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 attorney, 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 I. 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.

00747

01200000000092


Lay joined the Union of Concemed 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 subcommittee,
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 existed 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 Marc 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 series 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.

01200000000017


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01300000000514


is this for the speech or other atuff?

Original Message-----

From: Wiedman, Mark

Sent: Priday, January 04, 2002 5:47 PM

To: Roseboro, Brian; Bitsberger, Timothy
Subject: FW: Draft Memo on Enron/CFMA Articles

This is something to keep close tabs on -- would it make sense to meet with Heidi and
Norman on this?

Sdeieadel Original Message-----

From: Carleton, Norman <Norman.Carletonsdo.treas.gov>

To: Roseboro, Brian <Brian.Roseborosdo.treas.gov>; Bair, Sheila
<Sheila.Bairedo.treas.gov>; Gross, Jared <Jared.Gross@do.treas.gov>; Wiedman, Mark
<Mark,Wiedmana@do.treas,gov>; Bitsberger, Timothy <Timothy .Bitsbergerado.treas.gov>; Smith,
Amy <Amy.Smithedo,treas.gov>

CC: Schultheiss, Heidilynne <Heidilynne.Schultheissedo.treas.gov>; Nickoloff, peter
<Peter .Nickoloffédo.treas.gov>; Ellett, Martha <Martha.Ellett@do,treas.gov>; Gabilondo,
Jose <Jose.Gabilondo@do.treas.gov>; Sutton, Gary <Gary.Suttonédo.treas.gov>

Sent: Pr. jan 04 17:29:36 2002

Subject: FW: Draft Memo on Enron/CFMA Articles

Attached is a memo that details our first attempt to clarify what the prese has been
saying in regards to Enron and the Commodity Futures Modernization Act.

I talked to the Ken Raigler, 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 thia we, 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, the major beneficiaries of these provisions are Enron's competitors, such as
the InterContinental Exchange and TradeSpark, which are stuctured as electonic trading
facilities. Enron did get the leqal certainty it wanted that the CFTC cannot regulate
EnronOnline. {(b)(5)]

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 Messag =
From: Schultheiss, Heidilynne
Sent: Friday, January 04, 2002 5:10 PM
To: Carleton, Norman
Subject: Draft Memo on Enron/CPMA 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 articles are
downloaded as the latter pages.

01200000000007


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01300000000509


Wiedman, Mark

pan Moncey enue 07, 2002 10:23 AM
mt: January 07,

Subject: RE: Draft Memo on Enron/CFMA Articies

{(b)(5) , (b)(8))

Prom: Bitsberger, mothy

Sent: Monday, January 07, 2002 10:10 AM

To: Wiedman, Mark

Subject: RE: Draft Memo on Enron/CFMA Articles

[()(5) , (6)(6)]

Original Message----~

Wiedman, Mark

: Monday, January 07, 2002 10:08 AM

To: Biteberger, Timothy; Roseboro, Brian
Subject: RE: Draft Memo on Enron/CFMA Articles

{()(5) , (b)(6)]

Original Message----~

Biteberger, Timothy

Sent: Monday, January 07, 2002 10:07 AM

To: Wiedman, Mark; Roseboro, Brian

Subject: RE: Draft Memo on Enron/CFMA Articles

is this for the speech or other stuff?

o2+-- Original Message-----

From: Wiedman, Mark

Sent: Friday, January 04, 2002 5:47 PM

To: Roseboro, Brian; Bitsberger, Timothy
Subject: PW: Draft Meso on Enron/CFMA Articles

This is something to keep close tabs on -- would it make sense to meet with Heidi and
Norman on this?

etait Original Message-----

From: Carleton, Norman <Norman.Carletonsdo.treas,gov>

To: Roseboro, Brian <Brian,Roseboro@do.treas.gov>; Bair, Sheila

<Sheila Bair@do.treas.gov>; Gross, Jared <Jared.Grossedo.treas.gov>; Wiedman, Mark

<Mark.Wiedmanédo.treas.gov>; Bitsberger, Timothy <Timothy,Bitsbergera@do,treas.gov>; Smith,
Amy <Amy. Smithedo. treas.gov>

CC: Schultheiss, Heidilynne <Heidilynne.Schultheiss@do.treas.gov>; Nickoloff, Peter
<Peter.Nickoloff@do.treas.gov>; Bllett, Martha <Martha.Ellett@do.treas.gov>; Gabilondo,

Jose <Jose.Gabilondo@do,treas.gov>; Sutton, Gary <Gary.Sutton@do,treas.gov>
Sent: Fri Jan 04 17:29:36 2002

Subject: FW: Draft Memo on Enron/CFMA Articles

00720

01200000000065


{(b)(4))

01300000000920

02311


When would this speech take place?

-----Original Message-----

From: Wiedman, Mark

Sent: Friday, January 04, 2002 9:32 AM
To: Smith, Amy

Subject: RE: Enron
((b)(5)}
((b)(6)]

socee Original Measage-----
Prom: Smith, Amy

Sent; Friday, eery. 04, 2002 9:25 AM
To: Wiedman, Mark
Subject; Enron

{(b)(5))

Amy D. Smith

Deputy Assistant Secretary
(Banking and Finance)

The Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220

(202) 622-1900

(202) 622-0534 (fax)

Wiedman, Mark
From: Wiedman, Mark
pont ercey, January 04, 2002 9:32 AM
Subject: Ree Enron
{(o)(5)}
{OUTSIDE SCOPE]
From: ‘Smith, Amy
Sent: Friday, January 04, 2002 9:25 AM
To: Wiedman, Mark
Subject: Enron
{(b)(5)]
nee D. Smith
uty Assistant Secretary
(Garena and Finance)
Department of the Treasu!
1500 won OC 2 Avenue,
Washi yo aaa
(202)
(202) £20-0634 (fax)

00727

01200000000072


{(o)(5)]

00752

01200000000097


Subject: FW: Draft Memo on Bnron/CFMA Articles

{(b)(5)]

cree Original Message-----

From: ‘Schultheiss, poe ee

Sent: Priday, January 04, 2002 5:10 PM

To: Carleton, Norman

Subject; Draft Memo on Enron/CFMA Articles
((b)(5)]

The three news articles are
downloaded as the latter pages.

Wiedman, Mark
Sout ee , 2002 5:47 7PM
To: ro, Brian; Bi itsberger, Time
Subject: FW. Draft Memo on

evencims toe

This is something to keep close tabs on -- would it make sense to meet with
Heidi and Norman on this?

Shc Original Meossage-----

From: Carleton, Norman <Norman.Carletonedo.treas.gov>

To: Roseboro, Brian <Brian, Ro! roedo.treas.gov>; Bair, Shei
<Sheila.Bairédo.treas.gov>; Gro: Jared <Jared.Grossedo.t jov>; Wiedman, Mark

«Mark. Wiedman@do.treas.gov>; Bitsberger, Timothy <Timothy.Bitsbergerédo.treas.gov>; Smith,
Amy <Amy.Smith@do.treas.gov>

CC: Schultheiss, Heidilynne <Heidilynne.Schultheiss@do.treas.gov>; Nickoloff, Peter
<Peter.Nickoloff@do.treas.gov>; Ellett, Martha <Martha.Ellett@do.treas.gov>; Gabilondo,
Jose <Jose.Gabilondo@do.treas.gov>; Sutton, Gary <Gary.Sutton@do.treas.gov>

Sent: Fri Jan 04 17:29:36 2002

Subject: FW: Draft Memo on Enron/CPMA Articles

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

((b)(5)]

00723

01200000000068


Draft

{(b)(5)]

00771

01200000000116


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01300000000921


* Saying they don't understand it but still recommend it is a slap in the face to remind us how useless analysts are.”
says Robert Olstein, a 35-year Wall Street veteran who runs the $890 million Olstein Financial Alert Fund

After the market closed for trading on Aug. 14, Skilling, 48, abruptly resigned, citing personal reasons and raising
‘concerns among investors that dire financial news might be forthcoming

Falkng Stock
Enron stock dropped as much as $6. or 13 percent, the following day, ending the week at $36.67

Analysts insisted nothing was awry.“ There is nothing wrong with the company,” UBS's Barone said after meeting with
Lay, who had once again become Enron's CEO. “There is no other shoe to fall -- and no charges to be taken.” He
kept his “buy” rating on the stock.

Lehman's Gross also met with Lay and other senior managers on the night of Aug. 16. "The Enron machine is in top
‘shape and continues to roll along,” Gross wrote to investors the next day.

He dint see a short-term catalyst to boost the stock — then trading at $36.85 a share -- yet he urged investors to get
more shares, maintaining his “strong buy" recommendation and a 12-month price target of $72.

CSFB analyst Curt Launer wrote a brief note to clients after what he described as “intensive meetings” with
He said there was “no truth to any of the speculations” and kept his 12-month target of $84 and his
“buy” recommendation.

Enron a ‘Buy’

Of the 22 analysts who covered Enron, 19 rated the stock a "buy" as of mid-October 2001. That's when, one after
another, disclosures spied out of the Houston-based company: Enron's partnerships had hidden billions of dollars in
ebt years of profits had been exaggerated, and the U.S. Securites and Exchange Commission was investigating
Enron's partnerships with affiliates.

The disclosures dashed Enron's credibility with lenders and drove it to bankruptcy

On Nov, 21, with Enron stock at less than $7 — down more than 90 percent from its high in August 2000 -- Goldman's
Fleischer downgraded Enron to “’market perform,” Wall Street parlance for “hoki.” He didn't raspond to several phone
calls.

Easier Decision

Investors say Fleischer's decision to downgrade the stock was made easier by his firm's failure to win a role advising
Enron on its planned sale to Dynegy. “| wouldn't doubt at all that being dropped from the ‘recommended list’ had
something to do with not winning the advisory business," says Phelps

Fleischer and Goldman spokespeopie didn’t return phone calls.

To many investors, there were signals that should have tipped off analysts that something was amiss. In Decamber
2000 and January 2001, 10 top Enron executives sold more than $73 million in stock. Lay and Skilling together sold
stock valued at more than $17 6 milion, according to the Washington Service. which tracks insider stock sales and
purchases.

Insider sales are often a strong sign to investors that something’s wrong. Timothy Ghriskey, who at the time was a
fund manager at Dreyfus Corp., sold about 1.5§ million Enron shares in late 2000. “It wasn't much of an endorsement
that they were bailing out too,” he says. “I didn’t see much upside in the stock and figured that with the valuation so
high, there was a lot of downside if they failed to deliver.”

Wake-Up Cail for Analysts

Coxe and other investors say Enron's failure should provide a wake-up call for analysts, who pay too little attention to

company balance sheets. ““! pay the Street lots of commission dollars and expect that analysts are reading the
footnotes and kicking tires," Coxe says.

. 00733

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Wiedman, Mark
LL

From: Wiedman, Mark
Sent: Tuesday, December 18, 2001 12:55 PM
Subject: RE: Bloomberg: Enron Enriched Walll Street Firms, Analysts Ignored Warnings (long story)
[(b)(5)]
~-Original Message——--

From: Carleton, Norman

Sent: ‘Tuesday, December 18, 2001 12:12 PM

To: Bair, Sheila; Berardi, Steve; Bitsberger, Timothy; Eichner, Matthew; Gatwlondo, Jose; Gross, Jared; Hammer, Viva; Lori
Seoamorene (E-mail); Nickola, Peter; Nowey, Michael; Petrangel, Fred; Roseboro, Brian; Schuthesss, Hetiynne; Whaley,

‘Subject:

Jean; Wiedman,
Bloomberg: Enron Enriched Wal Street Firms, Analysts Ignored Warnings (long story)

1218 02:43

Enron Enriched Wall Street Firms, Analysts Ignored Warnings
By Adam Levy

Houston, Dec. 18 (Bloomberg) -- On Tuesday, Oct. 16, Enron Corp. Chief Executive Kenneth Lay delivered a shocker
Late in a conference call that followed the release of the company’s third-quarter results, Lay said Enron would
terminate one of its several limited partnerships -- and thereby wipe out $1 2 billion of shareholder equity

“I shuddered when | heard that,” says Gregory Phelps, who invests $1 1 billion in energy and utility stocks at John
Hancock Advisers Inc and has long avoided Enron “But it didn't seem to make much of an impression on part of the
investment community.”

Over the next few days, reports began piling up on Phelps's desk from the Wall Street analysts whe track Enron
Mernil Lynch & Co.. UBS Warburg LLC, Credit Suisse First Boston and Goldman Sachs Group Inc. still rated Enron a
"buy."

Prudential Securities inc. analyst Carol Coale wrote that she was “dismayed” by management's “disguise” of the $12
billion equity reduction, yet she kept intact her “buy” rating and $55 price target on Enron stock which was then
trading at $33.17.

"Strong Buy’

Richard Gross of Lehman Brothers Holdings Inc. maintained his “strong buy” rating. "The end of the world is not at
hand,” Gross said “We think investors should rustie up a little courage and aggressively buy the stock ”

Phelps and other investors say the analysts’ reactions were just another sign of Wall Street's gullibility about Enron

For more than a year, they say, analysts had ignored red flags ranging from inflated business valuations to large

Caner stock sales, to the abrupt resignation of Jeffrey Skiling in August 2001 — just six months into hes tenure as

As recently as September, Enron was the second most highly rated stock in the Standard & Poor's 500 Index, behind
Tyco International Ltd , according to Thomson Financial/First Call

“Enron is uniquely positioned to be the GE of the new economy,” Donato Eassey, Merrill Lynch's energy stock analyst.
told Bloomberg News in February 2001 "This isnt a management team to bet against ~ Eassey resigned trom Mernil
in December.

Support is Obvious

One of the main reasons for all of the support is obvious, say investors: Until the week before its third- quarter
earnings report in October, Enron was a deal machine that enriched dozens of Wall Street firms through lucrative
underwriting contracts, mergers and acquisitions assignments and derivatives trades

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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).

At a 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
red 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,

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"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 employces 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 unique 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. Joe 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
meeting 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
money, “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 era of a deregulated
wholesale electricity market.

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01300000000510


{(b)(5)}

Heidilynne

Sent: Friday, January 04, 2002 5:10 PM

To: Carleton, Norman

Subject: Draft Memo on Enron/CFMA Articles

{(b)(5)]

downloaded as the latter pages.

The three news articles are

Wiedman, Mark = ——

From: Wiedman, Mark

Sent: Friday, January 04, 2002 11.33 AM
To: Smith, Amy

Subject: RE: Enron

{(b)(5)]

Prom: Smith, Amy

Sent: Friday, January 04, 2002 11:31 AM
To: Wiedman, Mark

Subject: RE: Enron

{(b)(5)]

cteee Original Message-----

From: Wiedman, Mark

Sent: Friday, January 04, 2002 9:37 AM
To: Smith, Amy

Subject: RE: Enron

{(b)(5)]

----- Original Message-----~-

Prom: Smith, Amy <Amy.Smithado.treas.gov>
To: Wiedman, Mark <Mark,Wiedmanedo.treas.gov>
Sent: Fri Jan 04 09:33:41 2002

00724

01200000000069


Wiedman, Mark

From: ‘Wiedman, Mark

Sent: Thursday, December 06, 2001 7:56 AM
Subject: fyi article from the FT

[()(5))

US banks claim credit for new lending model
By Gary Silverman in New York and Charles Pretzlik in London
Published: December 5 2001 19:48 | Last Updated: December $ 2001 23:03

Citigroup and JP Morgan Chase are sitting on hundreds of millions of dollars in unsecured credit exposure to
Enron, the bankrupt energy trader, and yet they are calling their involvement a triumph.

Executives of the US banks are boasting that they were asked to advise Enron on its rescue options because they
were willing to extend the company credit.

Goldman Sachs, which has shied away from lending commitments, was noticeable by its absence.

The episode ended in tears as Enron's proposed sale to Dynegy collapsed and the company descended into
bankruptcy, leaving thousands of Enron employees without jobs.

But JP Morgan and Citigroup maintain the deal validated their model of the one-stop shop. Enron proved they
coud parlay a lending relationship into a crack at investment banking fees even if the end result was
unfortunate,

“No monoline investment bank could have done what we did,” said Michael Carpenter, chief executive of
Salomon Smith Barney, Citigroup's investment banking unit. “No monoline investment bank would have had
the ability to advise on the merger, advise on the debt financing and provide short-term liquidity at short
notice,

The implications of this model for investment banking, though, are grim. Gone, maybe forever, are the days
when traditional investment banks such as Goldman and Morgan Stanley simply advised companies, booked
fees and enjoyed retums on equity exceeding 30 per cent.

Rather, companies with commercial banking arms are committing capital to win a place at the negotiating table
and depressing returns. They can do this because the commercial were committing capital anyway and
making very little moncy at all.

The worry about this model goes back to the problem that forced commercial banks into investment banking in
the first place returns from lending often fail to justify the risks, Some analysts worry the lure of investment
banking fees will make lenders too willing to extend credit to keep relationships with companies that could
provide advisory work,

In the case of Enron, Citigroup and JP Morgan developed their unsecured exposures before the crisis, when the
energy trader was another highly rated customer.

“There has been a degree of front-loading of revenues and back-ending of credit costs,” said Michael Mayo,
analyst at Prudential Securities,

Accounting regulators are considering a proposal that could bring more discipline to banks requiring them to
mark their loan commitments to a market price. . ©.

Investment banks, not suprisingly, like the idea, but banking regulators are opposed because of fears the change

° 00736

1200000000081


Campaign Gifts, Lobbying Built Enron's Power In
Washington

By Dan Morgan and Juliet 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 carly
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 turned 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.

"I 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,

00741

01200000000086


would make earnings more volatile.

New research from Greenwich Associates suggests the debate will become more pressing. A survey of US chief
financial officers and treasurers found that for 52 per cent the provision of credit facilities was extremely or very
important in determining which bank was awarded valuable merger and acquisitions mandates.

The question for the credit-providing investment banks is how many Enron-like accidents they can absorb, They
have the capital, but the impact on earnings is an issue.

JP Morgan's unsecured exposure to Enron, for le, is $50m more than its third-quarter net earnings of
$449m. It could take a lot of M&A fees to make up for that.

. 00737

1200000000082


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"You'd be hard-pressed to find a house on the Street that didn't do business with Enron,” says Don Coxe, chairman
and chief executve of Harris Investment Management Inc., which in early December neld 78,000 Enron shares in the

Harris Insight Equity Fund. “They spread a ton of business around the Street, so it's no wonder these analysts were
behind the stock.”

Enron says it didn’t have a quid pro quo relationship with anyone, “At no time has Enron ever required any financial
firm to endorse our stock as a prerequisite for doing business with the firm,” says spokesman Vance Meyer

‘Taps on Shoulders"

Some Wall Street veterans say they don’t find that denial persuasive. “Even if there were no spoken agreements, you
can bet analysts often got taps on the shoulders from the investment bankers making sure thal they were reminded to
keep ‘buy’ ratings intact,” says Phelps. “That's just the way Wail Street works.”

Enron spread the wealth across many Walll Street firms. In May 2001, Enron used six banks - A G Edwards & Sons
Inc., Banc of America Securities, Dain Rauscher Wessels. First Union Securities Inc., Salomon Smith Barney inc and
UBS Warburg -- to manage a $151 million unit offenng for Northern Border Partners LP. one of scores of Enron-
Controlled partnerships.

Usually, no more than four underwriters are involved in deals that small, investment bankers say

CSFB advised Enron on a pending $2.9 billion sale of Portland General Electric Co. in October -- one of 41 separate
mergers and acquisitions transacbons Enron initiated since January 1999, according to Bloomberg data.

Enron Activity Owarfs Rivals

That dwarfs the number of deals over that span announced by rivals Dynegy Inc., which struck 15 corporate
Combinations, and Kinder Morgan Inc., which did a dozen deals.

Enron further cemented its relationship with Wall Street by borrowing from banks, obtaining letters of credit and trading
in Gerivatives -- financial instruments such as futures and options whose value is based on other assets

When Enron filed for bankruptcy in December, its list of creditors was 54 pages long and included Citigroup Inc
CSFB8's London branch, J. P. Morgan Chase & Co. and UBS.

Goldman Sachs is a dealer for Enron's $4 billion commercial paper program and has arranged six of the company’s 15
preferred share sales.

In June 1999, Merrill Lynch managed the $695 million initial public offering of Azurix Corp., Enron's water business
Run by Enron's former Vice Chairman Rebecca Mark, who resigned in August 2000, Azurix failed in its strategy to buy
water companies and win large projects. It lost a bid to acquire a 49 percent stake in Berlin's water utility, for example

Enron Buys Back Stock

Enron bought back the stock in 2001, after it had fallen more than 55 percent during the company's 18 months as a
public entity

in October, J. P. ee, ee 2 Conan tae peonioed Erin Wa 31 billion in credit lines to help it pay down
debt and meet day-to-day costs. Those loans came just in time for the two firms to win the business of advising Enron
On its planned acquisition by Dynegy.

J.P. Morgan and Citigroup's Salomon were set to charge $90 million -- $45 million each — for that advice. according to
people familiar with the arrangement

Dynegy was set to pay $15 million in advisory fees to Lehman Brothers. That would have been Lehman's biggest such
transaction in 2001

Dynegy Deal Falls Through

In December, after the Dynegy deal fell through, Enron obtained as much as $1.5 baion in new financing from J P
Morgan and Citigroup. On December 11, J. P. Morgan filed a lawsuit in Enron's bankruptcy case, seeking $2.1 billicn
~ funds the bank said aren't part of the energy trader's assets shielded trom creditors by the Chapter 11 filing

° 00731

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01300000000923


Draft

Jan. 16 speech to ACLI ~ outline

{(b)(5)]

00770

01200000000115


((b)(5)}

CONCLUSION

((b)(5)}

00740

01200000000085


((b)(4)]

02309

01300000000918


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 primary 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 return 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

01200000000018


Campaign Gifts, Lobbying Built Enron's Power In
Washington

By Dan Morgan and Juliet Bilperin
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 carly
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.

“think the Enron story is going to turn 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,

01200000000014


{(b)(4)]

02313

01300000000922


that issue, yes.

MR. RUSSERT: Do you believe the Treasury Department should look at this aggressively because of the
political considerations that some are suggesting?

SEC’Y O'NEILL: I think we need to be constantly looking at the rules and the schemes that exist for the way
private enterprise operates. With this in mind, investors and the general public need to be able to rely on the
truthfulness and completeness of what enterprises report. It’s a critical of why our economy has done so
much better than the rest of the world. It's because capital believes, who invest believe, that they can rely
on information that's provided to them and the U.S. economy. It's a principle we need to protect and cherish
and extend because it is so important to the fundamental operation of our kind of economy.

MR. RUSSERT: Do you think that Enron is a big story, a serious story?

SEC’Y O'NEILL: Well, it's obviously a big and serious story when millions of people are economically
impacted by the meltdown of a major corporation. Of course, it's a very important story and it’s something that
we need to pay attention to. But we need to pay attention to, again, whether or not all the facts have been
dutifully reported and people were given the information required under law to make intelligent decisions.

Wiedman, Mark

From: Wiedman, Mark

Sent: Monday, 07, 2002 10:08 AM
te Bitsberger, : Roseboro, Brian
Subject: RE: Draft Memo on Enron/CFMA Articles
{(b)(5)]

Mark

DRE Original Message-----

From: Bitaberger, Timothy

Sent: Monday, January 07, 2002 10:07 AM

To; Wiedman, Mark; Roseboro, Brian

Subject: RE: Draft Memo on Enron/CPMA Articles

is this for the speech or other stuff?

veces Original Message-----

From: Wiedman, Mark

Sent: Friday, January 04, 2002 5:47 PM

To: Roseboro, Brian; Bitsberger, Timothy
Subject; FW; Draft Memo on Enron/CFMA Articles

This is something to keep close tabs on -- would it make sense to meet with Heidi and
Norman on this?

sees Original Message-----

From: Carleton, Norman <Norman.Carletonédo.treas.gov>

To: Roseboro, Brian <Brian.Roseboro@do.treas.gov>; Bair, Sheila
<Sheila.Bairédo.treas.gov>; Gross, Jared <Jared.Gross@do.treas.gov>; Wiedman, Mark

<Mark.Wiedmanédo.treas.gov>; Bitsberger, Timothy <Timothy,Bitsbergeredo.treas.gov>; Smith,
Amy <Amy.Smithado.treas.gov>

CC: Schultheiss, Heidilynne <Heidilynne.Schultheissedo.treas.gov>; Nickoloff, Peter
<Peter Nickoloffedo.treas.gov>; Ellett, Martha <Martha,Ellett@do.treas.gov>; Gabilondo,
Jose <Jose.Gabilondo@do.treas.gov>; Sutton, Gary <Gary.Suttonedo.treas.qov>

Sent: Fri Jan 04 17:29:36 2002
, 00722

01200000000067


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CORRECTION

Wednesday, December 26, 2001; Page A02
A Dee. 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

00746

1200000000091


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01300000000511


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 EO!

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 tumed 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 I. 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.

01200000000020


Carleton, Norman

From: Raislerk@sulicrom.com
Sent: Teer August 07, 2001 3:32 PM
To: jo.treas.gov
Subject: FW. CF CFTC Presentation -- Final Version
Pe few _prenertaton
~
waren Original Message-----

Prom: chendrix@enron.com [mailto:chendrix@enron.com]
Sent: Wednesday, Auguet 01, 2001 3:57 PM

To: Raislerk@sullcrom.com

Subject: CFTC Presentation -- Final Version

Attached is the final version of the presentation. (See attached file:
efte_final_presentation.ppt)

This e-mail is sent by a law firm and contains information
that may be privileged and confidential, If you are not the
intended recipient, please delete the e-mail and notify us
immediately.

02302

01300000000911


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01300000000527


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 learn 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 Modernization Act, despite concerns of
some senior regulators.

At a 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

00748

01200000000093


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 studics and recruited business
support for deregulation. But the legislation never made it out of a congressional subcommittee.
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 existed 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 series of mectings 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.

00744

01200000000089


DRAFT
January 10, 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))

01200000000010


la Rua admitted he couldn't rule that out. "Things are pretty crazy
around here. Who can say?"

But Enron creditora, clients, and shareholders, who stand to lose
billions over their exposure to the company, weren't buying any of it.
“While they may act like it, they are not a South American country, and
Ken Lay is not the President of Argentina," declared J.P. Morgan Chase
Spokesman Alex Firtilly. "They are a malfeasant U.S. corporation that
has potentially caused us to lose $500 million. And Ken Lay is from
Migsouri.*

"eComo?," Lay replied. "No hablo Ingles.*

Recently ranked as high as No. 7 on the Fortune $00 list of the largest
U.S. companies, Enron literally ran itself into the ground by fudging
its books, making secretive deals that enriched company insiders, and
relying too heavily on debt, Though it was formed in 1986 with the
merger of Houston Natural Gas and InterNorth, Enron became Argentina
only recently, said Lay, “on the advice of our attorneys.”

That counsel came none too soon. As a South American state, all pending
U.S. and European lawsuits are rendered harmless. And the company
escapes what had been a daily fusillade of scorn from its former home.

Indeed, mich as the French were baffled by America's obsession with
President Clinton's sexual affairs, many South Americans gay they don't
understand why Enron and its leaders have been vilified. As former
Colombian President Ernesto Samper explained: “In the United States,
you look at corruption as an abomination We look at it as an art."

EXTRADITION DENIED

The U.S. State Department has refused to recognize Enron as Argentina,
and a spokesman said the Bush administration has officially requested
the extradition of Lay and the officers who allegedly fled with him.
Argentina, however, denied the reque: explaining that an entire
country cannot be extradited. And besides, they added, Lay had pledged
to help pay off the nation's $132 billion debt,

Asked where the bankrupt Enron got such a sum, Lay explained that after
proclaiming its nationhood status, the company had received an
emergency IMF loan. An IMF spokesman later confirmed the payment .

"From what we knew of their fiduciary practices, Enron appeared to have
all the hallmarks of a typical IMP fundee,* said IMP communications
director Nestor Svingen. "At first, we did balk when they asked for
$232 billion, but when they explained that some of the money would go
to repay overdue IMP loans, we thought, ‘Oh, that's all right then.’

"Not that we actually expect to see any money from anyone," Svingen
added. “It's just this little game we all play. Great fun if you like
numbers. Do you enjoy quadratic equations? I could do them all day."
Asked what Enron/Argentina had pledged to do with the extra $100
billion it requested, Svingen said the application had specified
funding for "civic infrastructure improvements."

“That usually means the president is going to build a Palace," Svingen
explained,

. 00735

1200000000080


{(b)(5)]

ISSUE AND DISCUSSION
{(6)(5)]

00739

01200000000084


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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 afier 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
interested party, They said the lead was taken by several major oi! 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 telecommunications services and sulfur-
dioxide emissions credits.

The new rules ensured that Enron and other merchant companies 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 economics, became “the ambassador" for deregulation, one former employee said.

Throughout the 1990s, Enron's agenda was opposed by coal-burning 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 Southern 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.

00743

01200000000088


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00500000000058


Carleton, Norman

From: Carleton, Norman

Sent: Wednesday, August 08, 2001 9:34 AM

To: Bair, Shella; Elchner, Matthew, Ellett, Martha; Fisher, Peter, Gabilondo, Jose; Gross, Jared;
aane Nickoloff, Peter; Novey, Michael; Rosedoro, Brian; Schultheiss, Heidllynne;

Subject: Retail Swaps ~ Enron PowerPoint Presentation

eine get

Attached is the Enron PowerPoint presentation for the retail swaps study group. Please note that the information is

proprietary.

Tracking: Recipient
Geir, Sheila
Echoes, Mamnew
Ehet, Martha
Fisher, Peter
Gatdondo, Jose
Gross, Jared
Hamener, View
Nickolotf, Peter
Novey, Michael
Roseboro, Bran
‘Schuiness, Hedtynne
Sutton, Gary
Hart, Anna

Delivery

Delivered: B01 214 AM
Oobvered: 01 O34 AM
Dolvered: 65101 G34 AM
Delvered: B01 O34 AM
Delvered: 8801 94 AM
Dekvered, 5/01 G34 AM
Delivered: B01 934 AM
Delivered: B01 &34 AM
Dulivered: 801 934 AM
Delvered: 801 G34 AM
Delivered. 83/01 G34 AM
Delivered: 88/01 634 AM

Read

Read: #601 1041 AM
Read: £01 640 AM
Read; 6/601 38 AM

Read: WOT 10:11 AM
Read: 8/601 &37 AM

Read: 01 G41 AM
Read: 6801 639 AM

Read: 801 6.51 AM
Read: £901 630 AM
Read: G01 12:14 PM

01899

01300000000507


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

01200000000019


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01200000000464


Enron

[(b)(5)]

00751

01200000000096


((b)(5)]

DD IN

((0)(5))

01200000000012


Subject: RE: Enron
{(b)(6)]
When would this speech take place?

o+--- ‘Original Message-----

From: Wiedman, Mark

Sent: Priday, January 04, 2002 9:32 AM
To: Smith, Amy

Subject: RE: Enron
((b)(5)]
{(b)(6)]

oo--- ‘Original Message-----
From: Smith,

3 Any
Sent: Friday, January 04, 2002 9:25 AM
To: Wiedman, Mark
Subject: Enron

[(b)(5))

Amy D. Smith

Deputy Assistant Secretary
(Banking and Finance)

The Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220

(202) 622-1900

(202) 622-0534 (fax)

Wiedman, Mark

Sent Friday, January 04, 2002 11:33 AM
4 |, Jan » H

To: ‘Smith, er

Subject: RE: Enron

Smart .

ooeee Original Message-----
Prom: Smith, Amy

Sent: Friday, January 04, 2002 11:31 AM

To: Wiedman, Mark
Subject: RE: Enron

{(b)(5)]

«008 Original Message-----

From: Wiedman, Mark

Sent: Priday, January 04, 2002 9:37 AM
To: Smith, Amy

Subject: RE: Enron

{(b)(5)]

00725

01200000000070


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 primary 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 return 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 Chency 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

00745

1200000000090


"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 unique 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. Joe 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 | 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 Horner, a
Washington lawyer who bricfly 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
money. “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 era of a deregulated
wholesale electricity market.

01200000000015


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01300000000525


Enron traded derivatives in energy, broadband and weather with a host of investment firms, and at the time it filed for
bankruptcy, it owed some of them hundreds of millions of dollars.

According to its filing, Enron owed $185 million to two offices of Chase Manhattan Bank, a subsidiary of J
P. Morgan Chase: $74 million to UBS: and $71 million to CSFB, Bear Stearns Cos. said # stood to lose $69 million
from the collapse of the energy trader; Commerzbank AG said it would lose slightly less than $45 million

Schmoozing Wall Street

Enron's muttiple business dealings with Wall Street caused firms to look favorably on the company’s new ventures.
Say investors.

In late January 2001, for example, Enron's senior management hosted a meeting for 170 analysts and investors
Skilling told the crowd that Enron's biggest immediate opportunity was its plan to trade broadband capacity: space on
the fiber-optic networks that zip voices, data and images around the planet.

Skilling saig that based on his analysis, Enron's broadband business was worth $36 bélion, or $40 a share. Enron
stock was then trading at $62. The business had lost $60 million on $408 million in revenue in 2000

“The numbers never added up, but Wall Street didn't challenge them,” says Harris Investment's Coxe.

Ronald Barone, an analyst at UBS Warburg, wrote after the January meeting that he was “brain drained. having
digested scores of detailed presentations.” He also wrote that he was “enamored” with Enron's broadband business.
even though it wouldn't generate earnings for at least a year because Mt would take that long to generate enough
trades.

$25 a Share

He estimated the business was worth $25 a share, or $22.5 billion. He kept his “strong buy" rating on the stock and, in
a January 25 report, raised his 12-month target on Enron stock to $102 from $100. The stock was trading at $82 at the
time. Barone declines to comment on his recommendations

Lehman's Gross raised his 12-month target prce on Enron to $100 from $90 after the company's analysts”
conference. He said he viewed Enron's foray into broadband as no different from any of is other endeavors

“Given the track record that has been displayed over the past 36 months, we have no reason to doubt the success of
their efforts,” Gross wrote a week after the conference in @ report dated Feb. 1. Enron stock was then trading at $78
“We continue to recommend Enron as a core holding.” he wrote. Gross declines to comment

$180 Million Charge

Enron's fiber-optic business collapsed this past summer. In its third-quarter earnings release, Enron said it had taken a
$180 million charge to restructure the business, including severance payments to 500 fired workers and a reduction in
the value of its operations.

As Enron's stock was rising on Wall Street, analysts often said they were in the dark about the company: how it made
money and booked sales and what was behind dazens of off-balance-sheet partnerships.

Them lack of knowledge didn't stop them from promoting Enron stock, Goldman Sachs analyst David Fleischer said in
March that Enron's “lack of disclosure and transparency is a long-standing hallmark.”

Enron had been a fixture on Goldman's “recommended list’ of a couple hundred favored stocks since 1993, when
analyst Fleischer joined the firm

Extraordinary Franchises"
Enron has built unique and, in our view, extraordinary franchises in several business units.” Fleischer said in March
On March 14, Commerzbank Capital Markets analyst Andre Meade raised his long-standing rating on Enron to

“accumulate” from “hold” because the stock had dropped 30 percent in the previous three months — even though he
$axd, he couldn't construct accurate earnings models. “Enron keeps a lot of facts close to the vest,” he said

° 00732

01200000000077


{(b)(4)]

01912

01300000000520


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.

00750

01200000000095


{(b)(4)]

01913

01300000000521


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.

01200000000023


{(b)(4)]

00500000000063


Several Wall Street firms took steps last year to defuse criticism that conflicts of interest taint analysts’ research In
July, Merrill Lynch announced that its analysts could no longer own shares in the companies they cover. CSFB soon
followed with similar announcements

As of Dec. 17, with Enron a penny stock, fetching 57 cents a share, 7 of 17 Wall Street analysts rated the stock a
“ole” and 5 offered a “sell” recommendation

Five other analysts advised their clients that the company at the center of the biggest bankruptcy filing in U.S. history
was stil a “buy.”

Wiedman, Mark _
From: Wiedman, Mark

Sent: Tuesday, ‘December 18. a decal 7:52 AM

To: Roseboro, Brian; Carleton, Norman, Nickoloff, Peter, Schultheiss, Heidilynne
Subject: FW: ENRON ADMITS IT'S REALLY ARGENTINA

waeee Original Message: =

Prom: Jon Gross <jgross®projectgrad.org>

To: Mark Wiedman <Mark,Wiedman@do.treas.gov>; Mike Grunwald <grunwaldmr@washpost .com>;
Anuj Gupta <agupta@mbal998.hbs.edu>; Eddy Daniele <eddy.dani:
Sent: Mon Dec 17 23:20:54 2001

Subject: PW: ENRON ADMITS IT'S REALLY ARGENTINA

Original Message
From: jmgross [mailto:jmgross@icademy.com)

Sent: Thursday, December 13, 2001 5:48 PM

To: Robert Vincent; Catherine Markman; Jonathan Gross
Subject: FW: ENRON ADMITS IT'S REALLY ARGENTINA

Too funny, on the slight chance you haven't already received this.

ENRON ADMITS IT'S REALLY ARGENTINA
Now Massive Ineptitude, Corruption Make More Sense, Analysts Say

Houston, Texas - Collapsed due to gross mismanagement and
insurmountable debt, energy company Enron today confessed to what many
observers had long suspected: it is actually Argentina.

Congressional leaders, who have called for an investigation into the
biggest corporate failure in U.S, history, immediately dismissed
Enron's claim, but Argentinians weren't so sure. "The shady deals. The
crazy debt. I knew there was something familiar about those guys," said
Banco del Argentina director Ernesto Caballo.

Enron chairman and CEO Kenneth Lay, speaking through an interpreter via
phone from Buenos Aires, apologized for any confusion the subterfuge
may have caused, and noted that sovereign nation, the company was
immune from U.S. prosecution. Lay also insisted that he had not *fled*
2 rok game but had returned home to the capital to visit "mi
familia."

While not directly stating it, Lay also hinted that he might in fact be
Argentinian President Fernando de la Rua. Reached in Buenos Aires, de

° 00734

1200000000079


{(b)(4)]

00500000000062


Wiedman, Mark

From: Wiedman, Mark

Sent: Eeiday. December 21, 2001 4:08 PM
To: Bitsberger, Timothy

Subject: Fw: Revised Enron Talking Points

once nares

Lemme see where I can take this, and we'll talk Jan 2.

eit Original Message-----
Prom: Carleton, Norman <Norman.Carletonédo.treas.gov>

To: Bitsberger, Timothy <Timothy.Bitsbergeredo.treas.gov>; Wiedman, Mark
«Mark. Wiedmanedo.treas.gov>

Sent: Pri Dec 21 15:56:13 2001
Subject: Revised Enron Talking Points

attached is a revised document based on Mark's comments.

Wiedman, Mark
From: Wiedman, Mark
Sent: Friday, December 21, 2001 1:28 PM
To: Batsberger, Timothy
Subject: RE: Enron Talking Points
am doing this right now
-—-Onginal Message—--

—_ Bitsberger, Timothy

Friday, December 2, 2001 11:31 AM
for Wiedman, Mark
Subject: RE: Enron Talking Points

can you please review and make comments to me first
~~~ Onginal Message--==

From: Carleton, Norman
Sent: Friday, December 21, 2001 9:47 AM
To: ——Bitsberyer, Timothy; Wiedman, Mark
Ce: ‘Schultheiss, Heiditynne; Nickoloff, Peter

<< File: Enron talking points.doc >>
Attached are draft Enron talking points for Peter Fisher.

’ 00728

01200000000073


CEA EXEMPTIONS

{(b)(5)]

01200000000011


From; Bitsberger, Ti

Sent: , Jani , 2002 12:51 PM
To: Wredmen 5 Mark”

Subject: RE: Oraft Memo on Enron/CFMA Articles

let's give it a day or two

--~--Original Message-----~

om; Wiedman, Mark

Sent: Monday, January 07, 2002 10:26 AM

To: Bitsberger, Timothy

Subject: RE: Draft Memo on Enron/CFMA Articles

do you want to suggest a meeting? i think you should, not me

+ could also talk to him, but that strikes me as less likely to succeed

sonnel Original Message-----~-

Prom: Bitsberger, Timothy

Sent: Monday, January 07, 2002 10:25 AM

To: Wiedman, Mark

Subject: RE: Draft Memo on Enron/CFMA Articles

me too

wane Original Message-----

From: Wiedman, Mark

Sent: Monday, January 07, 2002 10:23 AM

To: Bitsberger, Timothy

Subject: RE: Draft Memo on Enron/CFMA Articles

[(b)(5) , (b)(6)]

oseee Original Message-----

Prom: Bitsberger, Timothy

Sent; Monday, January 07, 2002 10:10 AM

To: Wiedman, Mark

Subject: RE: Draft Memo on Bnron/CFMA Articles

[(b)(5) , (b)(6))

ooeee Original Message-----

From: Wiedman, Mark

Sent: Monday, January 07, 2002 10:08 AM

To: Bitaberger, Timothy; Roseboro, Brian
Subject: RE: Draft Memo on Enron/CPMA Articles

{(b)(5) , (b)(6)]

date Original Mes:
Prom: Bitsberger,
Sent: Monday, January 07, 2002 10:07 AM

To: Wiedman, Mark; Roseboro, Brian

Subject: RE: Draft Memo on Enron/CFMA articles

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{(b)(5)]

Carleton/Federal Finance Policy Analysis/June 16, 1999

01789

01200000000445


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
interested party, They said the lead was taken by several major oil companies, including British
Petroleum Co, and Phillips Petroleum Co., which were concemed 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 telecommunications services and sulfur-
dioxide emissions credits.

The new rules ensured that Enron and other merchant companies 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 economics, became "the ambassador" for deregulation, one former employee said.

Throughout the 1990s, Enron's agenda was opposed by coal-burning 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,

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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 learn 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 carly 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 Modernization 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

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00761

01200000000106


Jacques, Kevin

From: Jacques, Kevin

Sent: Wi , January 16, 2002 9:11 AM
To: ‘ahetman@jcu.edu"

Subject: Thinking of you

{OUTSIDE SCOPE , (b)(6)]

The faiture of energy firm Enron has one of my immediate bosses names in the paper
and on TV regularly,

01200000001046


Wiedman, Mark

From: Carleton, Norman

Sent: Friday, December 21, 2001 3:56 PM
To: Bitsberger, Timothy; Wiedman, Mark
Subject: Revised Enron Talking Points

Attached is a revised document based on Mark's comments.

01200000000008


{(b)(4)]

02307

01300000000916


{(b)(5)}

CONCLUSION

[(b)(5)]

Attachments

{(0)(5)]

01200000000013


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
{(6)(5)]

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{(b)(S)]

Heidilynne
Sent: Friday, January 2002 $:10 PM
To: Carleton, Norman

Subject: Draft Memo on Enron/CFMA Articles

{(b)(5)]

The three news articles are
downloaded as the latter pages.

Wiedman, Mark

Sent, Monday, January 07, 2002 10:21 AM
To: Wiedman, Mark” ,

MR. RUSSERT: Enron, the biggest bankruptcy in our nation’s history-people at the top were able to trade out
their stock and bring home some money. at the bottom were not able to do that because of some of the
regulations imposed upon them. As secretary of Treasury, will you investigate Enron?

SEC'Y O'NEILL: You know, I think what we've been doing and what we'll do going forward is look and sce if
there are reg actions or rules that could be put in place that would avoid this kind of situation. I think the
dust hasn’t c! ee on this case and it's not clear whether the company fulfilled all of its obligations under
the existing rules. If they did, it suggests that we need rule change. If, on the contrary, it turns out that they
didn’t fully comply with all the rules, we have a different issue on our hands.

MR. RUSSERT: That's criminal behavior.

SEC'Y O'NEILL: Well, I don’t know. You're jumping to a conclusion. I wouldn't do that,

MR. RUSSERT: If they don’t comply with the rules.

SEC'Y O'NEILL: I would tell you from my own experience, again, having run a Fortune 50 corporation, that |
thought the rules were very clear on what's required for reporting. And I think we'll see fairly soon from the
work that’s being done by the SEC and others whether or not the corporation fully complied with its reporting
responsibilities,

MR. RUSSERT: Are you going to look into some of the offshore investments?

SEC'Y O'NEILL; Well, | think we need to look at their compliance with rules, and to the extent that takes us to

‘ 00721

01200000000066


Wiedman, Mark

So — ee

Sent! Friday, J wary 1 2002 11:42 AM
ent: . January 11,

To: Wiedman. Mark

Subject: Enron/CFMA Memo

Attached is an updated copy of the Enron/CFMA memo. The first four pages are the memo; the following pages are the
downloaded newspaper articles, | will bring copies with me at 12 noon, but | thought you should have an advance copy

reer ot

01200000000009


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).

At a 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
red 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
regulation 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.

00749

01200000000094


[(b)(4)]

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- Original Message
Prom: Smith, Amy <Amy.Smithedo.treas.gov>

To: Wiedman, Mark <Mark.Wiedmangdo.treas.gov>
Sent: Fri Jan 04 09:33:41 2002

Subject: RE: Enron

[(b)(6)]

When would this speech take place?

ooee- Original Message-----

Prom: Wiedman, Mark

Sent: Priday, January 04, 2002 9:32 AM
To: Smith, Amy

Subject: RE: Enron
((b)(5)]
{((b)(6)]

--+-- Original Message-----
From: Smi

Sent: Friday, January 04, 2002 9:25 AM
To: Wiedman, Mark
Subject: Enron

((b)(5)}

Amy D. Smith

Deputy Assistant Secretary
(Banking and Finance)

The Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220

(202) 622-1900

(202) 622-0534 (fax)

Wiedman, Mark

Somer peel il 04, 37 AM
oat crow, january 04, 2002 9:
Subject: RE Enron

[(b)(5)]

~-++-Original Message-----

Prom: Smith, Amy <Amy.Smith@do.treas.gov>
To: Wiedman, Mark <Mark.Wiedman@do.treas.gov>
Sent: Fri Jan 04 09;33:41 2002

Subject: RE: Enron

{(b)(6)]

00726

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01300000000917


Basorper December 21, 2001 11:35 AM

RE Re enon nan Taking Points

Peter sat me down yesterday and told me exactly how he likes to do speeches. I'll re-work it with Norman to get it into that

form and then forward it to you

Original Message-~--
From:

Bitsberger, Timattry
Sent: Fiidey, Deconber 21, 2001 11:31 AM
To: Wiedenan, Mark

Subject: RE: Enron Talking Points
can you please review and make comments to me first

Original Message--—

From: Carleton, Norman

Sent: — Fiiday, December 21, 2001 9:47 AM
To: Btsberger, Timothy; Wiedman, Mark
Ce: ‘Schulthess, Meld@ynne; Nickoloff, Peter
‘Subject: Enron Talking Points

<< File: Enron talking points.doc >>
Attached are draft Enron talking points for Peter Fisher.
Wiedman, Mark

From: Wiedman, Mark

Sent: ‘Wednesday, December 19, 2001 11:21 AM
To: Bitsberger, Timothy; Carleton, Norman
Subject: RE: enron

Miers Ha ~ at lento eahineh tt woetet Maybe we could append an article or two that has been particularly helpful (e.g,

aw Message-——-

From: Basberger, Timothy
Sent: Wednesday, December 19, 2001 11:18 AM
To: Carleton, Norman, Wiedman, Mark
Subject: enron
((b)(5)]

10

00729

01200000000074