From: julie.armstrong@enron.com
To: tk.lohman@enron.com, michelle.lokay@enron.com
Date: 2001-11-14 15:27:19+00:00
Subject: FW:

Another mention
Then, at an afternoon meeting of employees in the company's core natural gas and electricity trading operation, which provides by far the biggest part of Enron's profits, ''quite a bit of concern was raised about the news people had been seeing about this change-of-control payment,'' Mark Palmer, an Enron spokesman, said. 
At about 4 p.m. Central time, two senior executives who had attended the meeting, John Lavorato and Louise Kitchen, told Mr. Lay about the reaction of employees. ''Ken made a decision shortly thereafter that the best thing to do would be to waive the payment altogether,'' Mr. Palmer said. Even if Dynegy's directors later voted to award Mr. Lay a new severance agreement, he would turn it down, Mr. Palmer added. 

 -----Original Message-----
From: 	Armstrong, Julie  
Sent:	Wednesday, November 14, 2001 9:22 AM
To:	Lohman, TK
Subject:	

See about traders

11/14/2001
The Wall Street Journal
A3
(Copyright (c) 2001, Dow Jones & Company, Inc.)

Enron Corp. said its chairman, Kenneth Lay, has decided to forgo a severance payment of $60.6 million that could be triggered by Dynegy Inc.'s planned acquisition of Enron. Mr. Lay's decision capped a day in which he appears to have changed his mind on the matter at least twice. 
Early in the day, an Enron filing with the Securities and Exchange Commission laid out Mr. Lay's severance package. By midday, Enron indicated that Mr. Lay would keep only one-third of the payout, which he would take in stock in the combined company, and that he intended to donate one-third to a foundation to help displaced Enron employees. The remaining third would cover income-tax liabilities.
But by the end of the day, Enron spokesman Mark Palmer said that Mr. Lay, following a meeting of Enron energy traders, had decided against taking any of the severance pay. Though Mr. Lay didn't attend the traders' meeting, senior managers told him that "opinions were expressed that he shouldn't receive the payment," Mr. Palmer said. "He decided the cleanest thing to do was to waive the payment." The opinions of traders carry particular weight because they produce most of Enron's profits. Questions for Mr. Lay were directed to Mr. Palmer, who said he had spoken with Mr. Lay and other company officials during the day. 
The initial disclosure about Mr. Lay's hefty severance payment raised new questions about his willingness to sell Enron for a share price that was about a third of the market price of a month ago. Last Friday, Mr. Lay even said that Enron had other options to the Dynegy purchase, which might have allowed the energy company to remain independent, though he declined to elaborate. "Things weren't desperate . . . we had alternatives," Mr. Lay said. The 59-year-old Mr. Lay won't have an executive position at the combined company, though he might be a director. 
For the 12 months ended Aug. 31, Mr. Lay received about $70 million through the exercise of Enron options, according to disclosure reports compiled by Thomson Financial. Last year, Mr. Lay was paid $8.3 million in salary and bonus and more than $10 million in stock awards and other compensation. 
Enron, the nation's largest energy trader, saw its stock collapse in recent weeks following a series of disclosures about the company's extensive dealings with partnerships run by some of its own officers. Those dealings are under investigation by the SEC. Last Friday, Enron agreed to be acquired by the far smaller Houston-based Dynegy for stock, currently valued at about $10.7 billion. The merger agreement still must be approved by regulators and shareholders of the two companies. 
Separately, the California Public Employees' Retirement System, which owns about three million Enron and 500,000 Dynegy shares, said it would oppose the appointment of any current Enron board member to the board of a combined company. Michael Flaherman, chair of CalPERS investment committee said that it appeared that Enron's board "failed in its responsibility" to monitor the activities of Enron executives. 
Mr. Palmer, the Enron spokesman, said Mr. Lay had provisions in his employment contract to protect him against a sudden change in control from 1989 forward. In February 2000, when Enron stock was trading between $60 and $70 a share and Mr. Lay was being widely lauded for his performance, he negotiated a bigger severance package than he had previously. Last August, when Chief Executive Jeffrey Skilling quit unexpectedly, Mr. Lay assumed Mr. Skilling's duties and his contract term was extended by two years to Dec. 31, 2005. 
Under the terms of his contract, Mr. Lay is entitled to payment of $20.2 million for every full calendar year left on his employment contract, in the event that his employment terminates within 60 days of a change in control. Thus, Mr. Lay is entitled to three full years of payments, or $60.6 million. 
Mr. Lay, who took charge of the then-Houston Natural Gas Co. in 1984 when it was a regional pipeline company, wasn't the only member of his family to benefit from Enron's heady rise to a global energy giant. SEC filings show that in recent years a sister of Mr. Lay, Sharon Lay, and a son, Mark Lay, received millions of dollars in salary, commissions and bonuses related to Ms. Lay's travel agency and a paper-products company connected to the younger Mr. Lay. 
Mr. Palmer said it is a "cheap shot" to criticize the Lay family because the pertinent transactions were reported in several annual proxy statements. "The contracts were bid out and fairly awarded," Mr. Palmer said. Ms. Lay said her travel agency, of which she is president and half-owner, had won its Enron business through competitive bidding and by providing "the very best service possible." Mark Lay couldn't be reached for comment. 
Coming on top of disclosures of Enron's dealings with partnerships run by its own executives, the relationships between Lay family members and the company again raise questions about Enron's willingness to keep separate corporate and personal interests. Former Chief Financial Officer Andrew Fastow and possibly other Enron executives made millions of dollars from these partnerships. 
Mark Lay's dealings with Enron date back to 1994, according to the available SEC filings. In May 1997, Mark Lay and "certain other individuals" who together had been officers, directors or shareholders of a company called Paper & Print Management Corp., or PPMC, entered into employment agreements with an Enron unit, Enron Capital & Trade Resources, according to Enron's 1998 proxy statement. The individuals helped set up "a clearinghouse for the purchase and sale of finished paper products," according to the SEC filing. Mr. Palmer said this effort formed the rudiments of Enron's profitable paper and pulp-trading business. 
As part of the deal, Enron agreed to reimburse PPMC $1 million for certain expenses. Mark Lay and his colleagues also agreed to "convey" to Enron "certain intangible property rights" from PPMC. 
Mark Lay also got a three-year employment contract from Enron as a vice president of Enron Capital & Trade. He got a signing bonus of $100,000, a minimum monthly salary of $12,500, a minimum annual bonus of $100,000 for 1997-1999 and an option to purchase 20,000 Enron shares. Mark Lay is no longer with Enron and is now attending a seminary, said Mr. Palmer. 
Since 1985, Sharon Lay's firm, Lay/Wittenberg Travel Agency in the Park Inc., has provided travel arrangements for employees of Enron and its predecessor company. For this work the agency received $6.8 million from 1996 through 2000. In an interview yesterday, Ms. Lay said Enron accounted for more than half of her firm's revenue in some years. She said her brother's position was "more a problem" than an asset since it led some to assume she hadn't worked hard enough to get Enron's business.