February 22, 2002.............................................. 102
376. Amended and Restated Limited Partnership Agreement of
Sundance Industrial Partners, L.P., June 1, 2001............... 103
377. Citibank email, June 2001, re: Apache Opportunity (Any
feedback from Carpenter on Sundance; apparently the deal
closed.)....................................................... 175
378. Senior Bank Contacts, document prepared by Enron Corp....... 176
379. Enron status as of November 26, 2001 in terms of directors,
officers, stock outstanding, and direct subsidiaries........... 177
380. Enron Corp. Memorandum, October 1, 2000, re: Accounting
Enron's Investment in Fishtail LLC............................. 191
381. Additional documents regarding Project Bacchus:
a. Enron Corp. Memorandum, December 31, 2000, re: Project
Bacchus Transaction Memorandum............................. 196
b. Fishtail Total Costs..................................... 202
c. Citibank email, October 2000, re: Enron/Project Bacchus
(Dan sees NO chance that this deal will not go ahead . . .) 203
d. Citibank email, December 2000, re: Bacchus Equity (As you
know we are looking for a balance sheet provider for the
new Enron trade.).......................................... 204
e. Citibank email, December 2000, re: Enron Bacchus
(Citibank GRB have agreed to provide a 9-month facility for
the 194 M and also to take the credit risk on the equity
portion.).................................................. 205
f. Citibank fax, December 12, 2000, attaching copy with
comments of Global Loans Approval Memorandum, December 6,
2000, re: Project Bacchus (from section on page 3 entitled,
Enron Corporate Credit Risk: Enron Corp. will essentially
support the entire facility, whether through a guaranty or
verbal support.)........................................... 206
g. Citibank email, December 2000, re: Enron follow-up
(Having this source of liquidity during this nanosecond is
important in providing certain legal opinions . . .)....... 211
h. Citibank email, December 2000, re: Enron/Bacchus (. . .
the RAP treatment should be that the Banking Book will view
the Certificates as if it made a loan in the face amount of
the Certificates.)......................................... 212
i. Enron Corp. email, January 2001, re: Fishtail in EIM
Partners (In talking to Jeff, he does not like the way I
was proposing that Fishtail went into EIM Ptrs . . .)...... 213
j. Citibank email, February 2001, re: Bacchus (I had an
Enron question regarding the Enron gty provided for
Baccus(sp?).).............................................. 214
k. Citibank email, May 2001, re: phone call with bill brown. 215
l. Citibank email, November 2001, re: Enron Exposure (For
Bushnell), attaching Enron exposure table.................. 216
382. Additional documents regarding Project Sundance:
a. Sundance Earnings (Still Under Negotiation), document
prepared by Enron Corp..................................... 218
b. Administrative Agent Fee Calculation, document prepared
by Enron Corp.............................................. 219
c. Amended and Restated Sundance Limited Partnership
Agreement, June 1, 2001.................................... 220
d. Final Sundance Numbers, document prepared by Enron Corp.. 293
e. Citibank email, May 2001, re: Sundance (Re fleet: we shd
approach these guys by saying we are rolling the trs they
have on bacchus but also adding to it.).................... 295
f. Citibank email, May 2001, re: Sundance (Thoughts or
concerns I had as I read the revised Sundance LP
Agreement:)................................................ 296
g. Citibank email, May 2001, re: sundance (. . . I do not
understand why we are proposing to do this transaction. . .
.), attaching copy of First cut at questions re Sundance... 298
h. Citibank email, May 2001, re: Second Sundance question
set, attaching copy of Second Set of Sundance Questions.... 301
i. Citibank email, May 2001, re: Sundance Partnership....... 304
j. Enron email, May 2001, re: Updated Step by Step Sundance
structure Chart--03/22/01.................................. 306
k. Enron Corp. Presentation, Enron Industrial Markets
Finance Presentation of Sundance Industrial Partners, June
1, 2001.................................................... 311
383. Additional documents regarding Project Slapshot:
a. Flagstaff Capital Corporation, $375,000,000, Senior
Credit Facility, JPMorgan Confidential Information
Memorandum, May 2001....................................... 316
b. Enron Corp. (Morris Clark to Joseph Deffner) email,
undated, re: Repatriation of Cash from Enron Canada (It
should be noted that repaying the Preferred Shares within
the same year as entering into Project Slapshot puts
pressure on both of the above factors and, as such, puts
the integrity of the transaction at risk.)................. 352
c. Daishowa Acquisition Structure Steps, charts prepared by
Enron Corp................................................. 353
d. JPMorgan Chase email, February 2000, re: Slapshot--Frazer
Milner Tax Opinion, attaching copy of draft opinion on Re:
Canadian Structured Finance Proposal....................... 360
e. Handwritten notes of Enron Corp. re: Project Slapshot.... 379
f. Blake, Cassels & Graydon LLP Memorandum to Enron Corp.,
January 2001, re: Prepaid Forward Structure................ 387
g. Enron Corp./Blake, Cassels & Graydon LLP email, February
2001, re: Rider, attaching draft recharacterization rider.. 394
h. Project Slapshot, Canadian Tax Advantaged Financing
Structure for Project Crane & ECC Operations, March 20,
2001, Enron Corp. presentation............................. 396
i. Enron Corp. email, March 2001, re: Requirements for Right
of Offset accounting....................................... 417
j. Enron Corp./Blake, Cassels & Graydon LLP email, March
2001, re: Canadian Guaranty Issue with attached Enron Corp.
handwritten notes re: Slapshot............................. 418
k. Blake, Cassels & Graydon LLP Memorandum, March 2001, re:
Warrant Arrangement........................................ 420
l. JPMorgan Chase email, March 2001, re: enron.............. 422
m. Flagstaff Capital Corporation (Delaware), Assets and
Liabilities, document produced by JPMorgan Chase........... 423
n. Enron Corp./Blake, Cassels & Graydon LLP email, April
2001, re: Comments on drafts of April 12/01, attaching copy
of April 2001 Blake, Cassels & Graydon LLP Memorandum...... 424
o. Blake, Cassels & Graydon LLP Draft Memorandum, May 2001,
re: Tax Issues............................................. 428
p. Enron Corp./Blake, Cassels & Graydon LLP email, May 2001,
re: Tax Benefit Analysis, attaching draft Tax Benefit
Analysis................................................... 432
q. Handwritten notes of Enron Corp., May 2001, re: Slapshot. 435
r. Enron Corp. email, May 2001, re: Journal Entries ([H]ere
are accounting entries for the slapshot transaction.),
attaching copy of Slapshot-Initial Purchase; Slapshot--Year
1-5 Balance Sheet; and Slapshot-Year 5 End Unwind.......... 436
s. Enron Corp. Memorandum, May 2001, re: Project Slapshot--
Step-by-Step Description................................... 440
t. Handwritten notes of Enron Corp., June 2001, re: Slapshot 443
u. Enron Corp./Blake, Cassels & Graydon LLP email, June
2001, re: Blakes Second Set-off Opinion re: Hansen-
Flagstaff, attaching Blake, Cassels & Graydon LLP
correspondence concerning Project Slapshot................. 449
v. Flagstaff Capital Corporation, Commitment Allocations as
of September 24, 2001...................................... 453
w. Blake, Cassels & Graydon LLP invoice for services
rendered for the period ended June 21, 2001, re: Project
Slapshot................................................... 454
x. Enron Corp. Memorandum, October 2001, re: Campagnie
Papiers Stadacona.......................................... 456
y. Vinson & Elkins invoice for services posted through June
27, 2001, re: Project Slapshot-Enron $400,000,000
Structured Financing....................................... 458
z. Project Dasher, Preliminary Tax Disposition Structures To
Maintain Project Slapshot, August 31, 2001, prepared by
Enron Corp................................................. 459
aa. Enron Corp. email, December 2001, re: Slapshot (. . .
doug, pls call me asap since you are the most
knowledgeable.)............................................ 463
bb. Handwritten notes of Enron Corp., December 2001, re:
Slapshot/CPS restructuring with attached copy of Enron
Corp. Memorandum, December 2001, re: Proposed Sale of
Stadacona Mill--Restructuring Steps........................ 464
cc. Blake, Cassels & Graydon LLP Memorandum, December 2001,
re: Slapshot Restructuring/CPS Sale........................ 468
dd. Enron Corp. facsimile to Jeff McMahon, December 2001, re:
Stadacona (Project Slapshot)............................... 481
ee. Blake, Cassels & Graydon LLP Memorandum, January 2002,
re: Slapshot Structure, Current Status Issues and Proposed
Transactions............................................... 489
ff. JPMorgan Chase email, January 2002, re: Flagstaff
Commitment and Fee Letter (Given the sensitivity to the
Enron name and this transaction in particular, I would
suggest writing this up as an exception.).................. 494
gg. Enron Corp. Memorandum, November 2002, re: Project
Slapshot--Quarterly Payments............................... 495
hh. Patton Boggs LLP correspondence, on behalf of JPMorgan
Chase, to the Permanent Subcommittee on Investigations,
December 2002, re: structuring fees paid to JPMC........... 497
ii. Canadian Financing Strategy, A Presentation to Enron
Corp., September 2000, National Australia Group............ 498
jj. Additional Points, JPMorgan Chase document regarding
Project Slapshot........................................... 510
kk. Daishowa Acquisition Structure Steps, Enron document
regarding Project Slapshot................................. 511
384. Documents regarding Project Crane and Project Boomerang:
a. Enron Corp. email, December 2000, re: Project Crane--
Status Updated and Next Steps (I would to inform everyone
that yesterday we had a meeting with Jeff Skilling to
present Project Crane . . .)............................... 514
b. Enron Corp. email, December 2000, re: Skilling
presentation on EIM Pulp and Paper Market Making Strategy.. 515
c. Enron Risk Assessment and Control Deal Approval Sheet,
December 2000, re: Project Crane........................... 535
d. Project Crane, Steps to Acquire SAT and DFPL and Post-
Acquisition Undertakings, draft of presentation............ 542
e. Project Boomerang, Transaction Overview, prepared by
JPMorgan Chase............................................. 548
f. JPMorgan Chase email, November 2000, re: Project
Boomerang (I think what we would like to try to do is
define fair market value in such a way that it always turns
out to be equal to the value at which the SPE purchased the
business.)................................................. 551
385. Additional documents relating to FAS 125/140 Transactions:
a. FASB Statement No. 125, Enron Corp. presentation......... 553
b. Update on FASB 140, Transfers of Financial Assets &
Extinguishment of Liabilities, June 2001, Enron Corp.
presentation,.............................................. 571
c. Andersen email, November 1999, re: Total Return Swaps.... 584
d. Enron Corp./Andersen email, September 2001, re:
Background of Project Hawaii 125-O......................... 587
e. Enron Corp. Memorandum, December 2001, re: Hawaii
Structure Summary.......................................... 590
f. Enron Corp., Pre-Tax Earnings Analysis of SFAS 140's
1998-2001.................................................. 593
g. Enron Corp. email, May 2001, re: Offshore Double Lease
Accounting Treatment....................................... 594
386. Documents relating to transactions involving Canadian
Imperial Bank of Commerce (CIBC) and Enron Corp., November,
2002........................................................... 598
387. Additional documents regarding Enron Corp. structured
finance deals generally:
a. Global Finance: Funding Vehicles, May 2000, Enron Corp.
presentation............................................... 613
b. Funds Flow Vehicles, Enron Corp. document................ 621
c. Structured Finance Vehicle, August 24, 2001, Enron Corp.
presentation............................................... 629
d. Enron Corp., Structured Transactions Group Overview, June
2001....................................................... 652
e. Enron Structured Finance List As of 11/16/2001........... 659
388. Documents regarding Enron Bank Reviews:
a. Enron Corp. email, July 2000, re: Bank relationship
review..................................................... 686
b. Debt Investor Relationship Review, January 2001, Enron
Corp. presentation......................................... 689
389. Documents regarding Enron Asset Valuations:
a. Whitewing Presentation, August 14, 2001, prepared by
Enron Corp................................................. 741
b. Enron Global Assets and Services, Equity Value Schedule,
$(Millions), As of June 2001............................... 753
c. Enron Global Assets & Services, Significant Exposures
(InUS$MM's),............................................... 754
390. Additional documents regarding Enron Prepay Transactions:
a. Correspondence between Citigroup and the Permanent
Subcommittee on Investigations, July 2002-January 2003,
regarding Delta Energy Corporation......................... 755
b. Correspondence between JPMorgan Chase and the Permanent
Subcommittee on Investigations, July 2002-January 2003,
regarding Mahonia, Ltd..................................... 812
c. Summary of Proposed Transaction Approval Process (TAP)
Policy Revisions, undated, from the ``H'' drive of the
computer of Enron Corp. employee Rick Carson............... 952
d. Proposed Gas Storage Monetization Structure, undated,
from the ``H'' drive of the computer of Enron Corp.
employee Michael Garberding................................ 953
e. Enron Corp. email, December 2000, re: New Prepay with
Chase (In the prior transactions, we have received a
prepayment from Mahonia on a forward delivery schedule of
fixed volumes.)............................................ 959
f. Enron Corp./JPMorgan Chase email, September 2001, re: Rep
Letter for Mahonia, attaching draft Mahonia representation
letter..................................................... 960
g. Enron Corp. email, June 2001, re: Sample Swap Co Letter
(I am still trying to track down the original ``Delta/
Mahonia'' Letter. Everyone seems to have shredded their
files, which is a little disturbing.)...................... 962
h. Enron Corp. email, November 2001, re: Steps for $250mm
Swap Assumption............................................ 963
i. Enron Corp. email, September 2001, re: New Confirm....... 967
j. Enron Corp. email, July 2001, re: Citibank/Delta Prepay
(. . . the auditors would like to verify that the MMBtus
involved in the trade are not inconsistent with normal
trades that run through the financial book for gas.)....... 972
k. Enron Corp. email, September 2001, re: Revised Pre Pay
docs (This tracks language that is in the Guaranty and does
not name Chase.)........................................... 973
l. Enron Corp. email, October 2001, re: Comments on Prepaid
Swaps...................................................... 975
m. Enron Corp. email, September 2001, re: Mahonia Confirm.... 990
n. Enron Corp./JPMorgan Chase email, September 2001, re:
Mahonia Limited............................................ 998
o. Enron Corp. email, November 2000, re: Sale treatment for
Prepayments with subsequent participation to an investor... 1001
p. Enron Corp. email, September 2001, re: Chase Prepay...... 1003
q. Enron Corp. email, November 2000, re: Prepay (Andy,
Michael asked me to forward this structure to you in
advance of his call.)...................................... 1004
r. Enron Prepaid Oil Swap:.................................. 1005
391. Supplemental questions and answers for the record of
Citibank, regarding December 11, 2002, hearing, dated February
27, 2003....................................................... 1006
392. Correspondence from the Board of Governors of the Federal
Reserve System, Office of the Comptroller of the Currency,
Securities and Exchange Commission, to the Permanent
Subcommittee on Investigations, regarding followup to questions
posed in the Subcommittee's December 11th hearing and
recommendations included in the Subcommittee report entitled
Fishtail, Bacchus, Sundance, and Slapshot, Four Enron
Transactions Funded and Facilitated by U.S. Financial
Institutions................................................... 1008
EXHIBITS (CONTINUED)--VOL. II
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