- 21 -                                         
         advisory services, global investment management and advisory                 
         services, foreign exchange, treasury, and risk management                    
         services, and trust services.  ABN Trust Company (ABN Trust), was            
         an ABN affiliate.                                                            
         In 1989, Merrill Lynch representatives contacted Johannes                    
         den Baas (den Baas), vice president, Corporate Finance (ABN-New              
         York), and proposed that ABN enter into general partnerships with            
         certain U.S. corporations.  In an August 7, 1989 memorandum to               
         Arthur Arnold, executive vice president, Corporate Finance (ABN-             
         New York), den Baas described the structure of the partnerships              
         and timing of partnership investments in terms substantially                 
         similar to those set forth in the Zelisko memorandum.  Unlike the            
         Zelisko memorandum, den Baas stated that the partnership was                 
         designed to reduce a U.S. corporation's liability for alternative            
         minimum tax.  The den Baas memorandum includes a discussion of               
         the financial risks to ABN in pertinent part as follows:                     
              Credit risk:  The structure demands that virtually no                   
              credit risk will be taken in the partnership since any                  
              defaults on the principal of the investments will                       
              jeopardize the objective as described hereafter.  The                   
              nature of paper invested in will be of the highest                      
              credit quality and will have short term maturities.                     
              * * *                                                                   
                        *    *    *    *    *    *     *                              
              Market interest rate risk:  ABN New York will take care                 
              of perfect hedges in order to protect the bank from the                 
              changes in the value of the underlying securities * * *                 
              due to interest rate fluctuations.  * * *                               
Page:  Previous   11   12   13   14   15   16   17   18   19   20   21   22   23   24   25   26   27   28   29   30   NextLast modified: May 25, 2011