Mcinerney, Roberta

From: Carleton, Norman
Sent: Friday, December 14, 2001 10:15 AM
To; Bair, Sheila; Berardi, Steve; Bitsberger, Timothy; Eichner, Matthew; Gabilondo, Jose; Gross,

Jared; Hammer, Viva; Lori Sanatamorena (E-mail); Nickoloff, Peter, Novey, Michael;
Pietrangeli, Fred; Roseboro, Brian; Schultheiss, Heidilynne; Whaley, Jean; Wiedman, Mark;
Bieger, Peter; DeMarco, Edward; Dorsey, Karen; Ellett, Martha; Ellis, Dina; Huffman, Lucy;
Hughes, Gerry, McGivern, Tom; Mcinemey, Roberta; Saltadin, Anne; Smith, Amy; Sutton,
Gary, Tishuk, Brian

Subject: Enron -- Dec. 11 ABI Website

Enron Bankruptcy Update

Enron Japan, Affiliates Seek Bankruptcy Protection

Enron Japan Corp., a wholly-owned subsidiary of failed U.S. energy giant Enron Corp. announced
that it and its three Japanese affiliates filed for bankruptcy yesterday, Dow Jones reported. The
move follows Enron's Dec, 2 chapter 11 bankruptcy filing in New York. “Enron Japan Corp., Enron
Japan Marketing Corp., Enron Japan Funding Corp. and E Power Corp. filed for bankruptcy...in
accordance with the Japanese bankruptcy law,” Enron Japan said.

Enron Court Hearing Pushed Back to Dec. 20

An Enron Corp. hearing has been rescheduled for Dec. 20 from Dec. 14, Doe Jones reported. The
hearing, the second since the energy-trading company filed for chapter 11 bankruptcy protection on
Dec. 2, will pertain to Enron's request to continue paying utility companies for electric bills. Judge
Arthur Gonzalez, who is presiding over Enron's case will also hear an interim request at this time to
retain Blackstone Group as financial adviser in Enron's restructuring.

600 Enron Employees Got Bonuses

Nearly 600 Enron Corp. employees deemed critical to running its prized energy trading business
received more than $100 million in bonuses last month as the company faced a merger and then
bankruptcy, according to the Associated Press. About half of those bonuses, given to 75 traders in
early November when Enron was planning to merge with smaller rival Dynegy Inc., may have to be
repaid because the merger collapsed, said Todd Zywicki, a law professor at George Mason
University.

Enron spokesman Mark Palmer said the $50 million given to traders before the merger crumbled
“was done in discussions with Dynegy to protect and preserve the value of the trading organization
through what we thought was going to be a fairly long merger process.” Dynegy spokeswoman
Debbie Fiorito said that Dynegy didn't approve or endorse those bonuses. Enron distributed an
additional $55 million to 500 employees two days before filing for bankruptcy as an incentive for them
to remain with the company while Enron works to emerge from chapter 11.

00200000000040


Those master agreements include certain events under which a counterparty can terminate a
transaction, Among those are failure to pay, failure to deliver and, of course, bankruptcy.

Whether counterparties will be able to claim exemption from the automatic stay that prevents anyone
from terminating contracts with a company that filed for bankruptcy will hinge on the type of deals
they're a party to and whether they meet certain statutory requirements. Although Enron and its
lawyers are likely to nitpick the unwinding of each and every contract involving the company, legal
experts noted that Enron's fondness for EE! agreements should help those entangled in power
purchase agreements to liquidate their positions since these contracts treat all participants as forward
contracts merchants. Such merchants are exempt from the stay stipulated by section 362A of the
bankruptcy code.

Key to how well or poorly counterparties will make out now that Enron's business has been all but
dried out, is how much if any collateral protects their transactions.

So far, it's unclear how much of Enron's derivative transactions were collateralized. But lawyers
familiar with the matter said it was likely that a large amount of those contracts were not
collateralized.

That's likely to be bad news for some counterparties. Because if they’re owed money by Enron on
their netted derivative exposure, they'll have to join other unsecured creditors, likely receiving little of
their claims. The bonds and bank debt of Enron took a nose dive after Dynegy rescinded its merger
offer, with trading levels indicating that those mostly unsecured creditors thought they would recoup
only 20% to 25% of the money loaned to Enron.

-By Carol S. Remond, 201-938-2074; Dow Jones Newswires; carol. remond@dowjones.com

(Phyllis Plitch contributed to this column.)

0200000000088


Sutton, Gary

From: Carleton, Norman
Sent: Thursday, November 29, 2001 6:19 PM
To: Bair, Sheila; Berardi, Steve; Bitsberger, Timothy; Cetina, Jal; Eichner, Matthew, Gabilondo,

Jose; Gross. Jared; Hammer, Viva; Lori Sanatamorena (E-mail), Nickoloff, Peter, Novey,
Michael; Pretrangeli, Fred; Roseboro, Brian; Schultheiss, Heiditynne; Sharer, James; Whaley,
Jean, Wiedman, Mark, Bieger, Peter, DeMarco, Edward; Dorsey, Karen; Ellett, Martha; Ellis,
Dina; Huffman, Lucy, Hughes, Gerry, McGivern, Tom; Mcinemey, Robverta; Salladin, Anne,
Smith, Amy; Sutton, Gary; Tishuk, Brian

Subject: Enron's Financial Woes Ripple Out Across Asia

November 30, 2001

Major Business News

Enron's Financial Woes
Ripple Out Across Asia

By JASON BooTH, HENNY SENDER and RicHaroD B. SCHMITT
Staff Reporters of THE WALL STREET JOURNAL

The sudden deep financial troubles of U.S. energy giant Enron Corp. sent ripples of concem across
Asia, damaging investments in Japan and potentially undermining businesses in South Korea and
Australia

The uncertainty for Asia is likely just beginning. If Enron files for protection under Chapter 11 of the
federal Bankruptcy Code in the U.S., as many investors and financial experts now expect, it is likely
to be one of the messiest, most complex bankruptcy cases ever, lawyers say. That is because of the
multifaceted nature of Enron's ance highflying operations, which combined a global energy business
with a massive financial-trading operation involving tens of billions of dollars in complex contracts. A
filing by Enron, with about $13 billion in debt, would rank among the largest bankruptcy filings ever.
Enron has about 800 trading partners or creditors.

The scale of the Enron collapse is huge, experts say, "There is nothing to compare it to,” sald
Edward Tillinghast, a bankruptcy specialist with Coudert Brothers in New York. “The business was so
large. There were so many different kinds of operating entities under the Enron umbrella.”

On Wednesday. as the last-ditch merger with Dynegy Inc. unraveled, the company’s credit was
downgraded to "junk" status by rating agency Standard & Poor's Corp. The stock market, signaling
that a bankruptcy filing is expected, hammered Enron stock, which was halted for a time on
Wednesday, and knocked lower some of its financial backers’ shares. Enron shares closed at 4 p.m.
in New York Stock Exchange composite trading at 61 cents, dawn $3.50, or 85%, Thursday moming
in New York, Enron was trading down 33%, or 20 cents, to 41 cents. On Wednesday, Enron bonds
also fell sharply, dropping to 50 cents on the dollar from around 55 cents, reflecting concerns over

00200000000084


Monday, January 22, 2001 1:54 PM
: geetha. treas.gov

‘Subject: Ind iol Meeting

Geetha,

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assistant and my paola a bi overwhelmed.

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adress othe menting | woul! appreciaamanaged tose fa

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Sestcany we ‘we want to On refgorm at the Indian that
to deliver power to customers other than MSEB.

We look forward to meeting you tomorrow.

(See attached file: Dabho! PPA - DC Talking Points.doc) << File: Dabhol PPA - DC Talking Points.doc >>

00500000001469


Bieger, Peter

From: Carleton, Norman
Sent: Friday, December 14, 2001 10:15 AM
To: Bair, Sheila; Berardi, Steve; Bitsberger, Timothy; Eichner, Matthew; Gabilondo, Jose; Gross,

Jared; Hammer, Viva; Lori Sanatamorena (E-mail), Nickoloff, Peter; Novey, Michael;
Pietrangeli, Fred; Roseboro, Brian, Schultheiss, Heidilynne; Whaley, Jean, Wiedman, Mark,
Bieger, Peter; DeMarco, Edward; Dorsey, Karen; Ellett, Martha; Ellis, Dina; Huffman, Lucy;

Hughes, Gerry, McGivern, Tom; Mcinemey, Roberta; Salladin, Anne; Smith, Amy, Sutton,
Gary, Tishuk, Brian

Subject: Enron - Dec. 11 ABI Website

Enron Bankruptcy Update

Enron Japan, Affiliates Seek Bankruptcy Protection

Enron Japan Corp., a wholly-owned subsidiary of failed U.S. energy giant Enron Corp. announced
that it and its three Japanese affiliates filed for bankruptcy yesterday, Dow Jones reported. The
move follows Enron's Dec. 2 chapter 11 bankruptcy filing in New York. “Enron Japan Corp., Enron
Japan Marketing Corp., Enron Japan Funding Corp. and E Power Corp. filed for bankruptcy...in
accordance with the Japanese bankruptcy law,” Enron Japan said.

Enron Court Hearing Pushed Back to Dec. 20

An Enron Corp. hearing has been rescheduled for Dec. 20 from Dec. 14, Doe Jones reported. The
hearing, the second since the energy-trading company filed for chapter 11 bankruptcy protection on
Dec. 2, will pertain to Enron's request to continue paying utility companies for electric bills. Judge
Arthur Gonzalez, who is presiding over Enron's case will also hear an interim request at this time to
retain Blackstone Group as financial adviser in Enron's restructuring.

600 Enron Employees Got Bonuses

Nearly 600 Enron Corp. employees deemed critical to running its prized energy trading business
received more than $100 million in bonuses last month as the company faced a merger and then
bankruptcy, according to the Associated Press. About half of those bonuses, given to 75 traders in
early November when Enron was planning to merge with smaller rival Dynegy Inc., may have to be
repaid because the merger collapsed, said Todd Zywicki, a law professor at George Mason
University.

Enron spokesman Mark Palmer said the $50 million given to traders before the merger crumbled
“was done in discussions with Dynegy to protect and preserve the value of the trading organization
through what we thought was going to be a fairly long merger process." Dynegy spokeswoman
Debbie Fiorito said that Dynegy didn't approve or endorse those bonuses. Enron distributed an
additional $55 million to 500 employees two days before filing for bankruptcy as an incentive for them
to remain with the company while Enron works to emerge from chapter 11,

00200000000230


how much creditors might receive if the company does seek bankruptcy-court protection.

Enron spokeswoman Karen Denne said the company is exploring its options and wouldn't comment
on whether it has retained bankruptcy counsel.

The fallout in Asia was felt immediately on Thursday. The biggest news was in Sydney, where Enron
Australia said it was suspending operations pending further developments regarding Its U.S. parent.
“We are now waiting for clarification about Enron's situation globally and will advise the local market
once we have received that advice,” legal counsel Rob McGrory said.

The announcement followed a warning by Standard & Poor's about counterparty exposure in the
Australian electricity market, citing the overnight downgrade of Enron. “The recent developments
with Enron serve as a further example of the credit risks faced by energy market participants as they
seek to manage their market risks in Australia's volatile power market,” said Laurie Conheady, an
associate director at Standard & Poor's.

Similarly, Enron's presence in South Korea appears to be nearing an end. According to officials at SK
Corp., Enron plans to sell its 50% stake in joint venture energy distribution firm SK-Enron Co. SK-
Enron was formed in 1999, and controls about 25% of South Korea's natural-gas market, according
to the firm's Web site.

Analysts said that Enron had offered to sell its stake to SK Corp., yet the Korean partner said it has
no plans to buy the shares. "We already hold 50% ... we don't need the rest," said a company
spokesman, Daniel Youn.

Enron was also considered a potential buyer of power generation assets from South Korean
government-controlled Korea Electric Power Corp. Kepco is looking to sell assets as past of a wider
privatization drive.

Pressure elsewhere in the region was felt primarily in the financial markets. In Tokyo, the value of
money management funds Nikko Asset Management Co., UFJ Partners Asset Management Co.,
Japan Investment Trust Management Co. and Sumisei Global Investment Trust Management Co.,
fell due to their exposure to Enron debt, which amounted to about 40 billion yen ($324.9 million).
Enron news also sparked volatility in the copper and U.S. dollar market, according to traders.

Other financial backers of Enron were negatively effected as well. J.P. Morgan Chase and Citigroup,
which have invested hundreds of millions of dollars in hopes of keeping the Enron-Dynegy deal alive,
saw their stocks fall on Wednesday trading in the U.S. On Thursday moming Citigroup shares posted
slight gains, rising 19 cents to $47.99, while J.P. Morgan Chase shares were flat at $37.50. J.P.
Morgan Chase said in a statement it has about $500 million of unsecured exposure to Enron entities,
including loans, letters of credit and derivatives. It said it also has secured exposures, including $400
million in loans secured by Enron pipelines.

Besides banks and bondholders, dozens of companies, municipalities anc utilities in the U.S. that
had signed multiyear power contracts with Enron may be left in the lurch. Over the years, the likes of
retailer J.C. Penney Co., and shopping-mall company Simon Property Group signed on with Enron,
as it undercut local utilities in newly deregulated markets.

~ Rebecca Smith and Robin Side! contributed to this article.

Write to Jason Booth at jason.booth@awsj.com <mailto:jason.booth@awsj.com>, Henny Sender at

henny.sender@wsj,com <mailto:henny.sender@uwsj,com> and Richard B. Schmitt at
2

00200000000034


December 18, 2001

Senator Eyes End To Enron-Type Special-Purpose
Entities

Dow Jones Newswires

WASHINGTON -- U.S, Senate Commerce Committee Chairman Fritz Hollings, D-S.C.,
pledged Tuesday to introduce legislation to eliminate the sorts of financial accounting
that led to the financial collapse of Enron Corp. (ENE).

Ata committee hearing on the Enron debacle, Hollings called for legislation to eliminate
the use of special-purpose entities, which are partnerships or trusts through which
companies keep their debt off the books and, in Enron's case, overstate earnings.

Hollings said such off-the-balance-sheet transactions should end in order to protect
investors, Hollings also was highly critical of the amount of insider stock selling by top
Enron officials. He noted that Enron Chairman Kenneth Lay and former Chief Executive
Jeffrey Skilling each sold shares in recent months for more than $60 million, while
members of Enron's board sold shares worth more than $160 million.

“The selling of Enron was prolific,” Hollings said, calling the insider selling "a screaming
fed flag.”

If Enron officials felt the stock was undervalued, as they publicly attested, “why were
they cashing in?" Hollings said.

Hollings also said there was plenty of blame for the “shenanigans” associated with
Enron's collapse, which he likened to a "cancer." He cited Enron's role in persuading the
Commodity Futures Trading Commission against the Clinton administration's call for
regulation of energy derivatives, and subsequent congressional action to exempt from
tegulation the highly complex energy derivatives Enron's special-purpose entities
engaged in.

"We are all guilty for letting it happen,” Hollings said of Enron's collapse.

Sen. Byron Dorgan, D-N.D., chairman of the committee's consumer affairs panel,
described Tuesday's hearings as the first of several that will delve into the roles in
Enron's financial collapse played by: Enron officials; Arthur Andersen, Enron's outside
auditor, Wall Street analysts, and regulators.

"This is about an energy company that morphed into a trading company involved in
hedge funds and derivatives, It took on substantial risks, created secret off-the-books
partnerships and, in effect, cooked the books under the nose of their accountants and
investors,” Dorgan said.

00200000000502


Bieger, Peter

From: Carleton, Norman
Sent: Thursday, November 29, 2001 6:13 PM
To: Bair, Sheila; Bieger, Peter, Bitsberger, Timothy, DeMarco, Edward; Dorsey, Karen; Ellett,

Martha; Ellis, Dina; Gabilondo, Jose; Gross, Jared; Huffman, Lucy; Hughes, Gerry, McGivern,
Tom; McInerney, Roberta; Nickoloff, Peter; Roseboro, Brian; Salladin, Anne; Schulthess,
Heidilynne; Smith, Amy, Sutton, Gary, Tishuk, Brian; Berardi, Steve; Cetina, Jill; Eichner,
Matthew; Hammer, Viva; Lori Sanatamorena (E-mail); Novey, Michael, Pietrangell, Fred;
Sharer, James; Whaley, Jean; Wiedman, Mark

Subject: DJ: IN THE MONEY-2:Coliateral Key To Counterparties Recovery

November 29, 2001

IN THE MONEY-2:Collateral Key To Counterparties Recovery

Dow Jones Newswires

Thoughts of an Enron bankruptcy jogged memories of past filings, such as the case of Drysdale
Government Securities Inc., which involved public entities being left on the hook for millions of dollars
in uncollateralized government repurchase agreements.

But bankruptcy laws have evolved significantly since the 1982 collapse of Drysdale sent shockwaves
through the financial community and forced banks to pay out tens of millions of dollars to cover
Drysdale’s obligations to other government securities firms.

More recently, Orange County's 1994 bankruptcy following its derivatives debacle and the bitter
dispute surrounding German's Metaligesellschaft Ag for breach of forward petroleum contracts
suggests that acrimonious and lengthy litigations might be in the offing. In the latter case, many
counterparties settled out of court and took "haircuts" after a judge ruled that independent petroleum
marketers who entered into long-term hedging contracts as protection against escalating fuel prices
could sue the metals and engineering conglomerate for breach of contract.

But the extent to which those cases provide any lessons for Enron and its derivative counterparties
remains to be seen, experts said, depending on what sticky and complex issues might arise in
potential court actions.

Meanwhile, although Enron has yet to file for bankruptcy, most of its derivative counterparties are
likely already scrambling to exit their trades.

That's because Dynegy Inc.'s (DYN) decision Wednesday to abandon its plan to rescue Enron all but
sealed the fate of the ailing Houston energy trader which has been hobbled by accounting
irregularities and unquantified off-balance-sheet liabilities. Enron shares plummeted from about $90
a share last summer to 36 cents Thursday.

Derivative contracts are built around master agreements developed by the International Swaps and
Derivatives Association. As far as its power purchase deals go, Enron is said to have favored master
agreements drafted by the Edison Electric Institute, which draws heavily on ISDA’s blueprint.

00200000000240


how much creditors might receive if the company does seek bankruptcy-court protection.

Enron spokeswoman Karen Denne said the company is exploring its options and wouldn't comment
on whether it has retained bankruptcy counsel.

The fallout in Asia was felt immediately on Thursday. The biggest news was in Sydney, where Enron
Australia said it was suspending operations pending further developments regarding its U.S. parent.
“We are now waiting for clarification about Enron's situation globally and will advise the local market
once we have received that advice,” legal counsel Rob McGrory said.

The announcement followed a warning by Standard & Poor's about counterparty exposure in the
Australian electricity market, citing the overnight downgrade of Enron, “The recent developments
with Enron serve as a further example of the credit risks faced by energy market participants as they
seek to manage their market risks in Australia's volatile power market,” said Laurie Conheady, an
associate director at Standard & Poor's.

Similarly, Enron's presence in South Korea appears to be nearing an end. According to officials at SK
Corp., Enron plans to sell its 50% stake in joint venture energy distribution firm SK-Enron Co. SK-
Enron was formed in 1999, and controls about 25% of South Korea's natural-gas market, according
to the firm's Web site.

Analysts said that Enron had offered to sell its stake to SK Corp., yet the Korean partner said it has
no plans to buy the shares. "We already hold 50% ... we don't need the rest,” said a company
spokesman, Daniel Youn.

Enron was also considered a potential buyer of power generation assets from South Korean
government-controlled Korea Electric Power Corp. Kepco is looking to sell assets as past of a wider
privatization drive.

Pressure elsewhere in the region was felt primarily in the financial markets. In Tokyo, the value of
money management funds Nikko Asset Management Co., UFJ Partners Asset Management Co.,
Japan Investment Trust Management Co. and Sumisei Global Investment Trust Management Co.,
fell due to their exposure to Enron debt, which amounted to about 40 billion yen ($324.9 million).
Enron news also sparked volatility in the copper and U.S. dollar market, according to traders.

Other financial backers of Enron were negatively effected as well. J.P. Morgan Chase and Citigroup,
which have invested hundreds of millions of dollars in hopes of keeping the Enron-Dynegy deal alive,
saw their stocks fall on Wednesday trading in the U.S. On Thursday morning Citigroup shares posted
slight gains, rising 19 cents to $47.99, while J.P, Morgan Chase shares were flat at $37.50, J.P.
Morgan Chase said in a statement it has about $500 million of unsecured exposure to Enron entities,
including loans, letters of credit and derivatives. It said it also has secured exposures, including $400
million in loans secured by Enron pipelines.

Besides banks and bondholders, dozens of companies, municipalities and utilities in the U.S. that
had signed multiyear power contracts with Enron may be left in the lurch. Over the years, the likes of
retailer J.C. Penney Co., and shopping-mall company Simon Property Group signed on with Enron,
as it undercut local utilities in newly deregulated markets.

-- Rebecca Smith and Robin Sidel contributed to this article.

write to daar! Booth at iason booth€hawel.gom <malta:jason boothiRawsl com>. Henny Sender at
renn z and Richard B. Schmitt at

0020000000238


indicating that those mostly unsecured creditors thought they would recoup only 20% to 25% of the money
loaned to Enron,

-By Carol S. Remond, 201-938-2074; Dow Jones Newswires; carol.remond@dowjoncs.com
(Phyllis Plitch contributed to this column.)

0200000000244


[(b)(5)]

ISSUE AND DISCUSSION
((b)()]

00200000000492


financial downfall.

Enron Seeks Supplier to Take Over California University System Powers Contract

Enron Corp is looking for another electricity supplier to complete its contract with California's
two public university systems, a spokeswoman for California State University said yesterday,
reported Dow Jones. Enron Energy Services Inc.'s current contract with California State and
the University of California Systems expires on March 31, 2004, said spokeswoman Clara
Potes-Fellow. The Enron subsidiary filed for chapter 11 bankruptcy protection Dec. 2.

Enron Contract Hearing Moved To Dec. 18

A bankruptcy court hearing regarding embattled Enron Corp.'s motion to negotiate, end or sell
certain contracts has been postponed to next Tuesday, Dec. 18, Dow Jones reported. The
meeting was originally scheduled for today. Earlier this week, Enron filed a motion with the
court asking to be allowed to terminate with other parties certain contracts with safe-harbor
provisions. The company doesn't want to ask for court approval every time it seeks to end an
agreement.

In its filing, Enron had asked for authority to end some of these safe-harbor contracts and
negotiate payments for each termination. Creditors, including Cinergy Corp.'s Cinergy
Services Inc. and Wiser Oil Co., have filed objections. The motions and objections will be
addressed at Tuesday's bankruptcy court hearing.

00200000000236


Mcinerney, Roberta

From: Paulus, Michael

Sent: Thursday, March 15, 2001 6:02 PM
To: Mcinerney, Roberta; Constantine, Eleni
Subject: FW: Enron Meeting Request

Please see below. Any thoughts?

~--Onginal Message—~
From: Bis, Cores
Sent: Thursday, March 15, 2001 5:59 PH
To: Fisher, Peter; Paulus, Michael; Carleton, Norman
cc Gross, Jarod
Subject: RE: Ereon Meeting Request
{(b)(5)]
- Message
From: Fisher, Peter
Sent: Thurscay, March 15, 2001 5:31 PM
To: Paulus, Michael; Elks, Cina; Carleton, Norman
Ce: Gross, Jared

Subject: RE: Erecn Meeting Request
| also see no reason to object.

From: Paulus, Michael

Sent: — Thursday, March 15, 2001 $:27 PM

Tor Bits, Dina; Fisher, Peter; Carleton, Norman
ca Gross, Jared

‘Subject: Enron Meeting Request

Jetf Skilling, President and CEO of Enron has requested a meeting with the Secretary for April 5 to discuss the
West Coast energy crisis. | see no reason to object, Thoughts?

00200000000052


Sutton, Gary

From: Carieton, Norman
Sent: Thursday, November 29, 2001 6:09 PM
To: Bair, Shea; Berardi, Steve; Bitsberger, Timothy; Cetina, Jill; Eichner, Matthew, Gabilondo,

Jose; Gross, Jared; Hammer, Viva; Lori Sanatamorena (E-mail), Nickoloff, Peter; Novey,
Michael; Pietrangell, Fred, Roseboro, Brian, Schulthe:ss, Heiditynne; Sharer, James; Whaley,
Jean; Wiedman, Mark; Bieger, Peter; DeMarco, Edward, Dorsey, Karen; Ellett, Martha; Ellis,
Dina; Huffman, Lucy, Hughes, Gerry; McGivern, Tom; Mcinemey, Roberta; Saltadin. Anne;
Smith, Amy; Sutton, Gary; Tishuk, Bran

Subject: A Dow Jones Newswires Column: Enron's Derivatives Could Test Courts (discusses
bankruptcy netting issues)

November 29, 2001

IN THE MONEY: Enron's Derivatives Could Test Courts

By CAROL S. REMOND and PHYLLIS PLITCH
A Dow Jones Newswires Column

NEW YORK -- Prepare for the largest test in bankruptcy history of safe harbors designed to protect the liquidity
of the nations’ financial system.

Enron Corp.'s (ENE) much-anticipated bankruptcy filing, if it indeed comes, is certain to be precedent setting.
First, in terms of sheer magnitude, we're talking about $62 billion in assets. But also because it's likely to
involve hundreds, if not thousands, of counterparties intertwined with Enron in various financial and energy
derivative transactions.

Unlike other creditors whose claims will be stayed under U.S, bankruptcy laws, those counterparties will vie to
unwind their trades, may they be "power forwards" or credit derivative contracts, in order to find more worthy
hedging partners.

Built in the bankruptcy code are exemptions for securities or commodities contracts, These safe harbors were
developed over the years as a sort of security blanket for the vital hedging functions that these transactions
provide,

"These special rules are designed to avoid a domino effect,” said a bankruptcy lawyer, who like many contacted
for this column, declined to be identified given the likelihood that he'll end up representing one or many parties
involved in Enron's expected Chapter 11 filing.

Counterparties claiming redress through these exemptions should be able to net out their various derivative
contracts with Enron, attempting to use whatever collateral was pledged under those transactions to quantify
how much money they owe to or are owed by Enron, All of that is normally done on the side, without prior
bankruptcy court approval,

The problem is that Enron will likely question attempts to unwind those trades and take issue with the manner
in which its counterparties netted their exposure to the company, observers say.

Given the large number of parties involved and the magnitude of Enron's recent losses, the treatment of
derivative contracts could be further complicated by the market's lack of understanding of just how much value
is left in Enron's assets. That's an issue that will permeate the proceedings with all of Enron's stunned creditors.
On top of its derivative exposure, Enron is on the hook for roughly $13 billion in debt.

As part of its energy trading operations, Enron was a party to billions of dollars of derivative contracts designed
t

00200000000089


Subcommittees of the House Financial Services Committee and the Senate Commerce
Committee have already held hearings.

But Lieberman's panel is the top investigative committee of the Senate. Under Republican
leadership during the Clinton administration, then-chairman Fred D. Thompson (R-Tenn.)
headed an investigation of Bill Clinton's 1996 presidential campaign fundraising.

Levin and Lieberman said they intend to look into the close ties between Lay and President
Bush, a connection that some Democratic Party officials say they hope to take advantage of in
this year’s congressional election campaigns.

Levin said he wants to know what advice Lay, who was a large contributor to the Bush
campaign, gave to officials of the new administration as it formulated energy policy a year ago.
Enron “also had close relationships with some Democrats, it's fair to say," Lieberman
acknowledged. He said he expected the inquiry to be bipartisan and to have Thompson's support.
“We are going to work together," Lieberman said.

Lieberman said the committee also wants to leam whether federal regulators have the authority
to adequately oversee the complex commodity trading and financial transactions that were the
foundation of Enron's rapid growth over the past three years.

Lieberman noted that much of Enron's trading in energy derivatives was exempt from regulation
by the Commodity Futures Trading Commission, and he said a focus of the inquiry would be
whether this allowed the company to hide some transactions.

Enron was an active player in lobbying for the exemption beginning in the early 1990s,
according to sources. The exclusion was initially approved by the CFTC in 1992, and in 2000
Congress endorsed it as part of the Commodity Futures Modemization Act, despite concerns of
some senior regulators.

Ata joint hearing on the legislation by the Senate Banking and Agriculture committees in June
2000, then-CFTC chairman William J. Rainer spelled out his “reservations” about the exclusion
and said that "the case for it has not been made" with regard to energy derivatives.

‘© 2002 The Washington Post Company

00200000000501


1/11/02 16:35 FAX 202 225 8165 GOV REF MIN Boose

The Honorable Paul H. O"Neill

The Honorable Donald L. Evans
January 11, 2002
Page S

(7) How did Undersecretary Fisher conduct this investigation? Did he or his staff
communicate with any Enron officials or representatives? If so, please indicate names,
dates, form of communications, and information exchanged. Did he or his staff
communicate with Enron’s auditors or any financial backers? Did he or his staff
communicate with any financial experts outside of the Commerce or Treasury
Departments? Did he or his staff communicate with any others within the
Administration? Please provide any written or electronic materials held by your
respective departments that relate to any of these questions.

(8) At the time that you decided to take no action, had you considered the potential impacts
of an Enron bankruptcy on its employees? Did you make any attempt to obtain
information about the impact of such a bankruptcy on the employees?

(9) The Bush Administration continued to advocate for retroactive repeal of the corporate
alternative minimum tax throughout the month of November, when repeal could have had
a significant impact on Enron's financial situation. Did any Enron official or
representative ask you, any other person in your Department, or to your knowledge any
other official in the Administration, to support this legislation? Were you aware that
Enron favored adoption of this legislation?

{10) Why did it take so long for the public to learn about your contacts with Enron prior to its
bankruptcy filing?

I want to make clear that | believe it is inappropriate to make any ethical allegations
against you or any other Administration official at this time. I think it is essential, however, that
these questions be answered so that there is a clear public accounting of this matter. We all owe
that to the thousands of families that are facing financial ruin from the Enron bankruptcy, and I
hope that it will be possible for you to provide the answers I’m seeking by January 18, 2002.

Sincerely,

foes aetdarn

Ranking Minority Member

00100000000585


Such a venture would help shore up EnronOnline which was once one of Enron's most valuable asset.

Spokesmen for J.P. Morgan Chase, Citigroup and UBS declined to comment officially. A spokesman for Enron
wasn't immediately available

Enron filed for bankruptcy protection on Dec, 2 after its debt was downgraded to junk status and investors and
clients lost confidence in the company over accounting irregularities and off-balance-sheet liabilities, ‘The
Chapter 11 filing is the largest in U.S. history, with more than $31 billion in reported debt and billions more in
as-yet unreported off-balance-sheet liabilities,

“By Carol S. Remond; Dow Jones Newswires; 201 938 2074;
carol . remondsdowjones .com

Gabilondo, Jose

ee —
From: Carleton, Norman

Sent: Thursday, December 06, 2001 4:26 PM

To: Bair, Sheila, Berardi, Steve; Bitsberger, Timothy; Eichner, Matthew, Gabilondo, Jose; Gross,

Jared, Hammer, Viva; Lori Sanatamorena (E-mail), Nickoloff, Peter, Novey, Michael;
Pietrangeli, Fred; Roseboro, Brian; Schulthess, Heidilynne; Whaley, Jean; Wiedman, Mark
Subject: DJ: US Power Markets Showing Few Scars From Enron's Fall

December 6, 2001

US Power Markets Showing Few Scars From Enron's Fall

By JON KAMP and KRISTEN MCNAMARA
Of DOW JONES NEWSWIRES

NEW YORK - U.S. electricity markets continued to hum along Thursday without Enron Corp.'s (ENE)
formerly dominant presence, and with few signs the energy giant's sudden departure is having any impact on
prices.

‘The unwinding of trading positions with Enron has caused some prices to fluctuate recently, But such trading
activity has waned, and fundamental factors like weather conditions and natural gas prices have regained their
place as key market drivers, traders said.

"I think everybody's done unwinding,” said one power trader, who noted that Enron's Web-based trading
platform wasn't showing any prices Thursday. "There's not a market open on EnronOnline.”

Enron wouldn't comment on the status of its trading operations or EnronOnline Thursday,

Even in the Northeast U.S., one area where forward power prices were moved recently by Enron's troubles,
prices were once again moving on normal market conditions, traders said,

“Right now, everything's back to normal," a New York trader said, with "no influence at all" from Enron.

Prices for Northeast electricity scheduled for delivery months from now fell late last week, as traders sought to
resell power previously contracted with Enron into an already saturated market. Early this week, traders who
had purchased electricity from Enron and dissolved those contracts emerged as buyers, sending prices back up.
That trend seemed to end Thursday, as traders finished flattening positions with Enron,

Stronger natural gas futures prices bolstered so-called forward power prices in the Northeast Thursday. The
price of natural gas, fuel for a growing number of power plants, is often a major influence on forward electricity

6

00200000000640


Dorgan noted that Lay, Enron's chairman and chief executive, has agreed to testify at a
future hearing. Dorgan also said the committee will invite Skilling, Enron’s former chief
executive, and Andrew Fastow, Enron's former chief financial officer, to testify at the
same hearing.

“Was this just bad luck, incompetence and greed, or were there some criminal or illegal
actions, as has been suggested by the accounting firm that reviewed Enron's books?”

Dorgan said.

00200000000503


Dow Jones Newswires.

Last week, S&P noted about a $3.3 billion notional, or face value, of Enron credit exposure in the s) ic
collateralized debt obligations, or CDOs, that it rates. In these deals, the credit risk of a portfolio of obligors is
Iransferred to a swap counterparty and to investors who buy notes ranging from high credit quality to slightly
speculative. Enron also was a swap counterparty on some $3 billion face value worth of deals rated by S&P.

And Enron was among the more actively-traded names in the single name credit default swap market,
insurance-like contracts between two counterparties that protect against defaults and other credit events like
restructuring. Estimates from CreditSights in New York put the counterparty exposure to Enron in the default
swap market in the range of $8 billion to $10 billion,

But Enron's credit exposure isn’t concentrated among financial institutions like it may have been at one time,
S&P said Thursday.

The bonds are held mostly by insurance companies, pension and mutual funds, and CDO structures, which, in
tum, may be held by insurance and banking organizations, S&P said,

Among banks, the highest exposures in dollar terms are to be found at Enron's lead banks, J.P. Morgan Chase &
Co. (JPM) and Citigroup Inc. (C), S&P said. But much of that exposure is secured,

As of Thursday, the estimated direct exposure of U.S. insurers’ asset portfolios to securities issued by Enron
and its affiliates is more than $3.5 billion, which is not likely in itself to "negatively affect” the ratings of those
insurers, S&P added.

The derivatives exposures present the more "complicated and incomplete" picture, But Enron, prior to its
demise, was a triple-B-rated counterparty, meaning that institutions on the other side required higher levels of
collateral.

And S&P added that those with Enron exposure often sought to protect themselves by obtaining credit
protection on the Enron name in the form of credit default swaps, letters of credit, or bank guarantees. This
transferred the risk beyond the natural counterparties on derivative transactions, which are otherwise a relatively

small group of companies.
"The mechanism of diversifying risk, by laying it off in a variety of markets, worked,” Azarchs said.
-By Joe Niedzielski, Dow Jones Newswires, 201-938-2039; joc.nicdziclski@dowjones.com

00200000000642


Sutton, Gary

Carleton, Norman

Thursday, December 06, 2001 4:15 PM

Roseboro, Brian; Basberger, Timothy; Wiedman, Mark; Gross, Jared, Gabilondo, Jose;
Sutton, Gary, Nickoloff, Peter, Schultheiss, Heidilynne, Novey, Michael; Hammer, Viva;
Eichner, Matthew

Subject: CAPITAL VIEWS: New SEC Chairman Gets A ‘Dingell-Gram’ (Enron mentioned at end)

December 6, 2001

CAPITAL VIEWS: New SEC Chairman Gets A ‘Dingell-Gram*

By Joun CONNOR
A Dow Jones Newswires Column

WASHINGTON -- Perhaps inevitably, Harvey Pitt, the new chairman of the Securities and Exchange
Commission, has Rep. John Dingell, D-Mich., on his case.

Dingell, the ranking minority member and former chairman of the House Energy and Commerce Committee,
has been spreading apprehension if not outright terror through the nooks and crannies of the federal bureaucracy
for decades with what have come to be known as Dingel!-grams. Now he has fired one off to Chairman Pitt.

"On October 22, 2001, in your first speech as chairman of the Securities and Exchange Commission, you
observed to an audience of accountants that the SEC ‘has not, of late, always been a kinder and gentler place for
accountants,” Dingell wrote in a Dec. 5 letter to Pitt,

The missive (maybe missile is a better word) was released by the Congressman Thursday.

"Afler noting your representation of the AICPA (American Institute of Certified Public Accountants) and cach
of the Big Five Accounting firms for the past two decades, you lamented that ‘somewhere along the way,
accountants became afraid to talk to the SEC, and the SEC appeared to be unwilling to listen to the profession,”
and you vowed that ‘those days are ended," Dingell recounted, laying the groundwork for what came next.

"Lam deeply troubled by the tone and tenor of your remarks," the Congressman said. “Your choice of words
sends the wrong message to auditors, to the SEC staff, and to the investing public. Your message appears to be
that the rules will not be implemented as vigorously as they should be. I trust this is not what you meant to
convey and that you will correct any misunderstanding at the earliest possible time, This is critical, given the
plummeting confidence of investors in the integrity of financial reporting at this time.

“You may choose to repudiate the legacy of your predecessor, Arthur Levitt,” Dingell continued. "But make no
mistake about it; his tenure, and that of his team on these issues - former Chief Accountant Lynn Turner and
former Director of Enforcement Richard Walker - represent a high mark at the SEC in fighting financial fraud,
and the standard against which you will be measured.”

We'll await Pitt's full response, which no doubt will come in due course.

Having dispensed with the pleasantries or lack thereof, the Congressman served up a number of questions that
he asked Pitt to consider in the course of the SEC's investigation into the Enron matter.

Dingel!'s first question reads as follows: "Enron Corp. set up a complex web of off-balance sheet special
purpose entities. What was the underlying business purpose and substance of each of these entities and of
Enron's transactions with them? Enron's current report on Form 8-K dated November 8, 2001, still does not

00200000000080


Mcinerney, Roberta

From: Carleton, Norman
Sent: Tuesday, December 18, 2001 10:46 AM
To: Wiedman, Mark; Bair, Sheila; Bieger, Peter, Bitsberger, Timothy; DeMarco, Edward; Dorsey.

Karen; Ellett, Martha; Ellis, Dina; Gabilondo, Jose; Gross, Jared; Huffman, Lucy, Hughes,
Gerry, McGiver, Tom; Mcinemey, Roberta; Nickoloff, Peter; Roseboro, Brian; Salladin, Anne;
Schultheiss, Heidilynne; Smith, Amy; Sutton, Gary; Tishuk, Brian

Subject: ABI Website (12/17); Sensenbrenner Still Wants Netting Language to Be Part of Bankruptcy
Bill

Sensenbrenner Still Wants Netting Language to Be Part of Bankruptcy Bill

House Judiciary Chairman James Sensenbrenner (R-Wis.) is standing firm in his desire to move so-called
netting language as part of a comprehensive bankruptcy reform bill, a spokesman said, CongressDaily reported.
On Thursday, Sensenbrenner met with House Financial Services Chairman Michael Oxley (R-Ohio) and Federal
Reserve Chairman Alan Greenspan to discuss the possibility of passing netting legislation this year separate
from the beleaguered bankruptcy bill. Federal financial regulators and Financial Services Committee lawmakers
have renewed their calls for that action, in light of the recent collapse of Enron, The netting provisions are
designed to enable quick resolution to complex financial contracts in the event a party in the deal went bankrupt.
However, the netting provisions are one of the few consensus areas in the underlying bankruptey bill, which is
currently in conference, and proponents are not apt to separate them out. “There was agreement between
everyone that the netting provisions [are] very important,” a Sensenbrenner aide said. “He's trying to get the
bankruptcy bill moving, and that's where we are right now.”

00200000000041


Sutton, Gary

From: Carleton, Norman
Sent: Friday, December 21, 2001 10:37 AM
To: Cetina, Jil; Bair, Sheila; Berardi, Steve; Bitsberger, Timothy; Eichner, Matthew, Gabilondo,

Jose; Gross, Jared; Hammer, Viva; Lori Sanatamorena (E-mail); Nickolotf, Peter, Novey,
Michael; Pietrangeli, Fred; Roseboro, Brian; Schultheiss, Heidilynne; Whaley, Jean; Wiedman,
Mark; Bieger, Peter, DeMarco, Edward, Dorsey. Karen; Ellett, Martha; Ellis, Dina; Huffman,
Lucy, Hughes, Gerry, McGivern, Tom; Mcinerney, Roberta; Saladin, Anne; Smith, Amy,
Sutton, Gary, Tishuk, Brian

Subject: DJ: US Congress Faits To Pass Contract Netting Bill

December 21, 2001

US Congress Fails To Pass Contract Netting Bill

Dow Jones Newswires
(This article was originally published Thursday.)

WASHINGTON - Despite an eleventh-hour appeal from Federal Reserve Chairman Alan Greenspan
and pressure from Wall Street, lawmakers again failed to enact legislation that clarifies corporate
bankruptcy laws by allowing companies to quickly settle outstanding derivatives contracts in the event
of an insolvency.

The once-obscure financial issue gained new prominence and urgency on Capitol Hill as lawmakers
struggled to understand the high-finance finagling that lead to the recent Chapter 11 bankruptcy filing
of energy giant Enron Corp. (ENE).

The measure allows institutions to quickly close outstanding derivatives contracts with bankrupt
trading partners by netting all the losses and gains of individual contracts into one deal.

"Enron underscores the importance of it,” said Peggy Peterson, spokeswoman for the House
Financial Services Committee. “The other factor is the recessionary economic climate - the netting
provisions would lower market risk."

Greenspan recently met with committee Chairman Michael Oxley, R-Ohio, and House Judiciary
Chairman James Sensenbrenner, R-Wis., after Oxley held a bruising hearing on financial
improprieties leading to Enron's demise.

Pressure to pass the measure was already building since the Sept, 11 terrorist attacks shut down
U.S, financial markets and destroyed the Manhattan offices of many Wall Street brokerage houses.

"Congress should not fail to enact netting legislation this year," Greenspan and Treasury Secretary
Paul O'Neill wrote House lawmakers a few weeks after the attacks. “Further delays would
unnecessarily place the financial system at greater risk.”

But Sensenbrenner rebuffed requests from Greenspan, Oxley and House leaders to pass the
legislation apart from the larger bankruptcy bill it was attached.

1

00200000000072


Complicated, off-balance sheet transactions were Enron's undoing. Its stock collapsed after a Nov. 8
announcement that the firm had overstated its net income by $569 million over four years.

Creditors are now lining up to collect on the approximately $40 billion in debt owed by Enron.

Of that, roughly $22 billion is on the balance sheet in the form of bank debt, commodity-transaction
financing, bonds and other public securities. The remainder is made up of roughly $7 billion in bonds
and bank debt linked to other assets in special partnerships, as well as an additional $10.7 billion in
“project finance,” a term that typically refers to money lent to build power plants or oil refineries.

-By Dawn Kopecki, Dow Jones Newswires; 202-862-6637; Dawn.Kopecki@dowjones.com

00200000000044


provide an explanation to investors, years after some of these entities were formed. How did the Securities and
Exchange Commission fail to require adequate disclosures over those years?"

His second question (there are 15 in all) referenced FASB statement No. 57, "Related Party Disclosures,” and
wondered in part; "How did Enron avoid making these disclosures and how did Arthur Andersen fail to require
adequate disclosures?"

And so on. Dingell’s last question was: "Who profited from Enron's complex business structure? Where did all
the money go?"

00200000000081


McInerney, Roberta

From: Carleton, Norman
Sent: Friday, December 14, 2001 10:13 AM
To: Bair, Sheila; Berardi, Steve; Bitsberger, Timothy, Eichner, Matthew; Gabilondo, Jose; Gross,

Jared; Hammer, Viva; Lori Sanatamorena (E-mail); Nickoloff, Peter; Novey, Michael;
Pietrangeli, Fred; Roseboro, Brian; Schultheiss, Heidilynne; Whaley, Jean; Wiedman, Mark;
Bieger, Peter, DeMarco, Edward; Dorsey, Karen; Eliett, Martha; Elles, Dina; Huffman, Lucy;
Hughes, Gerry; McGivern, Tom; McInerney, Roberta; Saladin, Anne; Smith, Amy; Sutton,
Gary, Tishuk, Brian

Subject: Enron -- ABI Website Dec. 12

Enron Update

U.S. Congress to Hold First Hearing on Enron Bankruptcy Today

The first congressional hearing into the collapse of Enron Corp. gets underway today with testimony
from auditors of the former energy trading giant but not the top executive of the embattled Houston-
based company, Reuters reported. Enron chief executive Kenneth Lay declined an invitation to
testify before the House Financial Services Committee. “We're disappointed,” panel chairman and
Rep. Michael Oxley (R-Ohio) said. “But this is just] the first in a series of hearings and investigations
that the committee will be conducting.”

Arthur Andersen CEO Joseph Berardino will face questions about when Enron's auditors first realized
there were problems with Enron's accounts. SEC Chairman Harvey Pitt, who has promised a
thorough but quick probe of Enron, also declined an invitation to appear at today’s hearing. Instead,
SEC Chief Accountant Robert Herdman will testify, Also set to testify at the hearing is Richard
Trumka, secretary-treasurer of the AFL-CIO. Oxley has said any further Financial Services committee
hearings on Enron after Wednesday will not occur until 2002.

Congress Demands Records, Briefing From Enron

A congressional committee yesterday demanded that Enron Corp. hand over financial records and
meet with committee staff within 10 days, according to Reuters. The House Energy and Commerce
Committee called on Enron to turn over documents relevant to the committee's investigation into the
company's collapse, said committee Chairman Rep. Billy Tauzin (R-La.) and Rep. James Greenwood
(R-Pa). In letters sent this week to Enron Chairman Kenneth Lay, and Andrew Fastow, the
company's former chief financial officer, Tauzin and Greenwood also requested staff interviews with
both current and former senior Enron employees as well as members of Enron's audit and
compliance committee by Dec. 21.

In their letters, Tauzin and Greenwood requested that a mountain of documents be turned over to the
committee by Dec. 17. The request listed 43 separate aspects of the Enron case in which the
committee has interest, including: earnings restatement decisions, financial ties among Enron officers

and outside partnerships they were involved with, minutes from board and aucit committee meetings
from 1997 to present and correspondence between Enron auditor Arthur Andersen and the company.

J.P. Morgan Sues Enron for $2.1 Billion

J.P. Morgan Chase & Co., one of Enron Corp.'s biggest creditors, yesterday sued the troubled
energy trader for more than $2.1 billion, Reuters reported. The New York-based bank claimed in a
suit filed in the U.S, Bankruptcy Court in New York on behalf of itself and related parties that it has
rights to Enron assets such as accounts receivable, commercial paper, cash, and other property,
which allegedly are not protected in Enron's bankruptcy proceedings.

Enron holds the assets in dispute only as a servicer for the alleged owners, under two accounts

1

00200000000038


Stewart, Elizabeth K.

From: Rao, Geetha

To: & Ba rGvens Maureen; Mils, Marshall; Cristopulos, Greg: Clapp, Gene; Stewart,
Sree reser one ee oe
Ce: Radelet, Steve

Subject: RE: India/Dabhol Meeting

John Hardy from Enron left a message this morning to inform us that Enron is plani on calling the GOI rantee for
toe GEE'S missed payments tomorrow, Around 90 days 893. Caron moked the Sate guareriee for EB's payments
which the State did not honor, as of tast Thursday's . In the meanwhile MSEB submitted a small payment (approx
$2 million). The State had one week to submit the payment to Enron but opted to put in place an expert committee to
review the Dabhol situation instead. In other news, Enron is close to selling its 30% stake in oll/gas fields offshore of
Maharashtra and Gujarat.

00500000001444


markets.

The price for power scheduled for delivery in New York City during summer 2002 traded at $72 per megawatt-
hour Thursday, up $1 from the price seen for the same contract the previous day. Prices for winter power also
rose $1 in New England, pushed up by with natural gas, to trade at S38/MWh,

A similar increase in Midwest and Southeast forward power trading - linked by some traders to unwinding
Enron positions - also appears over with little impact seen on prices, traders said,

Gabilondo, Jose

From: Carleton, Norman
Sent: Thursday, December 06, 2001 4:29 PM
To: Bair, Shela; Berardi, Steve; Bitsberger, Timothy; Eichner, Matthew, Gabilondo, Jose; Gross,

Jared; Hammer, Viva; Lori Sanatamorena (E-mail), Nickoloff, Peter, Novey, Michael;
Pietrangeli, Fred; Roseboro, Brian; Schultheiss, Heidilynne: Whaley, Jean; Wiedman, Mark
Subject: DJ: Vast Dealings With Enron Helped Diversify Risk, Some Say

December 6, 2001

Vast Dealings With Enron Helped Diversify Risk, Some Say

By JOB NIEDZIELSKI
Of DOW JONES NEWSWIRES

NEW YORK -- Enron Corp.'s (ENE) financial dealings rippled throughout global financial markets, but in
some ways, the spread of risk among hundreds of institutions has softened the blow from the biggest bankruptcy
in U.S. history.

Ata time when many companies are putting their house in order with regards to Enron - for cxample, by
disclosing bond holdings or closing out derivatives contracts - Standard & Poor's noted Thursday that credit
exposure to Enron isn't concentrated in any one institution, country, or even industry.

Total credit exposure to Enron likely exceeds the $33 billion on Enron Corp.'s balance sheet, but those
exposures come in many forms, not all of which are equally risky, S&P said. "The good news is that while some
of the exposures may be material, they do not appear, at least on the basis of initial reports, to be life threatening,
to any institution,” the rating agency said.

The tone of S&P's remarks Thursday cchoes that of some reports this week from Wall Street fixed-income
firms. Merrill Lynch said almost every global financial entity has derivative contracts outstanding with Enron.
"This is actually a positive as risk to Enron is spread over a large number of counterparties," Merrill said.

But what's been difficult for agencies like S&P to get at, is the full picture of Enron's exposure throughout
financial markets, such as derivatives. Enron's liabilities to counterpartics, or the amount it owed to third parties
under derivatives contracts, was around $18.7 billion as of Sept. 30, according to Swaps Monitor, the New York
firm that tracks over-the-counter derivatives.

A lot of Enron's derivatives counterparties who didn't want to keep the full share of their Enron exposure on
their trading books may have offloaded some of the risk in the credit derivatives market, or through surety bonds
issued by insurers. That in tum created more financial contracts or synthetic bonds that use credit derivatives
exposed to an Enron failure.

"We, by no means, have gathered the complete picture of who's holding the bag." S&P’s Tanya Azarchs told
7

0200000000641


EI Martha

From: Carleton, Norman

Sent: Friday, January 04, 2002 5:30 PM

To: Roseboro, Brian; Bair, Sheila; Gross, Jared, Wiedman, Mark; Bitsberger, Timothy, Smith, Amy
Ce: Schultheiss, Heidilynne; Nickoloff, Peter; Ellett, Martha; Gabiiondo, Jose; Sutton, Gary
Subject: FW: Draft Memo on Enron/CFMA Articles

Attached is @ memo that details our first atlernpt to clarify what the press has been saying in regards to Enron and the
Commodity Futures Modernization Act.

| talked to the Ken Raisler, a New York lawyer, about this. He told me that Enron did not directly lobby the administration
about the CFMA but was part of an energy coalition, which Mr. Raisler represented, that did lobby on this issue. The
exempt commodity/electonic trading facility provision in the CFMA did not directly benefit Enron since EnronOnline was not
structured as a trading facility as defined in the CFMA. Therefore, es (aie oaeencarien 6 mises proviekcs ate ons
competitors, such as the InterContinental Exchange and TradeSperk, which @s electonic trading facilities.
Enron did get the legal certainty & wanted that the CFTC cannot regulate EnronOniine. ie [(ONS)]

Ken also told me that he had talked to then Assistant Secretary Lee Sachs about the exempt commodity issue. According
to Ken, Lee told him that the Treasury would not oppose the CFMA because of the exempt commodity issue but
encouraged the industry to reach a compromise with the CFTC. In the end, Wall Street firms, energy firms, and the
futures industry, as well as the PWG (including the CFTC) all supported passage of the CFMA.

Original Message-——

From: ‘Schultneiss, Heidtynne

Sent: Friday, January 04, 2002 5:10 PM
To (Carfeton, Norman

‘Subject: (Draft Memo on Enron/CFMA Articles:

Attached is the draft memo on the Enron articles that asserted that the CFTC and PWG objected to the energy exclusion
provisions of the CFMA. The three news articies are downloaded as the latter pages.

ail

ronirw oo

00200000000490


indicating that those mostly unsecured creditors thought they would recoup only 20% to 25% of the money
loaned to Enron.

-By Caro] S. Remond, 201-938-2074; Dow Jones Newswires; carol.remond@dowjones.com
(Phyllis Plitch contributed to this column.)

00200000000030


Sutton, Gary

From: Carleton, Norman
Sent: Friday, December 14, 2001 10:02 AM
To: Bair, Sheila: Bieger. Peter; Bitsberger, Tenothy, DeMarco, Edward, Dorsey, Karen; Etlett

Martha; Ellis, Dina; Gabilondo, Jose; Gross, Jared; Huffman, Lucy, Hughes, Gerry, McGivern,
Tom; Mcinerney, Roberta; Nickoloff, Peter; Roseboro, Brian; Sailadin, Anne; Schultheiss,
Heidilynne; Smith, Amy; Sutton, Gary, Tishuk, Brian, Berardi, Steve; Eichner, Matthew:
Hammer, Viva; Lori Sanatamorena (E-mail); Novey, Michael; Pietrangeli, Fred; Whaley, Jean;
Wiedman, Mark

Subject: Enron and Bankruptcy Bill - ABI Website

ENRON UPDATE

Greenspan, Oxley Meet; Netting Bill Gains Support Following Enron Debacle

Federal Reserve Chairman Alan Greenspan met yesterday with key House lawmakers to
discuss this year's prospects for passing legislation that clarifies corporate bankruptcy laws
by allowing companies to quickly settle outstanding derivatives contracts in the event of an
insolvency, Dow Jones reported. The once-obscure financial issue has gained new
prominence and urgency on Capitol Hill as federal investigators sift through the mess left
behind by Enron's chapter 11 bankruptcy filing, The measure allows institutions to quickly
close outstanding derivatives contracts with bankrupt trading partners by netting all the
losses and gains of individual contracts into one deal.

House Financial Services Chairman Michael Oxley (R-Ohio) invited Greenspan to meet with
House Judiciary Chairman James Sensenbrenner (R-Wis.) after Oxley held a bruising hearing
on Wednesday on financial improprieties leading to Enron's demise. Complicated, off-balance
sheet transactions were the company’s undoing. Its stock collapsed after a Nov. 8
announcement that the firm had overstated its net income over four years by $569 million.
Creditors are now lining up to collect on about $40 billion in debt owed by Enron.

“Congress should not fail to enact netting legislation this year," Greenspan and Treasury
Secretary Paul O'Neill wrote House lawmakers a few weeks after the attacks. “Further delays
would unnecessarily place the financial system at greater risk." Lawmakers are now
questioning whether the legislation, which is also attached to a broader bankruptcy bill in
both chambers, could be applied to Enron's bankruptcy case if the bill passes this year.
Federal securities officials said it was unclear whether they could apply new contract netting
laws retroactively. Oxley hopes to get the bill passed by next week, before Congress finishes
its work for 2001.

House Probe Seeks Andersen's Records On Enron Audits

The House Energy and Commerce Committee yesterday asked Arthur Andersen to provide
records relating to its audits of Enron Corp., Dow Jones reported. At the same time, the
committee sent a letter to former Enron Chief Executive Jeffrey Skilling, requesting an
interview with committee investigators within the next two weeks, The committee also
formally sought interviews with David Duncan, Andersen's partner in charge of the company's
Enron account, and Andersen employees involved in the company’s audits. The requests
came after Joseph Berardino, Andersen's chief executive, told the House Financial Services
Committee on Wednesday that the auditing and consulting firm didn’t receive critical
information from its client concerning the special-purpose entities that brought about Enron's

1

0200000000078


Lay joined the Union of Concerned Scientists and environmental groups in calling for curbs on
carbon in the atmosphere. The Clinton administration was supportive, but this year the Bush
administration reneged on a campaign pledge to impose limits on greenhouse gas emissions from
coal-burning power plants.

A multimillion-dollar lobbying campaign in Congress to secure legislation requiring states to
institute retail electricity deregulation fared even worse.

Enron hired former New York representative Bill Paxon, a leading conservative, to run
Americans for Affordable Electricity, which commissioned studies and recruited business
support for deregulation. But the legislation never made it out of a congressional subcommittce.
At the same time, Enron was growing restive over the slow pace of deregulation in the wholesale
electricity market, the core of its business. Large parts of the country, especially the Southeast,
were still monopolized by regulated utilities that limited the opportunity for trading gas,
electricity and energy derivatives.

Political Pragmatism

Enron's political pragmatism was demonstrated in the 1998 New York Senate election, when it
dropped its support of the Republican incumbent, Alfonse M. D'Amato, after Democrat Schumer
endorsed Enron's goal of wholesale deregulation, sources said, Lay reciprocated by hosting
several fundraisers for Schumer, and Enron's political action committee contributed $7,500 to the
Schumer campaign.

The company’s lobbying team expanded along with its political spending. It outgrew the two-
person operation that cxisted in 1989 and began to reflect Enron's interest in everything from
pipeline safety and derivatives trading to Overseas Private Investment Corp. loan guarantees. By
last year, its lobbying expenses exceeded $2 million a year and covered a raft of big-name
consultants, such as former Montana governor Mare F. Racicot, the new Republican National
Committee chairman, and former top aides to House Majority Leader Richard K. Armey (R-
Tex.) and House Majority Whip Tom DeLay (R-Tex.)

The hazards of Enron's efforts to connect with both parties were evident last year, when shortly
before the November election, the company picked a Clinton administration Treasury official,
Linda Robertson, to run its Washington office.

A perturbed DeLay, whose campaign and related funds had received more than $100,000 from
Enron and Lay, briefly "excommunicated" Enron, a House source said. Robertson was not
invited to a serics of meetings of electricity lobbyists held in DeLay’s office last July, though an
Enron official did finally attend the sessions.

Enron had more success when Congress overwhelmingly approved legislation last year
containing a provision precluding the Commodity Futures Trading Commission (CFTC) from
regulating Enron's trading in energy derivatives. These instruments are traded largely between
electricity dealers and big wholesale consumers, which use them to hedge against price swings
that could adversely affect their businesses.

00200000000497


CORRECTION

Wednesday, December 26, 2001; Page A02

A Dec, 25 article incorrectly reported the action taken by the Senate Banking Committee, chaired
by Phil Gramm (R-Tex.), on a bill that exempted much of Enron Corp.'s trading activities from
federal regulation. The legislation was approved by the Senate Agriculture Committee.

© 2001 The Washington Post Company

00200000000499


Enron Executives Face Subpoenas

Senate Panel Also Orders Testimony of Directors
By Peter Behr and Dan Morgan

Washington Post Staff Writers

Thursday, January 3, 2002; Page B01

A Senate committee announced yesterday that it is subpoenaing top executives and directors of
the bankrupt Enron Corp. to determine their roles in the Houston company’s epic collapse.

Three other congressional committees already are digging into the Enron failure, but the
subpoenas announced yesterday are believed to be the first of the congressional probes, Among
the likely recipients is Wendy Gramm, an Enron director who is the wife of Sen. Phil Gramm (R-
Tex.),

Sen, Carl M. Levin (D-Mich.), chairman of the Governmental Affairs Committee's permanent
subcommittee on investigations, said the panel also will subpoena financial and trading records
from Enron and audit documents from its accountant, Arthur Andersen LLP.

Enron's attomey, Robert Bennett, called the subpoenas “totally unnecessary” and said "we are
fully cooperating with Congress.”

Although Enron Chairman Kenneth L, Lay did not show up for two earlier congressional
hearings on Enron's bankruptcy, he has agreed to testify next month before the Senate Commerce
Committee, Bennett said.

Enron has turned over nearly three dozen boxes of documents to the House Energy and
Commerce Committee, Bennett said. "I don't question the legitimacy of an inquiry [into Enron's
failure}, but it’s not a measured approach to have a half-dozen different committees doing this at
the same time," he said, “It can lead to a circus atmosphere and a lot of wasted time and effort."
The full Governmental Affairs Committee has scheduled a hearing for Jan. 24 on Enron's use of
a large number of partnerships that kept billions of dollars of corporate debt off the company's
books. The hearing will also examine whether federal regulators missed warning signs of the
company’s trouble,

Accounting errors involving the private partnerships caused Enron to overstate its earnings by
half a billion dollars over the past four years. Enron's disclosure of the overstatement, in
November, triggered a final plunge in the company’s stock price and the company's bankruptcy
filing Dec. 2.

Sen, Joseph |. Lieberman (D-Conn.), chairman of the full committee, said, "The focus is, how
did this corporation collapse, and what can we do to make sure that something like this never

happens again?"

Lieberman's committee joins an already crowded field of Enron inquiries. The House Energy and
Commerce Committee has sent investigators to interview Enron officials in Houston.

00200000000500


Sutton, Gary

From: Carleton, Norman
Sent: Friday, December 14, 2001 10:15 AM
To: Bair, Sheila; Berardi, Steve; Bisberger, Timothy, Eichner, Matthew, Gabilondo, Jose; Gross,

Jared; Hammer, Viva; Lori Sanatamorena (E-mail), Nickoloff, Peter; Novey. Michael,
Pietrangeli, Fred; Roseboro, Brian; Schultheiss, Heiditynne; Whaley, Jean; Wiedman, Mark;
Bieger, Peter; DeMarco, Edward; Dorsey, Karen, Ellett, Martha, Ellis, Dina; Huffman, Lucy:
Hughes, Gerry, McGivern, Tom; Mcinemey, Roberta; Saladin, Anne; Smith, Amy; Sutton,
Gary, Tishuk, Brian

Subject: Enron -- Dec. 11 ABI Website

Enron Bankruptcy Update

Enron Japan, Affiliates Seek Bankruptcy Protection

Enron Japan Corp., a wholly-owned subsidiary of failed U.S. energy giant Enron Corp. announced
that it and its three Japanese affiliates filed for bankruptcy yesterday, Dow Jones reported. The
move follows Enron's Dec. 2 chapter 11 bankruptcy filing in New York. “Enron Japan Corp., Enron
Japan Marketing Corp., Enron Japan Funding Corp. and E Power Corp. filed for bankruptcy, ..in
accordance with the Japanese bankruptcy law,” Enron Japan said,

Enron Court Hearing Pushed Back to Dec. 20

An Enron Corp. hearing has been rescheduled for Dec, 20 from Dec. 14, Doe Jones reported. The
hearing, the second since the energy-trading company filed for chapter 11 bankruptcy protection on
Dec. 2, will pertain to Enron's request to continue paying utility companies for electric bills. Judge
Arthur Gonzalez, who is presiding over Enron's case will also hear an interim request at this time to
retain Blackstone Group as financial adviser in Enron's restructuring.

600 Enron Employees Got Bonuses

Nearly 600 Enron Corp. employees deemed critical to running its prized energy trading business
received more than $100 million in bonuses last month as the company faced a merger and then
bankruptcy, according to the Associated Press. About half of those bonuses, given to 75 traders in
early November when Enron was planning to merge with smaller rival Dynegy Inc., may have to be
repaid because the merger collapsed, said Todd Zywicki, a !aw professor at George Mason
University

Enron spokesman Mark Paimer said the $50 million given to traders before the merger crumbled
“was done in discussions with Dynegy to protect and preserve the value of the trading organization
through what we thought was going to be a fairly long merger process.” Dynegy spokeswoman
Debbie Fiorito said that Dynegy didn't approve or endorse those bonuses. Enron distributed an
additional $55 million to 500 employees two days before filing for bankruptcy as an incentive for them
to remain with the company while Enron works to emerge from chapter 11.

00200000000075


To; Max B. Pulgar-Vidal
cc

Subject: Re: DR Power Sector - Cogentrix (Document link: Max B. Pulgar-Vidal)
Max:
Aide memoire is almost ready. | hope to finish it tonight.

IDB has distributed the documentation on the Cogentrix project to ts Board.
Presentation date is December 15 and approval is expected.

[(b)(5)]

rogards.
Philippe.

Max B. Pulgar-Vidal
1207/99 06:12 PM
Extn: 34839 Loc3c

te. Pappe JP. Durand, Susan G. Goldmark

Subject: DR Power Sector - Cogentrix

Orsaiia:

| met with Philippe Durand earker today. He is finalizing the Akte-Memoire and

wil get back to me tomorrow. ‘Once | meet with him again, we should meet with
you. Meanwhile, a few items for your information:

((b)(5)]

00500000001186


Harvey, Reavie

From: Jude Wanniski [jwanniski@polyconomics com]
Sent: Sunday, January 13, 2002 12:35 PM
on LM aagomae neared
ct reavie. harvey! reas. pov
Subject: enron
Sensational piece in the NYT magazine..., topped off by a terrific

appearance on Sunday. Tell O'Neill my only concern is the corporate
tax-rebate element in the stimulus bill... which had megabucks for Enron.
If it came from the White House folks, ie Lindsey, it will be a problem. fT
assume if it had passed last year, Snron could have collateralized it and
stayed alive.

Here is a note I sent to Pat Buchanan on his Meet the Press appearance with
Nader. Please show it to the Secretary. The only point in his interview
that I questioned was the report that 72% of the people think the economy
will improve this year. It won't, but the American people are reflecting
what they are being told by the administration and Lindsey's "textbook"
economics. Deflation grinds away and Greenspan remains in denial.

>Date; Sun, 213 Jam 2002 12:32:06 -0S00

»To: Pat Buchanan

>From: Jude Wanniski <jwanniskiepolyconomics com>
>Subject: nader is right

>
Dear Pat.... A good show with Nader on Meet the Press. But.....

>
>You would have gotten a lot more votes in 2000 if you had Nader's position
on how to keep America a “western nation,” Change our foreign policy and
export growth instead of the IMF/World Bank poison!! *Foreigners* would
rather stay home than come here to make a living, There is no single thing
we could do right now to make that happen than a restoration of the
dollar/gold link. When the dollar was as good as gold, the rest of the
world could link to it and grow around a stable unit of account, Under
Bretton Woods, there were no “IMF loans” to desperately poor third-world
nations. The IMF role was to monitor the BW system and provide short-term
help to countries trying to avoid devaluation from the $35 central gold
link. Private banks arranged the third world loans and did a good business
when they got paid back. After 1971, with the floating dollar, growth
stopped in the third world and the banks would up with bad loans. The IMP
was then given the job of *collecting," which meant getting the hard money
out of the US taxpayers and “giving” it to the bankrupt country, which of
course never saw the money. It went to the banks to clear up the bad loans.
It was a corrupt system from the start and has become totally corrupt by
now, You know all this, but you still approach the problem with rhetoric
that you should know by now does not fly with the American people. Put up
big fences to keep them out. On this, Nader is right, although I have not
heard him express himself this way in his campaigns. He hasn't taken on the
IMF, has he?

aJude

>

»PS When are you going to start jumping on the monetary deflation? A
recognition of it is the path to a gold standard, which solves the problem
that you and Nader and I all worry about, for our different reasons.

>

>

00100000000751


O1/11/02 16:33 FAX 202 225 5185 GOV _REF MIN @oo1

—

| rasan

COMMITTEE ON GOVERNMENT REFORM |
| DEMOCRATIC STAFF OFFICE
HON, HENRY A. WAXMAN
RANKING MINORITY MEMBER
B350A RAYBURN HOUSE BUILDING |

PHONE (202) 225-5051
FAX (202) 225-4784, 8185

DATE:_January 11, 2002 _
TO:__ Secretary Paul H. O’Nelll__

FAX:_(202) 622 - 0073
FROM:_Rep. Henry A. Waxman __
SUBJECT:

|

NO. OF PAGES:_6 _
(INCLUDING COVER SHEET)

COMMENT:

IF THERE IS A PROBLEM WITH THIS
TRANSMITTAL, PLEASE CALL OFFICE ASAP.

0010000000586 _


receivables deals, the suit claims. The assets are not property of Enron because they were sold
before Enron's Dec. 2 bankruptcy filing. J.P. Morgan acted as an agent in two credit facilities whose
proceeds helped fund two accounts receivables transactions between Enron and Sequoia Financial
Assets, a special purpose, bankruptcy-related entity, the sult said. Sequoia allegedly bought the
receivables from Enron and reinvested the money collected on the bills in short-term paper issued by
Enron and its Enron North America unit.

Dynegy Files Motion to Dismiss Or Transfer Enron Case

Dynegy Inc. filed a motion on Monday asking the federal bankruptcy court in the Southern District of
New York to dismiss Enron's $10 billion breach-of-contract lawsuit against Dynegy, or, to transfer the
case to Houston, Dow Jones reported. Enron's claims against its former merger partner “in no way
relate to federal bankruptcy law or the administration of these chapter 11 cases,” according to the
filing.

Dynegy asked the New York bankruptcy court to abstain from hearing Enron's suit against Dynegy,
which allegedly involves state rather than federal breach-of-contract claims. Alternatively, the case
should take place in Texas - where Enron and most of its units are based - instead of New York,
where the “only link to the dispute is ... hung upon the gossamer thread of the location of (Enron's)
subsidiary Enron Metals and Commodity Inc.”

00200000000039


to enable the company and its trading partners to hedge, among other things, against rapidly Nuctuating energy
prices and foreign exchange volatility - stabilizing otherwise uncertain markets. By its own account,as of
December 2000, Enron was involved in roughly $20 billion of derivative contracts on which it owed its
counterparties. More recent numbers aren't available.

Thoughts of an Enron bankruptcy jogged memories of past filings, such as the case of Drysdale Government
Securities Inc., which involved public entities being left on the hook for millions of dollars in uncollateralized
government repurchase agreements.

But bankruptcy laws have evolved significantly since the 1982 collapse of Drysdale sent shockwaves through
the financial community and forced banks to pay out tens of millions of dollars to cover Drysdale's obligations
to other government securities firms.

More recently, Orange County's 1994 bankruptcy following its derivatives debacle and the bitter dispute
surrounding German's Metallgesellschaft Ag for breach of forward petroleum contracts suggests that
acrimonious and lengthy litigations might be in the offing. In the latter case, many counterparties scttled out of
court and took “haircuts” after a judge ruled that independent petroleum marketers who entered into long-term
hedging contracts as protection against escalating fuel prices could suc the metals and engineering conglomerate
for breach of contract.

But the extent to which those cases provide any lessons for Enron and its derivative counterparties remains to
be seen, experts said, depending on what sticky and complex issues might arise in potential court actions,

Meanwhile, although Enron has yet to file for bankruptcy, most of its derivative counterparties are likely
already scrambling to exit their trades,

‘That's because Dynegy Inc.'s (DYN) decision Wednesday to abandon its plan to rescue Enron all but sealed the
fate of the ailing Houston energy trader which has been hobbled by accounting irregularities and unquantified
off-balance-sheet liabilities, Enron shares plummeted from about $90 a share last summer to 36 cents Thursday.

Derivative contracts are built around master agreements developed by the International Swaps and Derivatives
Association. As far as its power purchase deals go, Enron is said to have favored master agreements drafted by
the Edison Electric Institute, which draws heavily on ISDA's blueprint.

‘Those master agreements include certain events under which a counterparty can terminate a transaction. Among
those are failure to pay, failure to deliver and, of course, bankruptcy.

Whether counterparties will be able to claim exemption from the automatic stay that prevents anyone from
terminating contracts with a company that filed for bankruptcy will hinge on the type of deals they're a party to
and whether they mect certain statutory requirements, Although Enron and its lawyers are likely to nitpick the

unwinding of cach and every contract involving the company, legal experts noted that Enron's fondness for EEL
agreements should help those entangled in power purchase agreements to liquidate their positions since these

contracts treat all participants as forward contracts merchants. Such merchants are exempt from the stay
stipulated by section 362A of the bankruptcy code.

Key to how well or poorly counterparties will make out now that Enron’s business has been all but dried out, is
how much if any collateral protects their transactions,

So far, it's unclear how much of Enron's derivative transactions were collateralized. But lawyers familiar with
the matter said it was likely that a large amount of those contracts were not collateralized.

That's likely to be bad news for some counterparties. Because if they're owed money by Enron on their netted
derivative exposure, they'll have to join other unsecured creditors, likely receiving little of their claims, The
bonds and bank debt of Enron took a nose dive after Dynegy rescinded its merger offer, with trading levels

2

00200000000029


Sone Nondoy, January 22 2001 3:14 PM
To: julos, Greg; Grewe, Maureen; Mills, Marshall; Sampliner, Gary; Clapp, Gene
Subject: RE: India/Dabhol Meeting

We will go ahead and have the meeting on Wednesday January 24 at 3 pm. This time works
for Greg as well. Thanks, geetha

eiahe Original Message-----

Prom: Christopulos, Greg

Sent: Monday, January 22, 2001 3:04 PM

To: Rao, Geetha; Grewe, Maureen; Mills, Marshall; Sampliner, Gary;
Clapp, Gene ‘
Cc: Radelet, Steve

Subject: RE: India/Dabhol Meeting

Is there a chance this meeting can be moved up an hour or so?

<s- Original Message----~

From: Rao, Geetha

Sent: Monday, January 22, 2001 3:01 PM
To: Grewe, Maureen; Mills, Marshall; Sampliner, Gary; Christopulos,
Greg; Cla Gene

Cec: Radel Steve

Subject: FW: India/Dabhol Meeting

Attached is background material for the Enron meeting on Wednesday. Pls. note Mr. John
Hardy will also be attending.

-+--+-Original Message----~-
From: Tom.Briggssenron.com [mailto:Tom.Briggs@enron.com)
Sent: Monday, January 22, 2001 1:54 PM

To: geetha.rao#do.treas.gov

Subject: India/Dabhol Meeting

Geetha,

My apalesies for the delay in sending this material. I have lost both my
regular assistant and my temp so I am a bit overwhelmed.

ohn Hardy will be attending the t: t ¢ 3.[(b)(6)
. mene ry ey ee

address of the meeting I would appreciate it. I managed to lose that as
well.

John and I have a brief agenda: 1) we want to update you on Dabhol and 2)
we want to discuss way in which the USG may become involved in encouraging
market reform necessary to extract value out of our wating asset.
Specifically, we want to focus on refgorm at the Indian federal level that
will be necessary to deliver power to customers other than MSEB.

We look forward to meeting you tomorrow.
(See attached file: Dabhol PPA - DC Talking Points.doc)

00500000001468


From:
To:
Date:
‘Subject:

[(b)(5)]

ex.mail.’

ex.mail( Bruce,
11/19/99 10:51am
Re: OR Power Project

org”
|_Juba%iadb@worldbank.org’),Oom13.00P..

00500000001209


From: ex. mail.“Icrawlord@worldbank.org”

To: ex mail( gay. sills”,"greg.christopulos”,"hofschire...
Date: 8/25/99 2:22pm

Subject: Dominican Republic -- US Concerns Follow-up

FYI, attached a message from the World Bank's country director indicating follow
up action she took in Dominican Republic pursuant to concems we had raised with
her about the investment climate.

Forwarded by Todd W. Crawford/Person/World Bank EDs on
(08/25/99 02:20 PM

Orsala Kalantzopoulos
08/12/99 04:55 PM
Extn: 82636 Loc3c

To: Todd W. Crawford Eds
co:

Subject: Dominican Republic - US Concems Follow-up
Todd:

J was in the OR this week for couple of days, During my visit | met with USAID
‘and staff from the economic section of the US Embassy. {(b)(5)]

Please give me a call if you would like to discuss this further. Regards,
Crsata

Todd Crawford
Advisor, Office of U.S. Executive Director

Phone: 202-458-0112
Fax: 202-477-2967

email; tcrawford@woridbank.org

00500000001213


Mcinerney, Roberta

From: Carleton, Norman
Sent; Friday, December 14, 2001 10:02 AM
To: Bair, Sheila; Bieger, Peter; Bitsberger, Timothy; DeMarco, Edward; Dorsey, Karen; Ellett,

Martha; Ellis, Dina; Gabilondo, Jose; Gross, Jared; Huffman, Lucy, Hughes, Gerry, McGivern,
Tom; Mcinerney, Roberta; Nickoloff, Peter; Roseboro, Brian; Salladin, Anne; Schultheiss,
Heidilynne; Smith, Amy; Sutton, Gary; Tishuk, Brian; Berardi, Steve; Eichner, Matthew;
Hammer, Viva; Lori Sanatamorena (E-mail); Novey, Michael, Pietrangeli, Fred; Whaley, Jean;
Wiedman, Mark

Subject: Enron and Bankruptcy Bill - ABI Website

ENRON UPDATE

Greenspan, Oxley Meet; Netting Bill Gains Support Following Enron Debacle

Federal Reserve Chairman Alan Greenspan met yesterday with key House lawmakers to
discuss this year's prospects for passing legislation that clarifies corporate bankruptcy laws
by allowing companies to quickly settle outstanding derivatives contracts in the event of an
insolvency, Dow Jones reported. The once-obscure financial issue has gained new
prominence and urgency on Capitol Hill as federal investigators sift through the mess left
behind by Enron's chapter 11 bankruptcy filing. The measure allows institutions to quickly
close outstanding derivatives contracts with bankrupt trading partners by netting all the
losses and gains of individual contracts into one deal.

House Financial Services Chairman Michael Oxley (R-Ohio) invited Greenspan to meet with
House Judiciary Chairman James Sensenbrenner (R-Wis.) after Oxley held a bruising hearing
on Wednesday on financial improprieties leading to Enron's demise. Complicated, off-balance
sheet transactions were the company’s undoing. Its stock collapsed after a Nov. 8
announcement that the firm had overstated its net income over four years by $569 million.
Creditors are now lining up to collect on about $40 billion in debt owed by Enron.

“Congress should not fail to enact netting legislation this year,” Greenspan and Treasury
Secretary Paul O'Neill wrote House lawmakers a few weeks after the attacks. “Further delays
would unnecessarily place the financial system at greater risk.” Lawmakers are now
questioning whether the legislation, which is also attached to a broader bankruptcy bill in
both chambers, could be applied to Enron's bankruptcy case if the bill passes this year.
Federal securities officials said it was unclear whether they could apply new contract netting
laws retroactively. Oxley hopes to get the bill passed by next week, before Congress finishes
its work for 2001.

House Probe Seeks Andersen's Records On Enron Audits

The House Energy and Commerce Committee yesterday asked Arthur Andersen to provide
records relating to its audits of Enron Corp., Dow Jones reported. At the same time, the
committee sent a letter to former Enron Chief Executive Jeffrey Skilling, requesting an
interview with committee investigators within the next two weeks. The committee also
formally sought interviews with David Duncan, Andersen's partner in charge of the company's
Enron account, and Andersen employees involved in the company’s audits. The requests
came after Joseph Berardino, Andersen's chief executive, told the House Financial Services
Committee on Wednesday that the auditing and consulting firm didn't receive critical
information from its client concerning the special-purpose entities that brought about Enron's

00200000000056


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Saeeee 2157 Ravounw Houde Otrice Busnes SS
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won home Qoernons
January 11, 2002

The Honorable Paul H. O'Neill
Secretary of the Treasury

15® St. & Pennsylvania Ave., NW
Washington, DC 20220

The Honorable Donald L. Evans
Secretary of Commerce

14° St, & Constitution Ave., NW
Washington, DC 20230

Dear Secretary O'Neill and Secretary Evans;

J am writing to request information about your communications with Enron Chairman
Kenneth L. Lay and possibly other Enron officials or representatives prior to the company’s
bankruptcy filing. The purpose of the request is to determine why the Administration spparently
did nothing to mitigate the harm of the Enron bankruptcy to thousands of its employees and
shareholders. I am also interested in knowing why it has taken so long to learn that two Cabinet
Secretaries had early warning of Enron's impending bankruptcy.

News accounts of January 11, 2002, indicate that Secretary O'Neill received calls from
Mr. Lay on October 28 and November 8.' In one or both of these calls, Mr. Lay reportedly
informed Secretary O’Neill that he was concerned that Enron might not be able to meet its
financial obligations and that the results could be similar to those that occurred when Long-Term
Capital Management went bankrupt. Mr. Lay reportedly also had 2 conversation on October 29
with Secretary Evans. In this conversation, Mr. Lay apparently stated “that he was having
problems with his bond rating and he was worried about its impact on the energy sector,” and

‘Enron Asked for Help from Cabinet Offictals, Washington Post (Jan. 11, 2002); Enron
Contacted 2 Cabinet Officers before Collapsing, N.Y. Times (Jan. 11, 2002).

‘00100000000581


Enron goes global

Houstombased corporation Enron
annoanced an annual turnover last year
‘of $6bn ~ making it one of the world’s
largest gas companies. Aithoagh most of
their business is still in the United States,
the company’s greatest growth is through
contracts beyond North Anverica.

‘According to Rod Gray, Enron's senior
vice president, finance and treasury, the
world will mced another 100,000MW of
power over the next 10 years, most of
that outside the US. If gasfired stations
account for even a small percentage at
that, it is still a very big market

“We are looking at countries with the
following characteristics: those that are
peivatizing their infrastructure, these thal
have a natural gas potential which is
underutilised, and thase with a need for

generation.
In the UK, Enron is in negotiation on
four more plants, onc of which, valued at
$400m, could go ahead later this year

Another area of focus is Latin America,
where Enroe owns 3,800 miles of pipeline
‘and has just completed a
in Guatemala financed by

funding. Enron is also in discussion on
possible future projects in Malaysia,
Indonesia and China,

Faster Burope and the former Soviet
Union have proved frustrating frustrating
markets for Enron. A number of projects
are under consideration, including one in
Bitterfeld, in eastern Germany, and &
$200m project for Russia's Gazprom to
update part of its pipeline system and
compressor stations. “But Is a very slow
process, and the lack of a sound legal
structure is a great problem in that
region,” says Gray.

Much more promising is a possible
$2ba SOOMW station in Turkey, where
Enroa is being aivised by
Peabody and Bankers Trust, in conjunc-
tion with the UK's Midlands Electricity.

DEALS
[comin UP |

expects Turkey's relatively devel

Gray
oped capital markets to play a significant
role in the financing of the project.

In India the company is closest to suc
cess on a new development. Enroa pro
poses building a 2OCOMW power station

south of Bombay. The project will cost
between $2bn and Sn, to be bail in two
ef

phases, starting a5 4
operation which will later be converted to
liquified natural gas (LNG)

It wasn't at all the
agonising experience
you often hear about
a

“The project, in which Enron is being
advised by Barclays Bank, is to be funded
through a combination of World Bank,
US Exportimport Bank

at least $100m in rupee financing to be
raised from the Indian capital markets.
“Most of the risks in the natural gas
sector are similar to other sectors, even
though the factors may dif
fer,” notes Gray. “So- of course the

00500000001421


receivables deals, the suit claims, The assets are not property of Enron because they were sold
before Enron's Dec. 2 bankruptcy filing. J.P. Morgan acted as an agent in two credit facilities whose
proceeds helped fund two accounts receivables transactions between Enron and Sequoia Financial
Assets, a special purpose, bankruptcy-related entity, the suit said, Sequoia allegedly bought the
receivables from Enron and reinvested the money collected on the bills in short-term paper issued by
Enron and its Enron North America unit.

Dynegy Files Motion to Dismiss Or Transfer Enron Case

Dynegy Inc. filed a motion on Monday asking the federal bankruptcy court in the Southern District of
New York to dismiss Enron's $10 billion breach-of-contract lawsuit against Dynegy, or, to transfer the
case to Houston, Dow Jones reported. Enron's claims against its former merger partner “in no way
relate to federal bankruptcy law or the administration of these chapter 11 cases,” according to the
filing.

Dynegy asked the New York bankruptcy court to abstain from hearing Enron's suit against Dynegy,
which allegedly involves state rather than federal breach-of-contract claims. Alternatively, the case
should take place in Texas - where Enron and most of its units are based - instead of New York,
where the “only link to the dispute is ... hung upon the gossamer thread of the location of (Enron's)
subsidiary Enron Metals and Commodity Inc.”

0200000000232


Those master agreements include certain events under which a counterparty can terminate a
transaction. Among those are failure to pay, failure to deliver and, of course, bankruptcy.

Whether counterparties will be able to claim exemption from the automatic stay that prevents anyone
from terminating contracts with a company that filed for bankruptcy will hinge on the type of deals
they're a party to and whether they meet certain statutory requirements. Although Enron and its
lawyers are likely to nitpick the unwinding of each and every contract involving the company, legal
experts noted that Enron's fondness for EE| agreements should help those entangled in power
purchase agreements to liquidate their positions since these contracts treat all participants as forward
contracts merchants. Such merchants are exempt from the stay stipulated by section 362A of the
bankruptcy code.

Key to how well or poorly counterparties will make out now that Enron's business has been all but
Gried out, is how much if any collateral protects their transactions.

So far, it's unclear how much of Enron's derivative transactions were collateralized. But lawyers
familiar with the matter said it was likely that a large amount of those contracts were not
collateralized.

That's likely to be bad news for some counterparties. Because if they're owed money by Enron on
their netted derivative exposure, they'll have to join other unsecured creditors, likely receiving little of
their claims. The bonds and bank debt of Enron took a nose dive after Dynegy rescinded its merger
offer, with trading levels indicating that those mostly unsecured creditors thought they would recoup
only 20% to 25% of the money loaned to Enron,

-By Carol S, Remond, 201-938-2074; Dow Jones Newswires: carol.remond@dowjones.com

(Phyllis Plitch contributed to this column.)

00200000000032


McInerney, Roberta

From: Carleton, Norman

Sent: Thursday, November 29, 2001 6:13 PM

To: Bair, Sheila; Bieger, Peter; Bisberger, Timothy; DeMarco, Edward; Dorsey, Karen; Ellett,
Martha; Ellis, Dina, Gabilondo, Jose; Gross, Jared; Huffman, Lucy; Hughes, Gerry, McGivern,
Tom; Mcinemey, Roberta; Nickoloff, Peter; Roseboro, Brian; Salladin, Anne; Schutthaiss,
Heidilynne; Smith, Amy, Sutton, Gary, Tishuk, Brian; Berardi, Steve; Cetina. Jill; Eichner,
Matthew; Hammer, Viva; Lori Sanatamorena (E-mail); Novey, Michael; Pietrangeli, Fred;
Sharer, James; Whaley, Jean; Wiedman, Mark

Subject: DJ: IN THE MONEY-2:Collateral Key To Counterparties Recovery

November 29, 2001

IN THE MONEY-2:Collateral Key To Counterparties Recovery

Dow Jones Newswires

Thoughts of an Enron bankruptcy jogged memories of past filings, such as the case of Drysdale
Government Securities Inc., which involved public entities being left on the hook for millions of dollars
in uncollateralized government repurchase agreements.

But bankruptcy laws have evolved significantly since the 1982 collapse of Drysdale sent shockwaves
through the financial community and forced banks to pay out tens of millions of dollars to cover
Drysdale's obligations to other government securities firms.

More recently, Orange County's 1994 bankruptcy following its derivatives debacle and the bitter
dispute surrounding German's Metallgeselischaft Ag for breach of forward petroleum contracts
Suggests that acrimonious and lengthy litigations might be in the offing. In the latter case, many
counterparties settled out of court and took “haircuts” after a judge ruled that independent petroleum
marketers who entered into long-term hedging contracts as protection against escalating fuel prices
could sue the metals and engineering conglomerate for breach of contract.

But the extent to which those cases provide any lessons for Enron and its derivative counterparties
remains to be seen, experts said, depending on what sticky and complex issues might arise in
potential court actions.

Meanwhile, although Enron has yet to file for bankruptcy, most of its derivative counterparties are
likely already scrambling to exit their trades.

That's because Dynegy Inc.'s (DYN) decision Wednesday to abandon its plan to rescue Enron all but
sealed the fate of the ailing Houston energy trader which has been hobbled by accounting
irregularities and unquantified off-balance-sheet liabilities. Enron shares plummeted from about $90
a share last summer to 36 cents Thursday.

Derivative contracts are built around master agreements developed by the International Swaps and
Derivatives Association. As far as its power purchase deals go, Enron is said to have favored master
agreements drafted by the Edison Electric Institute, which draws heavily on ISDA's blueprint.

1

00200000000031


Ellett, Martha

From: Carleton, Norman
Sent: Tuesday, December 18, 2001 10:46 AM
To: Wiedman, Mark; Bair, Sheila; Bieger, Petar, Bitsberger, Timothy; DeMarco, Edward; Dorsey,

Karen; Ellett, Martha; Ellis, Dina; Gabilondo, Jose; Gross, Jared; Huffman, Lucy; Hughes,
Gerry, McGivern, Tom; Mcinemey, Roberta; Nickoloff, Peter, Roseboro, Brian; Salladin, Anne;
Schuttheiss, Heiditynne; Smith, Amy, Sutton, Gary, Tishuk, Brian

Subject: ABI Website (12/17): Sensenbrenner Still Wants Netting Language to Be Part of Bankruptcy
Bill

Sensenbrenner Still Wants Netting Language to Be Part of Bankruptcy Bill

House Judiciary Chairman James Sensenbrenner (R-Wis.) is standing firm in his desire to move so-called
netting language as part of a comprehensive bankruptcy reform bill, a spokesman said, CongressDaily reported.
On Thursday, Sensenbrenner met with House Financial Services Chairman Michael Oxley (R-Ohio) and Federal
Reserve Chairman Alan Greenspan to discuss the possibility of passing netting legislation this year separate
from the beleaguered bankruptcy bill. Federal financial regulators and Financial Services Committee lawmakers
have renewed their calls for that action, in light of the recent collapse of Enron, The netting provisions are
designed to enable quick resolution to complex financial contracts in the event a party in the deal went bankrupt.
However, the netting provisions are one of the few consensus arcas in the underlying bankruptcy bill, which is
currently in conference, and proponents are not apt to separate them out. “There was agreement between
everyone that the netting provisions [are) very important,” a Sensenbrenner aide said. “He's trying to get the
bankruptcy bill moving, and that's where we are right now.”

00200000000489


indicating that those mostly unsecured creditors thought they would recoup only 20% to 25% of the money
loaned to Enron.

-By Carol S. Remond, 201-938-2074; Dow Jones Newswires; carol.remond@)dowjones.com
(Phyllis Plitch contributed to this column.)

00200000000091


{(b)(5))

Todd

From: Bruce Juba/IDB-HO/IOB@IADB on 11/17/99 01:29 PM

To: William Schuerch@Wilkam Schuerch@0o, Treas. Gov@Smip@ladb, David
Bloomgarden@David.Bloomgarden@Do. Treas. Gov@Smip@iadb, Grog
Christopulos@Greg. Chxistopulos@0o. Treas, Gov@Smip@iadb

cc: Lawrence Harringlon/idb-Ha/ldb@ladb, Todd W, Crawiord Eds

Subject: DR Power Project

{(b)(S))

00500000001210


receivables deals, the suit claims. The assets are not property of Enron because they were sold
before Enron's Dec. 2 bankruptcy filing. J.P. Morgan acted as an agent in two credit facilities whose
proceeds helped fund two accounts receivables transactions between Enron and Sequoia Financial
Assets, a special purpose, bankruptcy-related entity, the suit said. Sequoia allegedly bought the
receivables from Enron and reinvested the money collected on the bills in short-term paper issued by
Enron and its Enron North America unit.

Dynegy Files Motion to Dismiss Or Transfer Enron Case

Oynegy Inc. filed a motion on Monday asking the federal bankruptcy court in the Southern District of
New York to dismiss Enron's $10 billion breach-of-contract lawsuit against Dynegy, or, to transfer the
case to Houston, Dow Jones reported. Enron's claims against its former merger partner “in no way
relate to federal bankruptcy law or the administration of these chapter 11 cases,” according to the

filing.

Dynegy asked the New York bankruptcy court to abstain from hearing Enron's suit against Dynegy,
which allegedly involves state rather than federal breach-of-contract claims. Alternatively, the case
should take place in Texas - where Enron and most of its units are based - instead of New York,
where the “only link to the dispute is ... hung upon the gossamer thread of the location of (Enron's)
subsidiary Enron Metals and Commodity Inc.”

0020000000077


Bieger, Peter

From: Carleton, Norman
Sent: Friday, December 14, 2001 10:10 AM
To: Bair, Sheila; Berardi, Steve; Bitsberger, Timothy; Eichner, Matthew; Gabilondo, Jose, Gross,

Jared; Hammer, Viva; Lori Sanatamorena (E-mail), Nickoloff, Peter; Novey, Michael:
Pletrangell, Fred; Roseboro, Brian; Schultheiss, Heidilynne; Whaley, Jean, Wiedman, Mark;
Bieger, Peter, DeMarco, Edward, Dorsey, Karen, Ellett, Martha; Ellis, Dina, Hutfman, Lucy;
Hughes, Gerry, McGivern, Tom; Mcinerney, Roberta; Salladin, Anne; Smith, Amy, Sutton,
Gary, Tishuk, Brian

Subject: DEC 13 ABI Website -- More on Enron and Bankruptcy

Enron Update

House Panel Vows Comprehensive Enron Investigation

House Financial Services Committee members yesterday plunged into what they pledged would be a
comprehensive investigation into the collapse of Enron Corp., a task made more difficult by Enron
Corp. CEO Kenneth Lay's failure to appear before the panel as a witness, CongressDaily reported.
Lay sent the committee a letter on Tuesday, explaining that he would be unable to attend the hearing
because he was scheduled to participate in bankruptcy proceedings. Financial Services Capital
Markets Subcommittee Chairman Richard Baker (R-La.) said the committee would continue its
investigation in “late January, possibly early February.” And, he added, “Our task is to establish the
facts, change the rules where needed and assist the SEC in pursuit of those who have violated the
law.”

Several lawmakers on both sides of the aisle also used Enron's demise as an opportunity to renew
their calls for the passage of a financial “netting” bill, provisions of which are included in the
bankruptcy reform bill. Financial Services Committee Chairman Michael Oxley (R-Ohio) and ranking
member John LaFalce (D-N.Y.) agreed that Enron's collapse underscores the urgent need for
passage of provisions designed to strengthen and update current statutory protections for netting
financial market contracts if a party defaults. Netting refers to the practice where the amounts due
between financial institutions in the event of a default are quickly calculated as one net amount,
helping reduce risk. The netting language is one of the few consensus items included in
comprehensive bankruptcy reform legislation that “is destined to go down to defeat,” LaFalce
asserted. “[Netting] is not a new issue,” he fumed. “We need to extract [those] provisions and simply
pass them independently.”

Auditor Hints of ‘illegal Acts’ at Enron

Enron Corp.'s outside auditor said yesterday “illegal acts” may have been committed at the energy-
trading company before it sought bankruptcy protection last week, The Washington Post reported.
The chief executive of Arthur Andersen, the accounting firm that approved years of financial
statements that overstated Enron’s profits and understated its debts, also said Andersen made “an
error in judgment” that accounted for $103 million in overstated profits.

While Joseph F. Berardino testified yesterday on Capitol Hill, giving Andersen's first substantive
explanation of why it certified Enron's reports, top Enron officers detailed a reorganization strategy for
creditors at a meeting in New York. And former Enron chief financial officer Andrew Fastow, after
failing to honor a Securities and Exchange Commission subpoena, surfaced at a news conference to
cispel speculation that he had fled the country. In addition to Congress and the SEC, the Justice and
Labor departments are investigating Enron's collapse. More congressional hearings are expected
next month. To read the entire story, point your browser to <http://Awww.washingtonpost.com/wp-

00200000000233


Sutton, Gary = a

From: Carleton, Norman
Sent: Friday, December 14, 2001 10:13 AM.
To: Bair, Sheila; Berardi, Steve, Basberger, Timothy, Eichner, Matthew, Gabdondo, Jose; Gross,

Jared; Hammer, Viva; Lori Sanatamorena (E-mail); Nickoloff, Peter; Novey, Michael;
Pietrangeli, Fred; Roseboro, Brian, Schultheiss, Heidilynne; Whaley, Jean; Wiedman, Mark;
Bieger, Peter; DeMarco, Edward: Dorsey, Karen; Eljett, Martha; Ellis, Dina; Huffman, Lucy,
Hughes, Gerry, McGivern, Tom, Mcinemey, Roberta; Saitadin, Anne; Smith, Amy; Sutton,
Gary, Tishuk, Brian

Subject: Enron -- ABI Website Dec. 12

Enron Update

U.S. Congress to Hold First Hearing on Enron Bankruptcy Today

The first congressional hearing into the collapse of Enron Corp. gets underway today with testimony
from auditors of the former energy trading giant but not the top executive of the embattled Houston-
based company, Reuters reported. Enron chief executive Kenneth Lay declined an invitation to
testify before the House Financial Services Committee. “We're disappointed,” panel chairman and
Rep. Michael Oxley (R-Ohio) said. “But this is [just] the first in a series of hearings and investigations
that the committee will be conducting.”

Arthur Andersen CEO Joseph Berardino will face questions about when Enron's auditors first realized
there were problems with Enron’s accounts. SEC Chairman Harvey Pitt, who has promised a
thorough but quick probe of Enron, also declined an invitation to appear at today's hearing. Instead,
SEC Chief Accountant Robert Herdman will testify. Also set to testify at the hearing is Richard
Trumka, secretary-treasurer of the AFL-CIO. Oxley has said any further Financial Services committee
hearings on Enron after Wednesday will not occur until 2002.

Congress Demands Records, Briefing From Enron

A congressional committee yesterday demanded that Enron Corp. hand over financial records and
meet with committee staff within 10 days, according to Reuters. The House Energy and Commerce
Committee called on Enron to turn over documents relevant to the committee's investigation into the
company’s collapse, said committee Chairman Rep. Billy Tauzin (R-La.) and Rep. James Greenwood
(R-Pa). In letters sent this week to Enron Chairman Kenneth Lay, and Andrew Fastow, the
company’s former chief financial officer, Tauzin and Greenwood also requested staff interviews with
both current and former senior Enron employees as well as members of Enron's audit and
compliance committee by Dec. 27

In their letters, Tauzin and Greenwood requested that a mountain of documents be turned over to the
committee by Dec, 17. The request listed 43 separate aspects of the Enron case in which the
committee has interest, including: earnings restatement decisions, financial ties among Enron officers
and outside partnerships they were involved with, minutes from board and audit committee meetings
from 1997 to present and correspondence between Enron auditor Arthur Andersen and the company.

J.P. Morgan Sues Enron for $2.1 Billion

J.P. Morgan Chase & Co., one of Enron Corp.'s biggest creditors, yesterday sued the troubled
eneray trader for more than $2.1 billion, Reuters reported. The New York-based bank claimed in a
suit filed in the U.S. Bankruptcy Court in New York on behalf of itself and related parties that it has
rights to Enron assets such as accounts receivable, commercial paper, cash, and other property,
which allegedly are not protected in Enron's bankruptcy proceedings.

Enron holds the assets in dispute only as a servicer for the alleged owners, under two accounts

1

0200000000076


It supported the 1992 Energy Policy Act, which opened the utility companies’ wires to electricity
merchants such as Enron. It also worked with the Commodity Futures Trading Commission --
then chaired by Wendy Gramm -- for a regulatory exemption for futures trading in energy
derivatives, which later became Enron's most lucrative business. Soon after Gramm stepped
down in 1993, she was appointed to Enron's board.

Independent sources knowledgeable about these dealings, however, said Enron was not the main
intcrested party. They said the lead was taken by several major oil companies, including British
Petroleum Co. and Phillips Petroleum Co., which were concerned about the effect of CFTC
regulation on their offshore trading in crude oil contracts. Wendy Gramm, an apostle of free
markets, needed little convincing, the sources said.

That same year, Lay served as chairman of the committee organizing the Republican National
Convention in Houston. Hedging its bets, Enron made a major contribution to a "street fair" in
honor of Sen, John Breaux (D-La.), a key energy policymaker, at the Democratic convention.
Key orders by FERC in 1996 also supported Enron's transformation into a freewheeling trader of
gas, electricity and more exotic products, such as tcelecommunications services and sulfur-
dioxide emissions credits.

The new rules ensured that Enron and other merchant companics could buy electricity from
independent power plants and sell it to distant customers, using transmission lines borrowed
from utility companies,

Even Enron's harshest critics credit Lay with putting new issues -- such as electricity
deregulation -- on the Washington agenda, Lay,a former Interior Department official with a PhD
in cconomics, became “the ambassador" for deregulation, one former employee said.

Throughout the 1990s, Enron's agenda was opposed by coal-buming utilities, especially ones in
the Southeast, which viewed the emerging wholesale electricity market as a threat to their turf.
Many of these, such as Atlanta-based Southem Co., had impressive political funding and
connections of their own.

But with the explosive growth of Enron and the GOP takeover of Congress in 1995, the
company’s soft-money donations -- unregulated and unlimited gifts to political parties and
organizations -- jumped sharply. They went from about $136,000 in the 1993-94 election cycle,
to $687,000 in 1996 and $1.7 million in 2000, according to the Center for Responsive Politics.

Frustrated by Washington

For all its connections, sources say, Enron often found Washington frustratingly slowand
unreliable.

The company placed a substantial bet on federal support for limits on the greenhouse gases
causing global warming, Enron officials hoped to exploit a new market in industry for carbon-
emissions credits, similar to the one that developed for sulphur credits after clean-air legislation
was enacted in 1990.

00200000000496


McInerney, Roberta

From: Carleton, Norman
Sent: Thursday, November 29, 2001 6:09 PM
To: Bair, Sheila; Berardi, Steve; Bitsberger, Timothy; Cetina, Jal; Eichner, Matthew; Gabilondo,

Jose; Gross, Jared; Hammer, Viva; Lori Sanatamorena (E-mail); Nickoloff, Peter; Novey,
Michael; Pietrangeli, Fred; Roseboro, rian; Schultheiss, Heidilynne; Sharer, James; Whaley,
Jean, Wiedman, Mark; Bieger, Peter; DeMarco, Edward; Dorsey, Karen; Ellett, Martha; Ellis,
Dina; Huffman, Lucy, Hughes, Gerry, McGivern, Torn; Mcinerney, Roberta; Salladin, Anne;
Smith, Amy; Sutton, Gary: Tishuk, Brian

Subject: A Dow Jones Newswires Column: Enron's Derivatives Could Test Courts (discusses
bankruptcy netting issues)

November 29, 2001

IN THE MONEY: Enron's Derivatives Could Test Courts

By CAROL S. REMOND and PHYLLIS PLITCH
A Dow Jones Newswires Columns

NEW YORK -- Prepare for the largest test in bankruptcy history of safe harbors designed to protect the liquidity
of the nations’ financial system.

Enron Corp.'s (ENE) much-anticipated bankruptcy filing, if it indeed comes, is certain to be precedent setting.
First, in terms of sheer magnitude, we're talking about $62 billion in assets, But also because it's likely to
involve hundreds, if not thousands, of counterparties intertwined with Enron in various financial and energy
derivative transactions,

Unlike other creditors whose claims will be stayed under U.S. bankruptcy laws, those counterparties will vie to
unwind their trades, may they be "power forwards" or credit derivative contracts, in order to find more worthy

hedging partners.

Built in the bankruptcy code are exemptions for securities or commodities contracts. These safe harbors were
developed over the years as a sort of security blanket for the vital hedging functions that these transactions
provide,

“These special rules are designed to avoid a domino effect," said a bankruptcy lawyer, who like many contacted
for this column, declined to be identified given the likelihood that he'll end up representing one or many parties
involved in Enron's expected Chapter 11 filing,

Counterparties claiming redress through these exemptions should be able to net out their various derivative
contracts with Enron, attempting to use whatever collateral was pledged under those transactions to quantify
how much money they owe to or are owed by Enron, All of that is normally done on the side, without prior
bankruptcy court approval,

The problem is that Enron will likely question attempts to unwind those trades and take issue with the manner
in which its counterparties netted their exposure to the company, observers say.

Given the large number of parties involved and the magnitude of Enron's recent losses, the treatment of
derivative contracts could be further complicated by the market's lack of understanding of just how much value
is left in Enron's assets. That's an issue that will permeate the proceedings with all of Enron's stunned creditors.
On top of its derivative exposure, Enron is on the hook for roughly $13 billion in debt.

As part of its cnergy trading operations, Enron was a party to billions of dollars of derivative contracts designed
1

00200000000028


Mcinerney, Roberta

From: Carleton, Norman
Sent; Friday, December 21, 2001 10:37 AM
To: Cetina, Jill; Bait, Sheila; Berardi, Steve; Bitsberger, Timothy; Eichner, Matthew; Gabilondo,

Jose; Gross, Jared; Hammer, Viva; Lori Sanatamorena (E-mail); Nickoloff, Peter; Novey,
Michael; Pietrangeli, Fred; Roseboro, Brian; Schultheiss, Heidilynne; Whaley, Jean; Wiedman,
Mark; Bieger, Peter, DeMarco, Edward; Dorsey, Karen; Ellett, Martha; Ellis, Dina; Huffman,
Lucy; Hughes, Gerry, McGivern, Tom; Mcinemey, Roberta; Salladin, Anne; Smith, Amy;
Sutton, Gary: Tishuk, Brian

Subject: OJ: US Congress Fails To Pass Contract Netting Bl

December 21, 2001

US Congress Fails To Pass Contract Netting Bill

Dow Jones Newswires
(This article was originally published Thursday.)

WASHINGTON -- Despite an eleventh-hour appeal from Federal Reserve Chairman Alan Greenspan
and pressure from Wall Street, lawmakers again failed to enact legislation that clarifies corporate
bankruptcy laws by allowing companies to quickly settle outstanding derivatives contracts in the event
of an insolvency.

The once-obscure financial issue gained new prominence and urgency on Capitol Hill as lawmakers
Struggled to understand the high-finance finagling that lead to the recent Chapter 11 bankruptcy filing
of energy giant Enron Corp. (ENE).

The measure allows institutions to quickly close outstanding derivatives contracts with bankrupt
trading partners by netting all the losses and gains of individual contracts into one deal.

“Enron underscores the importance of it,” said Peggy Peterson, spokeswoman for the House
Financial Services Committee. "The other factor is the recessionary economic climate - the netting
provisions would lower market risk.”

Greenspan recently met with committee Chairman Michael Oxley, R-Ohio, and House Judiciary
Chairman James Sensenbrenner, R-Wis., after Oxley held a bruising hearing on financial

improprieties leading to Enron's demise.

Pressure to pass the measure was already building since the Sept. 11 terrorist attacks shut down
U.S. financial markets and destroyed the Manhattan offices of many Wall Street brokerage houses.

“Congress should not fail to enact netting legislation this year,” Greenspan and Treasury Secretary
Paul O'Neill wrote House lawmakers a few weeks after the attacks. “Further delays would
unnecessarily place the financial system at greater risk,”

But Sensenbrenner rebuffed requests from Greenspan, Oxley and House leaders to pass the
legislation apart from the larger bankruptcy bill it was attached.

1

00200000000043


{(o)(5)]

ce; ex.mail(-William_Schuerch %wiliam. schuerchdo. trea...

00500000001211


to enable the company and its trading partners to hedge, among other things, against rapidly fluctuating energy
prices and foreign exchange volatility - stabilizing otherwise uncertain markets. By its own account,as of
December 2000, Enron was involved in roughly $20 billion of derivative contracts on which it owed its
counterparties. More recent numbers aren't available.

Thoughts of an Enron bankruptcy jogged memories of past filings, such as the case of Drysdale Government
Securities Inc., which involved public entities being left on the hook for millions of dollars in uncollateralized

government repurchase agrecments,

But bankruptcy laws have evolved significantly since the 1982 collapse of Drysdale sent shockwaves through
the financial community and forced banks to pay out tens of millions of dollars to cover Drysdale’s obligations
to other government securities firms.

More recently, Orange County's 1994 bankruptcy following its derivatives debacle and the bitter dispute
surrounding German's Metallgesellschaft Ag for breach of forward petroleum contracts suggests that
acrimonious and lengthy litigations might be in the offing, In the latter case, many counterparties settled out of
court and took “haircuts” after a judge ruled that independent petroleum marketers who entered into long-term
hedging contracts as protection against escalating fucl prices could suc the metals and engineering conglomerate
for breach of contract.

But the extent to which those cases provide any lessons for Enron and its derivative counterparties remains to
be seen, experts said, depending on what sticky and complex issues might arise in potential court actions.

Meanwhile, although Enron has yet to file for bankruptcy, most of its derivative counterparties are likely
already scrambling to exit their trades.

That's because Dynegy Inc.'s (DYN) decision Wednesday to abandon its plan to rescue Enron all but sealed the
fate of the ailing Houston energy trader which has been hobbled by accounting irregularities and unquantified
off-balance-sheet liabilities. Enron shares plummeted from about $90 a share last summer to 36 cents Thursday.

Derivative contracts are built around master agreements developed by the International Swaps and Derivatives
Association. As far as its power purchase deals go, Enron is said to have favored master agreements drafted by
the Edison Electric Institute, which draws heavily on ISDA's blueprint,

Those master agreements include certain events under which a counterparty can terminate a transaction. Among
those are failure to pay, failure to deliver and, of course, bankruptcy.

Whether counterparties will be able to claim exemption from the automatic stay that prevents anyone from
terminating contracts with a company that filed for bankruptcy will hinge on the type of deals they're a party to
and whether they meet certain statutory requirements. Although Enron and its lawyers are likely to nitpick the
unwinding of each and every contract involving the company, legal experts noted that Enron's fondness for EEL
agreements should help those entangled in power purchase agrecments to liquidate their positions since these
contracts treat all participants as forward contracts merchants. Such merchants are exempt from the stay
stipulated by section 362A of the bankruptcy code.

Key to how well or poorly counterparties will make out now that Enron's business has been all but dried out, is
how much if any collateral protects their transactions.

So far, it's unclear how much of Enron's derivative transactions were collateralized, But lawyers familiar with
the matter said it was likely that a large amount of those contracts were not collateralized.

‘That's likely to be bad news for some counterparties. Because if they're owed money by Enron on their netted
derivative exposure, they'll have to join other unsecured creditors, likely receiving little of their claims, The
bonds and bank debt of Enron took a nose dive after Dynegy rescinded its merger offer, with trading levels

2

00200000000243


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00500000001473


Campaign Gifts, Lobbying Built Enron's Power In
Washington

By Dan Morgan and Julet Eilperin
Washington Post Staff Writers
Tuesday, December 25, 2001; Page AO!

During the administration of the first President George Bush, a new party fundraiser named
Kenneth L. Lay was invited to spend the night at the White House. The sleepover was an early
coup for the chairman of Enron Corp, and a harbinger of things to come,

Over the following decade, Lay and Enron poured millions of dollars into U.S. politics,
cultivating unequaled access and using the entree to lobby Congress, the White House and
regulatory agencies for action that was critical to the energy company’s spectacular growth.

Now, with Enron's sudden bankruptcy, public attention has tumed not only to the financial
practices that brought the company down, but to what its far-flung political operations say about
the country's campaign finance system.

Some Democrats in Congress are spoiling for an opportunity to use Lay and Enron to embarrass
the Republican Party, which received most of the company’s largess over the years. They want to
look into such things as Enron's relationship with Phil Gramm (R-Tex.), ranking minority
member on the Senate Banking Committee and chairman of the committee at a time when his
wife, Wendy L. Gramm, was serving on Enron's board. Last year, Gramm's committee approved
legislation that included a key provision exempting parts of Enron's massive energy trading
operation from federal oversight,

"L think the Enron story is going to tum out to be an enormous political story," said Rep. Henry
A. Waxman (D-Calif.), ranking minority member on the House Energy and Commerce
Committee.

The ties of Lay to the White House and GOP leaders, he added, were so multilayered that
Republicans are likely to be reluctant to pursue them, But he made clear that he intends to do so
and expects the Democratic-controlled Senate to follow suit.

Enron also cultivated relationships with Democrats, however. Lay played golf in Vail, Colo.,
with President Bill Clinton, and Enron gave hundreds of thousands of dollars to Democratic
campaign committees and Democrats in the House and Senate, including Sen. Charles E_
Schumer (N.Y.) and Rep. Martin Frost (Tex.), the ranking minority member on the House Rules
Committee.

A Routine Cost for Some

Advocates of campaign finance reform say the Enron case vividly illustrates the ties between
politics and big money, though it's unclear that the company’s political operations were radically
different from others for whom political contributions have become a routine cost of doing
business,

00200000000494


00200000000086


Gabilondo, Jose

From; Carleton, Norman
Sent: Thursday, December 06, 2001 4:25 PM.
To: Bair, Sheila; Berardi, Steve; Bitsberger, Trnothy, Eichner, Matthew, Gabilondo, Jose; Gross,

Jared, Hammer, Viva; Lori Sanatamorena (E-mail); Nickoloff, Peter, Novey, Michael,
li, Fred; Roseboro, Brian; Schultheiss, Heidilynne; Whaley, Jean, Wiedman, Mark
Subject: DJ: Enron's $1.58 DIP Loan Syndication To Start Next Week

December 6, 2001

Enron's $1.5B DIP Loan Syndication To Start Next Week

By CAROL S. REMOND
Of Dow Jones Newswires

NEW YORK -- Enron Corp.'s (ENE) $1.5 billion interim financing package will be marketed for syndication
beginning next week.

A final term sheet for the deal, which was preliminarily approved by the bankruptcy judge who oversees Enron's
reorganization on Dec. 3, is now in the process of being finalized, people familiar with the matter said Thursday.

J.P. Morgan Chase & Co. (JPM) and Citigroup INC_ (C), Enron's two lead banks, have been organizing the
rescuc loan, known as debtor-in-possession, or DIP, financing.

That money is needed for the company to continue to operate and to protect any value left - value that could be
crucial for creditors to recoup any of their losses.

Under the terms of the deal, Enron has already received $250 million from J.P. Morgan Chase and Citigroup.
Another $250 million is expected to become available in the next couple of weeks, after Enron's lenders approve
the company new business plan.

The final $1 billion in funding is contingent on final approval of the court and successful syndication of the
Joan. Some of that last installment will be used to repay a $550 million loan extended by Citigroup and J.P.
Morgan Chase to Enron last month.

Although Enron's rapid fall has left a number of financial institutions exposed to the company’s fiscal and
accounting woes, the people familiar with the matter said they expected most syndicate players to be interested
in taking on some of the DIP financing. In a loan syndication, lead lenders offload a large part of the loan onto
other banks, thereby sharing the risk with the so-called syndicate group.

Most banks are willing to take on DIP lending because such exposure is senior to all other claims in bankruptcy
court. DIP loans are also attractive because they carry higher interest rates,

In the case of Enron, DIP financing comes at a cost of 350 basis points (3,5 percentage points) over the London
Interbank Offered Rate, or LIBOR. That's 100 basis points wider than the rate under which Citigroup and J.P.
Morgan Chase recently loaned $1 billion to Enron, which consisted of a $550 million loan secured by Enron's
Transwestern pipeline and a $450 million loan secured by the company’s Northern Natural Gas pipeline.

The final DIP package is scheduled to be approved by the bankruptcy judge on Jan, 7.

Meanwhile, J.P. Morgan Chase and Citigroup are said to continue working with UBS AG (UBS) on a plan to
form a joint venture under which UBS' subsidiary UBS Warburg would take over Enron's trading operations,

s

00200000000643


Sutton, Gary

From: Carleton, Norman
Sent: Thursday, November 29, 2001 6:13 PM
To: Bair, Shela; Bieger, Peter; Bitsberger, Timothy; DeMarco, Edward; Dorsey, Karen; Ellett,

Martha, Elis, Dina, Gabtondo, Jose; Gross, Jared, Huffman, Lucy, Hughes, Gerry, McGivern,
Tom; McInerney, Roberta; Nickoloff, Peter; Roseboro, Briar, Salladin, Anne; Schultheiss,
Heidilynne; Smith, Amy, Sutton, Gary, Tishuk, Brian; Berardi, Steve; Cetina, Jil; Eichner,
Matthew, Hammer, Viva; Lori Sanatamorena (E-mail); Novey, Michael; Pietrangeli, Fred;
Sharer, James; Whaley, Jean; Wiedman, Mark

Subject: DJ: IN THE MONEY-2:Collateral Key To Counterparties Recovery

November 29, 2001

IN THE MONEY-2:Collateral Key To Counterparties Recovery

Dow Jones Newswires

Thoughts of an Enron bankruptcy jogged memories of past filings, such as the case of Drysdale
Government Securities Inc., which involved public entities being left on the hook for millions of dollars
in uncollateralized government repurchase agreements.

But bankruptcy laws have evolved significantly since the 1982 collapse of Drysdale sent shockwaves
through the financial community and forced banks to pay out tens of millions of dollars to cover
Drysdale's obligations to other government securities firms.

More recently, Orange County's 1994 bankruptcy following its derivatives debacle and the bitter
dispute surrounding German's Metallgeselischaft Ag for breach of forward petroleum contracts
suggests that acrimonious and lengthy litigations might be in the offing. In the latter case, many
counterparties settled out of court and took “haircuts” after a judge ruled that independent petroleum
marketers who entered into long-term hedging contracts as protection against escalating fuel prices
could sue the metals and engineering conglomerate for breach of contract.

But the extent to which those cases provide any lessons for Enron and its derivative counterparties
remains to be seen, experts said, depending on what sticky and complex issues might arise in
potential court actions.

Meanwhile, although Enron has yet to file for bankruptcy, most of its derivative counterparties are
likely already scrambling to exit their trades.

That's because Dynegy Inc.'s (DYN) decision Wednesday to abandon its plan to rescue Enron all but
sealed the fate of the ailing Houston energy trader which has been hobbled by accounting
irregularities and unquantified off-balance-sheet liabilities. Enron shares plummeted from about $90
a share last summer to 36 cents Thursday.

Derivative contracts are built around master agreements developed by the Intemational Swaps and
Derivatives Association. As far as its power purchase deals go, Enron is said to have favored master
agreements drafted by the Edison Electric Institute, which draws heavily on ISDA's blueprint.

t

00200000000087


0020000000239


Complicated, off-balance sheet transactions were Enron's undoing. Its stock collapsed after a Nov. 8
announcement that the firm had overstated its net income by $569 million over four years.

Creditors are now lining up to collect on the approximately $40 billion in debt owed by Enron,

Of that, roughly $22 billion is on the balance sheet in the form of bank debt, commodity-transaction
financing, bonds and other public securities. The remainder is made up of roughly $7 billion in bonds
and bank debt linked to other assets in special partnerships, as well as an additional $10.7 billion in
“project finance,” a term that typically refers to money lant to build power plants or oil refineries.

-By Dawn Kopecki, Dow Jones Newswires; 202-862-6637; Dawn.Kopecki@dowjones.com

0200000000073


Bieger, Peter

From: Carleton, Norman
Sent: Thursday, November 29, 2001 6:09 PM
To: Bair, Sheila; Berardi, Steve; Bitsberger, Timothy, Cetina, Jill; Eichner, Matthew, Gablondo,

Jose; Gross, Jared; Hammer, Viva; Lori Sanatamorena (E-mail); Nickoloff, Peter; Novey,
Michael; Pietrangeli, Fred; Roseboro, Brian; Schultheiss, Heidilynne; Sharer, James; Whaley,
Jean; Wiedman, Mark; Bieger, Peter, DeMarco, Edward; Dorsey, Karen; Ellett, Martha; Eilts,
Dina; Huffman, Lucy, Hughes, Gerry; McGivern, Tom; Mcinemey, Roberta; Salladin, Anne;
Smith, Amy; Sutton, Gary; Tishuk, Brian

Subject: A Dow Jones Newswires Column: Enron's Derivatives Could Test Courts (discusses
bankruptcy netting issues)

November 29, 2001

IN THE MONEY: Enron's Derivatives Could Test Courts

By CAROL S. REMOND and PHYLLIS PLITCH
A Dow Jones Newswires Column

NEW YORK -- Prepare for the largest test in bankruptcy history of safe harbors designed to protect the liquidity
of the nations’ financial system,

Enron Corp.'s (ENE) much-anticipated bankruptcy filing, if it indeed comes, is certain to be precedent setting.
First, in terms of sheer magnitude, we're talking about $62 billion in assets. But also because it's likely to
involve hundreds, if not thousands, of counterparties intertwined with Enron in various financial and energy
derivative transactions.

Unlike other creditors whose claims will be stayed under U.S, bankruptcy laws, those counterparties will vic to
unwind their trades, may they be "power forwards" or credit derivative contracts, in order to find more worthy
hedging partners.

Built in the bankruptcy code are exemptions for securities or commodities contracts. These safe harbors were
developed over the years as a sort of security blanket for the vital hedging functions that these transactions
provide,

"These special rules are designed to avoid a domino effect,” said a bankruptcy lawyer, who like many contacted
for this column, declined to be identified given the likelihood that he'll end up representing one or many parties
involved in Enron's expected Chapter 11 filing.

Counterparties claiming redress through these exemptions should be able to net out their various derivative
contracts with Enron, attempting to use whatever collateral was pledged under those transactions to quantify
how much money they owe to or are owed by Enron, All of that is normally done on the side, without prior
bankruptcy court approval,

The problem is that Enron will likely question attempts to unwind those trades and take issue with the manner
in which its counterparties netted their exposure to the company, observers say.

Given the large number of parties involved and the magnitude of Enron's recent losses, the treatment of
derivative contracts could be further complicated by the market's lack of understanding of just how much value
is left in Enron's assets. That's an issue that will permeate the proceedings with all of Enron's stunned creditors.
On top of its derivative exposure, Enron is on the hook for roughly $13 billion in debt.

As part of its energy trading operations, Enron was a party to billions of dollars of derivative contracts designed
1

00200000000242


"There are aspects of [the Enron case] that remind us of the savings and loan scandal, in the
sense that a powerful institution used big money to buy influence and protect itself while
ordinary citizens ended up losing their life savings,” said Fred Wertheimer, president of
Democracy 21, a Washington interest group, referring to a banking controversy in the 1980s.
Enron's ties to Republicans and the present Bush administration were especially close. Lay raised
large sums for George W. Bush's campaign.

Enron, Lay and its employees have contributed $572,350 to him over his career, far more than
any other company, according to the Center for Public Integrity in Washington.

Several top administration officials have been Enron advisers or stockholders, Enron, Lay and
other senior executives contributed $1.7 million in soft-money donations to politicians in the
2000 election cycle, two-thirds of it to Republicans, according to the Center for Responsive
Politics.

Republicans clearly are sensitive to the potential political dangers. The National Republican
Senatorial Committee recently returned a $100,000 check collected from Enron in November,
after deciding that "it was appropriate to give it back,” spokesman Dan Allen said. The
Republican Governors Association last week returned an Enron donation of $60,000,

What was unigue about Enron, competitors and allies agree, was a brash and sometimes
counterproductive political style,

Stories of Enron's hardball style are legion. In October 1999, for example, Jeffrey K. Skilling,
then Enron's president, expressed his displeasure at Rep, Joc Barton's position on a deregulation
bill pending in the energy subcommittee Barton chairs.

The meeting grew "heated and awful,” said one person who was present, until Barton (R-Tex.), a
usually mild-mannered man who keeps a Bible on his desk, exploded. "Jeffrey Skilling, | may
not have your millions of dollars, but I am not an idiot,” one witness recalled Barton saying. The
mecting ended without Enron getting the changes it wanted. “Skilling did not get Washington,”
the source added.

"In their lobbying, they acted like the 800-pound gorilla they were," said Christopher Homer, a
Washington lawyer who briefly directed Enron's government relations in 1997, Lay and Skilling
declined interview requests, but Enron officials say they have no regrets about their use of
moncy. “It got us name recognition,” company spokesman Mark Palmer said. “Given the
aggregation of our foes, we had to make sure that people knew what our argument was,”

Jump-Starting Deregulation

Almost from its start in 1985 as a gas pipeline company, Enron needed help in Washington, and
it got it in a series of actions by Congress and the Federal Energy Regulatory Commission
(FERC) that undermined the traditional monopoly of utility companies over power plants and
transmission lines.

Enron lobbied for several of the initial actions that set the stage for the cra of a deregulated
wholesale electricity market.

00200000000495


01/11/02 _16:35_FAX 202 225 $185 GOV REF MIN Boos

The Honorable Paul H. O'Neil!

The Honorable Donald L. Evans
January 11, 2002
Page 4

between the company and the Bush Administration, the public deserves to know what
Administration officials knew and when they knew it about the situation of Enron and its
employees. Therefore, I request that the two of you individually respond to the following
questions:

Q@)

(2)

@)

(4)

(6)

(6)

Please provide details regarding your conversations with Mr. Lay of October 28, October
29, and November 8. Please provide any written or electronic materials held by your
Department that relate to this question.

Please provide details regarding Undersecretary Fisher's conversations with Mr. Whalley
in October and November. Please provide any written or electronic materials held by
your Department that relate to this question.

Did you, any other person in your Department, or to your knowledge any other official in
the Administration have any other communications with Mr. Lay or any other Enron
officials or representatives in 2001, beyond those referred to in questions 1 and 2? If so,
please provide names, dates, form of communication, and information exchanged or
matters discussed.

Upon receiving the information regarding Enron's financial situation in October, did you
convey information about Enron's financial condition to any person, apart from
Undersecretary Fisher? If so, please provide the names, dates, form of communication,
and the information exchanged, including copies of any written or electronic materials.

Did you, any other person in your Department, or to your knowledge any other official in
the Administration convey this information to any person within the Vice President's
office or any of the advisors to the President? If so, please provide the names, dates, form
of communication, and the information exchanged, including copies of any written or
electronic materials.

Please provide details about Undersecretary Fisher's review. For example, over what
time period did Undersecretary Fisher explore the financial implications of a potential
Enron bankruptcy? What was the scope of the exploration? Did the Department of the
Treasury or the Department of Commerce examine the impact of Enron’s potential
bankruptcy on the employees of the corporation? On the shareholders of the corporation?
On other creditors of the corporation? What were your respective departments’s
conclusions regarding the impacts of an Enron bankruptcy on each of these groups? On
the energy sector? On the financial sector? On the economy at large? Please provide any
written or electronic materials held by your respective departments that relate to any of
these questions.

00100000000584


Bieger, Peter

From: Carleton, Norman
Sent: Friday, December 14, 2001 10:13 AM.
To: Bair, Sheila; Berardi, Steve; Bitsberger, Timothy; Eichner, Matthew; Gabilondo, Jose; Gross,

Jared; Hammer, Viva; Lori Sanatamorena (E-mail); Nickoloff, Peter; Novey, Michael;
Pietrangeli, Fred; Roseboro, Brian; Schultheiss, Heiditynne; Whaley, Jean; Wiedman, Mark;
Bieger, Peter; DeMarco, Edward; Dorsey, Karen; Ellett, Martha; Ellis, Dina; Huffman, Lucy,
Hughes, Gerry, McGivern, Tom; Mcinerney, Roberta; Sailadin, Anne; Smith, Amy, Sutton,
Gary, Tishuk, Brian

Subject: Enron -- ABI Website Dec. 12

Enron Update

U.S. Congress to Hold First Hearing on Enron Bankruptcy Today

The first congressional hearing into the collapse of Enron Corp. gets underway today with testimony
from auditors of the former energy trading giant but not the top executive of the embattled Houston-
based company, Reuters reported. Enron chief executive Kenneth Lay declined an invitation to
testify before the House Financial Services Committee. “We're disappointed,” panel chairman and
Rep. Michael Oxley (R-Ohio) said. “But this is Gust] the first in a series of hearings and investigations
that the committee will be conducting.”

Arthur Andersen CEO Joseph Berardino will face questions about when Enron's auditors first realized
there were problems with Enron's accounts. SEC Chairman Harvey Pitt, who has promised a
thorough but quick probe of Enron, also declined an invitation to appear at today's hearing. Instead,
SEC Chief Accountant Robert Herdman will testify. Also set to testify at the hearing is Richard
Trumka, secretary-treasurer of the AFL-CIO. Oxley has said any further Financial Services committee
hearings on Enron after Wednesday will not occur until 2002.

Congress Demands Records, Briefing From Enron

A congressional committee yesterday demanded that Enron Corp. hand over financial records and
meet with committee staff within 10 days, according to Reuters. The House Energy and Commerce
Committee called on Enron to tum over documents relevant to the committee's investigation into the
company’s collapse, said committee Chairman Rep. Billy Tauzin (R-La,) and Rep. James Greenwood
(R-Pa). In letters sent this week to Enron Chairman Kenneth Lay, and Andrew Fastow, the
company’s former chief financial officer, Tauzin and Greenwood also requested staff interviews with
both current and former senior Enron employees as well as members of Enron's audit and
compliance committee by Dec. 21,

In their letters, Tauzin and Greenwood requested that a mountain of documents be tumed over to the
committee by Dec. 17. The request listed 43 separate aspects of the Enron case in which the
committee has interest, including: earnings restatement decisions, financial ties among Enron officers
and outside partnerships they were involved with, minutes from board and audit committee meetings
from 1997 to present and correspondence between Enron auditor Arthur Andersen and the company.

J.P. Morgan Sues Enron for $2.1 Billion

J.P, Morgan Chase & Co., one of Enron Corp.'s biggest creditors, yesterday sued the troubled
energy trader for more than $2.1 billion, Reuters reported. The New York-based bank claimed in a
suit filed in the U.S. Bankruptcy Court in New York on behalf of itself and related parties that it has
tights to Enron assets such as accounts receivable, commercial paper, cash, and other property,
which allegedly are not protected in Enron's bankruptcy proceedings.

Enron holds the assets in dispute only as a servicer for the alleged owners, under two accounts

00200000000231


Bieger, Peter

From: Carleton, Norman
Sent: Tuesday, December 18, 2001 10:46 AM
To: Wiedman, Mark; Bair, Shela; Bieger, Peter; Bitsberger, Timothy, DeMarco, Edward, Dorsey,

Karen; Ellett, Martha; Ellis, Dina, Gabilondo, Jose; Gross, Jared; Huffman, Lucy; Hughes,
Gerry, McGivern, Tom; Mcinemey, Roberta; Nickoloff, Peter, Roseboro, Brian; Saladin, Anne;
Schultheiss, Heidilynne; Smith, Amy, Sutton, Gary, Tishuk, Brian

Subject: ABI Website (12/17): Sensenbrenner Still Wants Netting Language to Be Part of Bankruptcy
Bil

Sensenbrenner Still Wants Netting Language to Be Part of Bankruptcy Bill

House Judiciary Chairman James Sensenbrenner (R-Wis.) is standing firm in his desire to move so-called
netting language as part of a comprehensive bankruptcy reform bill, a spokesman said, CongressDaily reported.
On Thursday, Sensenbrenner met with House Financial Services Chairman Michael Oxlcy (R-Ohio) and Federal
Reserve Chairman Alan Greenspan to discuss the possibility of passing netting legislation this year separate
from the beleaguered bankruptcy bill. Federal financial regulators and Financial Services Committee lawmakers
have renewed their calls for that action, in light of the recent collapse of Enron. The netting provisions are
designed to enable quick resolution to complex financial contracts in the event a party in the deal went bankrupt.
However, the netting provisions are one of the few consensus areas in the underlying bankruptcy bill, which is
currently in conference, and proponents are not apt to separate them out. “There was agreement between
everyone that the netting provisions [are] very important,” a Sensenbrenner aide said. “He's trying to get the
bankruptcy bill moving, and that’s where we are right now.”

‘00200000000229


The exemption, tucked into broader legislation that established the legality of unregulated
derivatives trading by banks, was not supported by a Clinton administration working group,
largely because of opposition from the CFTC. Since the departure of Wendy Gramm, some in
the agency had lobbied for tighter control over the exploding energy derivatives market. The
legislation passed through the Senate Banking Committee, then chaired by Phil Gramm, who has
received $97,350 from Enron employees and its political action committee since 1989. A Gramm
spokesman said the senator does not recall talking to his wife, an Enron director, about the
energy provision and played “no role" in negotiating it. Wendy Gramm did not return phone calls
seeking comment,

Enron was a pnmary player, with Koch Industries Inc., a large, privately held oil and gas
company based in Wichita, in pushing for the exemption, a source said. But the company’s main
effort was focused on the House Agriculture Committee, where the legislation originated. Its
chairman and ranking Democrat, Texas Reps. Larry Combest (R) and Charles W. Stenholm (D),
respectively, were among the top recipients of Enron campaign donations in the House since
1989.

The CFTC objected strenuously to the initial draft marked up by the committee, but the Texas
congressmen helped work out a compromise between Enron and the agency. The compromise
was then offered by Rep. Jerry Moran (R-Kan.}, the home-state congressman of Koch Industries
and a recipient of campaign donations from Enron and Koch in the last election cycle. Moran did
not retum a phone call seeking a comment.

Early this year, Lay seemed to be at the height of his political power, getting a private meeting
with Vice President Cheney to discuss the administration's energy policy proposals and weighing
in on key nominations to FERC.

Curtis Hebert Jr, FERC's chairman at the time, has reported that Lay called him and implied that
Enron would urge the newly installed Bush administration to keep him in the job -- if he changed
his views to support Enron's position for faster electricity deregulation, Lay contended that
Hebert called him to ask for support,

Hebert was not reappointed. He was replaced by Texas lawyer Pat Wood III, a strong advocate
of deregulation who had the backing of Lay and Enron.

Ironically, since Enron's fall, both FERC and Congress seem to be moving in the direction of the
deregulated markets Lay and Enron lobbyists had pushed for.

© 2001 The Washington Post Company

00200000000498


fick.schmitt(@wsj.com <mailto:rick.schmitt@wsj.com>.

00200000000035


Those master agreements include certain events under which a counterparty can terminate a
transaction, Among those are failure to pay, failure to deliver and, of course, bankruptcy.

Whether counterparties will be able to claim exemption from the automatic stay that prevents anyone
from terminating contracts with a company that filed for bankruptcy will hinge on the type of deals
they're a party to and whether they meet certain statutory requirements. Although Enron and its
lawyers are likely to nitpick the unwinding of each and every contract involving the company, legal
experts noted that Enron's fondness for EEI agreements should help those entangled in power
purchase agreements to liquidate their positions since these contracts treat all participants as forward
contracts merchants. Such merchants are exempt from the stay stipulated by section 362A of the
bankruptcy code.

Key to how well or poorly counterparties will make out now that Enron's business has been all but
dried out, is how much if any collateral protects their transactions.

So far, it's unclear how much of Enron's derivative transactions were collateralized, But lawyers
familiar with the matter said it was likely that a large amount of those contracts were not
collateralized,

That's likely to be bad news for some counterparties. Because if they're owed money by Enron on
their netted derivative exposure, they'll have to join other unsecured creditors, likely receiving little of
their claims. The bonds and bank debt of Enron took a nose dive after Dynegy rescinded its merger
offer, with trading levels indicating that those mostly unsecured creditors thought they would recoup
only 20% to 25% of the money loaned to Enron.

-By Carol S. Remond, 201-938-2074; Dow Jones Newswires; carol.remond@dowjones.com

(Phyllis Plitch contributed to this column.)

00200000000241


DRAFT
January 4, 2002

TO: Norman Carleton

Director

Office of Federal Finance Policy Analysis
FROM: Heidilynne Schultheiss

Financial Economist

Office of Federal Finance Policy Analysis

SUBJECT: Dow Jones Newswires and Washington Post Articles on Enron and the
Commodity Futures Modernization Act of 2000

BACKGROUND
[(b)(5)]

00200000000491


Enron Seeks $6 Billion From Asset Sales

Bankrupt Enron Corp. yesterday announced that It may sell its key energy trading unit and plans to raise up to $6
billion by selling other assets, Reuters reported. Chief Financial Officer Jeff McMahon said that Enron plans to
sell its troubled Azurix Corp. water unit, businesses in emerging markets and wind energy assets. It plans to
retain its exploration and production unit, wholesale and retail services and regulated businesses. McMahon
said Enron has about $13 billion in unsecured bank debt and an additional $2 billion in secured bank debt, Enron
plans to raise between $4 billion to $6 billion with the noncore asset sale,

Dynegy Suit to Gain Enron Pipeline Moved to Federal Court

Dynegy Inc.'s lawsuit to secure ownership of an Enron Corp. pipeline company has been transferred to the
Federal District Court in Houston, Dow Jones reported. The state District Court of Harris County, Texas, where
Dynegy originally filed the suit, transferred the case on Tuesday. Enron asked that the suit be moved to federal
court to determine whether it should be heard by the federal bankruptcy court in New York, as Enron's lawyers
have argued, or in state court, as Dynegy prefers. Dynegy plans to seek to move the case back to state court,

Dynegy filed suit against two Enron subsidiaries on Dec. 3 in the state court seeking contro! of the
Enron Northern Natural Gas Co, Dynegy based its claim to Northern Natural on an option it secured
from Enron in exchange for a $1.5 billion cash infusion. The option allowed Dynegy to acquire
complete control of Northern Natural in the event Dynegy’s offer to acquire Enron fell through.
Dynegy terminated its acquisition offer last month and told Enron it was exercising its option to buy
Northem Natural. Enron is contesting Dynegy's claim and has sued its one-time suitor for $10 billion
for wrongfully terminating its acquisition offer.

Enron Objection Deadline Extended to Dec, 18

Enron announced that it has moved the date of its next bankruptcy hearing, originally
scheduled for tomorrow, to Dec. 20. Enron representatives weren't immediately available to
provide the reason for the rescheduling. Enron said the hearing is designed to give adequate
assurance to utility companies providing services to Enron and its debtor subsidiaries. In
connection with the rescheduled hearing, Enron has extended the objection deadline to Dec.
18.

00200000000037


01/21/02 16:35 FAX 202 225 $185 ___s GOV REF MIN Qooa

The Honorable Paul H. O'Neill

The Honorable Donald L. Evans
January 11, 2002
Page 3

their retirement accounts and selling their plummeting Enron stock.* If Mr, Fleischer’s
representations are accurate, it would appear that no one in the Bush Administration acted on the
knowledge of Enron's rapidly declining financial condition to help employees whose retirement
plan collectively lost an estimated $1 billion? The life savings of many Enron employees simply
evaporated during this period. Moreover, based on the scant information that this Administration
has provided to date, it appears that no one bothered even to ask whether any remedies,
administrative of legislative, were available to help the Enron employees frozen out of their
retirement accounts.

In fact, some senior Administration officials have publicly expressed surprising
indifference to the fate of Enron employees and shareholders. Secretary O'Neill stated this
morning that “while Enron may be important, . . . in the world that I live in, with hundreds of
other things going on, this is just another piece of business.”"” The President's chief economic
advisor, Larry Lindsey, called the Enron debacle a “tribute to American capitalism.”"!

In addition, accounts of your carly conversations with Mr. Lay raise concerns about
whether advance notice of Enron's desperate financial condition was taken into account as the
Administration formulated positions on important matters of public policy. For example,
throughout the month of November, you continued to advocate for retroactive repeal of the
alternative minimum tax.* This legislation would have had dramatic implications for Enron, as
it would have given the company a government-funded infusion of $254 million.”

Given the magnitude of the financial harm caused by Enron's collapse, and the close ties

"Fair Shares? Why Company Stock is a Burden for Many, Wall Street Journal (Nov. 27,
2001).

*See Enron Employees Enraged Over Losses, Business Insurance (Dec. 10, 2001).

“Transcript of Good Moming America (Jan. 11, 2002).

"Interview with Lawrence Lindsey, Fox News Sunday Roundtable (Jan. 6, 2002).

"See Deal Breaker, New Republic (Nov. 29, 2001); U.S. Panel Says that Recession
Officially Began in March, Business Day (Nov. 28, 2001); Economic Aid Stalled Amid

Recession, Newsday (Nov. 27, 2001); U.S. Department of the Treasury, O ‘Neill Urges Senate to
Act Quickly on @ Bipartisan Economic Stimulus Bill (Nov. 8, 2001) (press release).

“Citizens for Tax Justice, House GOP “Stimulus” Bill Offers 16 Large, Low-Tax
Corporations $7.4 Billion in Instant Tax Rebates (Oct. 16, 2001, updated Oct. 26, 2001).

0100000000583


how much creditors might receive if the company does seek bankruptcy-court protection.

Enron spokeswoman Karen Denne said the company is exploring its options and wouldn't comment
on whether it has retained bankruptcy counsel.

The fallout in Asia was felt immediately on Thursday, The biggest news was in Sydney, where Enron
Australia said it was suspending operations pending further developments regarding its U.S, parent,
“We are now waiting for clarification about Enron's situation globally and will advise the local market
once we have received that advice,” legal counsel Rob McGrory said.

The announcement followed a warning by Standard & Poor's about counterparty exposure in the
Australian electricity market, citing the overnight downgrade of Enron. “The recent developments
with Enron serve as a further example of the credit risks faced by energy market participants as they
seek to manage their market risks in Australia’s volatile power market,” said Laurie Conheady, an
associate director at Standard & Poor's,

Similarly, Enron's presence in South Korea appears to be nearing an end. According to officials at SK
Corp., Enron plans to sell its 50% stake in joint venture energy distribution firm SK-Enron Co. SK-
Enron was formed in 1999, and controls about 25% of South Korea's natural-gas market, according
to the firm's Web site.

Analysts said that Enron had offered to sell its stake to SK Corp., yet the Korean partner said it has
no plans to buy the shares. "We already hold 50% ... we don't need the rest,” said a company
spokesman, Danie! Youn.

Enron was also considered a potential buyer of power generation assets from South Korean
government-controlled Korea Electric Power Corp. Kepco is looking to sell assets as past of a wider
privatization drive.

Pressure elsewhere in the region was felt primarily in the financial markets, In Tokyo, the value of
money management funds Nikko Asset Management Co., UFJ Partners Asset Management Co.,
Japan Investment Trust Management Co. and Sumisei Global Investment Trust Management Co.,
fell due to their exposure to Enron debt, which amounted to about 40 billion yen ($324.9 million)
Enron news also sparked volatility in the copper and U.S. dollar market, according to traders.

Other financial backers of Enron were negatively effected as well. J.P. Morgan Chase and Citigroup,
which have invested hundreds of millions of dollars in hopes of keeping the Enron-Dynegy deal alive,
saw their stocks fall on Wednesday trading in the U.S. On Thursday morning Citigroup shares posted
slight gains, rising 19 cents to $47.99, while J.P. Morgan Chase shares were flat at $37.50. J.P.
Morgan Chase said in a statement it has about $500 million of unsecured exposure to Enron entities,
including loans, letters of credit and derivatives. It said it also has secured exposures, including $400
million in loans secured by Enron pipelines.

Besides banks and bondholders, dozens of companies, municipalities and utilities in the U.S. that
had signed multiyear power contracts with Enron may be left in the lurch. Over the years, the likes of
retailer J.C, Penney Co., and shopping-mall company Simon Property Group signed on with Enron,
as it undercut local utilities in newly deregulated markets.

- Rebecca Smith and Robin Sidel contributed to this article.

00200000000085


From:
To:
Date:
Subject:

Todd:
{(b)(5)]

Meg Donovan
BERGK, CHRISTOPULOS, CLAPPG, KUHLOWM, SILLSG, ex.m...

12/14/99 1:10pm
DR Power Sector - Cogentrix -Repty

00500000001184


financial downfall.

Enron Seeks Supplier to Take Over California University System Powers Contract

Enron Corp is looking for another electricity supplier to complete its contract with California's
two public university systems, a spokeswoman for California State University sald yesterday,
reported Dow Jones. Enron Energy Services Inc.'s current contract with California State and
the University of California Systems expires on March 31, 2004, said spokeswoman Clara
Potes-Fellow. The Enron subsidiary filed for chapter 11 bankruptcy protection Dec, 2.

Enron Contract Hearing Moved To Dec. 18

A bankruptcy court hearing regarding embattled Enron Corp.'s motion to negotiate, end or sell
certain contracts has been postponed to next Tuesday, Dec. 18, Dow Jones reported. The
meeting was originally scheduled for today. Earlier this week, Enron filed a motion with the
court asking to be allowed to terminate with other parties certain contracts with safe-harbor
provisions. The company doesn’t want to ask for court approval every time it seeks to end an
agreement.

In its filing, Enron had asked for authority to end some of these safe-harbor contracts and
negotiate payments for each termination. Creditors, including Cinergy Corp.'s Cinergy
Services Inc. and Wiser Oil Co., have filed objections. The motions and objections will be
addressed at Tuesday's bankruptcy court hearing.

00200000000057


1/11/02 16:34 FAX 202 225 3183 GOV REE_MIN Boos

The Honorable Paul H. O’Neill

The Honorable Donald L. Evans
January 11, 2002
Page 2

that “he would welcome any support the Secretary thinks appropriate.”* In addition, Enron
President Lawrence “Greg” Whalley reportedly telephoned the Treasury Undersecretary for
domestic finance, Peter Fisher, six or cight times in late October and early November.’

White House Press Secretary Ari Fleischer stated that as a result of your conversations
with Mr. Lay, Secretary O'Neill asked Undersecretary Fisher to explore whether the “financial
condition of Enron could have similar implications as Long Term Capital." According to Mr.
Fleischer, you decided to do nothing.” Mr. Fleischer stated:

(T]he government...took a look at this from a substantive matter, from when Mr. Lay
made those phone calls, and decided the appropriate step was not to intervene or take any
action... This was done based on judgment of the Cabinet Secretaries and the merits, and
they decided properly and wisely so, in the President's opinion, that the government
should not have intervened in eny way after Mr, Lay made the phone call to Secretary
Evans.”

On December 2, Enron filed for bankruptcy. Approximately 4,000 Enron employees
have been laid off, and an additional 3,500 have been placed on leave.” Many Enron employees
have lost virtually their entire retirement accounts, which were heavily tied up in Enron stock.
Numerous other investors, including many retirement plans around the country, have lost
millions of dollars.

Mr. Lay’s discussions with the two of you took place squarely within a lock-down period,
when an estimated 12,000 participants in Enron's 401(k) plan were prevented from accessing

Enron's Lay Sought Cabinet Officials’ Help, Wall Street Journa) (Jan. 11, 2002); Enron
Chairman Warned Bush Officials on Collapse, N.Y. Times (Jan. 10, 2002).

*Enron Asked Treasury for Credit Aid, Associated Press (Jan. 11, 2002).
“White House Press Briefing (Jan. 10, 2002).

41d.

"Id.

"Labor Opens ERISA Investigation of Enron Assistance to Dislocated Workers, U.S.
News and World Report (Dec. 5, 2001).

00100000000582


{(b)(4)}

1
00500000001472


Enron Seeks $6 Billion From Asset Sales

Bankrupt Enron Corp. yesterday announced that it may sell its key energy trading unit and plans to raise up to $6
billion by selling other assets, Reuters reported. Chief Financial Officer Jeff McMahon said that Enron plans to
sell its troubled Azurix Corp. water unit, businesses in emerging markets and wind energy assets. It plans to
retain its exploration and production unit, wholesale and retail services and regulated businesses. McMahon
said Enron has about $13 billion in unsecured bank debt and an additional $2 billion in secured bank debt. Enron
plans to raise between $4 billion to $6 billion with the noncore asset sale.

Dynegy Suit to Gain Enron Pipeline Moved to Federal Court

Dynegy Inc.'s lawsuit to secure ownership of an Enron Corp. pipeline company has been transferred to the
Federal District Court in Houston, Dow Jones reported. The state District Court of Harris County, Texas, where
Dynegy originally filed the suit, transferred the case on Tuesday. Enron asked that the suit be moved to federal
court to determine whether it should be heard by the federal bankruptcy court in New York, as Enron's lawyers
have argued, or in state court, as Dynegy prefers. Dynegy plans to seek to move the case back to state court,

Dynegy filed suit against two Enron subsidiaries on Dec. 3 in the state court seeking control of the
Enron Northern Natural Gas Co, Dynegy based its claim to Northern Natural on an option it secured
from Enron in exchange for a $1.5 billion cash infusion. The option allowed Dynegy to acquire
complete control of Northern Natural in the event Dynegy’s offer to acquire Enron fell through.
Dynegy terminated its acquisition offer last month and told Enron it was exercising its option to buy
Northern Natural, Enron is contesting Dynegy’s claim and has sued its one-time suitor for $10 billion
for wrongfully terminating its acquisition offer.

Enron Objection Deadline Extended to Dec. 18

Enron announced that it has moved the date of its next bankruptcy hearing, originally
scheduled for tomorrow, to Dec. 20. Enron representatives weren't immediately available to
provide the reason for the rescheduling. Enron said the hearing is designed to give adequate
assurance to utility companies providing services to Enron and its debtor subsidiaries. In
connection with the rescheduled hearing, Enron has extended the objection deadline to Dec.
18.

0200000000234


financial downfall.

Enron Seeks Supplier to Take Over California University System Powers Contract

Enron Corp is looking for another electricity supplier to complete its contract with California's
two public university systems, a spokeswoman for California State University said yesterday,
reported Dow Jones. Enron Energy Services Inc.'s current contract with California State and
the University of California Systems expires on March 31, 2004, said spokeswoman Clara
Potes-Fellow. The Enron subsidiary filed for chapter 11 bankruptcy protection Dec. 2,

Enron Contract Hearing Moved To Dec. 18

A bankruptcy court hearing regarding embattled Enron Corp.'s motion to negotiate, end or sell
certain contracts has been postponed to next Tuesday, Dec. 18, Dow Jones reported. The
meeting was originally scheduled for today. Earlier this week, Enron filed a motion with the
court asking to be allowed to terminate with other parties certain contracts with safe-harbor
provisions. The company doesn't want to ask for court approval every time it seeks to end an
agreement.

In its filing, Enron had asked for authority to end some of these safe-harbor contracts and
negotiate payments for each termination. Creditors, including Cinergy Corp.'s Cinergy
Services Inc, and Wiser Oil Co., have filed objections. The motions and objections will be
addressed at Tuesday's bankruptcy court hearing.

00200000000073


to enable the company and its trading partners to hedge, among other things, against rapidly fluctuating energy
prices and foreign exchange volatility - stabilizing otherwise uncertain markets. By its own account,as of
December 2000, Enron was involved in roughly $20 billion of derivative contracts on which it owed its
counterparties. More recent numbers aren't available.

Thoughts of an Enron bankruptcy jogged memorics of past filings, such as the case of Drysdale Government
Securities Inc., which involved public entities being left on the hook for millions of dollars in uncollateralized
government repurchase agreements,

But bankruptcy laws have evolved significantly since the 1982 collapse of Drysdale sent shockwaves through
the financial community and forced banks to pay out tens of millions of dollars to cover Drysdale's obligations
to other government securities firms.

More recently, Orange County's 1994 bankruptcy following its derivatives debacle and the bitter dispute
surrounding German's Metallgesellschaft Ag for breach of forward petroleum contracts suggests that
acrimonious and lengthy litigations might be in the offing, In the latter case, many counterparties settled out of
court and took "haircuts” after a judge ruled that independent petroleum marketers who entered into long-term
hedging contracts as protection against escalating fuel prices could suc the metals and engineering conglomerate
for breach of contract.

But the extent to which those cases provide any lessons for Enron and its derivative counterparties remains to
be scen, experts said, depending on what sticky and complex issues might arise in potential court actions.

Meanwhile, although Enron has yet to file for bankruptcy, most of its derivative counterparties are likely
already scrambling to exit their trades.

That's because Dynegy Inc.'s (DYN) decision Wednesday to abandon its plan to rescue Enron all but sealed the
fate of the ailing Houston energy trader which has been hobbled by accounting irregularities and unquantified
off-balance-sheet liabilities. Enron shares plummeted from about $90 a share last summer to 36 cents Thursday.

Derivative contracts are built around master agreements developed by the International Swaps and Derivatives
Association. As far as its power purchase deals go, Enron is said to have favored master agreements drafted by
the Edison Electric Institute, which draws heavily on ISDA's blueprint.

Those master agreements include certain events under which a counterparty can terminate a transaction. Among.
those are failure to pay, failure to deliver and, of course, bankruptcy.

Whether counterparties will be able to claim exemption from the automatic stay that prevents anyone from
terminating contracts with a company that filed for bankruptcy will hinge on the type of deals they're a party to
and whether they mect certain statutory requirements. Although Enron and its lawyers arc likely to nitpick the
unwinding of cach and every contract involving the company, legal experts noted that Enron's fondness for EEL
agreements should help those entangled in power purchase agreements to liquidate their positions since these
contracts treat all participants as forward contracts merchants, Such merchants are exempt from the stay
stipulated by section 362A of the bankruptcy code.

Key to how well or poorly counterpartics will make out now that Enron's business has been all but dried out, is
how much if any collateral protects their transactions.

So far, it's unclear how much of Enron's derivative transactions were collateralized. But lawyers familiar with
the matter said it was likely that a large amount of those contracts were not collateralized.

That's likely to be bad news for some counterparties. Because if they're owed moncy by Enron on their netted
derivative exposure, they'll have to join other unsecured creditors, likely receiving little of their claims. The
bonds and bank debt of Enron took a nose dive after Dynegy rescinded its merger offer, with trading levels

2

00200000000090


Sent Monday January 22, 2001 3:01 PM
To: Grewe, Maureen; Milis, Marshall; Sampliner, Gary; Christopulos, Greg; Clapp, Gene
Subject: FW: India/Dabhol Meeting

Dennet FPA OC

Teaeghoms.. Attached is back; material for the Enron meeting on Wednesday. Pls.
note Mr. John Hardy will also attending,
«----Original Message----~-

Prom: Tom.Srigge@enron.com (mailto: Tom. Briggs@enron.com)
Sent: Monday, January 22, 2001 1:54 PM

To: geetha.rac@do.treas.gov

Subject: India/Dabhol Meeting .

Geetha,

My apologies for the delay in sending this material. If have lost both my
regular assistant and my temp so I am a bit overwhelmed

John Hardy will be attending the meeting tomorrow at 3. [(b)(6)]

If you could r me of the
a su of the meeting I would appreciate it. I managed to lose that as
well.

John and I have a brief agenda: i) we want to update you on Dabhol and 2)
we want to discuss way in which the USG may become involved in encouraging
market reform necessary to extract value out of our generating asset.
Specifically, we want to focus on refgorm at the Indian federal level that
will be necessary to deliver power to customers other than MSEB.

We look forward to meeting you tomorrow.

(See attached file: Dabhol PPA - DC Talking Points.doc)

00500000001470


Sutton, Gary

From: Carleton, Norman
Sent: Tuesday, December 18, 2001 10:46 AM
To: Wiedman, Mark; Bair, Sheila; Bieger, Peter, Bitsberger, Timothy, DeMarco, Edward; Dorsey,

Karen, Eliett, Martha; Ellis, Dina; Gabiiondo, Jose; Gross, Jared; Huffman, Lucy, Hughes,
Gerry, McGivern, Tom; Mcinermey, Roberta; Nickoloff, Peter, Roseboro, Brian; Saladin, Anne;
Schultheiss, Heidilynne; Smith, Amy; Sutton, Gary, Tishuk, Brian

Subject: ABI Website (12/17): Sensenbrenner Still Wants Netting Language to Be Part of Bankruptcy
Bill

Sensenbrenner Still Wants Netting Language to Be Part of Bankruptcy Bill

House Judiciary Chairman James Sensenbrenner (R-Wis.) is standing firm in his desire to move so-called
netting language as part of a comprehensive bankruptcy reform bill, a spokesman said, CongressDaily reported.
On Thursday, Sensenbrenner met with House Financial Services Chairman Michael Oxley (R-Ohio) and Federal
Reserve Chairman Alan Greenspan to discuss the possibility of passing netting legislation this year separate
from the beleaguered bankruptcy bill, Federal financial regulators and Financial Services Committee lawmakers
have renewed their calls for that action, in light of the recent collapse of Enron. The netting provisions are
designed to cnable quick resolution to complex financial contracts in the event a party in the deal went bankrupt.
However, the netting provisions are one of the few consensus areas in the underlying bankruptcy bill, which is
currently in conference, and proponents are not apt to separate them out. “There was agreement between
everyone that the netting provisions [are} very important,” a Sensenbrenner aide said. “He's trying to get the
bankruptcy bill moving, and that's where we are right now.”

00200000000074


(()(4)]

January 10, 2001

00500000001471


Mcinerney, Roberta

From: Carleton, Norman
Sent: Thursday, November 29, 2001 6:19 PM
To: Bair, Sheila; Berardi, Steve; Btsberger, Timothy; Celina, Jill; Eichner, Matthew, Gabllondo,

Jose; Gross, Jared; Hammer, Viva; Lori Sanatamorena (E-mail); Nickoloff, Peter; Novey,
Michael; Pietrangeli, Fred; Roseboro, Brian; Schulthelss, Heidiynne; Sharer, James; Whaley,
Jean; Wiedman, Mark: Bieger, Peter, DeMarco, Edward; Dorsey, Karen; Ellett, Martha; Ellis,
Dina; Huffman, Lucy, Hughes, Gerry; McGivern, Tom; Mcinemey, Roberta; Salladin, Anne:
Smith, Amy; Sutton, Gary; Tishuk, Brian

Subject: Enron’s Financial Woes Ripple Out Across Asia

November 30, 2001

Major Business News

Enron's Financial Woes
Ripple Out Across Asia

By JASON BooTn, HENNY SENDER and RICHARD B. SCHMITT
Staff Reporters of THe Watt STREET JOURNAL

The sudden deep financial troubles of U.S. energy giant Enron Corp. sent ripples of concern across
Asia, damaging investments in Japan and potentially undermining businesses in South Korea and
Australia.

The uncertainty for Asia is likely just beginning. If Enron files for protection under Chapter 11 of the
federal Bankruptcy Code in the U.S., as many investors and financial experts now expect, it is likely
to be one of the messiest, most complex bankruptcy cases ever, lawyers say. That is because of the
multifaceted nature of Enron's once highflying operations, which combined a global energy business
with a massive financial-trading operation involving tens of billions of dollars in complex contracts. A
filing by Enron, with about $13 billion in debt, would rank among the largest bankruptcy filings ever,
Enron has about 800 trading partners or creditors.

The scale of the Enron collapse is huge, experts say. "There is nothing to compare it to,” said
Edward Tillinghast, a bankruptcy specialist with Coudert Brothers in New York. “The business was so
large. There were so many different kinds of operating entities under the Enron umbrella,”

On Wednesday, as the last-ditch merger with Dynegy Inc. unraveled, the company’s credit was
downgraded to "junk" status by rating agency Standard & Poor's Corp. The stock market, signaling
that a bankruptcy filing is expected, hammered Enron stock, which was halted for a time on
Wednesday, and knocked lower some of its financial backers’ shares, Enron shares closed at 4 p.m.
in New York Stock Exchange composite trading at 61 cents, down $3.50, or 85%. Thursday morning
in New York, Enron was trading down 33%, or 20 cents, to 41 cents. On Wednesday, Enron bonds
also fell sharply, dropping to 50 cents on the dollar from around 55 cents, reflecting concems over

1

00200000000033


{(b)(5))

CONCLUSION
{(b)(5)]

{(b)(5)]

00200000000493


{(b)(5)]

>>> ex.mail."tcrawlord@worldbank.org” 12/13/99 05:37pm >>>

{((b)(5))

Just thought you might want to know.
————————- Forwarded by Todd W, Crawford/Person/World Bank EDs on
12/13/99 05:30 PM

Orsalia
12/0/88 08:37 AM
Extn: 62636 Loc3e

To: Todd W. Crawford Eds
co

Subject: DR Power Sector - Cogentrix

Todd:

Please see the attached from Max.

As you know, the Bank, IDB technical staff, and members of IDB senior management
have raised concems, but with very limited success. Orsalia

———-—. Forwarded by Max B. Pulgar-Vidal/Person/World Bank on

12/1089 05:38 AM ——_—_—_——_——

Philippe LP. Durand
12/09/09 05:55 PM
Extn 33244 LCSFE

00500000001185


Bieger, Peter

From: Carleton, Norman
Sent: Friday, December 14, 2001 10:02 AM
To: Bair, Sheila; Bieger, Peter, Bitsberger, Timothy, DeMarco, Edward; Dorsey, Karen; Ellett,

Martha; Ellis, Dina; Gabllondo, Jose; Gross, Jared; Huffman, Lucy, Hughes, Gerry, McGivern,
Tom; Mcinerney, Roberta; Nickoloff, Peter, Roseboro, Brian; Salladin, Anne; Schultheiss,
Heidilynne; Smith, Amy, Sutton, Gary; Tishuk, Brian; Berardi, Steve; Eichner, Matthew,
Hammer, Viva; Lori Sanatamorena (E-mail); Novey, Michael; Pietrangeli, Fred, Whaley, Jean;
Wiedman, Mark

Subject: Enron and Bankruptcy Bill -- ABI Website

ENRON UPDATE

Greenspan, Oxley Meet; Netting Bill Gains Support Following Enron Debacle

Federal Reserve Chairman Alan Greenspan met yesterday with key House lawmakers to
discuss this year’s prospects for passing legislation that clarifies corporate bankruptcy laws
by allowing companies to quickly settle outstanding derivatives contracts in the event of an
insolvency, Dow Jones reported. The once-obscure financial issue has gained new
prominence and urgency on Capitol Hill as federal investigators sift through the mess left
behind by Enron's chapter 11 bankruptcy filing. The measure allows institutions to quickly
close outstanding derivatives contracts with bankrupt trading partners by netting all the
losses and gains of individual contracts into one deal.

House Financial Services Chairman Michael Oxley (R-Ohio) invited Greenspan to meet with
House Judiciary Chairman James Sensenbrenner (R-Wis.) after Oxley held a bruising hearing
on Wednesday on financial improprieties leading to Enron's demise. Complicated, off-balance
sheet transactions were the company’s undoing. Its stock collapsed after a Nov. 8
announcement that the firm had overstated its net income over four years by $569 million.
Creditors are now lining up to collect on about $40 billion in debt owed by Enron.

“Congress should not fail to enact netting legislation this year,” Greenspan and Treasury
Secretary Paul O'Neill wrote House lawmakers a few weeks after the attacks. “Further delays
would unnecessarily place the financial system at greater risk.” Lawmakers are now
questioning whether the legislation, which is also attached to a broader bankruptcy bill in
both chambers, could be applied to Enron's bankruptcy case if the bill passes this year.
Federal securities officials said it was unclear whether they could apply new contract netting
laws retroactively. Oxley hopes to get the bill passed by next week, before Congress finishes
its work for 2001.

House Probe Seeks Andersen's Records On Enron Audits

The House Energy and Commerce Committee yesterday asked Arthur Andersen to provide
records relating to its audits of Enron Corp., Dow Jones reported. At the same time, the
committee sent a letter to former Enron Chief Executive Jeffrey Skilling, requesting an
interview with committee investigators within the next two weeks. The committee also
formally sought interviews with David Duncan, Andersen's partner in charge of the company’s
Enron account, and Andersen employees involved in the company's audits. The requests
came after Joseph Berardino, Andersen's chief executive, told the House Financial Services
Committee on Wednesday that the auditing and consulting firm didn't receive critical
information from its client concerning the special-purpose entities that brought about Enron's

00200000000235


Bieger, Peter

From: Carleton, Norman
Sent: Thursday, November 29, 2001 6:19 PM.
To: Bair, Sheila; Berardi, Steve; Bitsberger, Timothy, Cetina, Jill; Eichner, Matthew; Gabilondo,

Jose; Gross, Jared; Hammer, Viva; Lori Sanetamorena (E-mail); Nickoloff, Peter; Novey,
Michael; Pietrangell, Fred; Roseboro, Brian; Schultheiss, Heidilynme; Sharer, Jarnes; Whaley,
Jean, Wiedman, Mark, Bieger, Peter, DeMarco, Edward; Dorsey, Karen; Ellett, Martha; Ellis,
Dina; Huffman, Lucy, Hughes, Gerry; McGivern, Tom; McInerney, Roberta; Salladin, Anne;
Smith, Amy, Sutton, Gary; Tishuk, Brian

Subject: Enron's Financial Woes Ripple Out Across Asia

November 30, 2001

Major Business News

Enron's Financial Woes
Ripple Out Across Asia

By JASON BooTH, HENNY SENDER and RICHARD B. SCHMITT
Staff Reporters of THE WALL STREET JOURNAL

The sudden deep financial troubles of U.S. energy giant Enron Corp. sent ripples of concern across
Asia, damaging investments in Japan and potentially undermining businesses in South Korea and
Australia.

The uncertainty for Asia is likely just beginning. If Enron files for protection under Chapter 11 of the
federal Bankruptcy Code in the U.S., as many investors and financial experts now expect, it is likely
to be one of the messiest, most complex bankruptcy cases ever, lawyers say. That is because of the
multifaceted nature of Enron's once highflying operations, which combined a global energy business
with a massive financial-trading operation involving tens of billions of dollars in complex contracts. A
filing by Enron, with about $13 billion in debt, would rank among the largest bankruptcy filings ever.
Enron has about 800 trading partners or creditors,

The scale of the Enron collapse is huge, experts say. “There is nothing to compare it to,” said
Edward Tillinghast, a bankruptcy specialist with Coudert Brothers in New York. "The business was so
large. There were so many different kinds of operating entities under the Enron umbrella.”

On Wednesday, as the last-ditch merger with Dynegy Inc. unraveled, the company’s credit was
downgraded to “junk” status by rating agency Standard & Poor's Corp. The stock market, signaling
that a bankruptcy filing is expected, hammered Enron stock, which was halted for a time on
Wednesday, and knocked lower some of its financial backers' shares. Enron shares closed at 4 p.m.
in New York Stock Exchange composite trading at 61 cents, down $3.50, or 85%. Thursday morning
in New York, Enron was trading down 33%, or 20 cents, to 41 cents. On Wednesday, Enron bonds
also fell sharply, dropping to 50 cents on the dollar from around 55 cents, reflecting concerns over

00200000000237


Clapp, Gene mu

Sent Fises: Sones 23, 2001 8:55 AM

re fat Sit hana Soper. Cwstpus, rg: Cap, ne
Ce: Radelet, Steve

Subject: RE: India/Dabhol Meeting

Please note the following article from this moming's press summary:

US Envoy: India’s Enron Project Key To Foreign Investment

BOMBAY (AP)}-U.S. Ambassador to India Richard Celeste wamed Monday that
foreign investment in india would falter because of pressures that
threatened to derail the $3 billion Enron Corp. (ENE) power project.

“It regrettably feeds the concern among American and other foreign investors
tat ie rodys less-than-reliable efe coeeoatn cee their investment

* Celeste told an audience of business leaders, Paltans and
Servisaen agencies Eoretan, India’s financial hub:
India’s | tever investment has been in trouble since December
after the er Qoverinentcl Mahara vt TE creat cond Bara |, Said it
would retew a power urchase agreement .S, energy giant Enron Corp.

ihe sereemes ned in 1985 detalis the rate at which Enron's Indian
subsidiary, the Power Co., will sell electricity to the

power plant of 740 megawatts, already
mid: dw Second pose 1 a4 raga sveaued oe
completion by end 200°

fon of Boe naan and high cost of naphtha used to
mie pone govern ye Evvon project ouch 7 upees 8
wn st Wh 809 ab pai ot deal was signed six years ago

Enron has said it saw no curent need to renegotiate the tarif and maintained that a transition from naphine to Kqvefied
Celeste, an appointee of former U.S. President Bill Clinton, said he
discussions, but cau!

both sides would find a solution in tioned
“perceptions among American end investors will be affected by the
chatenge & and how it is resolved.”
He despite partnerships in software and information US.
investors were wary of India because of political pressures at the and
state level that had slowed the economic-reform a.
Stressing the need to business ties India, Celeste focused on
the Enron and asked "The Dabhol plant remain a symbol of
successful American investment in India and not a symbol of the impediments
‘stl hinder even greater foreign
Copy (c) 2001 Dow Jones and Com; Inc.

Pc at Sot lewsEDGEILAN: Tao Fae ya]

From: Roo Geeta Geetha
Sent Moncey, Jane 22, 2001 3:01 PM

To: Grewe, one 4 Marshall; Sampliner, Gary; Christopulos,

Cc: Radelet, Steve

Subject FW: India/Dabhol Meeting

Attached is background material for the Enron meeting on Wednesday. Pis. note Mr, John Hardy will also be attending.

From: aml mar SO [maitto:Tom.Briggs@enron.com)
1

1
00500000001477


Mcinerney, Roberta

From: Carleton, Norman
Sent: Friday, December 14, 2001 10:10 AM
To: Bair, Sheila; Berardi, Steve; Bitsberger, Timothy; Eichner, Matthew; Gabilondo, Jose; Gross,

Jared; Hammer, Viva; Lori Sanatamorena (E-mail); Nickoloff, Peter, Novay, Michael;
Pietrangeli, Fred; Roseboro, Brian; Schultheiss, Heidilynne; Whaley, Jean; Wiedman, Mark;
Bieger, Peter; DeMarco, Edward; Dorsey, Karen; Ellett, Martha; Ellis, Dina; Huffman, Lucy;
Hughes, Gerry, McGivern, Tom: McInerney, Roberta; Salladin, Anne; Smith, Amy, Sutton,
Gary; Tishuk, Brian

Subject: DEC 13 ABI Website — More on Enron and Bankruptcy

Enron Update

House Panel Vows Comprehensive Enron Investigation

House Financial Services Committee members yesterday plunged into what they pledged would be a
comprehensive investigation into the collapse of Enron Corp., a task made more difficult by Enron
Corp, CEO Kenneth Lay's failure to appear before the pane! as a witness, CongressDaily reported.
Lay sent the committee a letter on Tuesday, explaining that he would be unable to attend the hearing
because he was scheduled to participate in bankruptcy proceedings. Financial Services Capital
Markets Subcommittee Chairman Richard Baker (R-La.) said the committee would continue its
investigation in “late January, possibly early February.” And, he added, “Our task is to establish the
facts, change the rules where needed and assist the SEC in pursuit of those who have violated the
law.”

Several lawmakers on both sides of the aisle also used Enron's demise as an opportunity to renew
their calls for the passage of a financial “netting” bill, provisions of which are included in the
bankruptcy reform bill. Financial Services Committee Chairman Michael Oxley (R-Ohio) and ranking
member John LaFalce (D-N.Y.) agreed that Enron's collapse underscores the urgent need for
passage of provisions designed to strengthen and update current statutory protections for netting
financial market contracts if a party defaults. Netting refers to the practice where the amounts due
between financial institutions in the event of a default are quickly calculated as one net amount,
helping reduce risk, The netting language is one of the few consensus items included in
comprehensive bankruptcy reform legislation that “is destined to go down to defeat,” LaFalce
asserted. “[Netting] is not a new issue,” he fumed. “We need to extract [those] provisions and simply
pass them independently.”

Auditor Hints of ‘Illegal Acts’ at Enron

Enron Corp.'s outside auditor said yesterday “illegal acts” may have been committed at the energy-
trading company before it sought bankruptcy protection last week, The Washington Post reported.
The chief executive of Arthur Andersen, the accounting firm that approved years of financial
statements that overstated Enron's profits and understated its debts, also said Andersen made “an

error in judgment” that accounted for $103 million in overstated profits.

While Joseph F. Berardino testified yesterday on Capitol Hill, giving Andersen's first substantive
explanation of why it certified Enron's reports, top Enron officers detailed a reorganization strategy for
creditors at a meeting in New York. And former Enron chief financial officer Andrew Fastow, after
failing to honor a Securities and Exchange Commission subpoena, surfaced at a news conference to
dispel speculation that he had fled the country. In adgition to Congress and the SEC, the Justice and
Labor departments are investigating Enron's collapse. More congressional hearings are expected
next month, To read the entire story, point your browser to <http:/Awww,washingtonpost.com/wp-
Gyn/articles/A34904-2001Dec12.htmi>.

00200000000036