Gabilondo, Jose

From: Gabilondo, Jose

Sent: Thursday, November 01, 2001 9:36 AM
To: "Rees, Thomas’

Subject: RE; Enron and FAS 133

Thanks a lot, Tom. Hope all is well

we+-- Original Message

From: Rees, Thomas (mailto: Thomas .ReesSocc.treas.gov]
Sent: Thursday, November 01, 2001 9:24 AM

To: ‘Jose.Gabi londoédo.treas.gov*

Subject: RE: Enron and FAS 133

Hello Jose,

Good to hear from you.

Unfortunately, I have not followed the issue at Enron. {(b)(5)]

Beeet regards.

Tom Rees
(202) 874-5411

asoce Original Message-----

From; Jose.Gabilondo@do,treas.gov [mailto:Jose.Gabilondosdo.treas.gov)
Sent: Tuesday, October 30, 2003 5:38 PM

To: Rees, Thomas

Subject: Enron and FAS 133

Tom,
How are you doing?

I'm working on some Enron issues. 1 don't know whether you've been
following this case, but it seems to me like [(b)(5)]

Do you know about
this?

José

3

00200000000546


From: Bair, Sheila

Sent; Friday, January 11, 2002 9:40 AM
To: Hunt, Betty Ann
Subject: FW: Enron/PON meeting with Chao
for schedule
——Onginal Message
From: Adains, Tim
Sent: Friday, January 11, 2002 9:36 AM
Tor Bair, Shem
‘Subject: RE: EnroryPON meeting with Chao

ies she preeing (ackaly (onc) a Cone ore Evens fo otre ee cee POU: Sree © oe wo te eee
Peter was informed and is coming — I'm surprised he dicin’! share with you. We have a full house but | think we

dan squeeze youn [(0)(6)]

se Original Messagen=-
From: Bar, Shes
Sent: Porcas} persion St, 2002 9:29 AM

Te:
Subject: BronyPON meeting wth Creo

ust recelved en e-mail from Aan Combs st DOL thet she is accompanying Secretary Chee to's meeting oh he
Secretary today(?) Can you tell me something about this? I'd like to be included since | am the Secrelary’s PBGC
representative and am working with Mark on the post-Enron retirement benefit issues,

Sheila

01200000000950


Bair, Sheila

From: Bair, Sheila

Sent: Friday, January 11, 2002 9:39 AM
To: Adams, Tim

Subject: RE: Enron/PON meeting with Chao
thanks

Sent: Friday, January 11, 2002 9:36 AM
To: Bair, Sheila

Subject: RE: EnroryPON meeting with Chao

it's the meeting (actually lunch) with Chao and Evans to follow up on the POTUS's direction to look into the 401k-like
issues, Peter was informed and is coming — I'm surprised he didn't share with you We have a full house but | think
Wear eqmenee you [(GYS))

——-“Onginal Message———-
From: — Bair, Sheila
sae Friday, January 11, 2002 9:29 AM

Adsens, Tim
Subjects ExoryPON racing with Chao

Just received an e-mail fram Ann Combs at DOL that she is accompanying Secretary Chao to a meeting with the
Secretary today(?) Can you tell me something about this? Id like to be included since | am the Secretary's
PBGC representative and am working with Mark on the post-Enron retirement benefit issues,

Sheila

01200000000881


[(b)(4)]

02281

01300000000890


NewPower, and the company reportedly now has a customer base in 22 markets in 10 states.
However, the bad news for NewPower is that its losses continue to widen, apparently
resulting from a combination of weather factors and financial hits absorbed in several of the
states in which the company operates. This dichotomy does not appear to be getting any
better, and the company’s stock has continued to drop as a result.

In an effort to alleviate some of its financial woes, NewPower recently revised an existing
master netting agreement with Enron Corp. and several of its subsidiaries. The revised
agreement essentially lowers the amount of cash collateral that NewPower is required to post
to the Enron subsidiaries through Jan. 4, 2002. With the lowered financial obligations that it
must make to Enron, NewPower believes that it will have sufficient financial resources to
conduct its business in the near term until it secures ongoing asset-based financing.

However, from Enron's perspective, the losses associated with NewPower (and, by the same
token, the losses in water and broadband) have contributed to a steady drop in its own stock
price. The message is clear: The businesses that Enron plunged into as a way to diversify
have tainted the company as a whole, Further, what some analysts perceived as brash hubris
on Enron‘s part has not translated into measurable profits, and consequently Wall Street has
reacted by sending Enron's stock to a level that is about half of where it was a year ago. The
individual sectors that Enron has pursued are all unique, but they share the common
denominator of taking Enron away from what was a successful core business. Further, they
are similar in that Enron aggressively sunk large sums of capital into new business lines for
which it arguably had unrealistic expectations for growth. The problem with Enron's
bandwidth unit is that the company has faced an unanticipated excess of fiber-optic lines,
which has prevented the demand for the division's services from materializing as anticipated.
The problem with Azurix, which has been losing money since its formation in 1998, is that
privatization of the water sector has not materialized as quickly as Enron and other
companies anticipated. In addition to these problem areas, Enron also faces challenges
related to its investments in India (where it is locked into a legal battle with the state
government) and California (from which Enron has yet to receive full payment for previous
power sales),

In addition to the losses outlined in the 3Q report, there are new issues that are brewing at the
start of this week. First, the SEC has requested that Enron provide information regarding
“certain related party transactions.” Not much additional information is presently available
about this inquiry. However, it is probably connected to earlier reports about concerns related
to the dealings of Enron's Chief Financial Officer Andrew Fastow, who up until very recently
had run a limited partnership that bought assets from Enron. Ken Lay has said that Enron will
cooperate fully with the SEC's request. In a separate development, several mutual funds
{including AIM Constellation that once held large positions in Enron) have either liquidated or
reduced their holdings in the company, which has further weakened Enron's stock value.
Portfolio managers of the mutual funds have cited concerns about Enron's ability to balance
its new businesses with its core strength as an energy trader.

The present challenge for Enron is to convince investors that the company remains on solid
ground despite the losses. Thus, Lay has been quick to reiterate that earnings from the
company’s energy and gas-pipeline business are still strong. Further, Lay says that the

charges reported in the third quarter should be seen as a way to “clear away issues that have

clouded the performance and earnings potential of our core energy businesses.”
Nevertheless, the fact remains that Enron has invested huge amounts of money toward its
diversification effort, and in addition to water and broadband the company has invested into

14

00200000000540


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01300000000900


[(b)(4)]

02289

01300000000898


{(b)(4)]

02295

01300000000904


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01300000000908


{(b)(4)]

02287

01300000000896


3

° In the late '80s or early ‘90s, | attended a meeting in the office of the
Assistant Chief Counse! (Financial Institutions & Products) at which Enron
personnel (and probably outside counsel as well) described publicly
offered financial instruments that contained embedded commodity
derivatives. I'll see if | can find any notes that! still have.

Please let me know if there is anything else that you want me to do.

Attachments

0900000000003


McCall, Neal

pany rer rr Ji 17, 2002 10:20 AM
To: DeMarco, E nso
Ed,

Just a few tems.

1) Do | need to be briefed on what transpired in yesterday's pension security meeting?

2) | received the estimates that PBGC made on pension costs of the USX stee! proposal, which is in the form of a
‘spread sheet with notes, but I'm not absolutely sure what all the numbers represent. | have a call in to Stu Sirkin for an
explanation and will provide you with a copy and explanation once | have spoken with him

3) Looking at Commerce's comments on Pension Benefit Counsel's spread sheet it appears there is no
consensus as yet on what the task at hand is. Cornmetie Se aeliog fot lntonroation $5 [e very Speci 69 Enon problems:
most of the questions pertain to company stock. Their outlook is not nearly as global as Pension Benefit Counsel's.

Neal
McCall, Neal
From: McCall, Neal
Sent: Monday, December 17, 2001 12.13 PM.

To: DeMarco, Edward
Subject: Enron

Ed,

[(b)(5)]

Neal

LENGTH: 34005 words

COMMITTEE: HOUSE FINANCIAL SERVICES OVERSIGHT AND INVESTIGATIONS
SUBCOMMITTEE

HEADLINE; U.S. REPRESENTATIVE SUE KELLY (R-NY) HOLDS JOINT HEARING WITH THE
CAPITAL MARKETS, INSURANCE AND GOVERNMENT-SPONSORED ENTERPRISES
SUBCOMMITTEE ON THE BANKRUPTCY OF ENRON ENERGY TRADING COMPANY

OSE

Mr. Chairman, if 1 might, | do have a couple of questions before | make a statement. There was a comment
about the defined benefit en at Enron, which was a second or another means by which people could protect
their retirements. We've checked that out through the Pension Benefit Guaranty Corporation, and those assets
are guaranteed by the Pension Benefit Guaranty Corporation, That's the defined benefit plan.

01200000001167


Gabilondo, Jose

From:
Sent:
To:

Ce:
Subject:

{(b)(5)]

Gabilondo, Jose

Friday, November 02, 2001 2:29 PM

Authauser, David

Bieger, Peter; Mcinerney, Roberta

Enron: energy trading market structure and financing

00200000000531


Nickoloff, Peter
From: Schultheiss, Heidilynne

Sent: Wednesday, January 02, 2002 9:41 AM
To: Carleton, Norman; Nickoloff, Peter
Subject: ABI ENRON UPDATE

ENRON UPDATE

Enron DIP Hearing Delayed

The hearing over Enron Corp.’s $1.5 billion debtor-in-possession (DIP) financing package has been delayed
until Jan. 30 because the bankrupt Houston energy trader needs more time to assemble a business plan,
according to The Daily Deal, The hearing on the DIP had been scheduled for Jan. 7, but the sources said it
didn’t make sense to get the final approval on the funding package until a business plan is in place. The plan
would likely rely on the proceeds from the forthcoming auction in which Enron is selling a majority of its
trading business. Enron had been granted approval on Dec. 4 to use $250 million of the DIP - being led by J.P.
Morgan Chase & Co. and Citigroup Inc.'s Citibank unit - but the company has not drawn on the funds. The final
hearing on the DIP will be heard by Judge Arthur Gonzalez at the U.S. Bankruptcy Court for the Southem
District of New York in Manhattan. Final objections to the DIP are due on Jan. 23.

Wall Street Journal Reports Enron Heads Knew of Partnerships

Top Enron Corp. officials knew about the financial partnerships that fueled the former energy-trading giant's
downfall, and were aware of the possible conflict-of-interest issues surrounding its former chief financial
officer's involvement in them, The Wall Street Journal reported. Internal documents indicate that the
partnerships were viewed as essential to maintaining Enron’s rapid growth rate, the newspaper said in its online
edition. The documents also confirm the theory that top officials, including Chairman Kenneth Lay and former
President Jeffrey Skilling, were very involved with setting up and overseeing the partnerships, it added.

The documents include an intemal memorandum from an Enron attorney to Skilling regarding the way to
monitor transactions with the partnerships, as well as excerpts of minutes from the company’s board and board
finance committee meetings. The partnerships were run by former chief financial officer Andrew Fastow, who
was ousted in October. He had been instrumental in forming outside partnerships, known as special-purpose
entities (SPEs), associated with Enron that are a focus of an investigation by the U.S. Securities and Exchange
Commission. Houston-based Enron is thought to have used the SPEs in transactions designed to take debt off its
balance sheet and protect the good credit rating critical to its highly leveraged capital structure, according to
lawyers involved in the case. After it was forced to alter this strategy and restate its financial results to
consolidate the SPE transactions onto its books, Enron's corporate debt was downgraded and its stock price
plummeted.

Enron Creditor Opposes Data Release

After demanding payment from insurance companies that backed more than $1 billion worth of oil and gas
contracts signed by Enron Corp., J.P, Morgan Chase is trying to prevent the insurers from getting details about
the transactions, according to the Associated Press. The New York-based investment bank on Sunday filed an
objection to a request made by the insurers, who are refusing to honor $1.1 billion in surety bonds and are
asking for access to Enron financial records to determine if energy contracts actually existed. The request was
filed last month in U.S. Bankruptcy Court in New York, J.P. Morgan sought payment of the surety bonds after
the collapse of Enron. The payment dispute between the bankers and the insurers is the subject of a scparate
civil lawsuit taking place in U.S. District Court. The fact that it is now spilling over into the federal bankruptcy
court proceedings shows how the interests of Enron's creditors are intertwined.

The insurance companies involved include Citigroup Inc.'s Travelers unit; Kemper Insurance Co.'s
Lumbermens Mutual Casualty Co.; Allianz AG's Fireman's Fund Insurance Co.; Chubb Corp.'s Federal
Insurance Co.; St. Paul Cos.’s Fire and Marine Insurance; CNA Surety Corp.'s Continental Casualty Co.; Safeco

. 01304

01200000000659


Gabilondo, Jose

From: Gabilondo, Jose

Sent: Tuesday, October 30, 2001 12:38 PM
To: Aufhauser, David

Ce: Mclnerney, Roberta; Bieger, Peter
‘Subject: Preliminary thoughts on Enron
{(b)(5)]

Gabilondo, Jose

a

From: Gabilondo, Jose

Sent: Tuesday, October 30, 2001 12:38 PM
To: Aufhauser, David

Ce: McInerney, Roberta; Bieger. Peter
Subject: Preliminary thoughts on Enron
{(b)(5)]

ey

00200000000547


Page 2of4

((b)(5))]

01/16/2002
1000000001091


[OUTSIDE SCOPE]

0900000000002


Corp's Safeco Insurance Co.; Hartford Financial Services Group Inc.; and Liberty Mutual Insurance Co. The
insurers backed a total of $2 billion in transactions. Early last month, they asked J,P. Morgan Chase for details
of the contracts before they would pay off all of the surety bonds. All but one of the insurers, Travelers,
subsequently asked a bankruptcy court judge in New York to void $1.1 billion worth of the obligations. As a
result, J.P. Morgan had to increase its estimated exposure in the collapse of Enron to $2.6 billion-more than
double what it previously acknowledged-with $965 million of that amount tied to surety bond payments.

” 01305

01200000000660


he's looking to me directly for something. (My boss is not very happy about
that, I must say.) Could you recommend sources? I'm going through
Securities and Exchange Commission filings to piece together the company's
financial dealings, but I'm at a loss for developing knowledge about Enron's
role in the power market. Any advice would be welcome.

Talk to you later.

José

Gabilondo, Jose

From: Gabilondo, Jose

Sent: Thursday, November 01, 2001 3:48 PM
To: Mclnemey, Roberta; Bieger, Peter
Subject: Enron meeting - 4:00 pm Friday
Roberta,

When | got back to my office, | got your message and one from Betty asking if | could attend a 4:00 meeting
tomorrow with David and Peter Fisher on Enron. | checked with Martha (who put it on your calendar - Yvette was not
around), looked for Peter, and then called Betty back to say that we would attend tomorrow. | hope that's OK. Just so that
you know, | hadn't exchanged a word with David since we worked on the Argentina deal, i.e. | didn't solicit this assignment
from anyone.

On Tuesday when he called me into his office to discuss Enron, David told me that he wanted to meet that day or
the following after I'd done some research. By noon yesterday, I'd learned some things and made some notes that!
wanted to pass on before the meeting, because | wanted to be responsive to his urgency. Of course | wanted to clear
them with you but you were on the hl, Peter was busy, and after waiting a while | Cecided to leave a draft in his box
upstairs with a note saying that neither you nor Peter had vetted the document but that | wanted him to see a rough craft
because it had seemed like a fairly urgent priority when we talked. They are background rather than legal notes (copy
below), $0 - although | hesitated at length before sending them -- it seemed OK.

=,

persion see
Gabilondo, Jose

From: Aufhauser, David

Sent; Thursday, Novernder 01, 2001 12:43 PM

To: Gabilondo, Jose

Subject: RE: SEC comment: Enron's cash-financed equity buyback

meet on this tomorrow — set it up with ronnie

~—-Orignal Message--:--
From: Gabiiondo, Jowe
Sent: Thursday, ile 2001 9:03 AM
To: Authauser, David
‘Subject: RE: SEC comenent: Enron's cast-financed equity buyback
He's a nice guy.
‘Onginal Message

From: Aufhauser, David
a

00200000000544


{(b)(4)]

02297

01300000000906


may include the complete divestiture of all of its non-core businesses outside of the energy trading
core. If a takeover were to take place, it would probably occur soon (while Enron's stock remains low
and its core business remains strong) and with a buyer that seeks a large trading operation and
experience in risk management, None of the companies mentioned as possible buyers al this time
completely fall under this description, but given Shell's strong interest in wholesale markets | would
contend that this potential partnership makes the most sense. However, any company that makes a
serious bid for Enron would have to be very risk tolerant, considering the ongoing uncertainty
surrounding the company with regard to pending lawsuits and the SEC investigation.

In addition, it is significant that Enron is pursuing additional financing, which indicates that the
company intends to bolster its financial position and avoid any takeover attempts. Nevertheless,
various credit rating agencies such as Moody's are in the process of evaluating the company for
potential credit downgrades. A credit rating downgrade would raise Enron's cost of borrowing, which
in turn could cut into the profitability of the company’s business as a whole. The end result is that, if
Enron's financial position does not improve substantially in the near term, it will remain in a very
vulnerable position and a very real target for various takeover measures.

An archive list of previous IssueA/ert articles is available at
www.scientech.com <http://secure.scientech.com/lissuealert/>

We encourage our readers to contact us with their comments. We look forward to hearing from you.
Nani <mailto:nsprii intech.com>

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Advertising opportunities are also available on our Website.

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SCIENTECH's IssueAlertTM” articios are compiled based on the independent analysis of SCIENTECH consultants. The
10

00200000000536


[(b)(5)]

01581

01200000000236


Nickoloff, Peter

From: Carleton, Norman

Sent: Tuesday, August 07, 2001 10:07 AM

To: Bair, Sheila; Eichner, Matthew, Ellett, Martha; Fisher, Peter; Gabiondo, Jose; Gross, Jared;
Hammer, Viva; Nickoloff, Peter, Novey, Michael; Roseboro, Brian; Schultheiss, Heiditynne;
Sutton, Gary

Ce: Hamilton, Tynise

Subject: Retal Swaps Study — Memo on New York Interviews

Attached is a relatively informal memo on the New York interviews. There were designated note takers at these
interviews, and their summaries should be distributed soon.

This memo Is not for distribution outside of Treasury. We promised confidentiality to the interviewees. In particular, Enron
made a point that it did not want its business plans be made public at this time.

i

ri lenen mewrery
ere oo

01578

01200000000233


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November 2, 2001

Enron Update:
Sagging Stock Price, Increased Earnings Continue to Fuel
Takeover Speculation

By Will McNamara
Director, Electric Industry Analysis

[News item from Associated Press} Troubled Enron Corp. (NYSE: ENE) said it has secured $1 billion
in new financing, using its natural-gas and pipeline assets as collateral. But its stock price took
another dive after rising a day earlier on takeover speculation. In afternoon trading Nov. 1 on the New
York Stock Exchange, Enron shares were down 9.3 percent, or $1.29 a share, at $12.61.

Analysis: Like many following this ongoing story, | have been closely tracking the plummet of
Enron's stock since the Oct, 16 release of the company’s 3 financial report, in which a $638-million
loss was identified. Since that time, Enron's stature on Wall Street has literally fluctuated by the hour,
bumping up or down depending on the latest news report or rumor circulating across the Web. The
company’s financial problems have been well documented, along with the new Securities and
Exchange Commission (SEC) probe into Enron's financial deals involving its just-dismissed chief
financial officer. For background information on this case and the factors that led to Enron's current
maladies, please review my 10/22/01 IssueAlert, available at www.scientech.com/rci

<http;//secure, scientech.com/issuealerv/article.asp?id=950>. In this article, | will focus exclusively on
the new reports that put Enron in the unprecedented spot of being a possible takeover target.
Ironically, the very mention of Enron as a takeover target would have seemed ludicrous last year at
this time, when the company’s stock had just passed a 52-week peak of nearly $90 in August 2001.
As of early moming trading on Nov. 2, Enron shares were priced at $11.05, illustrating just how low
the company has sunk over the last year and how quickly the positions along the energy industry's
playing field can change.

There are three factors that, when taken together, put Enron in a vulnerable position for takeover
efforts. These three factors are a sagging stock price, comparatively solid revenue streams and a

?

00200000000533


Gabilondo, Jose

From: Jone-Lin Wang [jwang@CERA.com]
Sent: Friday, November 02, 2001 2:18 PM
To: jose.gabllondo@e<o.treas.gov
) *
Par praters 110001 NAP sep r8tery 0

*
Jose,

These charts contain power marketing information,

one -Lin

> <<Pwr_mkters_11020i.ppt>> <<NAP_top_mkters.xls>>

>

Gabilondo, Jose

OOO

From: Jone-Lin Wang [jwang@CERA.com)

Sent: Friday, November 02, 2001 1:30 PM

To: jose.gabilondo@do treas.gov

Subject: FW: — Enron Update: Sagging Stock Price, increased Earnings Continue to Fuel Takeover
Speculation

Another piece...Jone-Lin

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

From: IssueAlert@SCIENTECH.COM [mailto:IssueAlert@SCIENTECH.COM)

Sent: Friday, November 02, 2001 11:50 AM

To: ISSUEALERTHTML@LISTSERV.SCIENTECH.COM

Subject: Enron Update: Sagging Stock Price, Increased Earnings Continue to Fuel Takeover
Speculation

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00200000000532


Sent: = Wednesday, October 31, 2001 9.55 PM
To: Gablondo, Jose
Subject: RE: SEC comment: Errors cash-financed equity buyback

charlie is a former partner of mine and a friend.

~eQriginal Message---
From: Gabilondo, Jose
Sent: Wednesday October 31, 2001 3:57 PM
To: Aufhauser, David

{(b)(5)]

José

00200000000545


downplayed the significance of their relationship, Trans-Elect has clearly received financial backing
from GE. In fact, the Structured Finance Group of GE Capital Services owns a minority interest in
Trans-Elect (the size of the investment has not been disclosed). Note that GE Structured Finance
Group has many investments in other energy companies, including The New Power Company,
Enermetrix, Beacon Power, and Plug Power (to name just a few). | don't see the synergies between
GE Capital and Enron as much as with Shell or Berkshire Hathaway. However, if GE Capital is
attempting to simply increase its investments in the lucrative energy business without any
involvement in the operational aspects of the business, then this partnership could be considered
viable. GE's own microturbine business has slowed somewhat, so the advantage of gaining Enron's
wholesale business from a marketing perspective may also be a driver in this possible play. In
addition, a recent report in Business Standard indicated that General Electric plans to increase its
investment in India to about $800 million over the next three years with increased investments in the
infotech sector and GE Capital Services. Of course, Enron is still involved in the India energy market
due to its troubled Dabho! Power, which oversees a power contract in India.

The European companies such as Enel and E.ON may turn out to be credible prospects, as
companies across the Continent continue to seek merger and acquisition opportunities in the United
States, across generation and transmission sectors in particular. E.ON is still in the process of
purchasing the United Kingdom's Powergen, so it may be tied up in regulatory proceedings that
would preclude an additional acquisition. No word has emerged that may support or refute rumors
about a takeover from Enel.

Enron's stock price has oscillated wildly since its 3Q financial report was released in mid-October
The allegedly non-recurring losses in non-core businesses, and their potential impact on the basically
strong core business of natural-gas and power trading, coalesced with previous concerns about the
departure of Jeffrey Skilling as Enron's CEO and sent the company's stock on a downward spiral
(falling an approximate 54 percent in just seven days). Enron shares hit a nine-year low on Oct. 30
and then bounced up about 25 percent on the following day. The surprising upswing occurred when
Enron announced that it had secured $1 billion in fresh credit lines from investors such as J.P.
Morgan Chase & Co. and Salomon Smith Bamey, Inc, that it planned to use partly to supplement
short-term liquidity and refinance maturing obligations. However, at the same time, what had started
as an informal inquiry by the SEC officially became a full-scale investigation, which thus far has
served as a brick wall against any further increases in Enron's stock price. The identification of the
SEC probe as a full-scale investigation is significant because it gives regulators the right to subpoena
Enron company documents, which has been a point of contention for some time among investors
who claim that Enron has not been completely forthcoming about its practices.

The Enron questions of the moment are: How much further can the company’s stock fall before
Enron's business model is significantly restructured? Will Enron incur additional losses beyond the
allegedly non-recurring losses it claimed in the third quarter? Will Enron remain a takeover target,
and if so which company would be likely to make a bid for the company? What will be the outcome of
the SEC investigation and potential credit downgrades from agencies such as Moody's?

Some of these questions are impossible to answer at this juncture, without the benefit of a crystal
ball. Clearly, the sudden lack of investor confidence in Enron has rattled the company's executives,
which undoubtedly prompted the ousting of its former CFO. | would think that this lack of confidence
would also lead Enron to consider fundamental changes in its business model. However, it may be
too late to avert additional losses in non-core businesses such as broadband, water and retail, into
which Enron sunk large sums of capital but which have yet to produce measurable returns.

If Enron's stock remains in the basement, takeover rumors will undoubtedly continue. However,
Enron is challenged at this point to undertake a substantial modification of its business model, which

9

00200000000535


Kelly, John Jr

From: Parcel, John

Sent: Friday, January 18, 2002 2:08 PM
To: Kelly, John Jr

Ce: Gerardi, Geraldine

Subject: Yes: Enron Investigations

| have documents relating to a meeting Gerri Gerardi, Hudson Milner, and | had with Jaime Steve (American Wind Energy
Association (AWEA)), Robert Boyd (Enron Wind Corp.), Michael Pate (Enron Corp.) and Brian Fitzgerald (FPL Energy) on
February 26, 1999. The subject of the meeting was H.R. 750 (106th Cong.), which provided a 5-year extension of the
credit for producing electricity from wind. We have had several other contacts with Mr. Steve, as a representative of
WEA, on the wind credit. Although Mr. Steve did not purport to represent Enron at these meetings. the president of
Enron Wind was also president of AWEA during 1999. Should we provide additional information about the AWEA
contacts?

00900000000368


Gabilondo, Jose

From: Bieger, Peter

Sent: Tuesday, January 15, 2002 3:48 PM

To: King, Jeff; Lerner, Brad; Straus, Brandon; Sutton, Gary; Ellett, Martha; Gabilondo, Jose;
Reese, Cindy, McCament, James

Ce: McInerney, Roberta; Kinard, Yvette; Ospina, Martha

Subject; Enron document search and preservation tasker

importance Figh

[OUTSIDE SCOPE]

Gabilondo, Jose

From: Gabilondo, Jose

Sent: Thursday, January 03, 2002 4:52 PM
To: Bieger, Peter

Subject: Enron

[OUTSIDE SCOPE]

Gabilondo, Jose

From: Gabilondo, Jose

Sent: Wednesday, December 05, 2001 5:57 PM
To: Carleton, Norman

Subject: RE: Enron collage

Norman:

J also have several horrible Enron SEC filings with more detailed information about some of the related party
transactions which have gotten so much attention in the news of late. The SEC's electronic filing service (Edgar) makes it
very easy to track down public filings (although I'm still waiting for the Rosetta Stone that would help to make sense of the
transactions).

José
—-~-Original Message——
From: Carleton, Norman
Sent: Wednesday, December 05, 2001 2:58 PM

To: Gabiondo, Jose
Subject: AE: Enron collage

Thanks.

Onginal Message-—
From: Gablondo, Jose
Sent: Wednesday, December 05, 2001 2:56 PM

00200000000527


{(b)(4)]

02283

01300000000892


in the United States and Canada to determine:

The leading software providers

Drivers of utility technology decisions
Analysis of license sales versus ASP sales
New market opportunities
Growing/shrinking software markets

Download a sample prospectus for an introduction to this new survey at:

<http://secure.scientech.com/specialpages/Multi_Client.asp> and
contact Jon Brock at 505-244-7607 for more details.

<http://secure.scientech.com/issueswatch/article.asp?7id=832>
Miss last week? Catch up on the latest deregulation, competition and restructuring
developments in the energy industry with SCIENTECH's IssuesWatch
<http://secure.scientech.com/issueswatch/article.asp?id=950>

<http://secure.scientech.com/rci/wsimages/scientec! i! >
shttp:/ .scientech.com/rci/wsima ueAlert_L 1 >

October 22, 2001

Enron's Departure from Core Business
Takes a Toll on Performance

By Will McNamara
Director, Electric Industry Analysis

:/lsecure.scientech.com/rcijwsimages/will100border_c

[News item from Reuters] Enron Corp. (NYSE: ENE) stock sustained further heavy losses on
October 19 as investor confidence in the former Wall Street favorite remained at a low ebb
after it reported its first quarterly loss in over four years. The energy giant's stock was off
$3.32 or 11.45 percent at $25.68 per share at mid-day trade on Oct. 19, making a cumulative
loss of 28 percent for a week in which it reported a third-quarter loss of $638 million. As of
early morning trading on Oct. 22, Enron shares were priced at $21.99, a reflection of new

developments (including a new Securities and Exchange inquiry) that have caused uncertainty
about the company among investors.

Analysis: Enron's first financial report since the departure of former CEO Jeffrey Skilling in
August has not done much to once again instill investor confidence in the company, which

2

00200000000538


opinions expressed in SCIENTECH's IssueAlert articles are not intended to predict financial performance of companies
discussed, or to be the basis for investment decisions of any kind. SCIENTECH's sole purpose in publishing its
IssueAlert articles is to offer an independent perspective regarding the key events occurring in the energy industry, based
on ts long-standing reputation as an expert on energy issues.

Copyright 2001. SCIENTECH, inc. All rights reserved.

<http://infostore.con: i.com/ t.gif?lssueAlert=11 >
Gabilondo, Jose
From: Jone-Lin Wang [wang@CERA com}
Sent: Friday, Novernber 02, 2001 1:44 PM
To: jose.gabilondo@do.treas.gov

dose,

I have two charts (top 20 power marketers. etc.) to send to you but they
are part of a large report in pdf form. I can’t send the whole report
out. Nodoby is around to break up the pdf file for me, If you give me
your fax number, I can have them faxed to you.

Jone-Lin

Gabilondo, Jose

From: Jone-Lin Wang [wang@CERA.com)

Sent: Friday, November 02, 2001 1:29 PM

To: jose.gabilondo@do treas. gov

Subject: FW: — Enron's Departure from Core Business Takes a Toll on Performance
Jose,

| am sending you some information related to Enron.

Jone-Lin

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

From: IssueAlert@SCIENTECH.COM (mailto: IssueAlert@SCIENTECH.COM)
Sent: Monday, October 22, 2001 2:36 PM

To: ISSUEALERTHTML@LISTSERV.SCIENTECH.COM

Subject: Enron's Departure from Core Business Takes a Toll on Performance

Today's IssueA/ert Sponsors:

SCIENTECH is currently interviewing 1,500 utilities on CIS/CRM and customer care
un

00200000000537


{(b)(4))

02296

01300000000905


Carleton, Norman

From: Raislerk@sulicrom,.com

Sent: Tuesday, August 07, 2001 7:10 PM

To: norman.carleton@do.treas.gov

‘Subject: FW: CFTC Presentation — Final Version
om we et

This is the right version. Please acknowledge receipt.

~Original Message
Prom: chendrix@enron.com [mailto:chendrix@enron.com)
Sent: Tuesday, August 07, 2001 6:42 PM

To: Raislerk#sullcrom.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

Tor chendrix@enron.com
cc:
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 1 can forward it on to them. Thanks,

a+e-0 Original Measage- ----

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

To: Raislerk#oullerom.com

Subject: CPTC Presentation -- Final Version

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

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

‘ 02279

01300000000888


{(b)(5)]

01580

01200000000235


{(b)(4)]

02284

01300000000893


August 7, 200

MEMORANDUM FOR FILES
From: Norman Carleton

Subject: Retail Swaps Study Group Interviews at FRBNY, 8/01 - 8/02/01
{(b)(5)]

01579

01200000000234


solid position in the energy trading space. The first point is obvious; as Enron's share price has hit a
nine-year low and dropped by half in just one week, it is natural that other companies on the prow! for
lucrative acquisitions would begin to hover around the company. Enron shares have dropped
dramatically, and the company’s stock is now trading at close to book value. The other two factors |
mentioned may need some further elaboration. Despite the $638-million loss in the third quarter from
businesses such as broadband and water, Enron's core energy trading business posted a 26-percent
increase in recurring earnings in the same quarter. Thus, the core trading business is basically in
good shape and remains a strong cash generator. In addition, despite the recent turmoil, Enron
remains the largest natural-gas and power trader in the United States, and thus is an attractive target
for other companies operating in the same space. Further supporting this point, most reports indicate
that Enron is a principal in one-quarter of all electricity and natural-gas trades in the United States.

There are three companies that keep appearing on a short list of potential buyers in an Enron
takeover. | think it is important to discuss the individual objectives of these companies and the factors
that may lead them to pursue a purchase of Enron. The three companies most often mentioned are
Royal Dutch Shell, Berkshire Hathaway and GE Capital. In addition, a small number of European
companies such as Germany's E.ON and England's Powergen have also been mentioned. At
present, all the companies named have neither denied nor confirmed their involvement in a possible
Enron takeover.

Of all these names, Royal Dutch Shell, the number two energy firm in the world, has been perceived
as the top contender. The potential connection may have some legitimacy. First, Royal Dutch Shell is
the parent company to wholly owned subsidiary Sheil Oil, under which Shell Energy Services is a
wholesale and retail marketing subsidiary. Shell Energy Services, which is based in Houston, had
made previous penetrations into the retail electricity markets of Texas and Ohio, but recently
withdraw from both states to focus more exclusively on wholesale power transactions. Thus, Shell's
focus on the wholesale market through Shell Energy Services would make for a nice synergy with
Enron's prominent position in the wholesale trading space. Further, Shell had unsuccessfully tried on
its own to be involved in the merchant energy business, and thus an acquisition of Enron, the
dominant player in the energy trading space and an established energy franchise, would be on par
with the company’s strategy. Other reports have indicated that Shell had previously looked at a
possible Enron buy, even before the company began to experience financial instability. Financing the
deal would not be a problem for Shell, as Enron's current market capitalization is around $11 billion
and Shell would probably not have to offer a huge premium for the company.

Berkshire Hathaway, founded by multi-billionaire Warren Buffett, is another company with deep
pockets and a potential synergy with Enron, Berkshire Hathaway penetrated the energy industry with
a $9-billion purchase of Des Moines, lowa-based MidAmerican Energy Company, giving the
company a 75-percent ownership in the largest utility in lowa, which is strategically located in the
middle of several major markets in the Midwest. Buffett, who previously invested in non-energy
companies such as American Express and Coca-Cola, has been drawn to the energy space due to
deregulation opportunities, Berkshire Hathaway's acquisitions fit a pattern that Buffett created: They
are well-managed companies that sell a tangible product and have strong growth potential over the
long term. MidAmerican Energy arguably fit that template due to its history as an integrated utility.
Enron, which is far more difficult to define, may ultimately prove to be too abstract a company for
Berkshire Hathaway's tastes.

As discussed in yesterday’s IssueA/ert, GE Capital has been increasing its holdings in the energy
landscape lately due to its affiliation with Trans-Elect, a private company that is actively pursuing the
transmission assets sold by utilities. Trans-Elect and GE Capital are in the process of purchasing the
transmission assets of CMS Energy Corp. GE's role in the CMS deal is not entirely clear, but it
appears that the company is participating mostly as a financial backer. Although they have

00200000000534


[OUTSIDE SCOPE]

00900000000001


{(6)(4)]

02294

01300000000903


[(b)(4)]

02301

01300000000910


Bair, Sheila

From: Bair, Sheila

Sent: Friday, January 11, 2002 9:19 AM
To: Sweetnam, Bill Jr

Subject: RE: Enron Paper and Other issues

when is the savers summit? We are going to be hiring a senior fin it person within hopefully the next several weeks, Can
they put me on and placeholder for a member of my staff. In the interim, my staff contact should be Jesse Villareal.

Regarding the paper, its very helpful. | don't understand [(b)(5)] Can you elaborate?
----Onginal Message--—~
From: ‘Sweetnam, Bi Jr
Seat: Thursday, January 10, 2002 6:56 PM
To: Bar,
Ce: Reeder, W Thomas
Subject: Enron Paper and Other lesues

Attached is a paper on issues arising from employer stock in tax qualified plans. We gave a copy of this to Mark
Weinberger this evening.

| also talked with Paul Zarawski, Deputy Asst. Secretary for the PWBA (Ann Comb’s deputy) about the SAVERS
summit. He told me that there were 4 slots for Treasury and he had not heard from Treasury on who was filling those
slots. We should determine who will fill those slots, I'd like to be one of them and you should be one of the others,
Fm not sure how to fill the others. Paul has asked me to tell him how those people will be.

I'm sure that we'll be talking soon about Enron and other things.
<< File: enron issues,doc >>

William F. Sweetnam, Jr,
Benefits Tax Counsel

Office of Tax Policy

Treasury Department

1500 Pennsylvania Avenue NW
Washington DC 20220

Phone: 202-622-0170
Fax; 202-622-0646

01200000000883


Bair, Sheila

From: Bair, Sheila

Sent: Wednesday, January 09, 2002 6:56 PM
To: Lakritz, Robb; Hunt, Betty Ann
Subject: RE:

yep- | will try to make time. Tomorrow is tough, Betty -- please try to work in

Original Message
From: Lakrita, Robb
Sent: Tuesday, January 08, 2002 2:45 PM
To: Bar, Shefa
cc McCardel, Dan; Adams, Tim; Dam, Ken; Gross, Jared; Kupter, 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

01200000000905


[(b)(4)]

01300000000899

02290


[(b)(5)]

>

>-----Original Message-----

>From: Alysha Taylor [mailto:Alysha_Taylor@ita.doc.gov]
>Sent: Tuesday, October 16, 2001 4:57 PM

>To: Asamoal, Harvetta; aAronoft@doc.gov%internet;
>Greg.Christopulos@do.treas. gov internet,
>james.wallace@do.treas.gov%imtemnet, gsampliner@hotmail.com%intemet,
>Andrew Rudman; brooksj@ms.state.gov%internct;
>svatla@ms.state.govointernet, kelleymn@state.gov%intemet,
>rogersmb@state.gov%intemnct; speckjg@state govYointernet,
>tractonmk@state.gov%intemet, dkatz@ustr.govYinternet,
>fhucgel@ustr.gov%internet; sfabry@ustr.gov%internet

>Ce: Skip Jones; Stephen Jacobs

>Subject: Unfair/inequitable

>

{(b)(5)]

01/16/2002

Page 3 of 4

1000000001092


{(b)(4)]

02293

01300000000902


Gabilondo, Jose

From: Gabilondo. Jose
. Wednesday, November 14, 2001 1.27 PM
‘attarm@sec.gov'
Subject: Enron stuff

Mark

Hi. Here are the articles that | mentioned yesterday

Jose

C) EG)

PW Ewer FW Gru undo
Owen te Savona

Gabilondo, Jose

From: Gabilondo, Jose

Sent; Friday, November 02, 2001 3:29 PM

To: “Jone-Lin Wang’

Subject: RE:

Thanks again, Jone-Lin. 1 appreciate it.

eecee Original Message

From: Jone-Lin Wang (mailto: jwangeCERA.com)
Sent: Friday, November 02, 2001 2:18 PM
To: jose.gabilondogdo.treas.gov

Subject:

Joue,

These charts contain power marketing information

one-Lin

> «<<Pwr_mkter@_110201.ppt>> <<NAP_top_mkters.xle>>

00200000000530


28220

Beg Are)eydoig PUB jENUEPYLIOD

M@IAIZAQ *"diog uolUy

01300000000891


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.

‘ 02280

01300000000889


the steel and pulp and paper sectors as well. Thus, several questions remain at this juncture.
Are the losses reported in the third quarter only a temporary setback for Enron that will clear
the way for the company to return to a primary focus on its core business of energy trading?
Or, will the losses continue into the fourth quarter and 2002? Moving forward, will Enron once
again reshape its business model and eliminate the various businesses to which investors
have reacted less than favorably? Only time will tell as the industry continues to watch the
developments at Enron, which is clearly a company in the midst of another wave of change.

An archive list of previous IssueA/erts is available at
www.scientech.com <http://secure.scientech.com/issuealert/>

We encourage our readers to contact us with their comments. We look forward to hearing from you.
Nancy Spring <mailto:nspring@scientech.com>

Reach thousands of utility analysts and decision makers every day. Your company can schedule a
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SCIENTECH's IssueAlerts'TM’ are compiled based on the independent analysis of SCIENTECH
consultants. The opinions expressed in SCIENTECH's IssueAlerts are not intended to predict
financial performance of companies discussed, or to be the basis for investment decisions of any
kind. SCIENTECH's sole purpose in publishing its IssueAlerts is to offer an independent perspective
regarding the key events occurring in the energy industry, based on its long-standing reputation as
an expert on energy issues.

Copyright 2001. SCIENTECH, Inc. All rights reserved.
Hii i, if? 10/22/2001>

00200000000541


0,
%,

26220

o70g Asppaudoig pue jequEpquOD

M@lAM2AQ S33

01300000000901


{(b)(4)]

02298

01300000000907


ite Original Message-----

Prom: Squitieri, Ray (mailto: Ray.Squitieri@occ.treas.gov)

Sent; Tuesday, October 30, 2001 1:45 PM
To: ‘'Jose.Gabilondosdo.treas.gov’
Subject: RE: hi there

Hi Jose, Good to hear from &o You've come to the right place--meaning

Joveling nce mn. [OUTSIDE PE}

My number is 202,.874,5217
Call any time,

wo Original Message-----

From: Jose.Gabilondo@do.treas.gov [mailto:Jose.Gabilondo@do.treas.gov)

Sent: Tuesday, October 30, 2001 1:24 PM
Tor Squitieri, Ray
Subject: hi there

Ray.

[(b)(6) , OUTSIDE SCOPE]

I wanted your advice on something (I tried calling, but didn't have and

couldn't get your phone number).

((b(5)]

{(o)(6) , OUTSIDE SCOPE]

Could you recommend sources?
Securities and Exchange Commission filings to piece together the company's

I'm going through

financial dealings, but I'm at a loss for developing knowledge about Enron's

role in the power market. Any advice would be welcome.

Talk to you later.

José

00200000000543


2 2 2)

ancern (F200 pe Po peters 1/000 pe
intelligence pieces about Enron: Here's the 2000 annual report - .
and here's a list of the top 20

power marketers prepared by an energy consulting group - . Hope that you like the Paul Klee format.
Jose

Gabilondo, Jose
From: Gabilondo, Jose
Sent: Thursday, November 29, 2001 11:02 AM
To: Mcinerney, Roberta; Bieger, Peter
Subject: Enron
Roberta and Peter

FYI

| have tast week's public SEC filing which seemed to prompt Enron's default and am monitoring newspaper
stories, should David A. ask.

José

Gabilondo, Jose

From; Attar, Mark M. [AttarM@SEC.GOV]
Sent: Wednesday, November 14, 2001 1:33 PM
To; ‘Jose. Gabilondo@do treas.gov"

Subject: RE: Enron stutf

Thanks. I'll take a look.

-Original Message
From: Jose.CGabilondogdo.treas.gov [mailto:Jose.Gabilondogdo.treas.gov)
Sent: Wednesday, November 14, 2001 1:27 PM
To; attarmasec.gov
Subject: Enron stuff

Mark

Ri Here are the articlen that IT mentioned yesterday.

Joué

<<PW: Enron's Departure from Core Business Takes a Toll on
Performance>> <<FW: Enron Update: Sagging Stock Price, Increased

Earnings Continue to Fuel Takeover Speculations>

00200000000529


Bair, Sheila

ee

From: Bair, Sheila

Sent: Friday, January 11, 2002 9:29 AM
To: Adams, Tim

Subject: Enron/PON meeting with Chao

Just received an e-mail from Ann Combs at DOL that she is accompanying Secretary Chao to a meeting with the
Secretary today(?) Can you teli me something about this? I'd like to be included since | am the Secretary's PBGC
representative and am working with Mark on the post-Enron retirement benefit issues.

Sheila

01200000000882


Page 1 of 4

Sampliner, Gary

From: gary sampliner[(b)(6)]

Sent; Wednesday, October 17, 2001 2:42 PM

To: Harvetta Asamoah@hq.doe.gov; Alysha_Taylor@ita.doc. gov, aAronotf@doc gov,
Greg.Christopulos@do. treas. gov, james.wallace@ido.treas.gov, Andrew_Rudman@ita.coc.gov;
brooksj/@ms. state.gov, svatia@ms, state.gov; kelleymn@state gov, rogersmb@state.gov,
speckjg@state.gov, tractonmk@stale.gov, dkatz@ustr.gov, thuegel@ustr.gov; sfadry@ustr.gov

Ce: Skip_Jones@ita.dec.gov; Stephen_Jacobs@ita.doc.gov, Lana. Ekimoft@hq doe. gov,
gary.sampliner@do.treas.gov

Subject: RE: Unfair/inequitable -- Additional Examples

{(b)(5)]

Our Treasury e-mail is back up (I added Treas address as a ce on this one), so pls, send future e-mails to
me at that address.

>From: "Asamoah, Harvetta”

>To: "Alysha Taylor” , “aAronoff@doc.govYintermnctTM , “Greg, Christopulos@do.treas.yov%
internet , “james. wallace@do.treas.gov%internetTM , ((b)(6)] , “Andrew
Rudman" , "brooksj@mis.state.govYointemet”TM , “svatla(ams.state.gov%intemetTM ,

“kelleymn@state gov%internetTM , “rogersmb@state goveinternetTM , “speckjg@state.gov%intemetTM ,
“yractonmk@state.yov%intemetTM , “dkatz@ustr.gov%intemetTM , “fhuegel@ustr.gov%intemetTM ,
“'sfabry@ustr.gov%intemetTM

>CC:; "Skip Jones” , "Stephen JacobsTM , “Ekimoff, Lana”

>Subject: RE: Unfair/inequitable -- Additional Examples

01/16/2002
1000000001090


To: Carteton, Norman
Subject: Enron college

Norman:

Here — for what they're worth -- are the best of my Enron resources. Here's the link to a daity price chart
of Enron's common stock. which is easier to drag on to your screen and to open (rather than saving): << File
energysquib.doc >>
This is a tiny note that | wrote about Enron market structure << File: article2.ntm >>. These are two (now dated)
market intelligence pieces about Enron: << File: article htm >> << Filo: ar2000 pdf >> Here's ihe 2000 annual
report - << File: Pwr_mkters_110201 ppt >> and here's a list of the top 20
power marketers prepared by an energy consulting group - . Hope that you like the Paul Kiee format

José

Gabilondo, Jose

From: Gabilondo, Jose

Sent: Wednesday, December 05, 2001 5:47 PM
To: Carleton, Norman

Subject: Enron Corp. Stock Chart

Norman:

This should work. | dragged this icon on to my shortcut screen, so that | just need to hit without separately
accessing the Internet. Also, below is the agenda for the repo conference. Let me know if you're interested in any topic in
particular that | should focus on,

José
ee

Chan tern

Gabilondo, Jose

From: Gabiondo, Jose

Sent: Wednesday, December 05, 2001 2:56 PM
To: Carleton, Norman

Subject: Enron collage

Noeman:

Here — for what they're worth -- are the best of my Enron resources. Here’s the link to a daily price chart of
7)
ern aoe
Enron's common stock, which is easier to drag on to your screen and to open (rather than saving):

toe res

This is a tiny note that | wrote about Enron market structure ‘These are two (now dated) market

00200000000528


[(b)(4)]

02285

01300000000894


Schultheiss, Heidilynne

ang Weansedey, Janu “Jonuiey 02, 2002 9:41 AM
To: Carleton, , Peter
Subject: ABI ENRON UPDATE

ENRON UPDATE

Enron DIP Hearing Delayed

The hearing over n Corp.’s $1.5 billion debtor-in-possession (DIP) financing package has been delayed
until Jan, 30 because the bankrupt Houston energy needs more time to assemble a business plan,
according to The Daily Deal. The hearing on the DIP had been scheduled for Jan. 7, but the sources said it
didn’t make sense to get the final approval on the funding package until # business plan is in place. The plan
would likely rely on Seneces fon the forthcoming auction in fh which Enron is selling a majority of its
trading business. Enron | apse been granted approval on Dec. 4 to use $250 million of the BP being led by J.P.
Morgan Chase & Co, and Citigroup Inc,"s Citibank unit - but the company has not drawn on the funds. The final
hearing on the DIP will be heard by Judge Arthur Gonzalez at the U.S. Bankruptcy Court for the Souther
District of New York in Manhattan. Final objections to the DIP are due on Jan, 23,

Wall Street Journal Reports Enron Heads Knew of Partnerships
Top Enron Corp. officials knew about the financial ips that fueled the former energy-trading giant's
downfall, and were aware of the possible conflict-of-interest issues surrounding its former chief financial
officer's involvement in them, The Wall Street Journal reported. Internal documents indicate that the
parmereips were viewed as essential to maintaining Enron's rapid growth rate, the newspaper said in its online
edition, documents also confirm the theory that top officials | including Chairman Kenneth Lay and former
President Jeffrey Skilling, were very involved with setting up and overseeing the partnerships, it added.
The documents include an internal memorandum from an Enron attorney to Skilling regarding the way to
monitor transactions with the partnerships, as well as excerpts of minutes from the company’s board and board
finance committee meetings. The partnerships were run by former chief financial officer Andrew Fastow, who
was ousted in October, Hel had been instrumental in forming outside partnerships, known as special-purpose
entities (SPEs), associated with Enron that are a focus of an investigation by the U.S. Securities and Exchange
Commission. Houston-based Enron is thought to have used the SPEs in transactions designed to take debt off its
balance sheet and protect the good credit rating critical to its highly leveraged capital structure, according to
lawyers involved in the case. After it was forced to alter this strategy and restate its financial results to
ae SPE transactions onto its books, Enron's corporate debt was downgraded and its stock price
UTM

Enron Creditor Opposes Data Release
Afier demanding payment from insurance companies that backed more than $1 billion worth of oil and gas
contracts signed by Enron Cons J.P. Morgan Chase is trying to prevent the insurers from getting details about
the sraneuctioas; accordi ¢ Associated Press. The New York-based investment bank on Sunday filed an
objection to a request made by the insurers, who are refusing to honor $1.1 billion in surety bonds and are
asking for access to Enron financial records to determine if energy contracts actually existed, The request was
filed last month in U.S. Bankruptcy Court in New York. J.P. Morgan sought payment of the surety bonds after
the collapse of Enron. The payment dispute between the bankers and the insurers is the subject of a
oy lawsuit awed lace in U.S. District Court. The fact that it is now spilli me} over into the federal bankruptcy
proceedings shows how the interests of Enron's creditors are intertwi
thei insurance companics involved include Citi Inc.*s Travelers unit; Kemper Insurance Co.’s
Lumbermens Mutual Casualty Co.; Allianz AG's Fireman's Fund Insurance Co.; Chubb Com: '$ Federal
Insurance Co.; St. Paul Cos.’s Fire and Marine Insurance; CNA Surety Corp.'s Continental Casualty Co.;
Sateco Corp's Safeco Insurance Co.; Hartford Financial Services Group Inc.; and Liberty Mutual Insurance Co.
The insurers backed a total of $2 billion in transactions. Early last month, ney asked J.P. Morgan Chase for
details of the contracts before they would mt iy off all of the surety bonds. ut one of the insurers, Travelers,
subsequently asked a bankruptcy court judge in New York to void $1.1 billion worth of the obligations. As a
result, J.P. Morgan had to increase its estimated exposure in the collapse of Enron to $2.6 billion-more than
double what it previously acknowledged-with $965 million of that amount tied to surety bond payments,

‘ 01269

01200000000625


From: Carleton, Norman
Sent: Wednesday, August 08, 2001 9:34 AM
To: Bair, Sheila; Eichner, Matthew; Eliett, Martha; Fisher, Peter; Gabilondo, Jose; Gross, Jared;
Palys Viva; Nickoloff, Peter, Novey, Michael; Roseboro, Brian; Schulthess, Heidilynne;
tton, Gary
Subject: Retail Swaps -- Enron PowerPoint Presentation

et Anat pet

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

proprietary,

Tracking: Recipient
Bar, Sheits
Genner, Matthew
Bilet. Martha
Fisher, Pote-
Gator do, vost
Gross. Jared
Hanmer, Vivo
Nickolelf, Peter
Nowey, Mchaet
Roseboro, Brian
Schult-oiss, Hoidilynne
‘Sutton, Gary
Hart, Aone

Delivery
Delivered: 6/601 O34 AM

Delivered: 8/8/01 1:34 AM
Delivered: 4/8/01 $34 AM
Delivered: £801 9:34 AM
Delivered: 8/8/01 9:34 AM
Debverod: 8/8/01 9:34 AM
Delivered: S01 9:34 AM
Dewvered: 8601 934 AM
Delivered: 8/8/01 934 AM
Delivered: 8/601 934 AM
Detvered: £8101 9:34 AM
Delivered: 8/6/01 9:34 AM

Read

Read: 8/01 1041 AM
Road: 8/8101 S40 AKI
Read: 8/801 9.38 AK!

Road: 4/801 10:11 AY
Read: 6/8/01 9:57 AM

Read, 6/8/01 S41 AR!
Read: G601 9:30 AN

Read: 6/6/01 9.51 AN
Read: 8/901 8:30 AM
Read: 8401 12.14 PU

02229

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{(b)(5)}

>

>Alysha E. Taylor
>International Trade Specialist
>Office of Multilateral Affairs
>International Trade Administration
>Department of Commerce
>14th & Constitution Ave., NW
>Washington, DC 20230
>(202) 482-2841

>Fax: (202) 482-5939
>alysha_taylor@ita.doc.gov

>

Get your FREE download of MSN Explorer at http://exploret.msn.com

01/16/2002
1000000001093


has experienced one of its most turbulent years in recent memory. While Skilling cited
personal reasons for his departure, many analysts suspected that a significant drop in
Enron's share price and financial losses in its diversified businesses also played a role. At the
time of Skilling's departure, Enron's stock had tumbled to a 52-week low. However, based on
the new 3Q report, it now appears that Enron's downward turn may be continuing despite the
return of Kenneth Lay to the company’s top spot. In essence, Enron's financial problems have
been caused by businesses that the company has established as a way to diversify from its
core focus on wholesale power sales. It appears that Enron is learning a costly
lesson—namely that investors are not responding favorably to the company’s innovation,
especially if bottom line performance is in any way compromised. The road ahead may remain
uncertain for Enron, as a good number of unresolved issues and a new Securities and
Exchange Commission (SEC) inquiry into financial dealings of its chief financial officer
continue to overshadow the company.

Let's first establish the financial losses that Enron has reported in the third quarter. As noted,
as a whole the company reported $638 million in losses, after taking $1.01 billion in charges
associated with several of its non-core businesses. When we break down the losses, it
becomes clear that Enron is struggling with its operations in three businesses: water,
broadband and the retail power market. Specifically, Enron reported $287 million in charges
from Azurix, its water and wastewater business; $180 million in charges related to the
downsizing of its broadband operations (including severance costs and losses on inventory
sales and customer contracts); and $544 million in what the company is calling “investment
losses.” Evidently, about half of the $544-million figure is related to Enron's investment in
NewPower Company, the retail electricity and natural-gas provider that Enron launched about
two years ago with partners America Online and IBM. Enron owns 45 percent of NewPower. In
addition, Enron's debt to total capitalization ratio reportedly will increase to about 50 percent,
although Lay says that pending asset sales may reduce that amount to 40 percent by the end
of 2002. However, it is important to note that Enron's 3Q recurring net income (before the
write-offs) did increase 35 percent to $393 million, or 43 cents a diluted share, and revenue in
the quarter rose to $47.6 billion from $30 billion in 3Q 2000.

The losses associated with NewPower are particularly interesting. As one of the leading
investors in the company, Enron drove NewPower's aggressive business focus on retail
residential power sales, despite ongoing concerns about the development of retail
competition across the United States. NewPower went public last year at an opening price of
$21, and in the early days of its initial public offering was trading above that price. However,
the company’s stock has experienced a devastating drop in value, and is currently priced at
$1.25. NewPower is not scheduled to release its own 3Q financial statement until early
November, but it is expected that the company will continue to incur significant losses for the
foreseeable future. Specifically, NewPower recently reiterated its earlier expectations of a 3Q
loss of $65 million to $70 million, or $1.12 to $1.20 a share. Third-quarter revenue reportedly
will be slightly lower than the $60 million to $65 million that the company had forecast in
August.

In analyzing NewPower’s 2Q financial losses (see IssueAlert from 8/8/01 at
www.scientech.com/rci <http:/iwww.sec' h. issueAlert>), | argued that the
company is really struggling from a mix of positive and negative factors in its efforts to
become the leading retail energy provider in residential and small business markets in the
United States. On the positive side, NewPower has recently secured a large number of new
customer accounts, most significantly from its purchase of customers and related assets
from AES Corp. and DTE Energy. These purchases prompted an impressive growth spurt for

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01300000000897


Gabilondo, Jose

From; Gabilondo, Jose

Sent: Friday, November 02, 2001 12:57 PM
To: itieri,

Subject: RE: Enron

I thought that there are western and eastern grids, and then one for Texas. Strange...1
got no answer or voice mail right now at 4-5217.

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

From: Squitieri, Ray [mailto:Ray.Squitieri@occ.treas.gov)
Sent; Priday, November 02, 2001 12:56 PM

To: 'Jose.Gabilondogdo.tr -gov'

Subject: RE: Enron

I'm sorry to report that I am one of the uninitiated. What's the 3 grid
atructure? I take it Jone-lin didn't know.

ted Original Message-----

Prom: Jose.Gabilondo@do.treas.gov [mailto:Jose.Gabilondosdo.treas.gov]
Sent; Priday, November 02, 2001 12:23 PM

To: Squit i, Ray

Subject: RE: Enron

Par be it from me to explain energy, but do you happen to have {or know
where I can get) a schematic explanation of the 3 grid structure for the
uninitiated? I'm meeting with some people today and I hoped to have some
diagram that showed power market structure,

I just spoke with Jone-lin. You were certainly right about her knowledge
base. She waa super helpful.

José

~----Original Message-
From: Squitieri, Ray [mailto:Ray.Squitierigoce.treas.gov]
Sent: Wednesday, October 31, 2001 2:54 PM

To: 'Joge.Gabilondo@do.treas.gov'

Subject: Enron

Jose, just give Jone-lin a call at 202.857.5175
She'd be happy to share what she knows about Enron.
By the way, what's your phone #7

Ray

ice Original Message-----~

From: Jose.Gabilondoado.treas.gov [mailto:Jose.Gabilondo@do.treas.gov}
Sent: Tuesday, October 30, 2001 2:33 PM

To: Squitieri, Ray

Subject: RE: hi there

((b)(5)]

Thanks a
lot for telling Jonelin. I look forward to talking with her. I'11 call you
in a little while.

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