Riggs National Corporation & Subsidiaries, f.k.a. Riggs National Bank and Subsidiaries - Page 41

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          behalf of the Brazilian Government, but rather it was acting on             
          behalf of the borrowers-to-be.                                              
               As pointed out by the U.S. Court of Appeals for the District           
          of Columbia Circuit in Riggs II, 163 F.3d at 1366:                          
               The Minister deemed it appropriate to “look through”                   
               the Central Bank to those ultimate private                             
               borrowers--so-called “borrowers-to-be”-- for purposes                  
               of deciding the proper tax treatment of the loans. * *                 
               *  The Minister concluded that the “borrowers-to-be”                   
               aspect of the loans compelled an analogy to the garden                 
               variety private borrower situation * * *.  [Emphasis                   
               supplied.]                                                             
          The Court of Appeals further stated: “The Minister’s order to the           
          Central Bank to withhold and pay the income tax on the interest             
          paid to the Bank goes beyond a mere interpretation of law. * * *            
          Such an order has been treated as an act of state.”  Id. at 1367.           
               With respect to the pecuniary benefit, the Finance                     
          Minister’s ruling holds that once the tax has been paid, the                
          pecuniary benefit is applicable in accordance with Brazilian law.           
          Under Brazilian law, borrowers were granted a pecuniary benefit             
          equal to a percentage of the withholding tax paid on the interest           
          due on net loans.  In the case of repass loans, where the                   
          borrower is a bank but the funds are re-lent to Brazilian                   
          persons, the borrowing bank collects the tax from the repass                
          borrowers and is obligated to transfer the total value of the               
          pecuniary benefit to those repass borrowers.  The Finance                   
          Minister’s ruling treats the Central Bank as a borrowing bank in            
          a repass loan transaction.  The Central Bank must pay the                   





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