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 # July 24, 2002
 
Understanding Recent Press Coverage
 
Below is background information to help our clients and investors understand recent press coverage about Enron and Citigroup.
  • The transactions we entered into with Enron were entirely appropriate at the time based on what we knew and what we were told by Enron. We were assured that Enron's auditors had approved them and we believed they were consistent with accounting rules in place at the time.
     
  • If, as alleged, Enron was engaging in the deceptive conduct being reported, or was inflating the value of its assets on its balance sheet, or if Arthur Andersen was expressing, privately and to the Enron Audit Committee, serious reservations about Enron's financial statements, it would have entirely altered our dealings with the company.
     
  • With respect to transactions being "disguised loans," every day, companies use structured finance tools to access the value of their operations to fund their future growth.
     
  • Far from being secret, it was common knowledge that Enron was using these structured finance tools. Rating agencies wrote reports about them and Enron won awards for them.
     
  • And, they were carried on Enron's balance sheet as liabilities, which are obligations of the company every bit as much as loans.
Obviously, an important debate is now underway among regulators, Congress, companies and commentators. We believe the changes in accounting rules, together with new certification and disclosure rules proposed by the SEC, and legislation on accounting oversight and regulation such as that now pending before Congress, will go a long way toward restoring faith in the integrity of financial statements. Business and the investing public must be able to bank on certified financial statements.
 
 
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