Citigroup Inc. arranged an unusual financing technique for Enron Corp. that enabled the energy trader to appear rich in cash rather than saddled with debt, according to internal documents of both companies.

Details of the controversial arrangement are only now coming to light as Congress turns to probing the role played by Enron's banks in enabling its illusory growth.

In a series of deals known as Yosemite, the documents show, Citigroup's complex scheme helped Enron borrow money over the past three years that was booked as coming from trades instead of loans. The deals, involving bond offerings and trades with an offshore entity, helped boost the company's weak cash flow to match its growth in paper profits, at a time when the gap between the two had grown to as much as $1 billion a year, according to one Enron memo.

 Wonder whether anyone in this pod has read this book

Wheel, Deal, and Steal: Deceptive Accounting, Deceitful CEOs, and Ineffective Reforms
by Harvard business school professor Daniel Quinn Mills

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Here's another paper by
STEPHEN B. COHEN
Georgetown University Law Center

Abstract:     
Years before the ENRON debacle, the Supreme Court heard a pair of cases involving dishonest financial accounting, Frank Lyon Co. v. U.S. and Cottage Savings Ass'n. v. Commissioner. In both cases, federal bank regulators had encouraged deceptive financial accounting, and the deceptive accounting became the basis for taxpayer claims. The Supreme Court, however, did not comment in either opinion on the deceptive character of the financial accounting that gave rise to tax litigation.

mita