During the summer of 2002 the financial press reported that Citigroup was being investigated for allegations that it had arranged transactions for Enron so as to intentionally misrepresent the nature of the transactions and consequently achieve favorable balance sheet treatment. Essentially, the deals were structured to make it appear that money was coming into Enron from trading activities, rather than from loans. A July 23, 2002, New York Times article by Richard Oppel and Kurt Eichenwald entitled Citigroup Said to Mold Deal to Help Enron Skirt Rules suggested that Citigroup intentionally kept certain parts of a secret oral agreement out of the written record for fear that it would change the accounting treatment. Critics contend that this had the effect of significantly understating Enron's liabilities, thus misleading investors and creditors. Citigroup maintains that, as a lender, it has no obligation to ensure that its clients account for transactions properly. The proper accounting, Citigroup insists, is the responsibility of the client and its auditor.

The NY Times article noted that in one presentation made to sell this kind of deal to Enron and other companies, Citigroup stated that using such an arrangement eliminates the need for capital markets disclosure, keeping structure mechanics private.

Why might a company wish to conceal the terms of a financing arrangement from the capital markets (investors and creditors)?

Is this appropriate? if yes or no, why?

Do you think it is ethical for a lender to market deals in this way? why?