true sale

A true sale of the assets, he said, would have taken "one and a half years, at least."

Because Enron would still bear the risk of loss for the entire investment, such an agreement would mean that no true sale had taken place.

That, the government said, constituted a guarantee against loss, meaning that Enron's risk of ownership was never transferred, as would occur in a true sale.

True sale opinions are issued in letters routinely written by law firms in connection with various types of financings.

"True sale letters are very carefully crafted to express what the law is," Mr. Kravitt said.

"Can't use V&E due to conflict - they provided some true sale opinions on some of the deals," she wrote.

If Enron guarantees Merrill against loss, then the risk of ownership never passed from Enron, meaning that no true sale took place.

"If Vinson & Elkins did know there was something wrong at Enron, they have much larger problems than true sale opinions," he said.

To be effective a securitization normally requires a "true sale" of receivable, but in certain countries there is a risk of the transfer being recharacterised.

The S.E.C. is evidently questioning whether the advertising sold to Bertelsmann was really a true sale worth $400 million.

Some legal scholars say Vinson & Elkins's role in producing the true sale opinions could potentially expose it to a malpractice suit by Enron.

Repeatedly, the lawyers returned to the theme that their clients believed that the investment was at risk, which would mean they were justified in considering the deal a true sale.

When a securitization takes place, there often is a "true sale" that takes place between the Originator (the parent company) and the SPE.

The funds were really used to buy high-yielding government securities that would stop the true sale of any non-performing assets to a special purpose vehicle, or SPV.

Vinson & Elkins provided true sale letters for at least some of Enron's financing vehicles, an executive close to Enron said, though other law firms may also have been involved.

Senate investigators say the Bacchus transaction was not a true sale but was really a loan to Enron that the energy company used to book at least $112 million in profits in 2000.

The sale must be a true sale - a mortgagee cannot sell to himself, either alone or with others, even for fair value; such a sale may be restrained or set aside or ignored.

Repo 105 made use of an accounting rule where, if the assets sold were valued at more than 105% of cash received, the transaction could be called a true sale and the assets removed from Lehman's books.

And that is the essence of the fraud described in the complaint: Enron sold its interest in broadband to itself but pretended that there were outside investors with capital at risk to make the transaction appear to be a true sale.

Investigators say documents show that Enron intended to have Merrill bought out the following summer, so the transaction was not a true sale but instead a sham deal that allowed Enron to increase its earnings for the previous year.

For example, to obtain approval from accountants that such a transaction can be treated as a sale, Enron would have had to obtain two written findings from its lawyers, known as a true sale opinion and a nonconsolidation opinion.

While lawyers interviewed in the last few days about the matter were wary of criticizing Vinson & Elkins until all the facts were known, they said that as law firms issued more true sale opinions, they will find themselves under increasing scrutiny.

They have also told investigators that Enron made no guarantee that Citigroup would not lose its investment and that it was their understanding that both Arthur Andersen, Enron's auditor, and an outside law firm had approved Bacchus as a true sale.

This sale has to be for the market value of the underlying assets for the "true sale" to stick and thus this sale is reflected on the parent company's balance sheet, which will boost earnings for that quarter by the amount of the sale.

Law firm Linklaters has received unfavorable press treatment in relation to their issuance of an English law opinion which characterised the arrangements as a true sale as opposed to a transfer by Lehman with a charge back in favour of the transferor, although there is no suggestion that their advice was wrong.