From: david.delainey@enron.com
To: wes.colwell@enron.com
Date: 2000-06-19 11:59:00+00:00
Subject: Re: Fort James Amortization

Wes, expense the amortization to Office of the Chairman not West Power or 
Origination.

Regards
Delainey
---------------------- Forwarded by David W Delainey/HOU/ECT on 06/19/2000 
11:57 AM ---------------------------
From: Tim Belden on 06/19/2000 07:30 AM PDT
To: David W Delainey/HOU/ECT@ECT
cc:  
Subject: Re: Fort James Amortization  

I try to run clean, conservative books.  To that end, I assessed every single 
originated transaciton when I took over the group in 1999.  Edith Cross and I 
turned over every rock that we could find, booked things properly, and moved 
on.  I know nothing about this amortization that's been going on.  Perhaps 
there were two payments to Fort James -- one being the payment that west 
power trading expensed in 1997 associated with the in money Wauna/Halsey 
position and the other associated with the overall alliance.  West Power 
Trading very clearly liquidated the payment associated with Wauna/Halsey in 
1997.  I have the DPR from March of 1997 to prove it.  If this payment was 
capitalized for some reason after West Power Trading expensed it, then I'm 
not sure what to do.  It seems odd for us to pay for the same bad position 
twice.  

If the amortization is associated with the second payment to Fort James -- 
the alliance payment -- then we have a different kettle of fish entirely.  I 
don't understand why it was ok for the amotization to hit the industrial 
group but when we do a one-time amortization of the balance it all of a 
sudden switches over to the West Power Trading group.  How come last month it 
was "proper" for the charge to hit the industrial group and this month it is 
"proper" for the charge to hit West Power Trading.  The charge should hit 
whoever's rc it was who thought that paying Fort James a bunch of money was a 
good idea.  If that person is no longer around the charge should either hit 
that person's successor or it should hit a management book.

To your point about who benefits from the termination of this deal.  Clearly, 
it is a good idea to terminate these deals and remove bad positions with a 
lot of uncertainty from the West Power Trading books.  Having said that, I 
have a hard time feeling good about the "benefit" that West Power Trading has 
received from these deals.  In 1999 I was told that this was largely a legal 
question.  A memo written by Jake Thomas on April 7, 1999 memorializes this 
line of thought.  We established a $500k legal reserve, rebooked the deals, 
took most of the positive value to the book to offset large losses associated 
with other old deals and granted the remainder, about $1 million, to Jake in 
origination.  The entity that has benefited the most from these deals is West 
Origination.

Finally, I can't see how this expense belongs to West Power Trading.  I would 
like to understand how all of the accounting worked before I can accept an 
expense on my rc.  If you want to deal with the expense separately and have a 
discussion about granting origination for terminating this deal then let's do 
that.  That discussion needs to reflect history, and include the origination 
that was granted in 1997, 1999, and include the legal reserve of $500k.

Give me a call when you get a chance.






David W Delainey
06/16/2000 05:11 PM
To: Tim Belden/HOU/ECT@ECT
cc:  
Subject: Fort James Amortization

Tim, my understanding is that partnership fee (the $11.0M) has been amortized 
for the last several years and expensed to the Industrial groups (McConville 
and Ondarza).  As you are aware, I sued them for breach.  The settlement 
involved the elimination of all existing transactions between Ft. James and 
Enron including the Wauna and Halsey power contracts.  It is my understanding 
that the benefit of the elimination of those shorts resides in the Portland 
shop.   The elimination of the shorts would not have occurred without the 
lawsuit on the alliance and the settlement I originated.  It seemed logical 
to charge the Portland office with the remaining un-amortized fee of $1.8M as 
a cost of eliminating the shorts for no cost and no future contingent 
liability.

Lets discuss.

Regards
Delainey
---------------------- Forwarded by David W Delainey/HOU/ECT on 06/16/2000 
07:00 PM ---------------------------
   
	
	
	From:  Tim Belden                           06/16/2000 05:09 PM
	

To: Wes Colwell/HOU/ECT@ECT, David W Delainey/HOU/ECT@ECT, John J 
Lavorato/Corp/Enron
cc: Paula Harris/HOU/ECT@ECT 
Subject: Fort James Amortization

Edith Cross and I looked at the Fort James deal in great detail in early 
1999.  When the deal was closed, west power trading booked an in the money 
position and an offsetting expense of about $11 million.  This money has 
already liquidated from our book.  In fact, I have a copy of the 3/31/97 DPR 
that reflects this liquidation.  At that time, west power trading also paid a 
350k credit reserve, 247k to the finance book, and 1.3 million in 
origination.  

I have also heard about a "partnership" fee that Enron paid to Fort James 
around the same time.  I'm not sure what this fee was and who benefitted from 
it.  It had nothing to do with the west power trading book.

On John's recommendation I called Wes to see if we could figure this out.  
Wes, please give me a call back to discuss.  I think that someone needs to 
look at the actual journal entries from March of 1997 to see why an expense 
of $11 million was deferred.

This is not my problem.  I should not receive this expense.  Until this is 
resolved, I would greatly appreciate it if the writedown of the deferred 
account does not hit west power trading's expenses.