{(b)(5)}

00500000000196


Lebryk, David

From: Lebryk, David

Sent: Thursday, January 10, 2002 7:08 PM
To: Hammond, Donald

Subject: RE: FT Article

This doesn't help much either.

Despite continued whispers around Washington that Paul O'Neill's job is in jeopardy, the White House
yesterday stood by its man, saying rumours of the outspoken Treasury secretary’s imminent downfall were
nothing but "kerfuffle” and "nonsense".

Asked whether President George W, Bush's confidence extended to O'Neill's handling of the Argentine crisis -
while some critics have accused the Treasury of failing to give Buenos Aires more support, others have
slammed O'Neill for not cutting the strapped government loose earlier - Ari Fleischer, White House spokesman,
insisted it did.

“O'Neill has done an excellent job," he told a gathering of reporters.

When the irascible Helen Thomas, a columnist for Hearst newspapers and the dean of the White House press
corps, reminded Fleischer that the riots and government collapse in Argentina have not generally been viewed
as successes where policymakers have done "excellent" jobs, a nonplussed Fleischer said the blame did not fall
at O'Neill's feet: "Not everything in the world is in the control of the United States, or even the Treasury
secretary.”

Copyright: The Financial Times Limited 1995-1998

~——-Original Message——~

From: Hammond, Donald

Sent: ‘Thursday, January 10, 2002 5:52 PM
To: Lebeyk, David

‘Subject: PW: FT Artie

intresting

Original

From: Seward, Lachlan

Sent: ‘Thursday, January 10, 2002 11:46 AM
To: Hamenond, Donald

Subject: FT Article

Don, Here's the article | mentioned. Lach

Financial Times (London)
January 9, 2002, Wednesday London Edition |
SECTION: BACK PAGE - FIRST SECTION; Pg. 20
HEADLINE: Whispers in the shadows leave O'Neill vulnerable: US Treasury
secretary faces a campaign from enemies within the Bush administration.
Gerard Baker reports:
BYLINE: By GERARD BAKER
BODY:
In Washington, whispers don't stay whispers for long, especially when they
1

1100000000021


‘

BUGLE INDEVEDUAL ACCOUNT PLans ano ERISA’s Fiouciagy DUTIES . 37

Investment in company stock would need to be pru-
dent, since diversification is not part of the equadon.
What does this mean for a small company with a sig-
nificant net worth that produces little or no profits for
itsshareholders? Does a duty exist to sell the company
stock and invest the proceeds in investments that pro-
duce reasonable retums, such as blue chip mutual
funds? Or does the EIAP nature negate the need to
consider such a possibility? Does it mater if the plan
is an ESOP? To the author's knowledge, there are no
answers to these questions. Presumably, fiduciaries of
small companies need not shop their company re-
gardless of the level of profitability, but should con-
sider any purchase offers that arise_ In this regard, all
companies hope to, and plan to (at least eventually),
make a profic

UNWORKABILITY

If the Law is that company stock must be a prudent in-
vestment, regardless of the wustee’s awareness of in-
side information, the limited prudence requirement
putsa fiduciary in a difficult situation. When the stock
isatan all-time high, asale would produce a relatively
great return, Under the waditional “buy low/sell
high” menuality, the ELAP would have served its pur-
pose—the employees’ efforts presumably caused the
stock to increase, and the sale will reap them rewards
that can then be diversified and held for redrement.
For most ELAPs, the plan would need to be amended
allow for diversification. Once the stock reaches an
alltime high, oddly, some might argue itis an impru-
dent investment, because it has a relatively weak po-
tential upside, thus necessitating a sale of the stock
with or without permissive plan terms. Although all
stocks go through ups and downs (to the author's
Knowledge, no publicly traded stock has ever only
gone up in valuc), simply because a stock is trading at
an alltime high does not mean it will not continue to
increase in value. In this regard, every company is dif-
ferent. A fiduciary who seeks to sell the stock that has
been rising could be questioned for his or her ac-
ons—it was doing so well, so why did you sell? A sale
often is the “end of the line.” Many ESOPs relate to
small private companies, where the ESOP's trust owns
all ora substantial portion of the stock of the sponsor
company. A sale to another company would ordinar
ily cause the company to be a subsidiary of a larger
entity—a drastic change, Could ERISA’s duty of pru-
dence require such a change? Decisions to “sell out”
or merge ordinarily fall outside of ERISA. When the
company is wholly owned by an ELAP, however, ERISA
fiduciary responsibility will come into play when a

purchase offer is received. Absent an amendment, an
ERISA fiduciary duty challenge could potentially
arise for failing to follow the plan's terms. The fiduci-
ary might argue, in certain cases, that the offer was
one that no prudent fiduciary would refuse. (SeeCen-
tral Trust Co. v. American Avents Corp., 771 F. Supp.
871 (S.D. Ohio 1989),}

If the ESOP (or other EIAP) relates to a publicly
traded company, and the ESOP ownsa minority inter-
est in the company, amending the plan (if necessary)
and selling the company stock when it is trading at a
relatively high price could be difficult. Depending on
various factors, the ESOP would likely be an “affiliate”
of the company for purposes of securities laws, and
thus unable to sell all of the stock at once in the open
market. This would force the plan to sell the stock
gradually over time in accordance with SEC Rule 144.
Furthermore, if corporate insiders recommend to
management that the plan be amended to convert
from ELAP status, the message to the market might be
harmful to the stock's price. Specifically, investors
could interpret such a move as indicating that the
stock will not appreciate further, thus potentially
causing a sell-off that would reduce the stock's market
value, Lawsuits could be anticipated.

In contrast, when a company experiences finan-
cial difficulties, a fiduciary is putin a difficult position
if the plan isan ESOP or other EIAP that owns all ora
substantial portion of the company’s stock. A sale ata
low price will produce a relatively poor return. If the
stock is close to worthless, any potential future loss
would be insignificant, As noted above, a sale to an-
other company will result in a change of control, and
the return on the sale may be relatively low. The fidu-
ciary could be quesdoned for not having acted ear-
lier, But, at any given point in time, the future of a
company cannot be foreseen. Consider the Chrysler
situation described at the beginning of this article.
Many people credit much of Chryster’s turnaround to
the efforts of Lee Iaccoca. Recently, Chrysler merged
with Daimler Mercedes Benz, Was invesument in
Chrysler stock a prudent action in 1981, when the
value was near $3 per share and the company was tec-
tering on bankruptcy? Looking back, it sure was. If,
however, Chrysler had maintained an EIAP and sold
out when the stock was at an all-time low, that judg-
ment call would surely have been questioned (at least
it almost certainly would be in today’s litigious envi-
ronment), probably in the form of a class action
lawsuit.

Chrysler is but one example of a turnaround, In
Fecent years, IBM stock fell drastically before IBM

00100000000429


acditions
in the fourth quarter,” the report said.
The CSFB release said that other securities firms do not appear to have a

major exposure to Enron, and that it estimates that firms such as Bear
Stearns,

Goldman Sachs, Lehman Brothers and Merrill Lynch likely have less than
$100

million in totel loan exposure.

On Wednesday, Enron saw its credit ratings downgraded to junk status by
the

three major credit ratings agencies, and its proposed acquisition by
Dynegy
Inc, (OYN) was as @ result scuttled.

-By Michael S. Derby, Dow Jones Newswires; 201-938-6192;
michael .derby@dowjones.com

(END) Dow Jones Newswires 11-29-01
LLAGEST/AP-DJ)--11-29-01 1148EST

[IMAGE]
(See attached file: ATT200860,gif)

01100000000111


TREASURY CLEARANCE SHEET NO
Oate 972208 _

MEMORANDUM FOR: O SECRETARY (DEPUTY SECRETARY 0 EXECUTIVE SECRETARY

X ACTION OCBRIEFING CO INFORMATION [LEGISLATION
OOPRESS RELEASE OPUBLICATION COREGULATION CISPEECH
OO TESTIMONY O OTHER:

FROM: Malachy Nugent, Office of African Nations
SUBJECT: Response Letter to Christopher Long of Enron Corporation

REVIEW OFFICES (Check when office clears)

(D Under Secretary for Finance 0) Enforcement O Policy Management
O Domestic Finance Oatr © Scheduling
1 Economic Policy O Customs OC Public Affairs/Liaison
O Fiscal OFLETC O Tax Policy
OFms O Secret Service O Treasurer
C Pubdtic Debt 0 General Counsel Oeae
O Inspector General O mint
Under Secretary for int'l Affairs DIRS O Savings Bonds
Oi International Affairs O Legistative Affairs
OC Management O Other ———
QOocc

OASIA/INN (4303 NY)

OASIA/INN (4311 NY)

SPECIAL INSTRUCTIONS

Oem ae he

1D Ensewtwe Secretary Cate

00100000000093


BS * Japan |
Merrill Lynch Comment

4 December 2001

Production Team Japan Daily Notes

(84-3) 3213-6269

Japan Daily Notes: 4 December 2001

Highlights:
¢ BANKS: Impact of Enron Similar to Mid-size Domestic Bankruptcy
(Yamada)
Mermill Lynch & Co. Merrill Lynch, as 2 full-service firm, has or
Global Securines Research & Economics Group may have business relationships, including
Global Fundamental Equity Research Department investment banking relationships, with the

companies in this report.

01000000000930


Donovan, Meg

From: Sills, Gay
Sent: Thursday, July 12, 2001 5:41 PM
To: Rao, Geetha; Berg, Katie; Grewe, Maureen; Resnick, Bonnie; Christopulos, Greg; Sampliner,
Gary
Ce: Donovan, Meg; Mills, Marshall; McDonald, Larry, Radelet, Steve
Subject: RE: Dabho! meeting on Enron/OPIC project at NSC
OK WITH ME
~onOriginal Message--—
From: Rao, Geetha
‘Thursday, July 12, 2001 5:39 PM
To: ‘Sills, Gay, Berg, Katie; Grewe, Maureen; Resnick, Bonnie; Chnistopulos, Greg; Sampliner, Gary
ca ‘Donovan, Meg; Mills, Marshall; McDonald, Larry; Radelet, Steve
Subject: RE: Dabhot meeting on Enron/OPIC project at NSC
Importance: Hoh

We have a final set of talking points for both Treasury and State to send over to NSC by COB today ..... please
comment by 6 pm today if you have any concerns... it is line with what we had suggested, We've also posed some
questions to OPIC, Thanks! and sorry for the short deadline!

snes Original Message-----

Prom: Speck, Janet G [mailto:SpeckJGestate.gov]

Sent: Thursday, July 12, 2001 5:20

To: 'Rao, Geetha'; Usrey, Gary S; Gadzinski, Peter S$; Shub, Adam M(E);
Walker, M Karen; ‘brooks, jo'

Cc: Scholz, Wesley S; Delare, Thomas L; Bay, Janice PF

Subject: TALKING POINTS FOR US EMBASSY- INDIA

Attached are talking points for the Embassy to deliver to the GOl re Dabhol.
They have been revised as per Treasury's suggestions. Please let me know
asap if you have further comments so that we can forward them to the NSC
tonight. Thanks.

<< File: EmbtalkY1 Dabhol rev.doc >>

{(b)(5)]
——-Ongina! Message—
From: Rao, Geetha
Sent: ‘Thursday, Jaty 12, 2001 11:01 AM

To: predooge tot —Layvecbor irony myweb aa eco

Attached are the talking points that State sent over this morning. Please review and send back
comments by 1:30 pm TODAY, We need to submit a joint set of TPs today. Also note that 1(0)(5)]

any other suggestions?

00500000000472


Grewe, Maureen
Sent: Wednesday, Duly 11, 2001 12:52 PM
To: Sil, Gay; Resnick, Bonnie; Crristopulos, Greg; Sampliner, Gary; Rao, Geetha
Ces Donovan, Meg; Mls, Marshall; McDonald, Larry; Radelet, Steve
Subject: Dabhol meeting on EnroryOPIC project at NSC

This is a readout of the meeting at NSC this morning. There is also an ACTION request, USG
agencies are requested to get back to NSC by cob tomorrow with comments on OPIC's suggested
talking points for a demarche to the GO! by the Charge in Delhi. | talked to the State reps after the
meeting (from South Asia bureau, Investment office and Larson's office) and they seem to be
basically in the same place as | was on what an appropriate message might be. My proposed plan is
tat Gena wil ak a rt rack a conmants one taking pats ad cst han win
Treasury as early as possible this afternoon, requesting e “oof is
cob today. 20 that we cen circulate our comments to Stale and try to come up with lint suapasted-
points to submit to NSC by cob tomorrow. Please let me know if you have any concems about this

plan.

Readout of meeting:
Attendees; NSC, State (EB front office and investment office, South Asia Bureau), Treasury (Grewe,
Rao, Sampliner), Commerce, OPIC (President Peter Watson, GC Ron Jonkers and several others)

[(b)(5)]

00500000000483


Eligible
Individual
Account Plans
and ERISA’s
Fiduciary Duties

By ALLEN BUCKLEY

What are an ERISA fiduciary’s duties when dealing
with an eligible individual account plan? This article
explores that question, to which there is no clear

answer,

Alles Buckley is a partner sith Sraith Helos Mulless & Moore LL
Geongia, specializing in employee benefits lac The
thor wishes to express his gratitude to Brad Turner, Esq, of
Trositman Sanders LLP for his hetp with the securities law anneces
of this anticle.

‘
ARTICLE

Imagine you've just been hired asthe investment fidu-
Giary of an employee stock ownership plan (ESOP) of
a large company (XYZ Corp.) that has been in exis

tence in a stable industry for a long time. In Year | of
your engagement, the company is not doing well but
is nowhere near bankruptcy. In accordance with plan
terms, substantially all of the ESOP’s assets are in-
vested in company stock. Legal counsel has advised
that you need not diversify the assets as would ordi-

niarily be necessary for a typical retirement plan, but
you must act prudently, Counsel has also informed
you that you could be Personally liable for any losses
incurred by plan participants asa result of a breach of
your fiduciary duty,

‘The average of the month's high (ask) price and
the month's low (bid) price (hereafter, the average
Price) for the company stock held by the ESOP for
December of Year 1 is $13.125, Thereafter, X¥Z's
situation worsens. The average price for the month of
July of Year 2 is $10.875. The average price for Decem-
ber of Year 2 is $8,993.

Things then get worse. The first sentence of an
article of a December of Year 3 edition of Newsweek
magazine reads: “For months XYZ Corp. has been
inching closer to bankruptcy, dragged down by asales
curve that seemed to slip another notch with every
fresh headline on the Company's crisis,” The same ar-
ticle states that XYZ Corp.'s daily losses are running
between $6 million and $8 million. The average price
for the month of December of Year $ is $6.83.

As the fiduciary overseeing this company’s ESOP,
should you now, at the end of Year 3, sell the company
stock of the ESOP (or begin selling) and then diver-
sify the proceeds so as to attempt to produce a re-
spectable return for the participants? If you sell now,
will you be questioned for not having sold in Year 1?
Orin Year 2? Could you have already failed to act pru-
denily by not selling before things got this bad?

You don't sell, hoping the company will come
back, In Year 4, the company’s stock price continues
to fall, but the company continues to avoid bank
ruptcy. For December of Year 4, the average price is
$5.50. Time to sell?

In Year 5, things even get worse. The stock con
tinues to fall. The average price for December of Year
5 is $3.07. You fear that if you don't sell and the com
pany goes bankrupt, you'll surely be sued for not hav.
ing sold and produced something worthwhile for the
Participants, You ask yourself, why didn’t I sell in Year

1? Or at least in Year 2? You could have utilized the
sales proceeds of the company stock to purchase blue
chip mutual funds. You ask yourself, why haven't I al-

00100000000419


Wiss, Barbara

From: —Lori.Santamorena@bpd.treas.gov
Sent: Friday, November 30, 2001 7:52 AM

Page | of 2

To: rhe Nadir. Isfahani@bpd.treas.gov; Chuck Andreatta@pd.treas.gov;

Glen.M.
Ce: barbara.wiss@do.treas.gov

Subject; DOW JONES NEWSWIRES: Bank Regulators See No Systemic Risk From En ron Collapse

Moverber 25, 2992

bank Reguistors See Ho Systemic Risk From Enron Collapse

Ry REBECCA CHRISTIE

Of (Cw JONES NEMSWIKES

WASHINGTON -- U.S. bank regulators say the financial collapse of energy
giant Enron should have little lasting impact on the basking industry

fioee of the four major bank regulators expressed concern Thursday that
Enron's meltdown would ssoubell inte systemic problens,

“It's something we are looking at. We have not identified anything
would Concern Us a great deal,” seid Mert Schmidt, assistant director of
xuporvision for the Federal Oepesit tneurance Corporation, of possible
ripple effects trom Enron’s difficulties. “Obviously the Enron situation is
something we and other regulaters are following ctosely.”

Sank regulators generally den‘t comment on specific banks. Scheidt said the
banks the FDIC has been contactes haven't expressed undue concern about
Enron's crisis. Schmidt saic segulations and internal guidelines generally
limit Dank exposure fo any one Company and even any one industry.

“ke are not aware of any individual bank that house cutaited direct exposure
to Emron,* Schmidt sig. “Obviously, there will be sone losses suffered.”

Citigroup was one of the banks with the closest ties to Enren’s failed desi
with Oynegy Inc., which scetched its buyout Did Wednesday as financial
ratings agencies lowered Enron to junk status, Citigroup is regulated by the
OffLee of the Comptroller of the Currency, which had no specific comment on
t bank but expressed confidence in the banking industry's ability to
weather the aters.

“The OCC continually monitors market conditions and banks are always in the
Process of taking profits and losses,* said a spokesman for the Office of

the Comptrolier of the Currency. “The OCC is confident that any lcases cue
te wart

condit

can be accommodated with minimum impact.”

major would-be Gealmaker, JP Morgan Chane, is regulated by the

The Fed had no specific comment on bank: ure to
Engom, but @ spokesman for the Federal Reserve Bank ef Wew Yorks noted
Sodnesday that “the markets aze functioning sormally.*

‘The Office of Thrift Supervision, whose wesbers generally lend to homebuyers
and smaller businesses, also was not expecting 4 major ripple effect.

“It looks Like the Enron deal would have no broad-range effect on the thrift
industry,” said Office of Thrift Supervision spokesman Sam Eskanati, who
noted thet thrifts tend te lend to smaller businesses. Still, he said OTS
was “sanitoring the situation carefully.”

1/16/02

01100000000090


On Wednesday, Enron saw its credit retings downgraded to junk status by
the

three major credit ratings agencies,
Dynegy
inc. (DYN) was as a result scuttled.

-fy Michael S$. Derby, Dow Jones Newswires; 201-938-4192:
michael .derby#dowjones.com

and its proposed acquisition by

(END! Dow Jones Newswires 11-29-01
LI4BEST(AP-DJ)=--11-29-01 1146EST

| IMAGE!
{See attached file: ATT200860.gif)

01100000000096


Donovan, Meg

From: Sills, Gay
Sent: Thursday, July 12, 2001 4:10 PM
To: Rao, Geetha
Ce: Donovan, Meg
Subject: RE: Dabhol meeting on Enron/OPIC project at NSC
ok with me
—-Onginal Message--—-
From: Rao, Geetha
Sent: Thursday, day 12, 2001 3:52 PM
To: ‘Sits, Gay
Ce Donovan, Meg
‘Subject: RE: Dabhel meeting on Enron/OPIC project at NSC
[(6)(5)}

<< File: EmbtalkY1 State 2.doc >>

won Original Message

From: — Sills, Gay

Sent: — Thursday, July 12, 2001 3:44 PM

To: Rao, Geetha

Ce: Donovan, Meg

‘Subject: FW; Dabhol meeting on Enron/OPIC project at NSC

—~Orighy Message——

From: Donovan, Meg

‘Sent: — Thersday, July 12, 2001 3:21 PM

To: ‘Sais, Gay

Subject: RE: Dadnol meeting on Enron/OPIC project at NSC

{(b)(5)]

——Original Message----
From: Sis, Gay
‘Sent: Thursday, July 12, 2003 3:18 PM

To: Rao, Geetha; Berg, Katie; Grewe, Maureen; Resnick, Bonnie; Christopulos, Greg: Sampiiner, Gary

‘Subject: RE; Dabihol meeting on Enron/OPIC project at NSC

((b)(5)]
= Onginal Messages
From: Rao, Geetha
Sent: pace! j2, 2003 21:01 AM
To: Rao, Geetha; Berg, Katie; Sits, Gay; Grewe, Maureen; Resnick,
Cc Oonovan, Meg; Mills, Marshall; McDonald, Larry; Radelet, Steve
Subject: RE: Dabhol meeting on EnrorVOPIC project at NSC
Importance: High

Attached are the talking points that State sent over this morning.

Please review and send back any
comments by 1:30 pm TODAY. We need to submit a joint set of TPs today. [(b)(5)]

00500000000478


Question: [(b)(5)]
Answer;
((b)(5)]

Background
{(b)(5)]

00100000000724


Bradshaw, Tara

From: Press_Office@finance-rep.senate.
Sent: Monday, January 14, 2002 5:18 PM
To: Jill_ Gerber@finance-rep.senate gov
Subject: Enron, retirement plan rules

For Immediate Release
Monday, Jan. 14, 2002

Grassley Explores New Protections for Retirement Plan Participants

WASHINGTON - Sen. Chuck Grassley, ranking member of the Committee on
Finance, is pursuing whether Congress should tighten up protections for
retirement plan participants in light of Enron's collapse.

“Millions of Americans have hundreds of billions of dollars invested in
employer-sponsored retirement plans,” Grassley said. “These plans receive
favored treatment under the federal tax code. The Committee on Pinance has the
primary responsibility, under its jurisdiction, for making sure retirement plans
comply with the tax code and other laws. Our commi also has the
responsibility to fix any weaknesses that might 1 retirement plan
participants in trouble if their employer goes under."

Grassley said the details of the Enron retirement plans are still
forthcoming. However, he said, some areas already are emerging as targets for
scrutiny. Specific a: # Grassley is looking into are:

Company stock. Under current rules, a company can restrict a retirement
plan participant from selling the match received in company stock through an
employee stock ownership plan. (Enron employees’ company stock matches were
restricted.) Grassley is researching whether employees should be able to change
this investment choice prior to an arbitrary age.

Mandated purchases of company stock. Current law allows a plan sponsor to
compel employees to purchase up to 10 percent of employer stock as a condition
of participating in a 401(k) plan. Grassley said he thinks this rule should be
eliminated.

Fiduciary rules. These rules ensure that companies properly invest and
handle retirement plan mo: » including spending the money for the exclusive
benefit of their employees. Retirement plans are tax-favored vehicles,
authorized under the Internal Revenue Code. Grassley said he wants to learn
whether Enron officials violated their fiduciary duties and in general, whether
Congress should change the existing rules.

Black-outs, A *black-out" or *lockdown" occurs when a plan is shut dom
for 4 period of time to allow, for example, change to another plan
administrator. Enron had such a "black-out,* though the length of time is
disputed. Grassley said he wants to get the facts on this event because it may
coincide with the decline in the company’s stock value,

Mandated diversification of stocks in retirement plans. Some legislation
has been introduced that mandates employees hold no more than a certain
percentage of stock in their 401(k) plan. Diversification in one part of the
plan should indicate that all investments should be mandated. Grassley said he
has an open mind, but thinks mandates are not desirable nor particularly
feasible.

Grassley said he is pursuing these ideas with experts from outside groups
and agencies such ag the Treasury Department, the Labor Department and the

00800000000864


Robb..,.I hope you have found your way back home by now and have readjusted
to this time zone....no longer is this easy for me! I would like to visit
with you at bys) convenience on this credit crunch issue in the energy
sector...- [(b)(5)]

,best regards,,,jcl

The information contained in this e-mail message is intended only for the
personal and confidential use of the recipients} named above. This message
may be an attorney-client communication and/or work product and as such is
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recipient, you are hereby notified that you have received this document in
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The information contained in this e-mail message ia intended only for the
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this message is strictly prohibited. If you have received this communication in error,
please notify us immediately by e-mail, and delete the original message.

00100000000786


n

{(b)(5)]

00500000000211


((b)(5))

From: Lori.Santamorena@bpd.treas.gov
[mailto:Lori.Santamorenaébpd.treas.gov)

Sent: Thursday, November 29, 2001 12:14 PM

To! cavid.lebryk@do.treas.gov

Subject: 1DJC ) DJ CSFA: Three Big Banks Have $1.5B Loan Exposure To

serr* Forwarded by Lori Santamorena/BPD on 11/29/01 12:13 PM -----
“PUBLIC DEBT, US DEPT
OF TREASURY* To:
<GSRS@bloomberg.net> LSANTAMORENAGBPD, TREAS

11/29/01 12:07 eM ec:
bee:
Subject:
1DJC ) DJ CSFB: Three
Big Banks Have $1.58

Loan Exposure To

OJ CSB: Three Big Banks Have $1.5B Loan Exposure To Enron
2001-11-29 11:48 (New York)

NEW YORK (Dox Jone:
3.P.
Morgan Chase (JPM) each have an estimated $500 million in direct loan
exposure
to beleaguered energy trading firm Enron Corp. (ENE), according to Credit
Suisse First Boston on Thursday.
noting that “details on bank exposures to Enron Corp. are not
completely transparent," CSFB analysts also said that Bank One Corp (ONE)

~~Bank Of America (BAC), Citigroup Inc. (C) and

y $300 million bank loan exposure, and Wachovia Corp. (WB) has a $50

The analysts saic that the tallies represent direct Loan exposures. They

aren't reflective of balance sheet counter-party risk obligations, which
could

be “significant.”

“This renains a highly fluid situation, and may require many of the long
dist

of banks which are likely Enron creditors to take incremental reserve

01100000000110


Question: [(b)(5)]

Answer:
((b)(5)]

See 1/17/02 NYT article included in background materials.

00100000000727


{(b)(5)]

00500000000218


Pension Benefit Guaranty Corporation.

"The tax code smiles on retirement plang, for good reason," Grassley said.
“Tax breaks encourage employers to set up retirement Plans and employees to take
part in those plans. If employers find it easy to break the rules, then
Congress hag to re-write the rule book. Otherwise, employees counting on a
secure retirement might be left out in cold.*

In addition to the retirement plan track, Graseley said he is part of an
effort to look into whether Enron used certain tax vehicles that might have
masked the company's financial condition.

00800000000865


Page | of 2

Hammond, Donald

From: — Lori.Santamorena@bpd.treas.gov

Sent: Friday, November 30, 2001 8:01 AM

To: david.lebryk@do.treas.gov; donald. hammoni@do.treas.gov
Subject: DJ: IN THE MONEY-2:Collateral Key To Counterparties Recovery

this is a good article
— Forwarced by Lon SantanoreeaBPO on 11/3001 07:58 AM me

Norman Carlatongido.treas.gov
 Ellenddo treas.gow. te Gross€)so treas.gav,
1172W01 06:19 PMA ar Jose Gablondogso tress. pov, Jarod

a
Subject Du: IN THE MONEY.2:Cotateral Kny To Counterpartes Recovery

Movenber 29, 20012

IN TH MONEY-2. Collateral Key To Counterparties Recovery

Dow Jones Newswires

‘Thoughts of an Enron bankruptcy jogged wemories of past filings, euch aw the
‘case of Drysdale Government Securities Inc.. which involved public entities
Deing left on the hock for eillions of doliers in uncollateralized
qovernsent repurchase agreecents_

Wut bankreptcy laws have evolved significantly since the 1902 collapse of
Drysdale sent shockwaves through the financial comeunity and forced hanks to
psy cut tens of miljions of dollars to cover Drysdale’s cbligations te cther
governnent securities firme.

More recently, Orange County's 1994 bankruptcy following ite derivatives
debacle and the bitter dispute surrounding Gerean'n Metalignneliachatt Ag
for breach of forward petroleus contracts suggests that acrimonious and
lengthy litigaticas might be in the offing, In the La
counterparties settled out of court and tock "haircut:
that independent petroleur rarketers whe entered into long-term hedging
Contracts as protection againat escalating fuel prices could eve the metalo
and engineering conglomerate fer breach ef contract.

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

‘esovhile, although Enron has yet to file tor bankryptcy. wost of its
derivative counterparties are Likely already scrasbiing to exit their
trades

That's because Dynegy Inc.*@ (bYs) decieton Wednesday to abandon ite plan ro
Teecue Enron ail but sealed the fate cf the ailing Houston energy trader
which han been hobbled by accounting irregularities and unquantities
oft-balance-shoet liabilities, Enrom shares plummeted from about $90 « share

01/16/2002

1100000000080


{(b)(5)]

G.Christopulos/ITI/OPIC/Cuiaba-opt

Cleared by:
GHSills/IT1
JEichenberger/IDB
WSchuereh/ID

00500000000182


((b)(5)]

Geetha will circulate revised points today. Please comment as quickly as you can and by cob today if possible,
$0 we Can try to coordinate with State. Call me or Geetha if you have any questions or need other background.

Thanks.

0500000000491


ELIGIBLE INDIVIDUAL ACCOUNT
PLANS LEGISLATION PROPOSAL
SUMMARY

1; If the plan sponsor maintains a “substantial retirement plan” that docs not invest in company
stock, then ERISA’s fiduciary duties of diversification, prudence and loyalty do not apply to any other
plan or portion thercof to the extent that such plan invests, or permits investment in, company stock

{i.c. eligible individual account plans-hereafter, “ELAPs”), Accordingly, there would be no potential
ERISA cause of action with respect to the ELAP(s) of the plan sponsor duc to purchase or holding of
company stock, even if the plan sponsor files bankruptcy, assuming: (a) all transactions in company
stock have been at arm’s length, (b) no commissions have been charged with respect to purchases or
sales; and (c) plan terms have been followed. A “substantial retirement plan” is a defined as; (a) 3
non-contributory defined benefit plan which does not backload accruals and that supplies a 33.3% of
final average pay pension plus COLAs for an employce who works 30+ years; or (b) a defined
contribution plan with a 6% employer contribution which is not invested via participant direction,

2; If #1 docs not apply, and the plan is funded (partially or fully) by employee contributions,
then the plan must place a 20% limit on the amount of employee-funded accounts that can be invested
in company stock in order for the relicf from ERISA’s fiduciary duties described in #1 above with
respect to company stock to apply, Employees could not be required to invest any portion of their
contributions accounts in company stock. No limits would exist, however, on the amount of
investment in company stock with respect to matching contributions accounts. Under a transition rele,
excess amounts in cmployce-funded accounts with respect to a plan that permits (but does not require)
investment in company stock could be transferred to existing matching contribution accounts over a 2-
year period without participant consent. If these limits are not followed, the duties applicable to
EIAPs under current law would apply, except that the burden of proof would lie with fiduciaries in the
event of a lawsuit if the sponsor went bankrupt or bocame insolvent.

3. If a substantial retirement plan (as described in #1 above) is not supplied, and the plan is an
ESOP or stock bonus plan that is fully funded by employer contributions, then relief from ERISA’s
fiduciary duties as described in #1 above applies. However, such relief would not apply in the event
that the employer filed bankruptcy or became insolvent. Instead, the duties of prudence and loyalty
applicable under current law would apply.

4 If the conditions of #1 above are not met, and a plan allows direction of investments into non-
diversified investments such as individual company stocks, then ERISA’s fiduciary duties apply to the
design feature that allows investment into non-diversified investments, including the percentage of
any participant’s account that can be invested in company stock, unless cither: (a) a substantial
retirement plan is maintained; or (b) the plan limits investment in any one non-diversified investment
to 20% of participants’ accounts. Whether the duty has been met will depend on the facts and
circumstances including, but not limited to, the limitations placed on participants’ abilities to invest in
non-diversified investments and the disclosures provided to participants about the risks of lack of
diversification of investments.

The ability of participants and plan trustees to participate in lawsuits brought outside ERISA would
not be impacted. ERISA's fiduciary dutics would continue to apply in all of the above cases in the
event of any corporate reorganization, stock sale or other major transaction involving the employer.
The reliefs supplied above would apply only if summary plan description explains the risks of
investment in non-diversified investments, including company stock.

$7098

00100000000412


{(b)(5)]

ATTACHMENTS

i i.

00100000000138


Carleton, Norman

Som foe. Neo? 2001 6:39 PM
To: Rasiet@euicom cont

Subject: RE: Ci Presentation — Final Version
Ken,

Thanks. I received it this evening.

Norman

-Original Message-----

From: Raislerkésullcrom.com (mailto:Raislerk@sullcrom.com]
Sent: Tuesday August 07, 2001 7:10 PM

To: norman, carleton@do.treas.gov

Subject: PW: CFTC Presentation -- Final Version

This is the right version. Please acknowledge receipt.
<+---1 Original Message -----

Prom: chendrix@enron.com [mailto:chendrix#enron.com]
Sent: Tuesday, August 07, 2001 6:42 PM

To: Raislerkesullcrom.com
Subject: RE: CFTC Presentation -- Final Version

Here you go, (See attached file: cftc_final.ppt)

Raislerk@sullcrom.com on 08/07/2001 05:06:50 PM
To: chendrix#enron.com

ect
Subject: RE: CFTC Presentation -- Final Version

Chris,

As I am sure Scott told you, this presentation went very well,

Treasury has

asked for copies in electronic form. Can you resend this to me without the

notes imbedded so I can forward it on to them. Thanks.
Ken

~-*=-Original Message-----

From: chendrix@enron.com [mailto:chendrix@enron.com]
Sent: Wednesday, August 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:

ceftc_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

1

01300000000022


BRIEFING

MEMORANDUM FOR UNDER SECRETARY GEITHNER

FROM: Meg Lundsager
Deputy Assistant Secretary for Trade & Investment Policy

SUBJECT: OPIC Financing for the Cuiaba Bolivia-Brazil Pipeline

ISSUE: [(b)(5)]

[(b)(5)]

OPTIONS:

[(b)(5)]

00500000000179


[(b)(5)]

00500000000477


{(b)(5)]

Geetha will circulate revised points today. Please comment as quickly as you can and by cob today if possible,
80 We Can try to coordinate with State, Call me or Geetha if you have any questions or need other background,

Thanks.

00500000000486


DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20220

JUL 23 1998
ACTION

MEMORANDUM FOR DEPUTY ASSISTANT SECRETARY ZELIKOW

FROM: Edwin L. Barber, [II
Director, Office of African Nations

SUBJECT: Response letter to Christopher M. Long of Enron Corporation
ACTION-FORCING EVENT: [(b)(5)]

RECOMMENDATION: [(b)(5)]

Agree Disagree Let's Discuss

ATTACHMENT: Tab A: Response Letter to Christopher M. Long

{(b)(5)]

00100000000092


IN THE NEWS: 1/18/02 Page 2 of 18

Ideally, he said, he’s like to "slightly increase” the audit rate, but barring that
he hopes the declining audit rate will at least stabilize and that the new
research program will eventually make the current level of audits "more
targeted and more effective.”

In the next few years, Rossotti hopes the IRS will be able to extend its
tax-audit study to corporations.

IRS Changes Rules for Foreign Taxpayer ID

The Intemal Revenue Service has issued regulations
effective Thursday that allow casinos and other entities
that find themselves needing to pay foreign people
unexpected earnings to issue those earnings without first
obtaining a taxpayer identification number in limited
circumstances.

Current law requires casinos and other payers of earnings to obtain a
taxpayer identification number for a foreign person. The IRS has an
expedited process for obtaining the taxpayer ID number, but the expedited
process cannot be used when IRS offices are closed on weekend or
holiday.

Without a taxpayer ID the casino or other entity must withhold a 30% tax on
earnings such as gambling winnings. But many countries have tax treaties
with the U.S, that exempt gambling earnings and other earnings or apply a
different tax rate. [fa foreign person who doesn't have a U.S. taxpayer ID
number receives gambling earnings on a weekend, they must later file a form
with the IRS to obtain a full or partial refund of the 30% tax that is withheld.
Ifa foreigner has a U.S. taxpayer ID the paying entity can withhold the
proper amount of tax subject to the tax treaty.

‘The new regulations allow casinos and other paying entities to pay a foreign

person and withhold tax at the rate agreed to by a particular country's tax :
treaty with the U.S. without first obtaining the taxpayer ID number if it is

during a time when the IRS is closed, such as on a weekend. The

regulations require the paying entity to obtain a taxpayer ID number the first

day the IRS is reopen for business.

House Health Subcommittee Chair Seeks Medicare-Choice
Boost

House Ways and Means Health Subcommittee Chairwoman Nancy
Johnson, R-Conn., is seeking to boost funding for so-called
Medicare-Choice programs by $1.2 billion starting next
fiscal year,

This comes after the Centers For Medicare and Medicaid Services
announced it could only give private health insurers who participate in the
Medicare-Choice program a 2% increase in payments. Johnson noted that
health costs rose 11% last year. She says unless Congress approves
additional funding for Medicare-Choice, seniors will be in "jeopardy of
losing quality health care.”

2. IRS moves to renew audits to check compliance * REUTERS

O1/18/2002
00800000001049


Purchase deals ge, Enron is said to have favored master agreene
by the Edison Electric Institute, which draws heavily om 150A’

Thome waster egreements include certain events under which a counterparty
can tereinate @ 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
acay that prevents anyone from terminating contracts with a company that
tiled tor bankruptcy will hinge on the type of deals they'ze « party to and
whether they meet certain statutory requirements. Although Enron and its
lawyers are Likely to nitpick the unwinding of each and every conteact
involving the company, legel experts noted that Enron's fondness for EET
agreements should help those entangled in power purchase agreesents to
liquidate their positions since ee _chene contracts treat all participants as
forwers contracts merchants. Such merchants are exenpt from the stay
stipulated by secticn 3624 of the bankruptcy code.

Key to how well of poorly counterparties will sake out mow that Enron’
iness has been all but dried out, ts how euch if any collateral protects
© transactions,

fo faz unclear how much of Enron's derivative transactions we
collateralized, ut lawyers familiar with the matter aaid it was likely that
@ Large scent of thoes contcacts were not collateralized,

That's Likely to be bed sews for some countezparties. Secause if they're
owed roney by Enron on their netted derivative ei they'll have to
jean ether cneecured cregitors, Likely receiving little ef their claims, The
bonds and bank debt of Eston took « nose dive after Dynegy rescinded its
earger offer, with trading levels indicating that those mostly unsecured

Creditors thought they would recoup ealy 208 to 25% of the money loaned to
fearon,

By Cai S. Remond, 201-938-2074; Dow Jones Mewswires:
carol, remondtdowjones. com

(Mtyllis Pliteh eentesbuted to this colunm.)

1/16/02

01100000000093


011105
DEPARTMENT OF THE TREASURY

WASHINGTON, D.C, 20220

October 27, 1999

ACTION

ACTION
MEMORANDUM FOR, SECRETARY SUMMERS /
FROM: Neal S. Wolinkfy

Acting General Counsel
SUBJECT: Response to Letter from Kenneth L. Lay, Chairman and Chief

Executive Officer of Enron Corp.
ACTION-FORCING EVENT
{(b)(5)]
RECOMMENDATION
{(b)(5))
BACKGROUND
{(b)(5)]

EXECUTIVE SECRETARIAT

00100000000137


IN THE NEWS: 1/18/02 Page 3 of 13
REUTERS

01/17/2002 13:30
IRS moves to renew audits to check compliance

WASHINGTON, Jan 17 (Reuters) - This fall the U.S. Internal Revenue Service
will begin reviewing a “statistically valid” sample of tax returns in an
effort to update its information on taxpayer compliance.

The reviews, announced on Wednesday, will include less than 50,000 of the 132
million individual retums filed annually. The new audits, dubbed the

National Research Program, will take the place of a previous efforts
discontinued in 1988.

“If we can't make sure that everyone pays their fair share, then honest
taxpayers get stuck making up the difference. So, tracking taxpayer
compliance is a comerstone of a fair tax system,” Treasury Secretary Paul
O'Neill said in a statement.

The largest portion of the audits, about 30,000, will deal with only selected
portions of returns, not the painstaking "line-by-line” approach used in the
past.

Another 9,000 audits will include exchanging correspondence with taxpayers.
The IRS said some taxpayers contacted for the audits likely would have heard
from the IRS anyway in its routine of matching up information.

"The IRS is working smarter,” said IRS Commissioner Charles Rossotti, "We
have found new ways to use existing information to measure tax compliance.
‘The process is substantially less intrusive on taxpayers, but will help us

catch tax cheating and improve tax administration.”

By gathering data on taxpayer compliance, the IRS hopes to shrink the
so-called tax gap, the difference between total tax liability and taxes paid
voluntarily and on a timely basis, That gap for all taxes, including

individual, business, employment and estate levies, was estimated at $278
billion in the 1998 tax year.

In comparison, the budget surplus seen in Fiscal Year 2001 was much smaller,

at $127.02 billion.
3. They Had a Chance to Say Goodbye * Newsday

Newsday (New York, NY)

January 18, 2002 Friday ALL EDITIONS
SECTION: NEWS, Pg. A28
LENGTH: 323 words

HEADLINE: They Had a Chance to Say Goodbye
01/18/2002

00800000001050


Question: [(b)(5)]

Answer:
{(b)(5)]

00100000000722


{(b)(5)]

Geetha will circulate revised points today. Please comment as quickly as you can and by cob today if possible, so we
can try to coordinate with State. Cail me or Geetha if you have any questions or need other background.

Thanks.

00500000000493


was on what an appropriate message might be. My proposed plan is that Geetha will take a first crack at
cosnreeees OF Wee ule beats or Crete Dem wee eeeery @5 early as possible this afternoon. |
i i x x fo.

know if you have any concerns about this plan,

Readout of meating:
Attendees: NSC, State (EB front office and investment office, South Asia Bureau), Treasury (Grewe,
Rao, Sampliner), Commerce, OPIC (President Peter Watson, GC Ron Jonkers and several others)

[(b)(5)]

Geetha will circulate revised points today. Please comment as quickly as you can and by cob today if
possible, so we can try to coordinate with State. Call me or Geetha if you have any questions or need

00500000000488


In the situation described in the preceding paragraph, any portion of such plan
consisting of employer-provided matching contributions could be invested in company
stock. This could be done either voluntarily by the employce or involuntarily pursuant to
plan terms, The employer could establish any parameters with respect to investment of
matching contributions, including complete investment of the matching contributions
account in company stock without participant consent.

Also under the Proposal, if an employer does not maintain a “substantial
retirement plan” but maintains an ESOP or stock bonus plan, and all contributions to such
plan are made by the employer, then ERISA’s fiduciary duties are considered met with
fespect to purchasing or holding of company stock if plan terms are followed, no
commissions are charged with respect to purchases or sales and all transactions are at
arm’s length. However, in the event of bankruptcy or insolvency, as under current law,
participants could challenge a fiduciary’s actions under ERISA’s duty of prudence, based
on the facts and circumstances.

Participants and the trustee of any retirement plan could, as under current law,
participate in any other lawsuits with respect to company stock held. In all of the above
cases, ERISA’s fiduciary duties would apply in the event of a sales or reorganization
transaction of the plan sponsor, In any case not described above with respect to any
retirement plan not covered above, the ordinary, current law ERISA fiduciary duties
would apply, except that fiduciaries would have the burden of proving that they acted
prudently with respect to purchasing and/or holding of company stock in any lawsuit if
the employer files bankruptcy or becomes insolvent.

While ERISA’s fiduciary duties do not ordinarily apply to plan design matters,
they often apply to actions relating to plan investments. Because most participants are
unsophisticated with respect to investments, plan design features which allow participants
to invest in non-diversified investments such as an indiviual company’s stock may be
subject to ERISA’s fiduciary duties. (It is not certain whether such a design feature
would be subject to ERISA’s fiduciary duties under current law.) Under the Proposal,
such a design feature is an action that is subject to ERISA’s fiduciary duties unless if
adequate disclosures regarding non-diversified investments are provided to participants
and either: (a) a substantial retirement plan is maintained for the participants; or (b) the
maximum percentage that a participant's account can be invested in non-diversified
investments does not exceed twenty percent (20%). The determination of whether the
fiduciaries have acted prudently will be based on all of the facts and circumstances,
including, but not limited to, the limits provided by the plan on participants’ ability to
invest in non-diversified investments and disclosures provided to participants regarding
the risks of lack of diversification of investments.

Fiduciaries are always concerned with potential liability under ERISA for breach
of fiduciary duties. As a result, many employers may find it beneficial to redesign their

plans as necessary to fatt within the exemptions from the fiduciary duty rules supplied by
the Proposal

Charlotte 4639852 4

00100000000416


{(b)(5)]

Drafted by:
G.Christopulos/ITI
Cleared by:
HWalsh/IDB
GHSills ITI

ce: MColby/IDB

00500000000191


Importance: = High)

This is a readout of the meeting at NSC this morning, There is also an ACTION request. USG agencies
are requested to get back to NSC by cob tomorrow with comments on OPIC’s suggested talking points

for a demarche to the GO! by the Charge in Delhi. | talked to the State reps after the meeting (fram South
Asia bureau, Investment office and Larson's office) and they seem to be basically in the same place as |
was on what an appropriate message might be. My proposed plan is that Geetha will take a first crack at
comments on the talking points and circulate them within Treasury as early as possible this afternoon, 1
am requesting that everyone provide comments by.cob today, so that we can circulate our comments to
it to NSC by cot ow. Please let me

State and try to come up with joi 20
know if you have any concems sbout tis pen,

Readout of meeting:
Attendees: NSC, State (EB front office and investment office, South Asia Bureau), Treasury (Grewe,
Rao, Sampliner), Commerce, OPIC (President Peter Watson, GC Ron Jonkers and several others)

{(b)(5))

00500000000500


{(b)(5)]

any other suggestions?

<< File; EmbtalkY1 State.doc >>

From: Raa, Geetha
Sent: Wednescay, duly 33, 2001 4:33 PM
To: Berg, Katie; Sits, Gay; Grewe, Maureen; Resnick, Bonnie; Christopulos, Greg; Samgfiner, Gary
Cc: Donovan, Meg; Mits, Marshall; McDonald, Larry; Radelet, Steve
‘Subject: RE: Dabhol meeting an Eneon/OPIC praject at NSC
Katie, [(b)(5) We'll go ahead
((0)(5)] Thanks to all.
Original Message--—-
From: Berg, Katie
Sent: Wednesday, July 11, 2001 4:09 PM
To: ‘Sills, Gay; Rao, Geetha; Grewe, Maureen; Resnick, Bonnie; Christopuios, Greg; Sampliner, Gary
Ces Donovan, Meg; Mils, Marshall; McDonald, Larry; Radelet, Steve
Subject: RE: Dabho! meeting on EnroryOPIC project at NSC
{(b)(5)]
——Original Message——
From: ‘Sats, Gay
Sent; Wednesday, July 11, 2001 3:54 PM
To: Rao, Geetha; Grewe, Maureen; Resnick, Bonnie; Christopulos, Greg; Sampliner, Gary
co Donovan, Mog; Milis, Marshall; McDonald, Larry; Radelet, Steve; Berg, Katie
‘Subject: RE: Dabhel meeting on EnroeVOPIC project at NSC
OSD), F am adding katie berg. she
‘export credits. and eximbank
~~ Original Message
From: Rao, Geetha
‘Sent: ‘Weonesday, July 11, 2001 1:54 PM
Tor ‘Grewe, Maureen; Sits, Gay; Resnick, Bonnie; Cheistopuios, Greg; Samoliner, Gary
ce: Donovan, Meg; Mills, Marshal; McDonald, Larry; Radelet, Steve
Subject: RE: Dabhck moeting on Enron/OPIC project at NSC
Importance: High

{(b)(5)]

The Charge from the US Embassy will most likely deliver the points to the
GOl, Please comment asap. Thanks.

<< File: EmbtalkY 1.doc >>

Original Message—
From: Grewe, Maureen

Sent: Wednesday, July 11, 2001 12:52 PM

To: ‘Sils, Gay; Resnick, Bonnie; Christopulios, Greg; Sampliner, Gary; Rao, Geetha
co (Conoven, Meg; Milts, Marshal; McDonald, Larry; Radelet, Steve

‘Subject: (Cabhol mecting on Enron/OPIC project at NSC

This is a readout of the meeting at NSC this moming. There is also an ACTION
request. USG jes are requested to get back to NSC by cob tomorrow with
comments on (by)

2

00500000000479


Question: [(b)(5)]

Answer:
{(b)(5)]

00100000000728


{(b)(5)]

00500000000185


{(b)(5)]

01000000000626


{(b)(5)}

00500000000190


-tress.gov To: Lori.Santamorena@bpd.treas.gov,
Barbara.Wiss@do.treas.gov,

11/29/01 01:10 Glen.M.Owens@stls.frb.org,
PM Sheryl .Morrow@fms.treas. gov
ce:
Subject: RE: 1DJC } OJ CSFB: Three 2ig

Banks Have $1.58 Loan Exposure To

Lori et al-= As a general matter, [(b)(5)]

Original Message--
From: Lori.Santanmorena@bpd.treas.gov

{mai lto:Lori.Santamorena@bpd.treas.gov)

Sent: Thursday, Noveaber 29, 2001 12:14 PM

To: david. lebryk@do.treas.gov

Subject: 1DJC ) O27 CSFB: Three Big Banks Have $1.5B Loan Exposure To

ossee Forwarded by Lori Santamorena/BPD on 11/29/01 12:13 FM ----~
“PUBLIC DEBT, US DEPT
OF TREASURY* To:
<GSRS@bloomberg.net> LSANTAMORENAG SPD. TREAS
GOV
11/29/01 12:07 PM ce:
bec:
Subject:

ibgc ) DJ CSFB: Three
Big Banks Have $1.58
Loan Exposure To

DI CSPR: Three Big Banks Have $1.58 Loan Exposure To Enron
2001-11-29 11:48 (New York)

NEW YORK [Dew Jones)}--Bank Of America (BAC), Citigroup Inc. (C] and
J.P.
Morgan Chase (JPM) each have an estimated $500 million in direct loan
exposure
to beleaguered energy trading firm Enron Corp. (ENE), according to Credit
Suisse First Boston on Thursday.

While noting that “details on bank exposures to Enron Corp. are not
completely transparent,” CSFB analysts also said that Bank One Corp (ONE)
has @
iikely $300 million bank loan exposure, and Wachovia Corp. (WB) hes a $50
million exposure.

The analysts said that the tallies represent direct loan exposures. They

01100000000100


{(b)(5)]

00500000000186


Donovan, Meg

From: Toloui, Ramin
Sent: Thursday, July 12, 2001 9:00 AM
To: Grewe, Maureen; Donovan, Meg
Subject: RE: Dabho! meeting on Enron/OPIC project at NSC
Thank you both
sOniginal Message
From: Grewe, Maureen
Sent: frovéey, July 12, 2001 9:00 AM
To: Donovan, Meg; Toloul, Rasnin

Ramin -- we are going to do an info note on the Dabho! project, just so John has some idea about it, in case it needs
higher level attention at some point. Thanks.

——Original Message—

From: Donovan, Meg

Sent: — Thursday, July 12, 2001 8:08 AM

To: Toloui, Ramin; Grewe, Maureen

Subject: RE: Dabhol meeting on EnronyOPIC project at NSC

{(6)(5)]

Maureen -- did | garble that too badly?

Original Message-—--

From: Tolow, Ramin

Sent: Wednesday, Duly 11, 2001 8:43 PM

To: Donovan, Meg; Grewe, Maureen

‘Subject: RE: Dabhol meeting on EnronyOP IC project at NSC

Didn't got to raise with JBT before the end of the day. Should | wait until we have points for him to review?

Original Message——

From: Donovan, Meg

‘Sent: Wednesday, July 11, 2001 1:00 PM

Tor Grewe, Maureen

ca: Toloul, Ramin

‘Subject: RE; Dabihol meeting on Enron/OPIC project at NSC
thanks Maureen...

[(b)(5)]

Assume we should wait until the talking points are available to bring this to JBT's attention?
1

T
00500000000482


Donovan, Meg

From: Rao, Geetha

Sent: Wednesday, July 11, 2001 1:54 PM

To: Grewe, Maureen; Sills, Gay; Resnick, Bonnie; Christopulos, Greg; Sampliner, Gary
Ce: Donovan, Meg; Mills, Marshall; McDonald, Larry: Radelet, Steve

Subject: RE: Dabho! meeting on Enron/OPIC project at NSC

Importance: High

Attached are the revisions to the OPIC tatking points that OPIC sent over late yesterday. [(b)(5)}

Please comment asap, Thanks.

¥)

Brent) doc

Origins Message= =

From: Grewe, Maureen

‘Sent: Wednesday, July 11, 2001 12:52 PM

Tor Sis, Gay; Resnick, Bonnie; Cheistopulos, Greg; Sampliner, Gary, Rao, Geetha
ce: Donovan, Meg; Mis, Marshall; McDonald, Larry; Radelet, Steve

‘Subject: Dabhol meeting on EnrorVOPIC project at NSC

Importance: High

This is a readout of the meeting at NSC this moming. There is also an ACTION request, USG agencies are
requested to get back to NSC by cob tomorrow with comments on OPIC's suggested talking points for a demarche to
the GO! by the Charge in Delhi. | talked to the State reps after the meeting (from South Asia bureau, Investment
office and Larson's office) and they seem to be basically in the same place as | was on what an appropriate message
might be. My proposed plan is that Geetha will take a first crack at comments on the talking points and circulate them
within Treasury as early as possible this aftemoon. n requesting that everyone provide comments by cob today.
$0 that we can circulate our comments to State and try to come up with joint suagested points to submit to NSC by
cob tomorrow, Please let me know if you have any concerns about this plan.

Readout of meeting:
Attendees: NSC, State (EB front office and investment office, South Asia Bureau), Treasury (Grewe, Rao,
Sampliner), Commerce, OPIC (President Peter Watson, GC Ron Jonkers and several others)

((b)(5)]

00500000000492


CONCLUSION:

[(b(5)]

AGENCY VIEWS:

{(b)(5)]

TELEPHONE CALLS:

00500000000180


Page 2 of 2

<Dy Rebecca Christies Dow Jones Newnwirens 202 #62 9249)
tebecce.chrtstiebdowjones.com

1/16/02

1100000000091


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01000000000071


Page | of 1

Lebryk, David
From: _ Lori.Santamorena@bpd.treas.gov

Sent: Friday, November 30, 2001 7:41 AM

To: David.Lebryk@do.treas.gov
Subject: RE: 1DJC ) DJ CSFB: Three Big Banks Have $1.58 Loan Exposure

Dave,
Barbara may have filled you in by now- Kurt/Nadir/Barbara spoke with Glen- he's getting back to us today.
By the way, | saw Norman last night - [(b)(6)] We talked about Enron and the

retail swaps study- I'm at the 10am meeting today- the report is due to Congress in late December. He also said
the clearing bank interviews at FRBNY were very interesting. Any word on what the next step is?

Lori

01/18/2002
01100000000012


Page 2 of 2

last summer to 36 conte Thursday.

Derivative contracts are built around master agreements developed by the
International Swaps and Cerivatives Asscciation, A®
Purchase desis go. Enron is said te have Favored master agreements drafted
by the Zdiven Electric Institute. which draws heavily om ISDA‘s bloeprint,

Those master agreements include certain events under which a counterparty
can terminate a transactica. Asong those are failure to pay, failure to
Geliver and, of course, bankruptcy.

Wether counterparties will be able to claim exeeption from the aytosatic
stay that prevents anyone from terminating contracts with # company that
filed for bankruptcy will hinge on the type of deals they‘re @ party to and
whether they meet certain statutory requiresents, Althowgh Enron acd ite
lawyers are likely to nitpick the umwinding of each and every contract
involving the company, legal experts noted that fnron's fondness for ERT
agteeeests should help those entangled in power purchase agreements to
liquidate their positions since these contracts treat all participants as
forward contracts merchants. Such werchante are exempt from the stay
stipulated by section 362A of the bankruptcy code.

Key to how well or poorly counterparties will make out mow that gnron’
business has been all but dried out, is how much Lf any collateral protects
their transactions,

So far, it's unclear how much of Enron's derivative transactions were
collateralized. Rut lawyers fomiliar with the matter eaid it wae likely that
@ large amount of those contracts vere not collateralized.

‘That's likely to be bad news for scee counterparties. Because if they're
owed woney by Enron on thelr netted derivative exposure, they'll have to
join other unsecured creditors, likely receiving littie of their claies. the
bonds end bank debt of Enron tock a nose dive after Dynegy rescinded its
serger offer, with trading levels indicating that those sostly unsecured
creditors thought they would recoup only 208 to 25% of the ecney loaned to
faron.

~By Carol S, Remond, 201-998-2074; Dow Jones Newswires:
caro)  resondadowjones com

(Phyllis Pliteh contributed te this colura.}

01/16/2002

1100000000081


immediately.

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.

01300000000023


013737

DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20220

January 15, 1999

MEMORANDUM FOR SECRETARY RUBIN

FROM: MICHAEL S, BARR
DEPUTY ASSISTANT SECRETARY
COMMUNITY DEVELOPMENT POLICY

SUBJECT: Letter From Kenneth L. Lay, Enron Corporation

ACTION FORCING EVENT:

Reply to Kenneth L, Lay's letter regarding endorsement of Houston's Empowerment Zone
application.

RECOMME ION:

‘That you gifin the attached letter.

Agree Disagree Let's Discuss

Attachment

Tab 1: Response letter to Kenneth L. Lay

00100000000106


Page 3 of 3

outlining Natione) Australia Bank's performance, click on (KAD AU
<Equity> CHPOOORSOSOLOB <GO>).

WAR AU «equity»
OWN US <Equity>
ENE OS <Rquity>
ANE AD <Equaty>
AKL LN <Equity>
AABA BA <Equity>
CBK GA <Equity>
ORD GR <Equity>
COx Gm <Equity>
CL FP <Equity>

BM} Mow/30/2001 16:44 Gut

1/16/02

01100000000107


Pengion Senefit Guaranty Corporation,

“The tax code smiles on retirement plans, for good reason,” Grassley said.
"Tax breaks encourage employers to set up retirement plans and employees to take
part in those plans. If employers find it easy to break the rules, then
Congress hag to re-write the rule book, Otherwise, employees counting on a
secure retirement might be left out in cold.”

In addition to the retirement plan track, Grassley said he is part of an
effort to look into whether Enron used certain tax vehicles that might have
masked the company's financial condition,

=30-

00800000000867


BRIEFING
MEMORANDUM FOR DEPUTY SECRETARY EIZENSTAT

FROM: Timothy F. Geithner

Under Secretary (International Affairs)
SUBJECT: Call From OPIC President Munoz
{(b)(5)]

00500000000217


((b)(5))

00500000000189


{(b)(5)]

Geetha will circulate revised points today. Please comment as quickly as you can and by cob today if possible, so we can
try to coordinate with State. Call me or Geetha if you have any questions or need other background,

Thanks.

00500000000505


mounted a comeback. More recently, AT&T has come
upon hard times.

Contrast Chrysler with Boston Market, Inc., for-
merly Boston Chicken, Inc. (BC). The stock of BC
doubled on the day of its initial public offering (IPO)
in 1993. In 1996, the company opened its one thou-
sandth store, and its annual sales were $1.2 bil-
lion—A47 percent higher than 1995 sales. The stock
traded at $41.50 pershare in December 1996, Despite
the growth, debt always burdened the company, and
profits never came. The stock began to drop. By June
1, 1998, it had dropped to $2.16 per share, In June
1998, BC's chief executive officer was quoted: “I re-
main fully committed to doing everything necessary
to achieve a turnaround for this company.” Would he
be BC's Lee laccoca? Would BC's stock rebound? The
answer to both questions is no, The aumaround never
came, and in October 1998, the company filed bank-
ruptcy. Before the bankruptcy, in May 1998, Arthur
Andersen LLP, BC’s auditors, issued an audit opinion
questioning the company’s ability to remain in busi-
ness. Immediately following the issuance of that opin-
ion, the company’s shares lost more than one-third of
their value. [See Stacy Roth, “Running Out of Cluck?
Boston Chicken Stock Takes Big Hit,” Daily News of
LA., May 30, 1998, ac BI] [fcompany stock must be a
prudent investment, query whether such an opinion
could be the turning point when sales need to begin.
(The author has personal feelings about BC's de-
mise—having bought in at $5 per share in 1998 and
later sold in the same year for $0.88 per share.) As in
the Chrysler situation, however, cach day that BC's
stock dropped could have been the ultimate low. BC
could have been Chrysler, It wasn't.

What the future will hold for any company can
never be determined. There simply are too many vari-
ables (c.g., new technology, law changes, natural dis-
asters, political unrest) that factor into any company’s
fate. A co situation exists with the “dot
coms” of the world. In 1999, they were the darlings of
the investment world; today, most of those chat re-
main are in bankruptcy or are experiencing financial
trouble.

POLICY

When an employee takes a job, he or she buys the en-
tire package of compensation and benefits. If com-

_Jouaxat of Pexsion Baers

pany stock is a retirement plan investment, the em-
ployee should live with the results—good or bad. SEC
rules exist to allow employees risking their own funds
to make informed investment decisions. ELAPs
should not become a “heads I win, wails you lose”
game with plan fiduciaries on the losing side. EIAPs
are part of what inspires employees to do a good job.
They should not be utilized as a mechanism for
Monday-morning quarterbacking. So far, the courts
have been unwilling to hold fiduciaries accounwble,
It is unfortunate that a more certain standard does
not apply so that fiduciaries would not be left with a
constant uneasy state of mind.

In any event, an EIAP plan sponsor that main-
tains a separate, diversified retirement plan that pro-
vides relatively substantial redrement benefits should
be exempt from any “higher” standard of care de-
scribed above. In such a case, the other plan presuma-
bly provides the retirement security sought by ERISA,
allowing the ELAP to serve as a pure equity-sharing
device.

CONCLUSION

What exactly must be done by an ERISA fiduciary to
comply with ERISA when dealing with an ELAP is not
cerain. If company stock must be a prudent invest-
ment visdvis other investment opdons available,
many ELAPs could easily violate this standard, poten-
tally subjecting their fiduciaries to liability. In con-
tran, if the standard is a more realistic standard of
merely ensuring that plan terms are met, liquidity
needs are satisfied, necessary disclosures are made,
and purchases and dispositions of company stock are
properly executed, then the standard is realistically
attainable by EIAPs.

Given the constantly uncertain future of any
company, and the ability of any company’s fate and
value to change, the ERISA standard should be the
lower standard—following plan terms, ensuring li-
quidity needs are met, making necessary disclosures,
and executing transacdons appropriately, For every
bankruptcy, there is a turnaround. If the disclosures
required under securities laws are made to partici-
pants, this standard should be applied even if the
EIAP's assets arc composed of both company and par-
ticipant contributions.

00100000000430


—————————————

Bi

JOURNAL Of PENSION Benertrs

tules, and must ordinarily put any duty to the corpo-
ration aside to the extent that dutyis inconsistent with
ERISA's fiduciary duties.

{t appears from the ERISA statute alone that in
the case of a traditional EIAP in which participants
¢annot direct investments to or from company stock,
a prudent fiduciary who is a corporate officer would
need to utilize all of the information at his or her dis-
posal in deciding whether company stock remains a
prudent invesunent. Under the prudent investment
standard discussed above (if it applies), if the inside
information led the fiduciaries to conclude that com-
pany stock was no longer a prudent investment, the
obligation to sell would presumably exist. Rule 10b-5,
however, would require a disclosure of the negative
inside information to potential buyers. Disclosure of
this information would presumably cause the poten-
tial buyers to refuse to buy at the then-current market
price, Hence, the only price at which the stock would
sell would be a new market value, as adjusted down-
ward to take into account the inside information, and
the loss chat the fiduciaries would be attempting to
avert would not be prevented. If the fiduciaries did
notoffer the stock forsale, the value would eventually
be reduced when the inside information became pub-
lic knowledge.

An argument could be made by participants that
not selling on the basis of inside information, when
the information is available to the fiduciary insiders,
or alternatively, disclosing the information to poten-
tial purchasers, would be a violation of ERISA’s duty
to act prudently and for the exclusive benefit of par-
Ucipants. The argument would be thar the duty to act
for the exclusive benefit of pardcipants would require
acting on the basis of all information available to the
fiduciaries, not just public information, and would
further prohibit disclosure of such information to po-
tential purchasers, which disclosure would lower the
Price received upon sale. (It is important to remem-
ber in this regard chat “bad” information that might
cause the price of company stock to go down is not
something that should result in a sale of company
stock. Only bad information that would lead a reason-
able person, knowledgeable as co investments, to con-
clude that itwould be imprudent to continue to invest
in company stock should result in a sale of company
stock.) As stated above, informing the third party of
such information would effectively foreclose the pos
sibility of a sale to such person, at least at the then-
market value. Utilization, however, of such informa:
tion without informing the Uhird-pary purchasers
would result in a violation of the fiduciary'’s duty to

such purchaser under Rule 10b-5. Again, ERISA does
not require such an action.

Often the terms of the governing plan provide
that the fiduciaries are indemnified by the company
for actions taken in good faith. If one assumes the
fiduciaries acted in good faith, and assumes the
enforceability of such indemnification provisions
(which would likely be far from clear in reality), in the
event of a sale of company stock and a loss bya third-
party purchaser when material negative inside infor-
mation was not disclosed, followed by liability of the
fiduciaries, any reimbursement by the company to
the fiduciaries for their liability to third-party pur-
chasers should be foran amount approximately equal
to the stock's decline in value since the wansaction.
(Notwithstanding the foregoing, the SEC is author-
ized, under Section 21A of the Exchange Act, to seck
restitution of up to three times the profit gained or
loss avoided as a result of insider trading.) This pay-
outwould, in turn, reduce the assets of, and hence the
value of, the company. All shareholders would be
harmed, and all empleyee participents could be
indirectly harmed: _

If inside information were not utilized, and no
sale occurred when utilization of such information
would have resulted in a sale (and hence no liability
existed with respect to any third party), participants
might suc based on a claim that the fiduciaries acted
improperly by notselling the stock when utilization of
inside information would have led a reasonable per-
son to conclude that the stock was no longer a pru-
dent investment. In such a case, in the unlikely event
of liability, the fiduciaries should still be indemnified
for their actions if governing documents so provided
and if they acted in good faith. The good-faith argu-
ment would be that.a sale would have required disclo-
sure of the inside information, which would have
reduced market value, Hence, the loss would have
been incurred anyway. Therefore, under either ap-
proach, the company’s resources could be depleted,
and this would reduce the value of the company to all
shareholders, (A very difficult question would be
raised in the very unlikely event that the recovery of
the third party purchaser or the participants from the
company was foreclosed because of the bankruptcy of
the company, The question would be, which party
should sustain the loss?)

Nothing would prevent the company from dele-
gating the obligation to analyze the prudence of
investment in company stock to a third-party profes-
sional. Such a delegation should prevent the ERISA:
SECissue from arising, because the third party should

“Correction tr be made im the Winter D00/-2 tctition

00100000000426 —


Bradshaw, Tara

From: Press_Office@finance-rep.senate.gov
Sent: Monday, January 14, 2002 §:18 PM
To: Jill_Gerber@finance-rep.senate gov
Subject: Enron, retirement plan rules

For Immediate Release
Monday, Jan. 14, 2002

Grassley Explores New Protections for Retirement Plan Participants

WASHINGTON - Sen. Chuck Grassley, ranking member of the Committee on
Finance, is pursuing whether Congress should tighten up protections for
retirement plan participants in light of Enron's collapse.

"Millions of Americans have hundreds of billions of dollars invested in
employer-sponsored retirement plans,* Grassley said. “These plans receive
favored treatment under the federal tax code. The Committee on Finance has the
primary responsibility, under its jurisdiction, for making sure retirement plans
comply with the tax code and other laws. Our committee also has the
responsibility to fix any weaknesses that might leave retirement plan
participants in trouble if their employer goes under.*

Grassley said the details of the Enron retirement plans are still
forthcoming. However, he said, some areas already are emerging as targets for
scrutiny. Specific areas Grassley is locking into are:

Company steck. Under current rules, a company can restrict a retirement
plan participant from selling the match received in company stock through an
employee stock ownership plan. (Enron employees’ company stock matches were
restricted.) Grassley is researching whether employees should be able to change
this investment choice prior to an arbitrary age.

Mandated purchases of company stock. Current law allows a plan sponsor to
compel employees to purchase up to 10 percent of employer stock as a condition
of participating in @ 401(k) plan. Grassley said he thinks this rule should be
climinated.

Fiduciary rules. These rules ensure that companies properly invest and
handle retirement plan money, including spending the money for the exclusive
benefit of their employees. Retirement plans are tax-favored vehicles,
authorized under the Intecnal Revenue Code. Grassley said he wants to learn
whether Enron officials violated their fiduciary duties and in general, whether
Congress should change the existing rules.

Black-outs. A “black-out" or “lockdownTM occurs when a plan is shut down
for a period of time to allow, for example, change to another plan
administrator. Enron had such a “black-out,* though the length of time is
disputed, Grassley said he wants to get the facts on this event because it may
coincide with the decline in the company's stock value.

Mandated diversification of stocks in retirement plans. Some legislation
has been introduced that mandates employees hold no more than a certain
percentage of stock in their 401(k) plan. Diversification in one part of the
eae should indicate that all investments should be mandated. Grassley said he
an open mind, but thinks mandates are not desirable nor particularly
ible.

Grassley said he is pursuing these ideas with experts from outside groups
and agencies such as the Treasury Department, the Labor Department and the

00800000000866


Question: [(b)(5)]

Answer;
[(b)(5)]

Background
{(b)(5)]

See 1/15/02 WS) article included in background materials.

00100000000726


a oie go Tiig Tet

t>§ ‘
en ee
BCR Ste ote

05002

01000000000073


‘That's because Dynegy Inc. "s (OYW) decision Wedresday to abandon its plan to
rescue Enron 441 but sealed the fate of the ailing Mousten energy trader
which has Deen hobblec by accounting irregularities and unquantified
Off-Dalance-sheet liabilities. Enron shares plummeted from about $90 s share
jest sumer to 3¢ cents Thursday,

Derivative contracts are built around master agreements developed by the
International Swaps and Derivetives Association. As far as its power

purchase deals go, Enron is said to have favores easter agreenents drafted
by the Edison Electric Institute, which draws heavily om IS0A's blueprint.

Thome maater agreements include certain events under which « counterparty
cam terminate a tranaaction, Among these are failure to pay, failure to
Veliver and, of course, bankruptcy.

Whether counterparties will be able to clais exexption from the automatic
Stay that prevents anyone from terminating conten ith @ company that

filed for bankruptcy will hinge on the type of Cad they're @ party to and
whether

tewolving the company, legal experts noted that Enron*s foedness for EET
agreenents should help those entangled in power purchase agreements to
Liquidate their positions since these contracts treat 11 participants as
forward contracts merchants. Such merchants are exeapt from the stay
stipulated by section 342A of the bankruptcy code.

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

at's unclear how much of Enron's derivative transactions were
Lived. fut lawyers familiar with the matter said it was Likely thet
* large amount of those contracts were not collateralized.

That's Likely to be bad news for some counterparties. Because if they're
ved money by Enron on their netted derivative exposure, they’! have to
Join other unsecured creditors, likely receiving little of thess claims, The
bonds and Bank debt of Enton took « nose dive after Dynegy rescinded its
Rezger offer, with tracing ieveis indicating that these mostly unsecured
creditors thought they would recoup only 208 te 258 of the money loaned te
Enron

~by Carol S. semond, 201-338-2074; Dow Jones Hewevires:
carol . renondidow jones .com

[Phyllis Plitch contributed te this colwn.}

1/16/02

Page 2 of 2

01100000000098


{(6)(5))

00500000000195


IN THE NEWS: 1/18/02 Page 18 of 18

But Social Security, under its "dual-entitlement rule,” does not pay full benefits to private-sector workers who
earned a retirement benefit and also are eligible for a spousal benefit. The rationale behind the rule is that a
person who receives a retirement pension is less dependent on a spouse and not entitled to a full spousal benefit,

Shaw held a hearing on the offset in the summer of 2000, and he signaled last year that he might rethink the
formula as part of a comprehensive plan to reshape Social Security.

That comprehensive plan -- the "Social Security Guarantee Plus Plan" -- has now taken shape and includes his
proposed change in the offset formula. Shaw’s plan would create a voluntary program under which workers
would receive a refundable tax credit of 2 percent to 3 percent of their earnings for investment in stocks and
bonds. Participating workers would receive a lump-sum payout on retirement, and Social Security would use
camings from the accounts to help pay regular benefits. Ultimately, Social Security's projected cash shortfalls
would be eliminated, the Shaw plan promises.

The prospects for Shaw’s legislation are unclear. Congress is headed into an election year, which can create
political crosswinds for members trying to move Social Security legislation. In addition, President Bush's Social
Security commission suggested that Congress take at least a year to discuss options before overhauling the
system.

Marlene Kawaguchi, a telecommunications manager at the International Broadcasting Bureau, retired Dec, 31
after more than 37 years of government service,

Miguel Torrado, associate commissioner for personnel at the Social Security Administration, will be the guest
on “The Business of Government Hour" at 8 a.m, tomorrow on WJFK radio (106.7 FM).

"The King Holiday, Federal Employees and Community Service" will be the topic for discussion on the
Imagene B. Stewart call-in program at 8 a.m, Sunday on WOL radio (1450 AM).

01/18/2002
00800000001053


{((b)(5))

roid comments by cob taday, 0 that we can create ar commento Stal an
try to come up with joi gas oints to
Jet me know if you heve any conceme about tis pian,

Readout of meeting:

Attendees: NSC, State (EB front office and investment office, South Asia Bureau),
Treasury (Grewe, Rao, Sampliner), Commerce, OPIC (President Peter Watson, GC
Ron Jonkers and several others)

(()(5)]

00500000000480


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DEPARTMENT OF THE TREASURY
1500 PENNSYLVANIA AVENUE, NW
‘TREASURY SECRETARY

WASHINGTON DC 2022

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00100000000432


{(b)(5))

Geetha will circulate revised points today. Please comment as quickly as you can and by cob
today if possible, so we can try to coordinate with State, Cail me or Geetha if you have any
questions or need other background.

Thanks.

o0s00000000498


Summary of Reasons for Company Stock and Directed Investment Changes
Proposal

Enron corporation's stock price experienced a Precipitous fall in late 2001,
culminating with Enron's bankruptcy filing, Many employees chose to invest in ENRON
stock through Enron's 401(k) plan. Matching employer contributions under the 401(k)
plan were made in Enron stock As a result, the retirement benefits of participants in the
ENRON 401(k) plan that were heavily invested in Enron stock have become almost
worthless

A similar situation recently occurred at Lucent Technologies, although Lucent has
not filed bankruptcy. In both the Enron situation and the Lucent Technologies situation,
lawsuits have been filed alleging breach of fiduciary duties under the Employee
Retirement Income Security Act of 1974 (“ERISA”).

Many corporate retirement plans (other than Enron’s and Lucent's) allow or
fequire employees to invest substantially in company stock, thus potentially causing part
or all of the retirement benefits of the employees of the companies that sponsor such
plans to be subject to tremendous risk, The Enron situation or the Lucent situation could
occur at any of these companies.

Aside from the employees’ risk problem, employers who Sponsor retirement plans
must appoint fiduciaries to oversee the investments and administration of their plans.
Such fiduciaries often are company officers and/or board members. ERISA places
substantial fiduciary duties on such individuals, including the duty to act prudently, and
Creates personal liability in the event of failure to fulfill these duties. Since a substantial
amount of money is often accumulated in retirement plans, to induce officers or board
members to serve as fiduciaries, the employer/plan sponsor typically will indemnify a
fiduciary who is subject to liability under ERISA if the fiduciary has acted in good faith.

The fiduciary duties of ERISA generally require an analysis by an investment
fiduciary of whether it is prudent to purchase or hold investments under a retirement plan,
including company stock. This duty exists even though plans designed to invest in
company stock (i¢., “eligible individual account plans”) are exempt from ERISA’s
general fiduciary duty that plan investments be diversified (to reduce the risk of large
losses), Particularly given the interaction of the Federal securities laws with ERISA, it is
very difficult to determine whether this duty has been met, and difficult to act should a
determination be made that purchasing or holding company stock is an imprudent course
of action. The case law to date regarding ESOPs has held that investment in company
stock is presumed to be a prudent course of action, and participants bear the burden of
Proving that the fiduciaries acted imprudently. ESOP fiduciaries can be sued even
though, by statute, ESOPs are required to be designed to invest primarily in employer
securities. Stock bonus plans are, similar to ESOPs, designed to invest substantially in

00100000000413


{(b)(5)]

Geetha will circulate revised points today. Please comment as quickly as you can
and by cob today If possible, so we can try to coordinate with State. Call me or
Geetha if you have any questions or need other background.

Thanks.

00500000000481


Donovan, Meg

From:
Sent:
To:

Cc:
Subject:

Katie, [(b)(5)]

inesday, July 11, 2001 4:13 PM
, Katie; Sills, Gay; Grewe, Maureen; Resnick, Bonnie; Christopulos, Greg; Sampliner,

Donovan, Meg; Mills, Marshall; McDonald, Larry; Radelet, Steve
RE: Dabhol meeting on Enron/OPIC project at NSC

8338

Thanks to all.

1} must admit having heard of this problem, Geetha's revised talking points look good to me, but | would
suggest that ts]

Original Message--~

From:

‘Sis, Gay

Sent: Wednesday, July 11, 2001 3:54 PM

To:

Rao, Geetha; Grewe, Maureen; Resnick, Bonnie; Christopuies, Greg; Sampliner, Gary

Cc: Donovan, Meg; Mills, Marshal; McDonald, Larry; Radelet, Steve; Berg, Katee
Subject: RE: Dabhot meeting on Enron/OPIC project at NSC
| thinkit is [(p)(5) am adding katie berg. she does export credits.
and exon)
Original Message——
From: Rao, Geetha

Sent: Wednesday, duly 11, 2001 1:54 PM
To: Grewe, Maureen; Sis, Gay; Resnick, Bonnie; Cheistopuics, Greg; Sampliner, Gary
Ce Donovan, Meg: Mils, Marsnall; McDonald, Larry; Radelet, Steve

RE: Dabhot meeting on EnroryOPIC project at NSC

Importance: = High

Attached are the revisions to the OPIC talking points that OPIC sent over late yesterday. [(b)(5)]

{(b)(5)]

Please comment asap, Thanks.

<< File: EmbtalkY t.doc >>

Orginal Message--

From: Grewe, Masreen

‘Sent: Wednescay, July 11, 2005 12:52 PM

To: Sits, Gay; Resnick, Bonnie; Crristopulos, Greg; Sampiiner, Gary; Rao, Geetha

ca Donovan, Meg; Mills, Marshall; McDonald, Larry; Radelet, Steve

Subject: Dabhol meeting on Enron/OPIC project at NSC

Importance: High

‘This is a readout of the meeting at NSC this morning. i USG agencies

There is also an ACTION request,
are raquested to get back to NSC by cob tomorrow with comments on OPIC's suggested talking points
for a demarche to the GO! by the Charge in Delhi. | talked to the State reps after the meeting (from South
Asia bureau, Investment office and Larson's office) and they seem to be basically in the same place as |

1

00500000000487


A BILL

To amend the Employee Retirement Income Security Act of 1974 to provide grcater
security for employees’ retirement benefits while protecting plan fiduciaries from potential
liability exposure if certain protections are provided to employees.

Be it cnacted by the Senate and House of Representatives of the Untied States of America
in Congress assembled,

SECTION 1. SHORT TITLE
This Act may be cited as the “Retirement Security Act of 2002.”

SECTION 2. LIMITATIONS ON FIDUCIARY LIABILITY EXPOSURE IN THE EVENT
EMPLOYEE RETIREMENT PROTECTION IS PROVIDED.

1. Section 404(a)(2) of the Employee Retirement Income Security Act of 1974
(“ERISA”) is amended to read as follows:

(2) Subject to the following provisions of this paragraph, in the case of an eligible individual
account plan (as defined in § 407(d)(3)), the diversification requirement of paragraph (1)(C) and
the prudence requirement (only to the extent that it requires diversification) of paragraph (1)(B)
is not violated by acquisition or holding of qualifying employer real property or qualifying
employer securities (as defined in § 407(d)(4) and (5)). However, the dutics described in
subsection (a) 1) shall not apply to the acquisition or holding of qualifying employer securities
by any cligible individual account plan (including any matching employer contributions account
therein invested in qualifying employer securities) if the summary plan description for the plan
thoroughly describes the risks of non-diversified investments (as defined in subparagraph (E))
and explains the impact of bankruptcy or insolvency of any issuer of common stock on the
issuer's shareholders (both in a manner understandable to participants), and either: (a) the plan
sponsor of such plan or an affiliate thereof also maintains a substantial retirement plan, as
defined in subparagraph (A) of this paragraph, in which the participants of the eligible individual
account plan are eligible to participate; or (b) the plan sponsor docs not maintain a substantial
retirement plan (as defined in subparagraph (A)), but the plan is described in subparagraph (B) of
this paragraph. In addition, if the eligible individual account plan is an employee stock
ownership plan (as defined in § 407(d)(6)) or a stock bonus plan (as described in subparagraph
(D) of this paragraph), that is fully funded by contributions of the plan sponsor or its affiliates,
but a substantial retirement plan (as defined in subpargraph (A)) is not maintained, then,
provided that the summary plan description for the plan thoroughly describes the impact of a
reduction in value of qualifying employer securities and the implications to the plan of
bankruptcy or insolvency of the plan sponsor or other issuer of qualifying employer securities
under the plan (in a manner understandable to participants), the duties described in the first
sentence of this paragraph (2) shall apply to such a plan only in the event of bankruptcy or
insolvency (as defined in Intemal Revenue Code § 108(d)(3)) of the company the stock of which
is held by the plan as qualifying employer securities,

Mitunes ©7319.

00100000000409


IN THE NEWS: 1/18/02 Page I7 of 18

Post

The Washington Post

January 18, 2002, Friday, Final Edition
SECTION; METRO; Pg. B02; FEDERAL DIARY STEPHEN BARR
LENGTH: 746 words
HEADLINE: Florida Lawmaker Suggests Another Road to 'Offset' Relief
BYLINE: Stephen Barr
BODY:

A top House Republican has offered a plan to modify the “goverment pension offset,” a provision of Social
Security law that reduces benefits for thousands of people who retired or will retire under the Civil Service
Retirement System.

Rep. E, Clay Shaw Jr. (R-Fla.), chairman of the House Ways and Means Social Security subcommittee, has
proposed revamping the offset formula as part of a bill that would ease the burden on the Social Security system
by encouraging younger workers to invest in personal retirement accounts,

Under the offset, a spousal or survivor Social Security benefit is cut by two-thirds of the person's government
pension, Shaw's proposal would peg the offset at one-third of an individual's government annuity. Many federal
retirees feel the two-thirds offset is too harsh. Some lose their entire Social Security benefit, and others,
especially women who held lower-income jobs, can ill afford to have their retirement income reduced, retirees
point out.

Officials at the National Association of Retired Federal Employees, which has lobbied for several years to
repeal or change the offset, said they were encouraged by Shaw's proposal, which is part of legislation aimed at
ensuring the survival of Social Security.

In their view, Shaw's proposal acknowledges retiree complaints that the offset is a serious problem. It also
provides another legislative alternative that may stir debate.

Offset bills have been introduced by various members of Congress during the last decade. For instance, Rep.
Howard P, McKeon (R-Calif.) has proposed repealing the offset altogether, and Rep, William J. Jefferson (D-
La.) and Sen, Barbara A. Mikulski (D-Md.) sponsored legislation that would guarantee a minimum $ 1,200
combined monthly income before the pension offset could be applied to Social Security spousal benefits.

“If you can go to some kind of markup, or get this fully considered by a committee, you have a range of
options to be considered and negotiated with,” said Judy Park, NARFE's legislative director.

NARFE estimates that 305,000 beneficiaries are affected by the offset and that the number grows by 15,000
each year,

The offset was enacted in 1977 to end what critics called an unfair advantage for government workers. Before
the offset's creation, federal workers could receive a full government pension and a full spousal benefit under
Social Security.

01/18/2002
00800000001052


Donovan, Meg

From: Toloui, Ramin

Sent: Wednesday, July 11, 2001 8:43 PM

To: Donovan, Meg: Grewe, Maureen

Subject: RE: Dabhot meeting on Enron/OPIC project at NSC

Dicin't get to raise with JBT before the end of the day. Should | wait until we have points for him to review?

ee

From:

Sent: Wee, uly 1, 2001 1200 PM

To:

Ce: food tenn

Subject: RE: Dabhol meeting on Enron/OPIC project at NSC

thanks Maureen...
Ramin -- we should probably bring JBT into the loop on this? Background is that [(b)(5)]

Assume we should wait until the talking points are available to bring this to JBT's attention?

to get back to NSC by cob tomorrow with comments on OPIC's suggested talking points for a
demarche to the GO! by the Charge in Delhi | talked to the State reps after the meeting (from South Asia
bureau, Investment office and Larson's office) and they seem to be basically in the same place as | was on what

talking points and circulate them within Treasury as early as possible this afternoon, | am requesting that_
0 that we can circulate our comments to State and try to come up

Readout of meeting:
Attendees: NSC, State (EB front office and investment office, South Asia Bureau), Treasury (Grewe, Rao,
Sampliner), Commerce, OPIC (President Peter Watson, GC Ron Jonkers and several others)

((b)(5)]

00500000000485


IN THE NEWS: 1/18/02 Page | of 18
Bradshaw, Tara

From: Washington Linda J [Linda.J.Washington@irs.gov)
Sent: Friday, January 18, 2002 10:46 AM

To: Carolyn Walas (E-mail); Charles A. Lacijan (E-mail), Charles L. Kolbe (E-mail); Denise L. Goss (E-mail);
Desler, Anne; George E. Farr (E-mail); Hart, Dale; Heather B, Rosenker (E-mail); Joelle Jordan (E-mail); Karen
Hastie Williams (E-mail); Loretta J. Bassette (E-mail); Lrievitan (E-mail); Martene Loor (E-mail); Maureen C.
Allen (E-mail); Steve Nickles (E-mail); Tara Bradshaw (E-mail); Taylor, Gloria

Subject: IN THE NEWS: 1/18/02

Today's Contents

1, TAX FACTS: IRS Chief Wants to Stop Declining Audit Rate * Dow Jones Newswires

Dow Jones Newswires
January 17, 2002
TAX FACTS: IRS Chief Wants to Stop Declining Audit Rate
By JENNIFER CORBETT DOOREN
Of Dow Jones Newswires

WASHINGTON -- The head of the Internal Revenue Service wants to
put a halt to the sharp drop in taxpayer audits.

IRS Commissioner Charles Rossotti says audits are necessary to encourage
individuals and businesses to pay their required amount of taxes.

Rossotti made his comments Wednesday during a news conference on the
IRS's plan to conduct special taxpayer audits in order to improve the
agency's overall audit program. Unless lawmakers on Capitol Hill have
strong objections, the IRS will likely begin conducting audits on 50,000
taxpayers as part of its “national research program” this fall.

Rossotti hopes the research program will allow the IRS to better target its
annual audits to people who are cheating the government rather than folks
who pay their fair share of taxes. He says improving annual audits is
especially important because fewer of them are being conducted,

In fiscal year 2000 about 618,000 individual taxpayer audits were
completed, which is down from 1.9 million in 1995.

While taxpayers would probably love it if the IRS audit rate continued to
drop or even go away, Rossotti said audits are "a critical part of
administering the tax system." He says actual audits and the threat of being
audited keeps the tax system fair by encouraging people to truthfully report
their incomes and deductions in order to pay the required amount of tax.

"At the level it's (audits) at now it’s very hard to do that,” Rossotti said.

01/18/2002
00800000001048


Donovan, Meg

From: Rao, Geetha
Sent: Thursday, July 12, 2001 2:25 PM
To: Donovan, Meg
Subject: RE: Dabhol meeting on Enron/OPIC project at NSC
((b)(5))
Original Message

From: Donovan, Meg

Sent: ‘Thursday, July 12, 2001 1:54 PM

To: Rac, Geetha

‘Subject: PW: Dabhol meeting on Enron/OPIC project at NSC

Importance: Hoh

| couldn't resist, [(b)(5)]

-—-Original Message-—-

From: Rao, Geetha

‘Sent: ‘Thursday, uly 12, 2001 11:01 AM

To: Rao, Geetha; Berg, Katie; Sits, Gay; Grewe, Maureen; Resnick, Bonnie; Christopaios, Greg; Sampliner, Gary
ca Donovan, Meg; Mills, Marshall; McDonald, Larry; Radelet, Steve

‘Subject: RE: Dabhol meeting on Enron/OPIC project at NSC

Importance: High

Attached are the talking points that State sent over this morning, Please review and send back any comments by
1:30 pm TODAY. We need to submit a joint set of TPs today. [(b)(5)]

any other suggestions?
<< File: EmbtalkY 1 State.doc >>

Original Message---~

From: Rao, Geetha

Sent: Wednesday, July 11, 2001 4:13 PM

To: Berg, Katie; Sits, Gay; Grewe, Maureen; Resnick, Bonnie; Christopulos, Greg; Semnpline:, Gary
Ce: Donovan, Meg; Mills, Marshall; McDonald, Laery; Radelet, Steve

‘Subject: RE: Dabhel meeting on Enran/OPIC project at NSC

Katie, [(b)(5)] Weill go ahead and send

0050000000496


{(b)(5)]

00500000000197


Questions for US Embassy in Indonesia re CalEnergy Project

[(b)(5)]

ITI, 1/23/98

g:\itikmemos\calen.q

((b)(5)}

00500000000193


‘
_— Jouanat. oF Pension Benerrrs

v's stock by stock bonus plans, since limitations in these
cases would be inconsistent with the mature of these
pens.

IS. Rep. No, 93-383 (1974), reprinted in 1974
US.C.C.AN, 4890, 4983 (emphasis added)}

The Conference Report to ERISA provides as
follows:

However, a special rule is provided for individual
account plans which are profitsharing plans,
stock bonus plans, employee stock ownership
plans, or thrift or savings plans, since these plans
commonly provide for substantial investments in
employer securities of real property...

In recognition of the special purpose of these in-
dividual account plans, the 10 percent limitation
with respect to the acquisition or holding of em-
ployer securities or emptoyer real property docs
not apply to such plans if they explicitly provide
for greater investment in these assets. Im addition,
the divertification requirements of the substitute and
any diversification principle that may develop in the apy
plication of the prudent man rule is net to restrict in-
vestments ty eligible individual account plans in
qualifying employer securities or qualifying emplayer
seal property.

{HLR. Conf. Rep. No. 93-1280, (1974), reprinted in
1974 U.S.C.CAN. 5038, 5097 (emphasis added)]
Concerning the prudent man nule, the Confer-
ence Report to ERISA provides:
The conferees expect that the courts will inter-
pret this prudent man rule (and the other fiduci-
ary standards) bearing in mind the special nature
and purpose of employee benefit plans.

UALR. Conf. Rep. No. 93-1250, (1974), reprinted in
1974 US.C CAN. 5038, 5083.)

(The diversification requirements of the substi-
tite and any diversification principle that may
develop in the application of the prudent man
tule is not to restrict investments by eligible indi
vidual account plans in qualifying employer scou-
fitles or qualifying employer real property.

(LR Conf. Rep. No. 93-1280 (1974), reprinted in 1974
US.C.C.AN. 5038, 5097.)

AUTHORITIES ON FIDUCIARY DUTIES

The decision to establish a plan dat invests in em-
ployer securities is a settlor function and nota fiduci-
ary function. Settlor functions include plan design as
well as establishment and termination decision mak:

ing by the plan sponsor. [See Lockheed Corp. v. Spink,
517 US. 882, 116 S. Ce 1783, 135 L. Ed. 24 153
(1996).) If a plan that directs that investment be
made in employer securities qualifies as an ELAP, the
fiduciary must act with the care, skill, prudence, and
diligence under the circumstances then prevailing
that a prudent person acting in a like capacity and fa-
miliar with such matters would use in the conduct of
an enterprise of like character with like aims.

Labor Regulations

ERISA requires that a plan fiduciary act prudently.
Labor Regulations Section 2550.404a-1(b) provides
that the prudence rule is satisfied if the fiduciary
(1) has given appropriate consideration to the facts and
circumstances the fiduciary knows or should know
are relevant to the particular invesument or invest-
ment course of action involved, including the role of
the investment in the plan's portfolio, and (2) has
acted accordingly. Hence, the fiduciary would pre-
sumably need to analyze the financial situation of the
employer, the industry outlook in general, and all in-
formation it has or should have in making its decision
as to whether investment (or continued investment)
in company stock is prudent. As discussed below, if
the plan's invesunent oversight fiduciaries are com-
pany “insiders,” an issue exists as to whether inside
information should be utilized when making invest-
ment decisions regarding company stock.

Obviously, the decision of whether to divest all of
the company stock of a plan that, by its terms, is de~
signed to be invested in company stock would require
significant consideration. But when does such consid-
eration need to be given? Quarterly? Annually? Daily?
When the stock is up? When it is down?

It is uncertain whether the answer to the pru-
dence question relating to company stock produces
an all-or-nothing result. If the question is whether
company stock is a prudent investment under ERISA,
it appears that a negative answer would mean full di-
vestiture. [Umay be, however, hat prudence would re~
quire only cessation of the purchase of company
stock. Oddly enough, such a situation might occur
when the stock was trading at an all-time high, or
when the company was teetering on bankruptcy, In ci-
ther case, the all-ornothing conclusion appears to be
the most logical, although it may not be feasible. (See
securities law discussion below.)

Labor Regulations Section 2550.40fa-1(b) pro-
vides that “appropriate consideration” shall include,
bucnot be limited to, (A) determination by the fiduci
ary that the particular investment or investment

00100000000422 —


DRAFT

{(b)(5))

00500000000184


Draft 6/9
BRIEFING

MEMORANDUM FOR UNDER SECRETARY GEITHNER

FROM: Meg Lundsager
Deputy Assistant Secretary for Trade & Investment Policy

William Schuerch
Deputy Assistant Secretary for Development, Debt & Environment Policy

SUBJECT: OPIC Financing for the Cuiaba Bolivia-Brazil Pipeline
. Issue: [(b)(5)]

Recommendation: [(b)(5)]

00500000000188


interests might diverge.
{(o)(5)]

Geetha will circulate revised points today. Please comment as quickly as you can and by cob today if
possible, so we can try to coordinate with State. Call me or Geetha if you have any questions or
need other background.

Thanks.

00500000000484


completely transparent," CSFB analysts also said that Sank One Corp (ONE)
has a

iskely $300 million bank loan exposure, and Wachovia Corp. (WB) has a $50
million exposure.

The analysts said that the tallies represent direct loan exposures. They

aren't reflective of balance sheet counter-party risk obligations, which
could

be “significant.”

“This remains a highly fluid situation, and may require many of the long
list
of banks which are likely Enron creditors to take incremental reserve
additions
in the fourth quarter,” the report said.

Tne CSF8 release saic that other securities firms do not appear to have a
major exposure to Enron, and that it estimates that firms such as Bear
Stearns
Geidman Sachs, Lehman Brothers and Merrill Lynch likely have less than
$100
million in tetal ican exposure.

On Wednesday, Enron saw its credit ratings downgraded to junk status by
the
three major credit ratings agencies, and its proposed acquisition by
Oynegy
Inc. |DYN) was as @ result scuttled.

~By Michael S. Derby, Dow Jones Newswires; 201-936-4192;
micnael.derby@dowjones.com

(END) Dow Jones Newswires 11-29-01
1148EST(AP-DJ}-=-11-29-01 1148EST

[IMAGE]
(See attached file: ATT200660.gif)

01100000000104


Page | of 2

Wiss, Barbara _

From: —Lebryk, David

Sent: Friday, November 30, 2001 10:45 AM

To: Wiss, Barbara

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

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

From: Lori,Santamorena@bpd.treas.gov [mailto:Lori.Santamorena@bpd treas.gov]
Sent: Friday, November 30, 2001 8:01 AM

To: davidJebryk@do.treas.gov; donald.hammondido.treas.gov

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

this is @ good article
—— Formarded by Lori Sastamorena/BPD on 11/9001 07 58 AM —
SER iy rata Barge reas 9 Pers Bepereco veagov, Tiny BikearperG@de 1808 Go.

11/2301 06:13 PM Hsia oo oo

jones eereeicosroen gor, “Jean. Whaiayi@oo wees. gov, Man. Wegmantjao.rees ger
Ca
‘Subject (0: IN THE MONEY-2:Cotateral Key To Counterpartias Recovery

Hovenber 29, 2001
iM THE MOMEY-2:Collaceral Ney To Counterparties Recovery

Cow Jones Newswires

Thoughts of an Enron tenkruptcy sogged monories of past filings, such as the
Saas of Oryscale Government Securities Inc., which involved public entities
being left om the no for millions of doll, An uncollateralized
geverneent repurchas gremunts.

But Bankruptcy laws have evolved significantly since the 1342 collapse of
Drysdale sent shockwaves through the financial community and forced Banks to
Pay cut tena of millions of dollars to cover Orysdsie's obligations to other
government securities firms.

ge County*s 1994 bankruptcy following ite derivatives
Gispute surrounding Cerman’s Metallgese!t:
petroleum contracts suggests that ace
Bignt be in the offing. In the latter
eparth 4 out of court and took “haireuts* «
it independent petroleun marketers who entered inte leng~
contracts as protection ayainst escalating fuel prices could sve the metals
and engineering conglasm: fer breach of contract

Lengthy Lith
eu

Dut the exter
Serivative counterparties rena:
what sticky and complex issues

to “hich those cases provide any lessons for Enron and ite
to be seen, experts seid, depending on
ht arise in potential court actions.

Meacwhile, although Enron hes yet to file for bankruptcy, most of its
derivative counterparties are Likely already scrambling to exit their
trades

1/16/02

01100000000097


In any case, in order for the fiduciary relief provisions described above to apply, if
the plan invests in company stock or allows participants to direct their investments into
any non-diversified investments (including, but not limited to, company stock), the plan's
summary plan description would need to explain the risks inherent in investment in a
single stock and in non-diversified investments in general, The explanation would
include a summary of what happens when a company becomes insolvent and/or files
bankruptcy.

Charlotte 463585 2 5

0100000000417


From: Lebryk. David

tg Woe Buren ere ed Senter eae nay took reas.
Subject: RE: DIC } bd COFB. Three Big Gorks Have St 30 Loon an
{(b)(5)]

Dave

Original Message-
Glen.M.Cwens@stis.frb.org [mailto;Glen.M.Owens@stls.frb.org]

Sent iday, November 30, 2001 6:05 AM

: David. Lebryk@de,treas.gov

Barbara.Wiss@do.treas.gov; Lori.Santamorena@bpd.treas.gov:
eryl.Morrow9fms.treas.gov; kurt .eidemiller@fms.treas.gov;
batley#fms.treas.gov; sam.stokes#fms.treas.gov;
alg.sadick@{ms.treas.gov; Jean.M.Lovati@stls.{rb.org;

Harriet .Siering@stls.frb.org

Subject: RE: ini | BJ CSFB: Three Big Banks Have $1.58 Loan Exposure To

{(b)(5)]

Tf you have any additional questions, please let me know,

1 Owens

ury Relations and System Support
314-444-4772

fax 314-444-8665

David. Lebrykédo

01100000000099


g;iti/opic/Cuiaba

00500000000192


EXECUTIVE SECRETARIAT CORRESPONDENCE COVER SHEET
Thursday, January 17, 2002

ACTION REQUIRED
PROFILE #: 2002-SE-000543
DATE CREATED:01/17/2002
ADDRESSEE: Paul H. O'Neill AUTHOR; Buckley, Allen
: Secretary ‘Smith Helms Mulliss & Moore
SUBJECT: Proposed Enron Pension Legislation

ABSTRACT: Encloses draft legislation to provide greater security for employees’ retirement benefits while protecting
fiduciaries from potential liability exposure if certain protections are provided to employees, such as

TASK ASSIGNMENT MEMORANDUM

ASSIGNED TO: David Aufhauser DATE DUE; 01/29/2002
General Counsel

REQUIRED ACTION: Direct Reply

DISTRIBUTION: EXECUTIVE SECRETARIAT

00100000000406


TALKING POINTS FOR US EMBASSY- INDIA
Re: Meeting with Ministries of Finance and Power and Dabhol Lenders’ Steering Committce

[Follow-up to meeting between Principal Secretary and National Security Advisor Mishra and
OPIC President Watson in Washington}

{(b)(5)]

00500000000476


Jann lS-02

Gitta From

>

TeTTT P.ONR/EGE PTET

JOUANAL OF PENSION DenereTs

and hopefully won't have to zedo
my tesdng from prior years.
(Gulp!) Along similar tines, 1
Wave persuaded Lonie Hassel to
write about the infamous Code
Section 401 (1), the section in the
code dealing with asset wansfercs
in corporate transactions.

I do like to mention our ¢ol-
umnists who expend los of time
and energy to come up with pichy
columns four times per year. I've
already mentioned some, but will
elaborate on others who have 2
column in this issu,

‘Tess Fervera, in her plan Sdi-
cary cohima, has addresses a ques
don about good Samaritans; Le,
the service providers who discover
fituciary breachesand take stepst0
rectify chem. Will dhey become tb
duciarics because of their acdons?
‘Will they violaze client confident
ality by reporting such breaches to
the DOL? Read on for answers to
these inmguing questions.

CORRECTION TO ALLEN
BUCKLEY'S ARTICLE IN
JOURNAL OF PENSION BEN:
EFITS VOLUME 9 NUMBER
1, AUTUMN 2001

On page 34, { the first full para
graph in the right hand column,
the last sentence (which begins
“All shareholders would be...*)
should have read as follows “All
sharcholdess would be haraied,
and all employee paricipants
could be indirectly harmed.”

Imertioned David Levin ear-
lier. He has been writing our Le
gal Developments column since
we started JPR in 1995, (don't be-
lieve he's missed a column and
T'm very graceful for his continu:
ing support “QDROs, 404(c)
Plans, and a Bear Market or
The Inccedible Shrinking Dt
vorce DeerceTM discusses bad
things that can happen when di-

. Vorces get ugly and the market is
going down.

We have a new columnist,
Lisa Germano, Lisa, whe previ-
ously edited the monthly newsletter
“The Pension Plan Administra-
tor.” will be bringing her skills to
‘J? and writing our Man Admin-
iswation column. In this issue, she
discusses the new small plan audit
requirements. Our previous col
umnist, Lorraine Dorsa, will be
moving over to the Plan Compll-
ance column. Due co my goof,
Lorraine's column did gor get

va

through. I apologize to Lorraine
and our readers and encourage
you to luok for Lorraine's column
dn the Spring issue.

Chris Cumming, our Tax-Ex-
empt Entities columnist, has writ
ten about the use of automatic
enrollment in 403(b) plans. Fred
Reish and Joe Faucher, our
401(k) Invesunent Issues colum-
nisss haveauthoreda piece on the
subject of whether plans are re-
quired to have an investment pol-
icy statement. Mike Moskal, our
usual Plan Investments colum-
nist, has instead penned a lewer
to the editor this time about the
Boehner Javesumcat Advice bill.

Tsead my good wishes to all
our readers for a happy, healthy,
and prosperous 2002)

Joon Guceiard!
January, 2002

00100000000431


appropriate message might be. My proposed plan is that Geetha will take a first crack at

comments on he taking pots and crave tem with Treasury 8, papahetrarys

this afternoon. ques! 18D y

we can circulate our comments to State and try to come up with

a Planes teks lndorlt eu Naveen eee one
is plan,

Readout of meeting:

Attendees: NSC, State (EB front office and investment office, South Asia Bureau),
Treasury (Grewe, Rao, Sampliner), Commerce, OPIC (President Peter Watson, GC Ron
Jonkers and several others)

{((b)(5)]

00500000000474


Sond ;Docenbet 023061 11.05 Aa

. . reas. gov; Harriet. Siering@stis fr org,
Jean.M, ts fd.org sory ealipy aie rl, ace 5
mary. eI , Sam. 4 Morrow@ims.| .f

‘Subject: Hrd ttn Big Banks ve $1.58 Loan Espoo Te rl

[(b)(5)]

if you have any additional questions, please let me know.

Glen Owens

Treasury Relations and System Support
314-444-4772

fax 324-444-8665

David. Lebryk@do

«treas.gov To: Glen.M.Qwens@stls.frb.org,
David. Lebryk@do.treas.gov

11/30/01 10:43 cc: Barbara.Wiss@do.treas.gov,

AM

Lori.SantamorenaSbpd.treas.gov,

Sheryl .Morrow#fms.treas.gov,
kurt.eidemiller@fms.treas.gov,
mary.baile ‘ms. treas.gov,

sam. stokes@fns.treas.gov,
craig.sadick@fms.treas.gov,

Jean... Lovatiéstis.frb.org,

Harriet .Siering@stls.frb.org

Subject: RE: 1DUC ) DJ CSFB: Three Big
Banks Have $1.58 Loan Exposure To

((b)(5)]

Thanks.

Dave

- Original Message-
From: Glen.M.Owens@stls.frb.org [mailto:Glen.M.OQwens@stls. frb.org])
Sent: Friday, November 30, 2001 8:05 AM

To: David, Lebryk@do.treas.gov

Ce: Barbara. Wiss@do.treas.gov; Lori.Santamorena@bpd.treas.gov;
Sheryl .Morrow#fms,treas.gov; kurt.cidemiller@fms.treas.gov;

mary. bailey@fms.treas.gov; sam.stokes@fms.treas.gov;
craig.sadick@ims.treas.gov; Jean,M.Lovatiastis, frb,org;
Harriet.Siering#stls.frb.org

1100000000108


Bolivia-Brazil Gas Pipeline & ENVIRONMENT ISSUES

Introduction

{[(b)(5)]

Other Environmental Issues

{(b)(5)]

Main Bolivia-Brazil Gasoducto
[(b)(5)]

Cuiaba Gasoducto
[(b)(5)]

00500000000210


32

’

_JOURNAL OF Pension Benerrrs

nized that ESOP fiduciaries must struggle with the
statutory ESOP duty to invest primarily in employer
securities and ERISA’s fiduciary duty of prudence.
Two U.S. circuit courts have resolved this conflict by
ruling that an ESOP fiduciary’s invesunent in em-
ployer stock is presumed prudent, but a participant
(or participants) can overcome this presumption by
showing that a prudent fiduciary acting under similar
circumstances would have made a different invest-
ment decision. [Se Moench v, Roberton, 62 F.3d 553
(34 Cir. 1995); Kuper v. lovenko, 66 F.3d 1447 (6th
Cir. 1995); see also Eccles and Gordon, “3rd and 6th
Circuits Apply Abuse of Discretion Standard to Fail-
ure of ESOP Fiduciaries to Diversify Plan Assets,” 4
ERISA Litigation Rep. 16 (Dec. 1995). In light of the
Chrysler comeback discussed above (and similar
comebacks) and the legislative history of ERISA, it is
difficult to imagine a situation in which participants
would be able to overcome the presumption,

In Kuper u, lovenko (66 F.3d 1447 (3d Cir. 1995)],
a class action lawsuit, the participant plaintiffs al-
leged, among other things, that the ESOP fiduciaries
breached their fiduciary duties by failing to diversify
the plan's assets when a substantial floss in value oc-
curred, The stock dropped from a price in excess of
$50 per share to a price slightly more than $10 per
share, The fiduciaries had access to several items of fi-
nancial and other information from which they could
gauge potential changes in stock value.

The Giduciaries in Kuperargued that the terms of
the plan did not grant them discretion to diversify the
plan's assets. Concerning this issue, the court ruled
that the “purpose and nature of ERISA and ESOPs
precludes a plan's per se prohibition against diversifi-
cation or liquidation.” (Kuper, 66 F.4d at 1457] The
court also noted the dual nature of ESOPs, which
serve both as an employee retirement benefit plan
and a technique of corporate finance, The court
stated:

Because of these dual purposes, ESOPs are not
designed (o guarantee retirement benefits, and
vey place employee retirement assets at much
greater risk than the typical diversified ERISA

plan.

(Kuper, 66 F.3d at 1459 (citing Moench v, Robertson,
62 F.3d 553, 571 (Sd Cir. 1995)]

After thoroughly analyzing both Congress's in-
tention to encourage ESOPs and ERISA’s fiduciary
duties, the court ultimately balanced the two pur-
poses by adopting Moench’s position that

an ESOP fiduciary who invests the assets in em-
ployer stock is entitled to a presumption dhat it
acted consistently by virtuc of that decision. How-
ever, the plaintiff may overcome that presump-
tion by establishing that the fiduciary abused its
discretion...

{id}

Other Authorities and Means of
Determination

Before the enactment of ERISA, stock bonus plans
that were not ESOPs were granted latitude by the IRS
with respect to return requirements. In Revenue Rul-
ing 69-65 (1969-1 CB. 114], the IRS ruled that stock
bonus plans that require investment exclusively in
employer stock are exempt from the requirement
that they cam a “fair return commensurate with
the prevailing rate.” This fair return requirement
was announced in Revenue Ruling 57-372. [1957-2
CB, 256]

[tis uncertain whether a profit sharing plan (in-
cluding a profit sharing plan that includes a cash or
deferred arrangement under Code Section 401 (k))
that is an ELAP is entided to a presumption of pru-
dence. To be conservative, since the courts have thus
far required that company stock be a prudent invest-
ment, a profit sharing plan's fiduciaries in charge of
investment oversight might assume the presumption
of prudence does not apply, and that the decision to
invest in company stock must be based on the general
prudence standard, that is, relative to other invest-
ment options that are available, Whether a presump-
tion of prudence exists or not, the prudence issue
should remain the same.

If the prudent invesument standard applies,
some mechanism must be established to determine
prudence, In this regard, courts generally measure
prudence by the process by which a decision was
made, and not by the result. Often, professional ana-
lysts of brokerage companies track the stock of pub-
licly waded companies as an investment option,
Ratings such as buy, hold, and sell are commonly ap-
plied. Since the analysts are professionals whose fate
is tied to their advice to their clients, if a sufficient
number of analysts track a stock and most of those
analysts rate the company’s stock as a hold or a buy or
the equivalent thereof, it would seem that the fiduci-
aries could utilize such results for a finding of pru-
dence. Presumably, the analysts utilize all public
information available when making their determina-
tionsand recommendations, Of course, since analysts

00100000000424


Question: [(b)(5)]

Answer:
((b)(5))]

See 1/19/02 St Petersburg Times article included in background material.

00100000000729


Information

MEMORANDUM FOR ASSISTANT SECRETARY GEITHNER

FROM: Meg Lundsager

Deputy Assistant Secretary for Trade & Investment Policy
SUBJECT: {(b)(5))
Introduction

{(b)(5)]

00500000000194


BuGHLe INDIVIDUAL ACCOUNT PLANS AND ERISA’ Frouciany Duties

— be]

not possess inside information. The downside of the
independent fiduciary approach is cost. Depending
on the value of the company stock in issue, an inde
pendent fiduciary would likely charge a substantial
sum to deal with such a high-risk task on an ongoing
basis. [t is likely that these costs could technically be
charged to the plans as.a cost incident to maintaining
plan investments. Query, however, whether partici-
pants would really benefit from such an expense.
Charging their accounts for such an expense could it-
selfarguably be a breach of fiduciary duty, especially if
no or little additional value would be provided by the
independent fiduciary, Charging such an expense to
the employer would reduce the employer's net worth
and the expense would thereby have a much smaller
(and indirect) impact on participants.

Although nothing in ERISA technically prohibits
a third party from acting as the sole fiduciary with re-
spect to investment oversight, the independent fidu-
ciary approach may raise the issue of a potential
ERISA violation simply because of the transfer of the
decision-making process from someone with supe
rior knowledge to someone with inferior knowledge.
(This could be true even if no inside information ex-
isted.) This issue would be particularly acute if the
prudent investment standard is applicable and the
transfer was made at a time when the (additional) in-
side information would lead a reasonable person to
conclude that the investment status of the stock has
gone from prudent to imprudent. The plan fiduciar-
ies could argue that taking such action was necessary
to avoid a conflict,

Itshould also be noted that if'a lawsuit arose un-
der any of the scenarios presented, technically the
seller would ordinarily be the trustee, If the trustee
did not possess inside information, a violation would
probably also exist under the securities laws if, for ex-
ample, participants were notified of inside informa-
tion that would cause a reasonable investor to believe
that the stock has ceased to be a prudent investment,
and the participants subsequently directed the trus-
tec to sell company stock. A directed trustee would or-
dinarily seek indemnification from the company for
any loss it incurred.

Based on the foregoing authorities, it appears
that there is no “correct” answer, and possibly no best
solution to the ERISA fiduciary duties/SEC Rule
10b-5 issue. Under recently promulgated SEC Rule
10b5-1, a purchase or sale is presumed to have been
made “on the basis of inside information if the per.
son making the purchase or sale was aware of the
information when making the purchase or sale. Al-

though this presumption is subject to certain affirma-
tive defenses, it negates the need to prove that an in-
sider “utilized” information in deciding to wade,
Thus, instructing insider fiduciaries to consider all
knowledge except inside information in performing
their prudence analysis would be of no real utility in
dealing with this apparent conflict. Utilization of an
outsider should help prevent the possibility of liabil-
ity to participans or third parties. The benefits of util-
izing an outsider would need to be weighed against
the detriment incident to using an outsider, particu
larly if the fees of the third party would be charged to
the plan. It might be that the casts are such that a pru-
dent fiduciary would notincur them. Ifa third party is
retained, the conservative approach would be to have
the company pay the fees.

SEC DISCLOSURE RULES

A twequalified plan may allow voluntary employee
contributions to be invested in company stock. SEC
disclosure rules exist to protect the employee. For
companies that file reports with the SEC under the
Exchange Act, the company shares that are available
for “purchase” by employees under such plans (as
well as “interests” in such plans) must generally be
registered with the SEC under the Securities Act of
1933, as amended (the Securities Act). The relatively
simple Form $8 can generally be utilized for this pur-
pose, Because an $-8 filing incorporates other SEC fil-
ings of the company by reference, itis relatively easy
to assemble. Fees must be paid to the SEC, based on
the number of shares registered.

If the Securities Act registration requirements
apply, a prospectus must be issued to the eligible par-
ticipants who may buy company stock. Often, plan
sponsors and/or administrators combine the pro-
spectus with the plan's summary plan description
(SPD). Every participant must receive an SPD. (Much
of the information required by the prospectus re-
quirements will be supplied in a typical SPD.) The
combined document will ordinarily state that it is
both an SPD and part of a prospectus under the secu-
rities Laws. One of certain specified documents, such
asan annual report or Form 10-K containing the most
recent annual financial statements of the company,
must ordinarily be issued with the prospectus. There-
after, cach participant investing in employer stock
must be treated as a sharcholder for disclosure pur.
poses. Accordingly, such participants must receive
copies of annual reports, proxy statements, and the
like. In addition, upon the filing of a Form $8, the

00100000000427 —


and property-casvelty insurers may absorb losses of more than $2
billice af Eneon tiles for bankruptcy protection, sei¢ Morgan
Stanley Dean Witter & Co. analyst Alice Schroede.

ARN Amro is one of the lenders behind Enron's $3 billion
Indian power plant. Enon owns 6S percent of the Cathe! Pever Co.
Project outside of Bombay, which has been hampered by cost over-
runs, penalty claims for undelivered power, and conflicts with tts
only cisent, the Maharashtra State Electricity Board.

““Should the Enron situation escalate into « full=fi
bankruptcy, we may need to make @ provision for 110 million euros
fer ur direct exposure,’ ABM Amro spokesman Martin Minn seid.
be a need to provide for it, we will de ao in the
f this year.
t nea Aboey National said it may have to set aside 95
million pounds 19235 Aitiicn! to cover possible losses frcm loans
te Enron. Peofit may be “‘down'’ in the second half from the year-
persed Secause of Enron, said Finance Director Mark Pain
in an interview.

Australie to Germany

Metional Avetrelia said it hes AS200 million ($104 million)
4n secured and unsecured exposure to Enron. "'We hag alressy
fectored in provisions for this kied of event, and it is
Sontistent with our bad debt outlook for this year.** seid Majella
Allen, a spokesvoman

Australia ¢ New Zealand Banking Group itd., the fourth=
dergest Australien benk, seid ite direct exposure is $69 million
and at has @ further $51 million indirect exposure to the U.S.
energy trader. ANE said leans to Enron would not affect its

wrprising, but then again
tion and spans the globe ao it deals
Ste fackiitios,'' saic Bill

ARM Anre Morgans Ltd.. the $0
‘client arm of ABN Amro Australia Ltd.

ate seeing fallout. Oresgner Bank AG, which
ia owned by Allianz AG, said its exposure to Enron ts less than
$200 million. KVB Growp, Germany’s Wo. 2 Dank, has about $100
million of exposure as well, Oeuteche Bank AG and Commersbemk AG
Said theie exposure to Enron amounts to "“couble-cigit"* millions
of euros,

Deutsche Bank, Kurope's largest bank, hes an exposure

signi fhesssiy~< below 100 million euros, said Ronald weichert, a
coopany spokeanan,

Energen Corp., an oil and natural-gas explorer and ges
distributor, said it has an $16.) milbion exposure with the alnost
bankrupt Enron Corp., which may Cut its 2002 earnings by 20 centa
to 25 cents « share
Pension funds will also record b:

losses. Calpers hela 3
week when Enron shares
Teachers Retizement Fund
ovned about 2 million shares. The Wew York State Common Retirenent
Syste said it Lost as such as $60 million om Enron,

Below is a list of seme banks and their estimated exposure to

$300 Million
Sredit Lyonnais $250 Million
Canadian imperial Bank $219 Million
ING Groep $195 Millfon
Abbey Mational 164 Million
Australia & New Zealand Banking $220 Million
ational Australia Bank $104 Million
Dresdner Rank Lesa Than $100 million
AN deze 97,3 Million
Deutsche Bank Less Than $90 Million
Rear Stearns $69 Million
Commerzbank Less Than $45 Million
WR Group $100 Million
Energen 20-25 Centa/shr

woWichael Nol in New York (232) 18-2384, Jennifer Freedman in

Brussels and Tom Giles and Tom Bawden in the London newsroom (44
20) 7990-7174, with reporting by Tansy Harcourt in Sydney, Steve
brinds in , Silje Skogatad in Frankfurt, Stephen Voss and

avid Welis in Mew York, Jim Polson in Princeton, and Daniel Taub

is Lea Angeles /tq/ts

Story illustration: To see a series of Bloomberg functiens

1/16/02

Page 2 of 3

1100000000106


TALKING POINTS FOR US EMBASSY- INDIA
Re: Mecting with Ministries of Finance and Power and Dabhol Lenders’ Steering Committee

[Follow-up to meeting between Principal Secretary and National Security Advisor Mishra and
OPIC President Watson in Washington)

{(b5)]

00500000000494


{(b)(5)]

ANALYSIS:

{(b)(5)]

00500000000181


other background.
Thanks,

00500000000489


BOLIVIA-BRAZIL GAS PIPELINES

Talking Points

{(0)(5)]

00500000000209


Donovan, Meg —— SS

From: ‘Sampliner, Gary
Sent: Wednesday, July 11, 2001 2:38 PM
To: Rao, Geetha: Grewe, Maureen; Sills, Gay; Resnick, Bonnie; Christopulos, Greg
Cec: Donovan, Meg: Mills, Marshall; McDonald, Larry; Radelet, Steve
Subject: RE: Dabhol meeting on Enron/OPIC project at NSC
| think the revisions [(b)(5)]

Original Message

From: Rac, Geetha

Sent: ‘Wednesday, July 11, 2001 1:54 PM

To: Grewe, Maureen; Sills, Gay; Resnick, Bonnie; Christopulos, Greg; Sampliner, Gary

ca Donovan, Meg; Mills, Marshall; McDonald, Larry; Radelet, Steve

Subject: RE; Dabhol meeting on project at NSC

Importance: High

‘Attached are the revisions to the OPIC talking points that OPIC sent over late yesterday, [(b)(5)]

Please comment asap. Thanks,
<< File: EmbtalkY1.doc >>

This is a readout of the meeting at NSC this moming. There is also an ACTION request, USG agencies are
requested to get back to NSC by cob tomorrow with comments on OPIC's suggested talking points for a
demarche to the GO! by the Charge in Delhi, | talked to the State reps after the meeting (from South Asia
bureau, Investment office and Larson's office) and they seem to be basically in the same place as | was on what
‘an appropriate message might be. My proposed plan is that Geetha will take a first crack at comments on the
talking points and circulate them within Treasury as early as possible this aflemoon. | am requesting that
everyone provide comments by cob today, so that we can circulate our comments to State and try to come up

Please let me know if you have any concerns

Reacout of meeting:
Attendees: NSC, State (EB front office and investment office, South Asia Bureau), Treasury (Grewe, Rao,
Sampliner), Commerce, OPIC (President Peter Watson, GC Ron Jonkers and several others)

{(b)(5)]

00500000000490


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01000000000932


involve someone's career. Sotto voce assertions that someone is on the way
up, down, or out, can quickly become deafening.

The man in the echo-chamber at the start of the second year of the
administration of George W. Bush is Paul O'Neill, Treasury secretary.

Throughout the holiday break, Washington was abuzz with speculation - not of
@ positive sort - about Mr O'Neill's future. He has powerful, and

increasingly vocal, critics within the Bush administration and in Congress.
From the very beginning of the administration, his habit of speaking his

mind on what was driving the dollar, the efficacy of international financial
co-operation and the folly of fiscal demand management roiled financial
markets, troubled his G7 counterparts and raised hackles among his
Republican colleagues.

Mr O'Neill was not helped either by a lack of clarity within the
administration about who held the reins of economic policymaking.

Lawrence Lindsey, Mr Bush's influential economic adviser, seemed much closer
to the president politically and personally. On several occasions last year,

the Treasury was forced to insist that it, rather than the White House, was

in charge of policy on international economics. Unfortunately, the

clarifications only helped to muddy the situation further.

But none of this seemed to worry the ever-cheerful former chief executive of
Alcoa, the aluminium producer. As the year wore on, he toned down some of
his more quotable remarks and after the tragedy of September 11, politicians

and financial markets had more important things to worry about.

But in the last month the political context of Mr O'Neill's vulnerability

has changed. When his critics were mostly currency economists and finance
ministers of emerging market cconomics, it did not secm to matter much, But
recently he has alienated the conservative base of the Republican party.

In the autumn, when the House of Representatives passed a highly partisan
post-September || economic stimulus package of tax cuts for business and
higher-income Americans, Mr O'Neill dismissed it as "showbusiness”,

Republicans were outraged. The Treasury secretary had already irritated some
within his own party with his cool support for Mr Bush's Dollars 1,350bn
(Pounds 931 bn) tax cut in June. There were reports on Capito! Hill of
delegations of Republican congressmen preparing to march up to the White
House and request Mr O'Neill's removal.

Middle-ranking White House officials have been conferring in private about
what they see as Mr O'Neill's shortcomings. A month ago, some were
encouraging speculation that his successors were already being lined up. A
favourite candidate was Phil Gramm, the ideologically rock-ribbed Texas
senator who retires this year. But Mr Gramm’s links with Enron, the failed
energy-trading company, seem to have removed him from consideration.

To conservatives, the dysfunction at Treasury goes beyond the secretary,
2

01100000000022


Question: [(b)(5)]

Answer:
{(o)(5))

00100000000723


other than a real estate investment trust (as defined in Intemal Revenue Code § 856) that is not
waded on a public stock exchange or similar exchange shall be considered an interest in real
estate if more than fifty percent ($0%) of the fair market value of the organization's asscts are
real estate interests.

(F) The foregoing provisions of this paragraph (2) shall not reduce the fiduciary duties of
subsection (a)(1) in the event of a sale, merger, reorganization or similar transaction with respect
to the issuer of qualifying employer securities (as defined in § 407(d)(5)).

SECTION 3. SPECIFICATION THAT ALLOWING PARTICIPANTS TO DIRECT
INVESTMENTS INTO NON-DIVERSIFIED ACCOUNTS GENERALLY IS A FIDUCIARY
ACTION.

1. The following sentence is added to ERISA § 404(c)(1), to follow the last sentence
thereof:

Notwithstanding the preceding provisions, the provisions of § 404(a)(1) shall apply to any action
conceming the ability of participants to invest in non-diversified investments (as defined in
subsection (a)(2)(E)), including the determination of the percentage that a participant can invest
his individual account in non-diversified investments, unless the summary plan description for
the plan thoroughly describes the risks of non-diversified investments and the impact of
bankruptcy or insolvency on any issuer of common stock on the issuer's sharcholders (in a
manner understandable to participants), and either (i) a substantial retirement plan (as defined in
subsection (a){2)(A)) is maintained in which the participants of the plan participate, or (ii) the
plan prohibits participants from investing more than twenty percent (20%) of their individual
accounts in any non-diversified investment (as defined in subsection (a)(2)(E)).

SECTION 4. BURDEN OF PROOF IN THE EVENT OF BANKRUPTCY OR INSOLVENCY
OF SPONSOR OF CERTAIN ELIGIBLE INDIVIDUAL ACCOUNT PLANS.

1 A new subsection (n) is added to § $02, to read as follows:

(n) If an eligible individual account plan (as described in § 407(d)(3)(A)) is maintained, but a
substantial retirement plan (as defined in § 404{d)(2)(C)) that benefits the participants of the
cligible individual account plan is not maintained, then, unless the plan is either described in §
404(a)(2)(B) or is an employee stock ownership plan or a stock bonus plan described in the last
sentence of § 404(a)(2), in any lawsuit alleging breach of the duties of § 404(a)(1) applicable to
eligible individual account plans, the burden of proving compliance with such rules with respect
to purchasing or holding of qualifying employer securities shall lie with the fiduciaries charged
with investment oversight of such qualifying employer securities in the event of bankruptcy or
insolvency (as defined in Internal Revenue Code § 108(d)(3)) of the issuer of qualifying
employer securities.

Atlenta $7319.1 3

ee - 0010000000411 _


aren't reflective of balance sheet counter-party risk obligations, which
could

be “significant.”

“This remains a highly fluid situation, and may require aany of the long
list

of banks which are likely Enron creditors to take incremental reserve
acditions

in the fourth querter,” the report said.

The CSFB release said that other securities firms do not appear to have a
major expesure to Enron, and that it estimates that firms such as Bear
Stearns,

Geldman Sachs, Lehman Brothers and Merrill Lynch likely have less than
$100

million in total loan exposure.

On Wednesday, Enron saw its credit ratings downgraded to junk status by
the

three major credit ratings agencies, and its proposed acquisition by
Oynegy
Inc. (DYN) was as @ result scuttled.

Ry Michael S. Derby, Dow Jones Newswires; 201-938-4192;
michael .derby@dowjones.com

(END) Dow Jones Newswires 11-29-01
DL4BEST(AP-DJ)--11-29-01 L14B8EST

[IMAGE}
(See attached file: ATT200860.gif)

1100000000101


Subject: RE: 1DJC ) DJ CSFB: Three Big Banks Have $1.55 Loan Exposure To

[(b)(5)]

If you have any additional questions, please let me know.

Gien Owens

Tr jury Relations and System Support
314-444-4772

fax 314-444-8665

David. Lebryk@do

-treas.gov
Lor: .Santamorenattpd.treas.gov,

11/29/01 01:10
PM

Three Rig

To

~ As a general matter, [(b)(5)]

To:

Barbara.Wiss@do.treas.gov,
Glen.M.Qwens@stls.frb.org,
Sheryl .Morrow#fms.treas.gov

ce:

Subject: RE; 1D7C ) DU CSFB:

Banks Have $1.58 Loan Exposure

01100000000109


PDohiman/Desk

ec: MColby/IDB

00500000000183


(A) _ For purposes of this paragraph (2), the term “substantial retirement plan” means a plan
that is funded solely by employer contributions and that is either: (i) a defined benefit pension
plan that does not invest in employer securities under which; (a) benefits accrue at a constant
rate, and an accrual is granted to any participant who performs a year of service (as defined in §
202(aX3)A)) during a plan year, (b) annual benefits at Social Security retirement age or prior
thereto in the form of a life annuity (or other annuity actuarially equivelant thereto) with respect
to a participant who has accrued benefits for thirty years equal or exceed one-third of the final
average compensation of the participant over the three, four and five year period (as specified in
the plan) immediately preceding retirement or termination (or lesser period for an individual who
does not work the minimum three, four or five year period specified in the plan), and (c) cost of
living adjustments are applied to accrued benefits and pension distributions annually at a rate
which equals or excceds the cost of living adjustments applicable to Social Security retirement
benefits for the year; or (ii) a defined contribution plan that does not invest in employer
securities, and that: (a) is not subject to participant direction of investments, and (b) allocates a
contribution equal to six percent (6%) of the participant compensation for each plan year to any
participant who performs a year of service (as defined in § 202(a)(3)(A)) during the plan year.
For purposes of this subparagraph, “compensation” means compensation as defined in Intemat
Revenue Code § 415(c)(3),

(B) An eligible individual account plan is described in this subparagraph if: (i) participant
contributions (whether elective deferrals under Internal Revenue Code § 402(g) or otherwise)
may be used to purchase qualifying employer securities; (ii) a participant is not required, under
the plan's terms, to invest any of his participant contributions account in qualifying employer
securities; and (iii) a participant may not direct that more than twenty percent (20%) of his
participant contributions account be invested in qualifying employer securities (as defined in §
407(d)(5)). The foregoing provision shall not limit, in any manner, a plan's ability to invest any
portion or all of any employer matching contributions accounts in qualifying employer securities.

(C)  Aplan that permits (but does not require) participant contribution accounts to be invested
in qualifying employer securities may convert to a plan described in subparagraph (B) of this
subsection (a)(2) and, in doing so, may utilize the part of the participants’ respective
contributions accounts in excess of the twenty percent (20%) limit of subparagraph (B) (as
determined on any day within one year of enactment of the Retirement Security Act of 2002) to
increase the investment in qualifying employer securities of any existing employer matching
contributions accounts of such participants without participant consent, provided that such action
occurs within two years of the date of enactment of the Retirement Security Act of 2002.

(D) A stock bonus plan is described in this subparagraph (D) if it is designed to invest
primarily or exclusively in qualifying employer securities, and it satisfies the conditions for tax
qualification under Internal Revenue Code § 401(a) and the other requirements prescribed by the
Scerctary of the Treasury applicable to stock bonus plans.

(E) For purposes of this subparagraph (E), a non-diversified investment is an investment in any
security, bond, indenture or interest issued by a single organization (or by any organization and
affiliated organizations), and any direct or indirect interest in real estate, provided that an interest
in a real estate investment trust (as defined in Internal Revenue Code § 856) shall not be a non-
diversified investment. For purposes of the preceeding sentence, an interest in an organization

Atlaena $7319.1

nN

00100000000410


[OUTSIDE SCOPE]

00100000000791


Japan Daily Notes ~ 4 December 2001 (33 merritt uynch

BANKS: Impact of Enron Similar to Mid-size Domestic Bankruptcy

Main Points:

© News: The FSA provisionally estimate the total size of Japanese bank lending to Enron at around ¥100bn.
Exposure amounts total around ¥35.3bn for MTFG and ¥33bn for Sumitomo Mitsui, However, these also include
project finance deals that are not subject to Enron's corporate risk. The banks will have to make reserves in
FY 302, but the size of the impact is similar to a mid-size domestic bankruptcy (Nikker).

© Earnings Implication: On a net basis (excluding project finance and loan sales), Sumitomo Mitsui has outstanding
credit of ¥25.8bn with Enron, while UFJ has a mere ¥1.8bn. Mizubo’s total loans appear to be slightly above
MTFG's when including loans to affiliates. For cach of these banks, however, the losses arc likely be absorbed in
FY 02 credit costs, so the impact on camings should be minimal. Additionally, the banks loan exposure to
Argentina is small,

© Investment Implication: Though having a minimal impact on earnings, the realization that Japan's banks have
credit risk not only domestically, but also internationally might be a psychological negative. However, the
“misclassification” of Enron as a debtor was not limited to Japanese banks — it seems it was classified as a normal
or special-mention borrower by US and European banks as well.

Comment: Enron loans: MTFG and Sumitomo Mitsui made formal press releases of their loan exposure to Enron on 3
December. MTFG's outstanding credit totaled ¥35.3bn, including some secured loans. Sumitomo Mitsui’s was ¥33ba ~ of
which ¥7.2n is project finance, and not subject to Enron's corporate risk ~ leaving a net credit of ¥25.8bn (USS1/¥123),
UFY’s credit of ¥5.8bn includes ¥4bn in loans sold, leaving a net ¥1.8bn. Mizuho has extended ¥15bn in credit to Enron's
parent, though we estimate loans to affiliates included would bring its total above MTFG's (see note).

On level with mid-sized domestic bankruptcy: The total of ¥100bn in credit to Enron (a few tens of billions of yen for each
of the four major banking groups) ranks it alongside a medium-sized domestic bankruptcy. While difficult to anticipate
what extra amounts might be involved at the present stage, this level of exposure should be covered by FY3/02 forecast
credit costs (Mizuho and UFJ, ¥2tr, Sumitomo Mitsui, ¥1tm, MTFG, ¥480bn). Moreover, Enron's bond credit rating prior
to failure was investment grade triple-B, so it seems it was not only Japanese banks, but also their US and European
counterparts who classified Enron as a normal or special-mention borrower.

Investment rating implication: Japanese banks’ inernational lending activity has been on the decrease ever since the 1998
financial crisis, and their credit risk is not as high as it was before. Nevertheless, the realization that Japan's banks have
credit risk not only domestically, in the form of large special-mention borrowers, but also internationally, might be a
psychological negative, We believe Japanese banks’ exposure to sovereigns Argentina and Turkey is small. While
Sumitomo Mitsui has some ¥2.3ba in loan exposure to Argentina, and MTFG some ¥89.2bn, in the latter's case, a major
proportion of this exposure is to affiliates of multinational corporations with high credit ratings and locally incorporated
Japanese companies, - Yoshinobu Yamada

(Note: | our 3 December Jntra-day Note, we estimated the exposure of the four major Japanese banks with Enron at ¥2-206n per bank,
‘but more precisely this should have read “credit pet bank of those belonging to the four major banking groups.)

Se eee OOS
Major Banks: Loan Exposure to Enron (¥bn)

Of Which Project Finance
Total Exposure or Loan Sales Net Exposure
Mizuho 1s" . .
MTFG % . .
UFJ 6 4 (Loan Seles) 2
SNBC 3 7 (Project) 26

* Exposure to Enron's parent. We estimate that exposure, including affiliates, would surpass NTFG.
Sources: Banks:

(Continued)
2

1000000000931


EuiGIneL INDIVIDUAL ACCOUNT PLANS AND ERISA’S FInucary DUTIES 31

couse of action is reasonably designed, as part of the
portfolio, to further the purposes of the plan, taking
into consideration the risk of loss and the opportu:
nity for gain (or other return) associated with the in-
vestment or investment course of action, and (B) has
considered the following factors: (1) liquidity, (2) re-
turn relative to the funding objectives of the plan, and
(3) diversification. It is important to note that this
regulation was drafted to apply to plans in general,
not. to cover ELAPs that invest primarily in employer
securities specifically. Therefore, the regulation must
be “toned down" to deal with EIAPs, Accordingly, for
example, the diversification factor does not apply.

Concerning (A), determining that the invest-
ment is reasonably designed to further the purposes
of the plan, taking into consideration potential risk of
Joss and opportunity for gain, EIAPs which are ESOPs
or stock bonus plans ordinarily are designed to cause
the participants to share in the fortunes of the com-
pany, good or bad. Also, as stated above, ERISA Sec-
don 404(a)(1)(B) requires that the fiduciary use the
care, skill, prudence and diligence under the circum:
stances that a prudent man acting in like capacity and
familiar with such matters would use in the conductof
an enterprise of like character and with “like aims.” As
noted in the legistation history, the “aim” of an EIAP
is for the participant to share in the fortune of the em-
ployer company, That aim would be difficult to
achieve without investing substantially in company
stock.

Concerning liquidity, if the company stock of the
plan sponsor held by the ELAP is traded daily on a
public stock exchange, this factor should be met. If
the company stock is not publicly traded, the liquidity
of the stock will require an analysis of the facts sur-
rounding the investment. The stock of most private
companies is illiquid in the short term. Given that
substantial legislation exists encouraging the forma-
tion of ESOPs, and almost all ESOPs relate to small
companies, it would appear to be unfair to apply the
liquidity factor to ESOPs.

Labor Regulations Section 2550.404a-1(b) pro-
vides thatthe remaining requirement, return relative
to the funding objectives of the plan, must be ana-
lyzed in light of dhe nature and objectives of the plan.
Ic is difficult to determine what this requirement
would mean for an EIAP that invests exclusively or al-
most exclusively in company stock. It appears from
the foregoing discussion from dhe legislative history
(and acceptance of Congress that EIAPs result in
sharing in the company’s risk and return) that the re-
turn could be appropriately geared solely toward the

company’s success, thus making the factor com:
pletely irrelevant. If so, then, for a publicly waded
company, the stricter standard (i.¢., that the in-
vestment be prudent) would be identical to the more
lenient standard that plan terms be followed, disclo-
sures be made, and so forth. Alternatively, it might be
that the appropriate return factor is the rate of return
for the industry in which the company conducts busi-
ness. In that case, private companies might need to
compare themselves with public companies in the
same industry.

The proposed regulations under ERISA Section
404(a) (1) (B) listed volatility as a factor, The pream-
ble to the final regulations discusses the exclusion of
volatility as a factor under the final regulations, The
preamble suggests that such factor ts part of the “role
of the investment in the plan's portfolio.” The pream-
ble states that volatility must be considered as part of
the prudence equation when volatility is present;
however, since this factor was not actually included in
the final regulations, it appears chat volatility need
not be separately considered. Some stocks, such as
those of public utility companies and real estate in-
vestment rusts (REITs), ordinarily experience insig-
nificant volatility. Volatility is particularly relevant
when a participant's distribution amount is deter-
mined as of a particular day, and a distribution is pay-
able upon a particular event, such as termination of
employment If company stock is experiencing a
downturn when a participant terminates employ
ment (or is involuntarily terminated), the distribu:
Gon amount payable to the participant will be
relatively low, Since a plan ordinarily cannot distrib-
ute vested accounts in excess of $5,000 without par
icipant consent, this issue ordinarily presents a
problem only if a cash-out provision exists as to small
accounts, such as onc applicable upon termination of
employment. (A problem could exist in other cases.
For example, a profit sharing plan might require
that a distribution be taken at normal retirement
age. Most plans, however, do not require that bene-
fis be distributed upon attainment of normal retire-
ment age.)

Case Law

Apparently realizing the dilemma fiduciaries face,
the case law has been very pro-fiduciary. A degree of
latitude has been granted to ESOPs by two U.S. courts
of appeals. As stated above, by statute ESOPs are plans
that are “designed to invest primarily” in employer se-
curities, These words are required to be included in
the language of ESOP documents. Case Law has recog

00100000000423


JOURNAL

PENSION
BENEFITS

ISSUES IN ADMINISTRATION,

GN, FUNDING AND COMPLIANC

Votume 9 © Number | © Autumn 2001

COLUMNS FEATURE ARTICLES

From THe Eorron Mutty Purpose 401(k) PLans? A Recenr RuuNG
Joan Gucciardi Sexves ONLY To HiGHuGHT Ossracues

Lecat Devetorments Susan J. Erickson

David R. Levin How HIPAA Recutanors Wu, Arrnct Grour
401(k) Invesmuents HEALTH PLAN Srowsoes AND Seavice Provivens
Fred Reish and Joe Faucher Fred Singerman and Kathy Schwappach

Pun Desnusutions DESIGNING Plans Arter EGTRRA

Melante N. Aska Knox Kevin J. Donovan and Joan Gucciardi
Vourrrary Coarection Issues A Now Penspecrive on Emrvover vs. Leasep Exrtover
Bruce Ashton and Nick White S. Derrin Watson

PLAN Actuary Eurciece INDIVIDUAL ACCOUNT PLANS ANO ERISA’s
Gene Fife Fiovaary Dunes

PLAN Fipocary Allen Buckley

Martha Jo Wagner and Chantel Sheaks Procepunat Due Diuctnck Iv THE SELECTION AND
PLAN INVESTMENTS Montromin OF PLAN Sexvict Provipers
Michael B. Moskal Tess J. Ferrera

PLAN ADMINISTRATION The Money Pusctase PLAN: R.LP.

Lorraine Dorsa Amy L. Cavanaugh

401¢K) Issues Focus ov... THE Pension Provisions of EGTRRA
Cynthia A. Groszkiewicz Dauid A. Pratt

INDEX TO VOLUME 8

s

PANEL Pusticarton

A
ASPEN Pustismuns, Ine

00100000000418 —


SMITH HELMS MULLISS & MOORE, L.L.P.

Attorneys at Law

1355 Peachuee Street, NE

Suite 750 T
Atlanta, Georgia 30309
(404) 962-1000

direct: 404-962-1042
fax: 404-962-1200
Allen Buckley @SmuthHelms.com
January 15, 2002

VIA UPS OVERNIGHT

Mr. Paul O'Neil
Department of the Treasury

Treasury Secretary
1500 Pennsylvania Avenue, NW

Washington, DC 20220
Re: — Proposed Enron Pension Legislation
Dear Mr. O'Neil:

I am an attomey who specializes in retirement plan benefits. Enclosed is a bill that our
firm has drafted in response to the ENRON situation and similar matters.

The bill relates to retirement plans, and it would amend the Employee Retirement Income
Security Act of 1974 (ERISA). We respectfully request that you consider the bill, A
sponsorship request was made yesterday to the following U.S. Senators; Max Cleland, Zell
Miller, John Edwards, Mike DeWine, Mike Enzi, and Judd Gregg. These materials have been
sent to Dick Wickersham of the Internal Revenue Service, (He informed the undersigned that he
would forward the materials to officials at the U.S, Department of Labor.)

Also enclosed are: (1) a bullet summary of the bill’s provisions; (2) a summary of the
reasons for the bill; and (3) an article authored by the undersigned discussing ERISA's fiduciary
duties applicable to eligible individual account plans (i.c., plans that invest or permit investment
in company stock) under ERISA, The article ties into the fiduciary aspects of the bill,

We believe that the enclosed bill provides needed protection for retirement plan
participants while at the same time fills some gaps in ERISA that need to be filled to protect plan
fiduciaries and sponsors. Thus, the bill attempts to strike a balance between employees’ needs
and employers’ needs, Simply put, we believe that the enclosed bill is a better bill than those
proposed to date, because it analyzes the entire set of problems that exist with respect to
company stock in retirement plans and non-diversification in general.

Among other things, the bill:

-reduces employee risks relating to company stock by placing greater burdens on plan
fiduciaries unless cither: (a) a substantial diversified retirement plan is supplied by the

ATLANTA CHARLOTTE GRreRseone BALEIOR witmington

00100000000407 _


From: Gien.M. gowearte te
Sent: Fitéay, Roveroer w, 2001 8:05 AM
To: li lo. reas gov
Ce: Barbara.’ tar petcaphe he feteps an ary
som sineen gine rae ove Wang oadionggins ‘Jean Mio Low fro.org:

Subject: RE: 1DJC ) DJ Testa: th Three Big Banks Have S150 toe Loan pnetene To

arrow oF
[(b)(5)]

Tf you have any additional questions, please let me know.

Glen Owens
Treasury Relations and System Support
314-444=4

fax 314-44

David. Lebryk@do

.treas.gov To: Lori.Santamorena@bpd.treas.gov,
Barbara.Wiss@do.treas.gov,

11/29/01 03:10 Glen.M.Qwens@stls,frb.org,

PM Sheryl .Morrow@fims.treas.gov
cc:
Subject: RE: 1DJC }) DJ CSFB: Three Big

Banks Have $1.58 Loan Exposure To

Lori et al-- As a general matter, [(b)(5)]

01100000000094


IN THE NEWS: 1/18/02 Page l6of 18
Assistant U.S, Attomey Noelle M. DiMarco is presenting the case before U.S. District Judge Keith Ellison.

DiMarco is trying to prove to the jury that the four defendants falsified tax returns for at least 20 of their clients
resulting in a 27-count indictment.

The penalties in the case carry up to five years for conspiracy and three years for each of the counts, plus fines
of up to $250,000,

The case stands on claims that the taxpayers’ eamed income credit was disallowed by the government and
ordered to be paid back, while the government indicted the tax preparers for allegedly falsifying information on
the tax returns to get the credit.

Margaret "Peggy" Alverdi, a 15-ycar veteran employee of the IRS was the government's witness Wednesday.

Alverdi audited some of the taxpayers’ claims and disallowed their earned income credit despite that in some
cases, she had found no fraud.

The tax cases were referred to Alverdi by IRS Special Agent Garry Ploetz as part of the Border Preparer
Project, an investigation that apparently covers the U.S.-Mexico border.

Gonzalez’s attomey Emilio Davila tried to show the jury that Alverdi's ruling to disallow the credit came
because she was "preprogrammed" by Ploetz, who was following up on a criminal investigation under the
Border Preparer Project.

Alverdi disagreed with the word “preprogrammed,”

Davila then asked her if she knew why Gonzalez was indicted on a tax return filed electronically that she didn't
prepare.

Alverdi answered, “No, I don't know."
Gonzalez was indicted on seven counts.

During cross-examination by Davila, Alverdi admitted that in three of the claims she had audited no fraud was
found and she marked "no" on the form's box.

Davila showed the jury Alverdi's report on which she indicated on the audit she performed on the tax retum of
Abel Moreno she had placed a question mark instead of indicating "yes or no” in finding negligence or fraud.

In the two audits done for Antonio Hemandez for years 1995 and 1996, she had indicated that no fraud was
found,

Alverdi testified she spoke to Hemandez on the telephone and he had explained that he had named his sister as a
dependent because their parents had not sent them any support money while they lived with their aunt.
Hemandez was claiming $3,346, which was disallowed by the auditor.

During the cross examination of the witness, Davila managed to get on the record that Hemandez was trying to
help his sister, an honor roll student at a local high school.

Earlier in the day, Alverdi was cross-examined by attomey Fausto Sosa, who represents Elizabeth Benavides.

The government expects to present more than 50 witnesses and continue presenting its testimony on Thursday,
15. FEDERAL DIARY: Florida Lawmaker Suggests Another Road to 'Offset' Relief * The Washington

01/18/2002
00800000001051


<< File; EmbtalkY 1 State.doc >>

——--Original Message-—-
From: Rao, Geetha
‘Sent: Wednesday, July 11, 2001 4:13 PM
Tor tas Kavi: Gay; Crees Mapas Beech, Bowsieg Cnhpton: Crags Sample, Ory
ca Donovan, Meg; Mills, Marshal; McDonald, Larry; Radelet, Steve
‘Subject: RE; Dabhol meeting on Enron/OPIC project at NSC
Kate, [(b)(5)]
Thanks to alll.
= Onginal Message-—-~
From: Berg, Katie
Sent: Wednesday, duly 11, 2001 4:09 PM
Tor ‘Sils, Gay; Rao, Geetha; Grewe, Maureen; Resrick, Bonwe; Qvistopulos, Greg; Sampiiner, Gary
co Donovan, Meg; Mills, Marshall; McDonald, Larry; Racelet, Steve
Subject: RE: Dabihol meeting an Eneon/OPIC project at NSC

| must admit to never having beard of this problem, Geetha's revised talking points look good to me.
but! would suggest that [(b)(5)]

—Driginl Message—-—
From: ‘Sits, Gay
Sent: Wednesday, July 11, 2001 3:54 PM
To: Rao, Geetha; Grewe, Maureen; Resnick, Bonnie; Christopulos, Greg; Sampliner, Gary
ca Donovan, Meg; Mills, Marshall; McDonaki, Larry; Radelet, Steve; Berg, Katie
Subject: RE: Dabhol meeting on Enron/OPIC project at NSC
i thinkit is ((b)(5)] am adding katie berg. she
does expon credits. and eximbank

PEBips eka OG

Rao, Geetha

Son Paesgrialeon 2001 1:54 PM

To: Grewe, Maureen; Sils, Gay; Resnick, Bonnie; Christopulos, Greg; Sampliner, Gary

Cc: Donovan, Meg; Mills, Marshal; McDonald, Larry; Radelet, Steve

‘Subject: RE: Dabhol meeting on Enron/OPIC project at NSC

Importance: High

Attached are the revisions to the OPIC talking points that OPIC sent over late yesterday.
((b)(5)]

The Charge from the US Embassy will most likely deliver the points to the GOI. Please
comment asap. Thanks.

<< File: EmbtatkY 1,doc >>

en

This is a readout of the meeting at NSC this morning.

USG agencies are requested to get back to NSC by cob tomorrow with comments on
OPIC's suggested talking points for a demarche to the GOI by the Charge in Delhi. |
talked to the State reps after the meeting (from South Asia bureau, Investment office and
Larson's office) and they seem to be basically in the same place as | was on whal an

2

00500000000473


6

Journal of Pensson Bevtrrrs

plan itself will become subject to a duty to file its an-
nual financial statements with the SEC on Form 11-K.

For companies that do not have a reporting duty
under the Exchange Act, SEC Rule 701 may offer re-
lief from these registration requirements. Rule 701
can be utilized to exempt both company stock and in-
terests in Guc-qualified and other benefit plans from
registration under the Securities Act. No filing with
the SEC is required if Rule 701 applies, aldhough a fil-
ing under applicable state securities laws may be re-
quired, Limits exist on the amount of employer
securities that can be sold pursuant to Rule 701. If
Rule 701 can be utilized, certain disclosure rules will
apply. If sales of employer securities under Rule 701
do not exceed $5 million in any 12-month period, the
employer must deliver only a copy of the plan docu-
ment to participants, Hf the plan is subject to ERISA,
this requirement is satisfied by (1) delivering the
SPD and any summaries of material modifications
(SMMs) and (2) making the plan document available
for copying and inspection upon request. If'such sales
do exceed $5 million in any such period, the em-
ployer must also deliver to participants certain finan-
cial information and a description of risks involved in
investing in the securities. Compliance with Rule 701
does not necessarily insure compliance with the anti-
fraud standards of the federal securities Laws.

401(k) PLANS

‘There are no special rules or exceptions for 401(k)
plans. If company stock is an investment option, it
must meet the prudence standard, whatever it might
be. If one assumes that the standard is that company
stock must be a prudent investment, query how the
equation is impacted if (1) investments can be
changed daily, and/or (2) numerous other diversi-
fied investment options such as mutual funds exist.
For a 401(k) plan that provides for daily investment
changes and makes numerous diversified investment
options available, it would seem that compliance with
SEC disclosure rules, plan terms, and ERISA’s pur-
chase and sale rules (i.c., no commissions, fair value)
should suffice to satisfy ERISA's fiduciary duties. At
present, however, there is no “law” to this effect.

For plans subject to ERISA Section 404(c), thor-
ough, specific rules apply if company stock is an in-
vestment option, The preamble to the final ERISA
Seetion 404(c) regulations, however, states that fidu-
ciaries must act prudently when choosing investment
alternatives. Most practitioners believe that the pre-
amble is a correet interpretation of the law; that is,
whether or not ERISA Section 404(¢) applies, fiduci-

aries must act prudently when choosing investment
options to be offered. Since (1) the language in the
preamble is not part of the final regulations, and
(2) the ERISA Section 404(c) regulations concerning
company stock are thorough, it is possible that an in-
dependent analysis of the prudence of offering com-
pany stock as an investment alternative may be
unnecessary,

Company stock can be somewhat of a circular
equation. Many companies hope that their employ-
ces will invest therein. Two possible reasons might in-
clude increased effort/ productivity (with resulting
increased stock price) and increased demand for the
stock (thereby increasing stock price). When a com-
pany which sponsors a participantdirected plan in-
duces a participant to invest in its stock, presumably
no ERISA issues or potential exposure exists if; (1)
the company is nota fiduciary, (2) the participant is
free to choose from a portfolio which includes com-
pany stock and several diversified investment options;
and (3) the participant is supplied with information
about the 401 (k) plan's other diversified investments
and about the riskteducing benefits of diversifica-
tion. However, if less than all three of the foregoing
conditions exist, it would seem that a fiduciary duty
breach could possibly exist, depending on the facts.

Concerning prudence, itis relatively easy to pick
a mutual fund that is prudent. Most mutual funds
carry tens to hundreds of stocks and/or bonds. Thus,
if a few of the investments go bad, the impact on the
overall fund will not be devastating. Similarly, itis not
difficult to act prudently when choosing a mix of mu-
tual funds to be offered. Most plans offer, at mini-
mum, a money market fund, a lange company equity
fund, and a balanced fund. If these options are sup-
plied, it & unlikely that a prudence challenge could
be mounted based on the mix offered.

Then comes company stock It is not diversified.
‘Thus, relative to mutual funds, it is a much riskier in-
vesument. But, as the legislative history to ERISA
points out, EIAPs serve a different purpose. The em-
ployee who works at the company and gets a feel of
the business can decide whether he or she wants to
risk some of his or her capital based on his or her feel
for and knowledge of the one company with which he
or she és very familiar. Thus, mutual funds and com-
pany stock are “apples and oranges,” and any at-
tempted comparison would be unreasonable.

SMALL COMPANIES
There are no separate rules for small employers
maintaining ELAPs. The rules described above apply

00100000000428 —


From: Lori Santamorena@>pd.treas.gov
Sent; Friday, November 30, 2001 2:23 PM
To: david lebryk@do.treas.gov

Ce: barbara wiss@do.treas.gov

Subject: 1BN ) Wall Street Firms, Pension Funds Face Enron Losses (U

o> Forwarded by Lon Santamorena/BPD on 11/3001 02:22 PM am
“PUBLIC OLOT, US DEPT OF TREASURY”

Page | of 3

co
17730001 02:10 PM Pl YEN ) Wall Street Firms, Pension Funds Face Ereon

Wall Street Firms, Pension Funds Face Enron Losses (Updated)
D00ied2930 22:44 (Hew York)

Wall Stewet Firms, Pension Funds face Enron Losses (Update3)
(Opdates with Calpers tcnses.!

Sew York, Mov. 30
Bear Stearns Cos., Eu:
California Public Baployee's Retirement System disclosed losses
from anvestments Enron Corp. expected to top billions of aollars,

Sear Stearns Cos., the sixth-biggest securities firs by
capital, said its exposure to Enron is $69 million. Duke Energy
Corp.. J.P. Morgan Chase & Co., Williams Cos. and other companies
together may lose more than $14 billion from a collapse of Enron.
An deze Molding WY, Abbey National Plc, National Avetralia Bank
Ltd. and other leeders disclosed potential losses.

Enron vould be the biggest beatrupecy ever — end
banks and securities fi
economic slowdown. Enron hed poe
less than $2 billion of cash as
million te lenders by mid-December.

This if having 4 tipple effect across the world,'* saic
Robert Fensloza, # fund manager at Aberdeen Asset Management As:
an Singapore.

At Least 16 companies have reported ure to possible
oases from Enrom tied te either loans of contracts with the
Houston-based company.

‘AIK Aaro, the largest Dutch bank, said it may set aside 110
Fillion eures ($97.5 million) to cover leans to the U.S. energy
trader. Britain's Abbey Mational said it's owed almost $165
illicn, National Australia and other Austraiian lenders said
theis Enron exposure totals about $350 million. France's Credit
tyennais SA said it has $250 million of loans to Enron,

blow for
an

dest week, it must pay $490

18D to J.P. Morgan

ING Groep BV. the biggest Legged financial-services company,

Dueck financial-services company, said it holds about $195 million

i> unsecured loens end bonds of Enron, Canacien Imperiel Bank of
ree, the eountey's third-biggest bank, said Enres owes it

S million, more than half in unsecured loans, letters of credit
and derivatives.

Almost two dozen electsteiey and natural gaa compani
Entoe owed them about $700 million as of Wednesdsy, when Oynegy
Inc. abandoned s merger, depriving Enron of cash it meeds to avoid
insolvency,

Ambac Financial Group Inc., XL Capitel Ltd. and ether bond

rr

1/16/02

01100000000105


employer securities, The law in this area, however, is far from clear, and there is no law
defining fiduciary duties relating to 401(k) plan investments in employer securities.’

Diversification of investments reduces risk. Sophisticated investors are
knowledgeable of this axiom. Generally speaking, however, employee participants in
retirement plans are not sophisticated investors. Given the chance, often based on “tips,”
etc., many of these individuals will invest disproportionately in one or a few stocks in an
effort to accumulate wealth quickly. Such a course of action can be dangerous.

In recent years, the 401(k) plan has become the most popular retirement plan.
Previously, most plan sponsors hired fiduciaries to invest the assets of the retirement
plans that they sponsored; in recent years, however, employers have created investment
fund options in which employees can individually direct the investment of their accounts.
Under ERISA § 404(c), ERISA's fiduciary duties are presumed to be met with respect to
such a plan if certain conditions are met. Even with this presumption, plan fiduciaries
must act prudently when deciding upon investment options to be made available. In
order to satisfy the requirements of ERISA § 404(c), the investment options offered must
be diversified in nature. In very recent years, a new trend has arisen with respect to
participant-directed accounts, which often allow participants to invest their accounts in
any manner desired, including investment in stocks of individual companies. Typically,
the amount or percentage of a participant’s account that can be invested in a single
investment option is not subject to limitation. Many professionals are concerned that
participants, who lack investment expertise, will subject their retirement benefits to
excessive risk by failing to properly diversify their accounts,

Disclosure of the risks of failure to diversify can only help prevent problems.
However, given that many individuals are prone to taking risky actions, it is doubtful that
increased disclosure rules alone will cure the problems relating to investments by
participants in company stock and other non-diversified investments.

Employers may offer only one retirement plan, offer more than one retirement
plan or offer a retirement plan with different components to it — ¢.g., a 401(k) component
and a profit sharing component. Ordinarily, plan design actions, including the decision
regarding the type of plan to be offered and the amount of benefits to be supplied, are
plan “settlor” functions which are not subject to ERISA’s fiduciary duties. In addition to
plan investment oversight, plan administration matters are subject to ERISA’s fiduciary
duties. Plan sponsors and the courts often find it difficult to distinguish a plan design
action from a plan administration or investment action,

Proposal. Under the Proposal, if an employer sponsors and fully funds a pension
plan that does not invest in company stock, and supplies a significant retirement income
of thirty-three and one-third percent (3314%) of final average compensation over the 3-5
year period preceding retirement (plus cost of living adjustments after retirement) for an
employee who has worked 30 or more years, then any other retirement or deferred

* Conceming ESOPs, see Moench vy Robertson, 62 F.34 $53 (3rd Cir. 1995) and Kuper v. lovenko, 66 F.3d
1447 6" Car, 1995),
Charlotte 4635852 2

00100000000414 —


David. Lebryk@do

-treas.gov To: Lori. Santamorena@bpd. treas.gov,
Barbara.Wiss@do,treas.gov,

11/29/01 01:10 Glen.M.Qwens@st1ls.frb.org,

PM Sheryl .Morrowd fms .treas.goyv

co:

Subject: RE: 1DJC ) DJ CSFB: Three Big
Banks Have $1.58 Loan Exposure To

Lort et al-- As a general matter, [(b)(5)]

Dave
- aga! iginal Message-----
Lori. Santamorena@bpd.

jov)
hursday, November 29, 2001 ia: 14 PH
To: david. lebryk@do.treas.gov
Subject: 100C ) DJ CSFB: Three Big Banks Have $1.55 Loan Exposure To

- Forwarded by Lori Santamorena/BPD on 11/29/01 12:13 PM <<<<-
“PUBLIC DEBT, US DEPT

OF TREASURY" To:
<GSRS@bloomberg.net> LSANTAMORENAGBPD. TREAS
.GOV
12/29/01 12:07 PM ec:
bec:
Subject:

1psc ) DJ CSFB: Three
Big Banks Have $1.58
Loan Exposure To

OJ CSF8: Three Big Banks Kave $1,558 Loan Exposure To Enron
2001-11-29 11:48 (New York)

NEW YORK (Dow Jones)--Bank Of America (BAC), Citigroup Inc. (C) and
J.P.

Morgan Chase (JPM) each have an estimated $500 million in direct loan
exposure

to beleaguered energy trading firm Enron Corp. (ENE), according to Credit
Suisse First Boston on Thursday.

While noting that "details on bank exposures to Enron Corp. are not
2

01100000000103


NR VENS, AND

[(o)(5)]

Answer;
((b)(5)]

Background
{(b)(5)]

See 1/24/02 NYT antcle included in background materials.

00100000000721


Donovan, Meg

From: Grewe, Maureen

Sent: Wednesday, July 11, 2001 1:17 PM

To: Donovan, Meg

Cc: Toloul, Ramin

‘Subject: RE: Dabhol meeting on Enron/OPIC project at NSC

Happy to be guited here. Not sure John really needs to see these particular points if we succeed in making them more
general (would be in keeping with typical USG points), But let me know if you want him to see it and I'll make sure they
get to you.

Probably an info memo is a good idea though? What do you think?

Do we know if Treasury has filled its seat on OPIC’s Board that used to be occupied by Stu Ezenstat? Larson is on the
OPIC Board and will be reviewing the points.

——Ongnal Message

from: Donovan, Meg

Sent: ‘Wednesday, July 11, 2001 1:00 PTM

Tor Grewe, Maureen

ca Tokxat, Ramin

‘Subject: RE; Dabhol meeting on Enron/OPIC project at NSC
thanks Maureen...

((b)(5)]

Assume we should wait until the talking points are available to bring this to JBT's attention?

From: Grewe, Maureen

Sent: Wednesday, July 11, 2001 12:52 PM

To: Sits, Gay; Resnick, Bonnie; Christopulos, Greg; Sampiner, Gary; Rao, Geetha
Ce: Danavan, Meg; Milts, Marshall; McDonald, Larry; Radelet, Steve

Subject: Dabhol meeting on Enron/OPIC project at NSC

Importance: High

This is a readout of the meeting at NSC this morning, There is also an ACTION request. USG agencies are
requested to get back to NSC by cob tomorrow with comments on OPIC's suggested talking points for a
demarche to the GO! by the Charge in Delhi. | talked to the State reps after the meeting (from South Asia
bureau, Investment office and Larson's office) and they seem to be basically in the same place as | was on what
an appropriate message might be. My proposed plan is that Geetha will take a first crack at comments on the
talking points and circulate them within Treasury 2s early as possible this afternoon. | am
everyone provide comments by cob today, so that we can circulate our comments to State and try to come up
orrow. Please let me know if you have any concems

Readout of meeting:
Altendees: NSC, State (EB front office and investment office, South Asia Bureau), Treasury (Grewe, Rao,
Sampliner), Commerce, OPIC (President Peter Watson, GC Ron Jonkers and several others)

((b)(5)]

00500000000502


Wiss, Barbara

From Lebryk, David

Sent: Friday, November 30, 2001 11:43 AM

To: ‘Glen.M.Owen:

Ce: Wiss, Barbara; Lori. treas.gov, Sheryl.Mi BOVs
craig. treas.gov; Jean. it frb.org; Harriet. frb.org

Subject; RE; 1DJC ) DJ CSFB: Big Banks Have $1.5B Loan Exposure To

Glen -- Thanks, your nete is very helpful. [(b)(5)]

taiaiatie Original Message-~--~

From: Glen.M.OQwens@stls.frb.org [mailto:Glen.M.Owens9stls.frb.org)
Friday, November 30, 2001 6:05 AM

David. Lebryk@do.treas.gov

: Barbara. Wiss@do.t S.gov; Lori.Santamorena@bpd.treas.gov;
eryl.Morrowfims.treas.govs kurt.cidemilleréfms.treas.gov;

mary. Dailey@fms.treas.gov; san.stokes@fms.treas.gov;

craig. sadick@fms.treas.gov; Jean.M.Lovati8stls. frb.org;
Harriet.Siering@stls.frb.org

Subject: RE: 1DJC ) OJ CSFB: Three Big Banks Have $1.58 Loan Exposure To

{(b)(5))

If you have any additional questions, please let me know,

Glen Owens

Treasury Relations and System Support
314-444-4772

fax 314-444-8665

01100000000102


(()(5)]

00500000000495


compensation plan of the employer that invests in company stock should be subject to a
relatively low standard of expected rate of retum requirements, because the employer has
fully funded and provided for substantial retirement benefits. The term “non-diversified
investments” generally refers to a plan investments such as real estate or a single
company’s stock that are not an internally diversified investment medium, such as a
mutual fund, Ifa company uses such a plan (called a “substantial retirement plan”), any
benefits provided under any other retirement plan its sponsors, such as an eligible
individual account plan, would simply serve to supplement the sufficient retirement plan
income. Under the Proposal, if a substantial retirement plan is maintained, then ERISA's
fiduciary duties do not apply to the purchase or holding of company stock by any eligible
individual account plan of the employer (provided that plan terms are followed, no
commissions are charged with respect to sales or purchases of company stock and sales
transactions relating to company stock are at arm's length). For these purposes, a defined
contribution plan will qualify as a substantial retirement plan if it does not provide for
participant direction of investments and such plan provides an annual allocation as a
percentage of Internal Revenue Code section 415 compensation which equals or exceeds
six percent (6%) of such compensation. Furthermore, if a “substantial retirement plan” is
maintained, provided adequate disclosures about the risks of failure to diversify are
supplied, any defined contribution plan that allows employees to direct their investments
into non-diversified investments would be exempt from ERISA’s fiduciary duties with
Tespect to the structure of such component and investments offered, provided adequate
disclosures are made to employees regarding the risks of non-diversification.

In the cases where the employer docs not sponsor a substantial retirement plan,
the employee's retirement income is less secured, and additional security is necessary.
Under the Proposal, in such a case, if the plan is a 401(k) plan or other plan partially
funded by employee contributions, the plan shall be deemed to satisfy ERISA’s fiduciary
duties with respect to purchasing and holding of company stock only if no more than
twenty percent (20%) of any participant's elective deferrals (or employee contributions)
account can be invested in company stock. Employees could not be required to invest in
company stock. Excess funds in an employee's elective deferrals account (or employee
contributions account) currently invested in company stock in excess of the above
limitation would need to be transferred to other investments within the two-year period
beginning on the date of enactment and such transfers must commence within one year of
the date of enactment. Maintenance of the 20% limit would be necessary whenever
investment changes are permitted. If a plan that required or permitted investment of
employee contributions in company stock did not follow these parameters, then ERISA’s
duty of prudence would apply to purchases and holding of company stock; however, in
the event of bankruptcy or insolvency of the plan sponsor, in any lawsuit, the fiduciaries
would bear the burden of proving that they acted prudently with respect to purchasing
and/or holding of company stock in any lawsuit. In addition, if the plan allows (but does
hot require) investment in company stock, then the plan can provide that shares of
company stock required to be divested from an employee's elective deferrals (or other
contributions) account because they are in excess of the above 20% limitation could, in
lieu of being divested, be exchanged for investments in the matching contributions
account not invested in company stock, without participant consent,

Charlotte 463585 2 3

0010000000415 _


[(b)(5)]

Geetha will circulate revised points today. Please comment as quickly as you can and by cob today if
possible, so we can try to coordinate with State. Call me or Geetha if you have any questions or need
other background.

Thanks.

0500000000501


13:48 P.O

Office of MaltiiateralDevelopment Baaks (OASIA/IDB)
1500 Pennsyivania Avene, N.W.
- Roam seat ar

(Fax# 202-622-2505)

‘Date ! _Pagolat__ 7 Pagers)
To Dks Suewh :
Teh # ae
FAX#
From: Gene Log

SS

Fig? 40D Euros Mee fy;

7

Wile gamntxce (ot Fex 6 Truaae ff

2) Enver le tier: 3 Asta. 2P— Ur

a IT a
=

00800000000028


Granat, Rochelle

Dance eee

From: Fall, James tlt

Sent: Wesnesday, January 16, 2002 7:38 AM

To: Wunderlin, Linda

Cc: Munk, Russell; Granat, Rochelle; Kimack, Michael
‘Subject: Enron - request of Treasury for any Enron Contacts

Joseph Hillings, the former head of the Enron office in Washington until his retirement last March, has been a personal
friend for more than twenty five years. | have had periodic contact with him as a personal friend, sometimes for lunch at
Treasury and outside. When questions have arisen about who paid for the lunch, | have discussed with the GC's office in
each instance. James H. Fall

01000000000661


bol-brz}.doc, by Michael Colby/IDB, 622-1542, 1 1/22/99.

00500000000212


{(b)(5)]

Geetha will circulate revised points today. Please comment as quickly as you can and by
cob today if possible, so we can try to coordinate with State, Call me or Geetha if you
have any questions or need other background,

Thanks,

00500000000475


ready been sued? Time to sell so as to get something for
the participants? (Surely if you sell nowyou'll be ques
tioned for not having sold cartier for a higher
price—the Newsweek article looms in your mind.)

In Year 6, you begin attending seminars on
wealth preservation with tides such as “Offshore
‘Trusts: Come Join the Party!” Somehow, things stag-
nate. Then, things begin to turn around. By Decem-
ber of Year 6, the average price has rebounded to
$14.83. Thank goodness you didn't sell at $3.07!

Year 7 is even better, For December of Year 7, the
average price is $27.75. For December of Year 8,
the average price is $29.57. For December of Year 9,
the average price is $44,375. The success continues
thereafter. What if you had sold at $3.07? What about
at $13.125 of $6.83?

Although the ESOP is imaginary, the story is oth-
erwise true, The company is Chrysler Corp., and Year
1 was 1977. (The name Chrysler was included in the
Newsweek quotation, not XYZ Corp. [Tom Nicholson
et al, “Will the Bailout Leak,” Newsweek, Dec. $1,
1979})

Uf Chryster maintained an ESOP or other eligible
individual account plan (e.g., a stock bonus plan)
that invested exclusively or primarily in company
stock, under current law its fiduciaries would likely
have agonized over what direction they should pur-
sue as the company continued to decline, Each day
could have been the alltime low (the worst day on
which to sell) preceding a turnaround, or could have
been the day before the day bankruptcy proceedings
began. Itis the law relating to this company stock see-
nario that this article primarily examines. Related is-
sues are also discussed.

(The pendulum may have recently begun to
swing back the other way for Chrysler—now Daimler
Chrysler, An article in the January 31, 2001, edition of
The Atlanta Journal-Constitution is ited “Chrysler plan
to cut 26,000 jobs revives memories of late 1970s.")

ERISA's GENERAL RULE

Under Section 404(a) (1) (B) of the Employee Retire-
ment Income Security Act of 1974 (ERISA), a fiduct-
ary in charge of investment of a retirement plan's
assets generally must make sure that the plan’s assets
are diversified so as to minimize the risk of large
losses. A fiduciary of a retirement plan is defined in
ERISA Section 3(21) to include any person who exer-
cises any discretionary authority or control respect-
ing management or disposition of the plan or its
assets. If, however, a plan is an eligible individual ac-
count plan (EIAP) under ERISA Section 407(d), and

JOURNAL OF PENSION Benrrrrs

the plan so provides, the assets may be invested pri-
marily or exclusively in common stock of the plan
sponsor, provided such investment (and continued
investment) does not nun afoul of ERISA’s duty to act
prudently, As explained below and exemplified
above, the prudence issue can presenta conundrum
for plan fiduciaries,

Under ERISA Section 407(d) (3), EIAPs can take
the form of ESOPs, stock bonus plans, or profit shar-
ing plans. Under Internal Revenue Code (Code) Sec-
tion 4975(e)(7), a money purchase pension plan can
be part of an ESOP. Technically, an ESOP can consist
of a stock bonus plan and a money purchase pension
plan. Quite often, an ELAP will be invested exclusively
or almost exclusively in company stock. Under Code
Section 4975(e)(7), an ESOP must, by its terms, be
designed to be invested primarily in certain employer
securities. Failure to be so invested over a significant
period of time could cause a plan to fail to qualify as
an ESOP, potentially resulting in significant detri-
mental tax consequences.

ERISA’s FIDUCIARY DUTTES AND ELAPS

Under ERISA Section 404(a)(1)(B), a fiduciary of a
pension plan must act with the care, skill, prudence,
and diligence under the circumstances then prevail-
ing that a prudent person acting ina like capacity and
familiar with such matters would use in the conduct of
an enterprise of like character and with like aims, Un-
der ERISA Section 404(a)(1)(C), a plan fiduciary
generally must diversify the investments of a pension
plan so as to minimize the risk of large losses, unless
under the circumstances it is clearly prudent not to
do so. ERISA Section 404(a)(2), however, provides
that in the case of an ELAP, the diversification require-
ments of ERISA Section 404(a)(1)(C) and the pru-
dence requirement (to the extent that it requires
diversification) of ERISA Section 404(a)(1)(B) are
not violated by the acquisition or holding of qualify-
ing employer securities.

Under ERISA Section 404(a)(1)(D), a fiduciary
must act in accordance with the documents and in-
struments governing the plan insofar as such docu-
ments and instruments are consistent with the
provisions of Titles I and IV of ERISA. Ifa plan provi-
sion violates the generally applicable fiduciary rules,
it cannot be followed. For example, a plan that pro-
vides that all of its assets or a specific subset or portion
thereof is to be invested in company stock would be
lawful provided that such investment did not violate
the otherwise applicable fiduciary duties of ERISA.
Under ERISA Section 408(¢), for purchases or sales

00100000000420


{((b)(5)}

Geetha will circulate revised points today, Please comment as quickly as you can and by cob today if possible,
so we can try to coordinate with State, Call me or Geetha if you have any questions or need other background,

Thanks.

00500000000503


BUGIBLE INDIVIDUAL ACCOUNT PLANS AND ERISA's Finuciary Dunes

a __s

rarely give sell ratings, interpretauion of recommen-
dations might be necessary. In this regard, in June
2001, the Securities and Exchange Commission
(SEC) issued a warning dat analysts’ reports may not
be unbiased as a result of conflicts of interest.

In sum, in the author's opinion, at present there
is no absolute law on the matter. The limited case law
from the U.S, courts of appeals to date (applicable to
ESOPs) has presumed that a relatively subjective in-
vestment standard applies, but has then placed the
burden on participant to prove that the standard has
been violated by an abuse of discretion.

INSIDER TRADING RULES

If the persons monitoring prudence are company in-
sides, an issue exists as to whether any inside infor-
mation they acquire must or can be utilized in their
prudence analysis, The interaction of two rules causes
adilemma when company insiders are the fiduciaries
who oversee investment of the company’s retirement
plans, if company stock is a plan investment:

1. ERISA rule, Fiduciaries must act prudently and
for the exclusive benefit of participants.

2 SECrule Rule 10b-5, promulgated under Section
10(b) of the Securities Exchange Act of 1934, as
amended (the Exchange Act), among other
things prohibits company insiders from purchas-
ing or selling securities “on the basis of material,
nonpublic information” concerning a company,
Thus, any insider can purchase or sell securities
while in possession of such information only ifhe
or she first discloses such information. (See Chi-
arella v, United States, 445 U.S, 222, 227-35
(1980).] Material nonpublic (Le., inside) infor-
mation is information that a reasonable investor
would likely consider significant to an invest-
ment decision and that has not been dissemi-
nated to the investing public. A classic example
of inside information is a forthcoming earnings
report.

‘The apparent rationale behind Rule 10b5 is
that an insider should not be able to utilize his or her
superior knowledge to the detriment of an unknow-
ing purchaser. Rule 10b-5 is of particular concern to
publicly waded companies, since open market tad-
ing in the company’s securities is more likely to in-
volve formational advantage on the part of
company insiders than is a privately negotiated
transaction,

ERISA Section 514(d) provides that ERISA will

notalter, impair, modify, invalidate, or supersede any
other federal law, or any rule or regulation issued un-
der any other federal law. [See also Chiarella v, United
States, 445 U.S. 222, 230-34 (1980); Feldman ¥.
Simkins Indus., Inc,, 679 F.2d 1299 (9th Cir. 1982).}
Based on this provision, a fiduciary should not be re-
quired to violate Rule 10b5 in order to comply with
ERISA. The author, however, could find no case law
that supports or refutes this position,

Asa practical matter, itis unrealistic to think that
someone can “tune out” a portion of his or her brain
when performing a prudence analysis. This practical-
ity is one more reason why the lesser standard of pru-
dence should be applied.

A few cases have addressed what happens when a
conflict arises between a general nom ERISA fiduciary
duty and the insider trading mules, One court has
ruled chat if a conflict arises between the two duties,
the fiduciary must remove him- or herself from the
conflict or face potential liability to either or both
partics to whom he or she owes a duty. (Cede & Co. v,
Technicolor, Inc.,634 A 2d 345 (Del. 1992)) Itshould
also be noted that under state law, officers and direc-
tors generally have a duty of loyalty to the company
they serve. [See id.] They have a duty not tw disclose
confidential information of the company that could
cause harm to the company, and informing potential
purchasers of company stock of negative information
could be harmful toa company. For example, such in-
formation could reduce the company’s credit rating,
thereby increasing its cost of capital. Federal securi-
ties laws similarly recognize the duty owed by officers
to the company to refrain from disclosing material in-
formation because “[i]nformation can be among a
corporation's most valuable assets.” [SeeUnited States
*. Chestman, 947 F.2d 551, 576-78 & n.5 (2d Cir.
1991) (enbanc) (Winter, J.,concurring in partand dis-
senting in part).)

There is no statutory definition of the term in-
sider for Rule 10b-5 purposes, but the courts have de-
fined the term to include corporate officers and
directors and other persons who have access to confi-
dential information intended to be available only for
a corporate purpose. [See Chiarella v. United States,
445 U.S. 222, 230-34 (1980); Feldman v. Simkins In-
dus., Inc., 679 F.2d 1299, 1304 (Sth Cir, 1982); SEC v,
Fox, 654 F. Supp. 781, 790 (N_D. Tex, 1986).] Often,
corporate officers with access to inside information
are the plan's fiduciaries in charge of invesunent
oversight. Under ERISA, company officers can serve
as plan fiduciaries. When acting as plan fiduciaries,
however, they must follow the ERISA fiduciary duty

00100000000425


G.Christopulos/ITVOPIC/Cuiaba-opt

Cleared by:
GHSills/ITI
JEichenberger/IDB
WSchuerch/ID
PDohiman/Desk

ec: MColby/IDB

00500000000187


Donovan

From: Grewe, Maureen
Sent: Wednesday, July 11, 2001 1:23 PM
To: Donovan, Meg
Subject: RE: Dabhol meeting on Enron/OPIC project at NSC
great, thanks!
Orginal Message-——-
From: Donovan, Meg
Sent: Wednesday, ty 11, 2001 1:22 PM
To: Grewe, Maureen
Cc: Teloui, Ramin
Subject: —_RE: Dabhol meeting on EnrorVOPIC project at NSC
thanks Maureen...
Ramin’s call on the info memo, but it sounds [(b)(5)] On talking points you're probably
right.

Iit give Ramin the background on the OPIC seat as soon as he has time to breathe.

Original Message

From: — Grewe, Maureen

Sent: Wednesday, July 11, 2001 1:17 PM

To: Donovan, Meg

ca Toloul, Ramin

Subject: RE: Dabhol meeting on Eneon/OPIC project at NSC

Happy to be guided here. Not sure John really needs to see these particular points if we succeed in making them
more general (would be in keeping with typical USG points). But let me know if you want him to see it and Ml
make sure they get to you.

Probably an info memo is a good idea though? What do you think?

Do we know if Treasury has filled its seat on OPIC's Board that used to be occupied by Stu Eizenstat? Larson is
on the OPIC Board and will be reviewing the points.

Original Message-——

From: Donovan, Meg

Sent: Wednesday, July 11, 2001 1:00 PM
Tor Grewe, Maureen
Ce: Toloul, Ramin
Subject: RE; Dabhol meeting on Enron/OPIC project at NSC

thanks Maureen...

((b)(5)]

Assume we should wait until the talking points are available to bring this to JBT's attention?

Original Message——-~

From: Grewe, Maureen

Sent: Wednesday, July 11, 2001 12:52 PM

To: Silts, Gay; Resnick, Bonnie; Christopulos, Greg: Sampiiner, Gary; Rao, Geetha
ca Conovan, Meg; Mills, Marshall; McDonald, Larry; Radelet, Steve

Subject: Cabral meeting on Enron/OPIC project at NSC

00500000000499


Question: ((b)(5)]

00100000000725


[(b(5)]

ceetataien Original Message-----
From; Lori.Santamorena@bpd. tre:
[mailto:Lori.Santamorena§bpd.treas,gov}

Sent: Thursday, November 29, 2001 12:14 PM

Tor david, lebryk@do.treas.gov

Subject: 1NUC } DJ CSFB: Three Big Banks Have $1.58 Loan Exposure To

+gov

sieteietel Forwarded by Leri Santamorena/BPD om 11/29/01 12:13 PM -----
“PUBLIC DEBT, US DEPT

OF TREASURY" To:
<GSRS@bloomberg.net> LSANTAMORENAG BPD. TREAS
-GOV
22/29/01 12:07 PM ce:
bee:
Subject:

ibJC } DJ CSFB; Three
Big Sanks Have $1.53
Loan Exposure To

DJ CSFB: Three Big Banks Have $1.58 Loan Exposure To Enron
2001-21-29 11:48 (New York)

WEW YORK (Dow Jones

J.P.

Morgan Chase (JPM) cach have an estimated $500 million in direct lcan
exposure

to beleaguered energy trading firm Enron Corp. (ENE), according to Credit
Suisse First Boston on Thursday.

While noting that "details on bank exposures to Enron Corp. are not
completely trensparent,” CSFB analysts also said that Bank One Corp (ONE)
has a@
likely $300 million bank loan exposure, and Wachovia Corp, (W3) has s $50
million exposure,

The analysts said that the tallies represent direct loan exposures, They
aren't reflective of balance sheet counter=-party risk obligations, which
could
be "significant.

“This remains a highly fluid situation, and may require many of the long
sist
of banks which are likely Enron creditors to take incremental reserve
additions
in the fourth quarter," the report said.

The CSFB release said that other urities firms do not appear to have a
major exposure to Enron, and that it estimates that firms such as Bear
Stearns.

Goldzan’ Sachs, Lehman Brothers and Merrill Lynch likely have less than
$100
million in total loan exposure.

“Bank Of America (BAC), Citigroup Inc. [(C) and

01100000000095


FLUGIBLE INDIVIDUAL ACCOUNT PLANS ANO ERISA's iouciany Dons 7 29

to qualify for exemption from the prohibited transac-
don rules, the sales price must be for adequate con-
sideration and no sales commissions can be charged.

A duty of loyalty to plan participants also exists
under ERISA. Under this duty, the fiduciaries must
act for the participants” best interests, even if doing so
is contrary to the plan sponsor’s or the fiduciary’s best
interests,

When combined, the rules described in the pre-
ceding paragraphs lead to the conclusion that an
EIAP that is designed (by its terms) to invest exclu-
sively or virtually exclusively in employer stock can be
so invested by the fiduciaries with respect to both the
existing trust fund and any future contributions to
the trust, provided that such actions would be taken
bya prudent fiduciary familiar with ELAPs and invest-
ments in general when acting under the same circum:
stances, given that the ordinarily applicable duty to
diversify is eliminated from the fiduciary analysis
equation. The question is, since an ELAP is designed
to be invested in company stock, when is the (limited)
prudence standard applicable to EIAPs violated?
Aviolation could mean liability for breach of fiduci-
ary duty.

THE QUESTION

The issue of EIAP prudence begs the question of
whether the company stock held by the trust of the
plan must be a prudentinvestmentunder the applica-
ble ERISA standards, or whether a lesser standard
mightapply. For example, the prudence requirement
(ic., that the fiduciaries act prudently) might simply
require that the plan's terms concerning purchases
and percentages of company stock holdings be
followed, sufficient liquidity be retained, required
securities law and ERISA disclosures be made, and
ERISA's requirements that (1) no sales commissions
be charged on purchases (or sales) and (2) no more
than fair value be paid for company stock be followed,
‘To the author's knowledge, there is no clear answer to
the question. As discussed further below, the limited
case law to date dealing with ESOPs has presumed
that company stock needs to be a prudent investment
under the applicable ERISA standards,

If ERISA's duty of prudence requires merely that
plan terms be followed, disclosure requirements be
satisfied, sufficient liquidity be retained, and pur-
chases and sales be made for fair value without com-
mission charges, there should be no magic to
compliance with the law. If an ELAP provides that all
of its assets can be invested in company stock, then,
subject to liquidity needs, provided purchases are

made ata price that does not exceed fair market value
and sales are likewise made at fair market value, and
no commissions are charged, up to 100 percent of the
plan's assets could be invested in company stock. Ifin-
vestment of employee contributions were required or
allowed, compliance with certain disclosure rules un-
der federal securities laws would also be necessary, as
further disclosed below,

If the correct interpretation of the statutory lan-
guage is chat company stock must bea prudent invest-
ment, the question of exactly what constitutes a
Prudent investment must be analyzed, As stated
above, without really analyzing the question pre-
sented above, the limited case law to date has pre-
sumed that company stock must be a prudent
investment under ERISA standards.

LEGISLATIVE HISTORY

‘The legislative history of ERISA does not provide a
clear answer to the foregoing question. The Senate
Report to ERISA provides the following:

The committee bill generally prohiblis employce
benefit plans from acquiring stock or other secu
tides of the employer. This is provided because
gencrally investment i an employer's securities sub-
pects plan participants to @ double risk of loss. If an em
ployer has sewere financial reverses, his employees say
not only lose their jobs (and the employer's contributions
for theie retirement may substantially decrease), but they
may alto suffer @ loss from decreases im the securities”
value and dividends. Also, if the trust is permitted
to invest in securities of the employer, the fiduct-
ary may well be subject vo great pressure to time
the purchases and sales 10 as to improve the mar-
ket in those securities, whether of not the inter-
esa of protecting retirement benefits of plan
participants may be adversely affected.

However, the bilt provides a special rule for profit-
sharing plans because the concept of these plans ix that
employees should shase in profits Uhrough dividends
and appreciation as wet! es through employer contribu.
Hons out of profits, Asa result it is mot a violation of this
securities of theemployer rule for a profit-sharing plan
40 invest all or any part of its axsets im securities of the
employer if the securities ave readily tradable in an estab
Aished secreritic: market. However, where de securities
are not tradable on an established market, then no
more than 10 percent of the profit-sharing trust's
assets is to consist of the employer's securities. This
lienit is needed because of the greater difficulty in
selling wich securities and therefore the greater
risk Involved in this situstion.

Moreover, the bill does not list acquisition of empliry-

00100000000421


{(b)(5)]

Drafted by:

Reviewed by:

GChristopulos/ITI

GHoar, Director/TTI
COuellette/ITI
M/Muench/GCI
GSampliner/GCI
MMonderer/IDD
SSager/IDA
BSctser/IMI
JCentina/IDB

. JWeiner&PWesv Intl Tax Counsel

00500000000198


Page | of 2

Wiss, Barbara - 7
From: Lori.Santamorena@bpd.treas.gov
Sent: oa November 30, a 8:01 AM

To: Deidere Brewer@bpd .treas. gov; Kurt. Eigemilier@dpd.treas.gov;
tee Senaye igor, Rade tsfanariopd Sete goes Kone neckinoghoe foe ae
ar aw

Subject: DJ: iN reclaieveciield Key To Counterparties Recovery

wos Forwarded by Lon Santamorena/BPD on 11/3001 08:00 AM —
Norman. Carieton{}do.treas. gow

112901 0613 PM

lial ‘Joan Whaleyi@do treas gov, Mark Wiiesmangco tress. gov

Sunect: DJ: IN THE MONEY-2:Coltaterat Key To Counterpartes Recovery

Moverber 29, 2001

If THE MOKEY.

Collateral Key To Counterparties Recovery

Cow ones Newewlcen

Thoughts of an Enron Bankruptcy jogged memories of past filings, such as the
case of Uryacele Government Securities Inc., which involved public entities
being lef: on the heok for aiiiions of doliers in uncollateralized
Qevernment repurchase agreenenta.

Wot bankruptcy laws have evelved significantly since the 1982 collepse of

J ent shockwaves through the financial community and forced banks to
na of millions of dollars to cover Oryadele's obligations to other
securition firms.

More recunthy, Orange County's 1994 bankruptcy following its derivatives

Gispute surrounding German's Metaligeselischatt Ag
Petroleun contracts suggests that acrisenious and
engthy litigations ight be in the offing. the be
8 settled out of court and took *haireut
nt petroleus mark who entered into long-tere hedging
Protection against jating fuel prices could sue the metals
and engineering conglomerate for breach of contract,

Sut the @xtent to which those cases provide any lessons for Enron and its
ve COUNTERPATties remains to be seen, #xj said, depending on
icky an¢ complex issues might arise in potential court actions.

Meanwhile, although Enron has yet to file for bankruptcy, most of its

aerivative counterparties are likely already scrambling to exit their
ceages

That's becuse Dynegy Inc. "s (DYN) decision Wednesday te abandon its plan to
fescue Enon al] but sealed the fete of the siling Houston energy trader
nich has been hobbled by accounting irregularities and unquantified
off-balance-sneet Liabilities. Enzon shares plummeted from about $90 a share
Jest summer to 36 cents Thursday

1/16/02

01100000000092


Washimptan, 01
Pe) dee-915)

' 05001

1000000000072


MEMORANDUM FOR JEAN HANSON

PROM: DENNIS I. FOREMAN
DEPUTY GENERAL COUNSEL AND
DESIGNATED AGENCY ETHICS OFFICAL

SUBJECT: The Secretary's letter re Enron Corp.

SUMMARY

((o(5)]

DISCUSSION

{((5)]

01000000000625


Mr. Paul O'Neil
January 15, 2002
Page 2

employer; or (b) substantial limits are placed on participants’ ability to invest in company
stock; and
-rewards employers who offer a substantial diversified retirement plan.

Your consideration of this matter is greatly appreciated.

Sincerely,
SMITH HELMS MULLISS & MOORE, L.L.P.

Qu. B

Allen Buckley

ABIsis
Enclosure
cc: Ms. Elaine Chaos, Secretary of Labor (via UPS overnight mail w/ encls.)
Mr. Donald Evans, Secretary of Commerce (via UPS overnight mail w/ encls.)

00100000000408


forward the points to State to push for a joint agreement on talking points... Thanks to all,

From: Berg, Kote

‘Sent: ‘Wecnesday, July 11, 2001 4:09 PM

To: Sils, Gay; Raa, Geetha; Grewe, Maureen; Resnick, Bonnie; Christepaios, Greg; Sampliner, Gary
(Ce: Donovan, Meg; Mills, Marshall; McDonald, Larry; Radelet, Steve

Subject: RE: Dabhol meeting on Enron/OPIC project at NSC

| must admit to never having heard of this problem. Geetha's revised talking points look good to me, but |
would suggest that [(b)(5)}

--~Original Message-—
From: ‘Sits, Gay
Sent: Wednesday, duly 11, 2001 3:54 PM
To: Rao, Geetha; Grewe, Maureen; Resnick, Bonnie; Christopuios, Greg; Sameliner, Gary
Subject: RE: Dabhol meeting on EnroryOPIC project at NSC
{YS}, am adding katie berg. she does export
s eximbank
---Oinginal Message-==-
From: Rao, Geetha
Sent: Wednesday, July 11, 2003 1:54 PM
To: Grewe, Maureen; Sils, Gay; Resnick, Bonnie; Christopulos, Greg; Saenpiiner, Gary
ca Donowan, Meg; Mis, Marshall; McDonald, Larry; Racelet, Steve
‘Subject: RE: Dabhot meeting on EnroeYOPIC project at NSC
Importance: High

Attached are the revisions to the OPIC talking points that OPIC sent over late yesterday. [(b)(5)]

é The
Charge from the US Embassy will most likely deliver the points to the GOI. Please comment asap,
Thanks,

<< File: EmbtalkY 1.doc >>

==Onginal Message-——

From: Grewe, Maureen

Sent: Wednesday, Ray 11, 2001 12:52 PM

To: ‘Sits, Gay; Resrick, Bonnie; Cheistopulos, Greg; Sampliner, Gary; Rao, Geetha
Ce: Donovan, Meg; Mils, Marshall; McDonaid, Larry; Radelet, Steve

Subject: Dabhel meeting on EnrorVOPIC project at NSC

Importance: High

This is a readout of the meeting at NSC this morning, There is also an ACTION request, USG
agencies are requested to get back to NSC by cob tomorrow with comments on OPIC's
suggested talking points for a demarche to the GO! by the Charge in Delhi. | talked to the State
reps after the meeting (from South Asia bureau, investment office and Larson's office) and they
seem to be basically in the same place as | was on what an appropriate message might be. My
proposed plan is that Geetha will take a first crack at comments on the talking points and
circulate them within Treasury a8 early as possible this afternoon, | am requesting that everyone
provide comments by cob today, so that we can circulate our comments to State and try lo come
morrow, Please let me know if you

have any concems about thes plan.

Readout of meeting:
Attendees: NSC, State (EB front office and investment office, South Asia Bureau), Treasury
(Grewe, Rao, Sampliner), Commerce, OPIC (President Peter Watson, GC Ron Jonkers and
several others)

{(b)(5))

00500000000497


Harvey, Reavie

From: LaKritz, Robb

Sent: Tuesday, December 11, 2001 1:42 PM
To: Harvey, Reavie

Subject: FW:

Can you please clear Jim Langdon in for 3:15 at have him report to your office. I will
come down and meer him then.

Thanks.

Robb Lakritz

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

From: Langdon, Jim Teal ito: jlangdon@AKINGUMP . COM)
Sent: Tuesday, December 11, 2001 1:41 PM

To: *Robb.LaKritz@do.treas.gov'

Subject: RE:

in the event our meeting still works... [(b)(6)] seeejel

areeel Original Message-----~

From; Robb.LaKritz@do.treas.gov (mailto;Robb.Lakritzado.treas.gov)
Sent: Tuesday, December 11, 2001 10:30 AM

To: jlangdon@AKINGUMP .COM

Subject: RE:

Just send me your SS# and birthdate.
Thanks .
Robb Lakritz

sees Original Message----~-

Prom: Langdon, Jim [mailto:jlangdon#AKINGUMP COM)
Sent: Tuesday, December 11, 2001 10:30 AM

To: 'Robb.Lakrite@do.treas.gov"

Subject: RE:

That would be great..... I will see you at 3:30 ...jel

tabetha Original Message-~----

Prom: Robb.LaKritz@do.treas.gov [mailto:Robb.LaKritz@do.treas.gov)
Sent: Tuesday, December 11, 2001 9:33 AM

To: jlangdon@AKINGUMP.COM

Subject: RE:

How is 3:30 p.m, here at Treasury?

Thanks.

Robb Lakritz

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

Prom: Langdon, Jim (mailto: jlangdom@AKINGUMP COM]
Sent: Tuesday, December 11, 2001 9:33 AM

To: 'Robb.Lakritz@D0.Treas.gov'
Subject:

00100000000785


There is also criticism of Peter Fisher, a Democrat and former New York
Federal Reserve official, who was appointed by Mr Bush to take charge of
domestic financial policy. John Taylor, the respected monetary economist who
heads international policy, has been hammered for his handling of the
financial crisis in Argentina,

The Free Congress Foundation consulted its members and offered a grading of
the performance of Mr Bush's cabinet. There were As for Donald Rumsfeld, the
defence secretary, and Dick Cheney, the vice-president; a strong B for John
Ashcroft at the Justice department; a C for the multilateralist Colin Powell

at the State department and a straight D for Mr O'Neill.

"O'Ncill doesn't understand where Republicans should be on the economy and
taxes," one respondent to the survey said, according to Steve Lilienthal,
foundation spokesman.

Mr O'Neill attracts criticism from non-conservatives too. The suspicion that
Treasury may have been overruled more than once by the White House is
damaging and seems to have contributed to, and been magnified by, a lack of
engagement on the part of Treasury in some big international issues.

Mr O'Neill has remained above the fray, apparently reluctant to be drawn
into the fighting around him. But there are signs that the Treasury might be
starting to speak up politely in its own defence.

Before Christmas, when a favourable article about Mr O'Neill appeared in the
editorial pages of the Washington Post, a Treasury official quickly drew it
to the attention of economics reporters.

And before the political obituaries are prepared, it should be remembered
that Mr O'Neill has powerful allies. His biggest sponsor is Mr Cheney, the
eminence grise of the Bush White House, who worked with Mr O'Neill in the
Ford administration. One of his admirers is Alan Greenspan, chairman of the
Federal Reserve.

“Well, you know, I have a couple of clients. The most important client is
the president of the United States,” Mr O'Neill said on NBC's Meet the Press
last Sunday.

“As long as they continue to tell me that they're happy with what I'm doing
. I'm going to be here to help them and be part of their team,”

01100000000023


Donovan

From: Grewe, Maureen

Sent: Wednesday, July 11, 2001 12:52 PM

To: Sills, Gay; Resnick, Bonnie; Christopulos, Greg; Sampliner, Gary; Rao, Geetha
Cc: Donovan, Meg; Mills, Marshall; McDonald, Larry; Radelet, Steve

Subject: Dabhol meeting on Enron/OPIC project at NSC

Importance: High

This is a readout of the meeting at NSC this moming. There is also an ACTION request. USG agencies are requested to
get back to NSC by cob tomorrow with comments on OPIC’s suggested talking points for a demarche to the GO! by the
Charge in Delhi. | talked to the State reps after the meeting (from South Asia bureau, Investment office and Larson's
office) and they seem to be basically in the same place as | was on what an appropriate message might be. My proposed
plan is that Geetha will take a first crack at comments on the talking points and circulate them within Treasury as early as
possible this afternoon. | am requesting that e nents by cob tod that we can circulate our
comments to State and try to come up with submit by cob tor ow. Please let me know
if you have any concerns about this plan.

Readout of meeting:
Attendees; NSC, State (EB front office and investment office, South Asia Bureau), Treasury (Grewe, Rao, Sampliner),
Commerce, OPIC (President Peter Watson, GC Ron Jonkers and several others)

{(b)(5)]

00500000000504


Dam, Ken

From: Dam, Ken

Sent: Tuesday, January 08, 2002 3:54 PM
To: LaKritz, Robb

Subject: RE:

I hope os. Id like to, Check with Reavie.

Original Message-—-

From: Lakritz, Robb

Sent: Tuesday, January 08, 2002 2:45 PM

To: Bair, Sheila

Ce: HeCardell, Dan; Adams, Tim; Dam, Ken; Gross, Jared; Kupfer, Jeffrey
‘Subject:

Sheila,

Do you have time tomorrow to meet with Dan McCardell and me to discuss an internal
policy roundtable we are hoping put together on issues related to the Enron situation
and ancillary developments?

Thanks.

Robb Lakritz

00100000000793