Less than a year ago, the Houston-based energy behemoth had everything: money, power, glitz, smarts, new ideas, and a CEO who wanted to make it the most important company in the world. Now its stock is down, wall street is bearish, and the CEO is gone. What went wrong?
by Mimi Swartz </mag/issues/authors/mimiswartz.php>
THE ENRON SKYSCRAPER NEAR THE SOUTH END OF HOUSTON'S DOWNTOWN feels like the international headquarters of the best and the brightest. The lobby in no way resembles the hushed, understated entryways of the old-fashioned oil companies, like Shell and Texaco nearby. Enron, in contrast, throbs with modernity. The people hustling in and out of the elevators are black, white, brown; Asian, Middle Eastern, European, African, as well as American-born. They are young, mostly under 35, and dressed in the aggressively casual uniform of the tech industry-the guys wear khakis, polo shirts, and Banana Republic button-downs. Almost preposterously fit, they move through the building intently, like winners. Enron is nothing if not energetic: A Big Brother-size TV screen frantically reports on the stock market near a bank of elevators, while another hefty black television relaying the same news greets people entering from the garage. A sculpture of the corporate symbol, an E tipped at a jaunty angle, radiates colors as it spins frenetically on its axis; a Starbucks concession on the ground floor keeps everyone properly caffeinated. Multicolored, inspirational flags hang from the ceiling, congratulating Enron on its diversity and its values; one more giant banner between elevator banks declares Enron's simple if grandiose goal: "From the World's Leading Energy Company to . . . The World's Leading Company!"
For a while, that future seemed guaranteed, as Enron transformed itself from a stodgy, troubled pipeline company in 1985 to a trading colossus in 2000. It was a Wall Street darling, with a stock price that increased 1,700 percent in that sixteen-year period, with revenues that increased from $40 billion to $100 billion. "The very mention of the company in energy circles throughout the world creates reactions ranging from paralyzing fear to envy," notes a 2001 report from Global Change Associates, a firm that provides market intelligence to the energy business.
This Enron was largely the creation of Jeff Skilling, a visionary determined to transform American business. Hired sixteen years ago as a consultant by then-CEO Ken Lay, Skilling helped build a company that disdained the old formula of finding energy in the ground, hauling it in pipelines, and then selling it to refineries and other customers. Instead, it evolved into a company that could trade and market energy in all its forms, from natural gas to electricity, from wind to water. If you had a risky drilling venture, Enron would fund it for a piece of the action. If you wanted your megacorporation's energy needs analyzed and streamlined, Enron could do the job. If you were a Third World country with a pitiful infrastructure and burgeoning power needs, Enron was there to build and build. Basically, if an idea was new and potentially-and fantastically-lucrative, Enron wanted the first crack. And with each success, Enron became ever more certain of its destiny. The company would be the bridge between the old economy and the high-tech world, and in February of this year, Skilling reaped his reward when he succeeded Lay as chief executive officer. Enron, says Skilling, "was a great marriage of the risk-taking mentality of the oil patch with the risk-taking mentality of the financial markets."
The Enron story reflects the culture that drove American business at the end of the twentieth century. Like the high-tech companies it emulated, Enron was going to reinvent the American business model and, in turn, the American economy. Maybe it was natural that this Brave New World also produced a culture that was based on absolutes: not just the old versus the new, but the best versus the mediocre, the risk takers versus the complacent-those who could see the future versus those who could not. The key was investing in the right kind of intellectual capital. With the best and the brightest, a company couldn't possibly go wrong.
Or could it? Today Enron's stock trades at around $35, down from a high of $80 in January. The press cast Enron as the archvillain of California's energy crisis last spring, and Skilling caught a blueberry pie in the face for his relentless defense of the free market. A long-troubled power plant project in India threatened the company's global ambitions. Telecommunications, in which Enron was heavily invested, imploded. Wall Street analysts who once touted the company questioned its accounting practices. Some of the change in Enron's fortunes can be attributed to the economic downturn in uncertain times that has afflicted all of American business. But the culture that the company created and lived by cannot escape blame.
ENRON, JEFF SKILLING SAYS, HAD "a totally different way of thinking about business-we got it." At Enron, in fact, you either "got it" or you were gone-it was as simple as black and white. It is not coincidental, then, that the color scheme of Skilling's River Oaks mansion mirrors the corporation he once headed. Here, the living room's white walls shimmer against the mahogany floors. Black leather trims the edge of snowy carpets. Billowy sofas set off the jet-black baby grand. In the entry, white orchids cascade from a black vase on a black pedestal table that in turn pools onto cold, white marble. There is only one off-color note: After almost twenty years, Jeff Skilling is no longer associated with Enron, having resigned abruptly after just six months as CEO. Once, Skilling was hailed as the next Jack Welch (General Electric's masterful CEO), as one of Worth magazine's best CEO's in America (anointed in 2001), and even as a daredevil who hosted the kind of unchained adventure junkets in which, a friend told BusinessWeek, "someone could actually get killed." Today, he sounds more like Ebenezer Scrooge on Christmas morning. "I had no idea what I'd let go of," Skilling says of all the personal sacrifices he made while retooling Enron.
From a black chair in the white library, across from a huge black and white photograph of his daughter and two sons, Skilling clarifies. The demands of working 24-7 for Enron caused him to ignore his personal finances. Divorced, he lived in a 2,200-square-foot house without a microwave or a dishwasher. He almost missed his brother's wedding. "Learning a foreign language-I never learned a foreign language!" he exclaims. He never once took his youngest son to school. "I'm interested in the kids. You don't do kids in fifteen-minute scheduling." Travel: "You can't go to Africa for a week and get anything out of it!" Skilling includes the study of architecture and design on his list of missed opportunities, then he stops and sighs. "I'm not sure that fulfillment in life is compatible with a CEO's job," he says, finally. Then his eyes lock on mine, and his voice, which had softened, regains its pragmatic edge. "It would have been easy to stay," he says. "But that would not have been good for me."
He's a smallish, ruddy-faced man who keeps himself at fighting weight, handsome in the way of corporate titans, with piercing cheekbones and that assiduously stolid gaze. But the impatience Skilling once reserved for cautious underlings and dull-witted utility company executives is now targeted at reporters who have labeled his resignation "bizarre" and associates who are bitterly skeptical of his need for family time. His shrug stretches the limits of his shimmering blue button-down, and his matching blue eyes look put upon. "I'm surprised," he says, "that people have so much trouble understanding this."
PEOPLE WHO PASSED THROUGH DOWNTOWN HOUSTON in the late eighties or early nineties couldn't help but notice a funny and, for its time, novel scene unfolding throughout the workday at the base of the Enron Building. From nine to five and before and after, you could see people slipping out of the pristine silver skyscraper to smoke. They perched on the chrome banisters or lurked near the glass doors at the entry, puffing like mad. They always looked hurried and furtive, even ashamed. Whatever people knew about Enron in those days (and most people didn't know much), it was often associated with that scene: Enron boasted one of the first nonsmoking corporate headquarters in Houston, and there couldn't have been clearer evidence of its break with the energy world of the past. What macho engineer would have put up with such humiliation?
But this company was a child of another time, that period in the mid-eighties when chaos enveloped the gas business. Federal deregulation of natural gas turned a steady, secure industry, in which gas pipeline companies frequently enjoyed a monopoly in portions of the areas that they served, into a volatile free-for-all. The situation was compounded five years later by federal deregulation of the pipeline business. So it happened that a gentlemanly gas pipeline company, Houston Natural Gas (HNG) found itself under attack from Coastal Corporation, Oscar Wyatt's less than gentlemanly firm. HNG was then run by Lay, a sturdy, taciturn former economics professor and Transco chief operating officer who had a passion for military strategy. (His doctoral thesis at the University of Houston was on supply and demand in the Vietnam War.) Lay, who was from Missouri and never succumbed-at least outwardly-to Texas brashness, had done well enough: Thanks to canny expansions, HNG's pipelines stretched from Florida to California and throughout the state of Texas.
HNG fended off Coastal, but to protect the company from other takeover attempts, Lay nimbly engineered the sale of HNG in 1985 to a friendly Nebraska pipeline concern called InterNorth, one of the largest pipeline companies in the country at the time. Then, a funny thing happened: HNG started acting in a way that would characterize the company for years to come-a lot like Coastal. What the Nebraskans blithely labeled "the purchase" was being called "the merger" back in Houston, and before long, following some particularly brutal politicking between Omaha and Houston, the company's center of gravity started shifting toward Texas, and shortly after that, Ken Lay was running a new company called Enron. "Over time it became clear that Lay had a better vision of the future," says one person associated with Enron at that time. "He never fought change. He embraced change."
Lay had won, but what exactly did that mean? Enron was saddled with massive debt from the takeover attempt, and thanks to deregulation, no longer had exclusive use of its pipelines. Without new ideas-for that matter, a whole new business plan-the company could be finished before it really even got started.
LIKE MANY PEOPLE WHO TEAMED UP WITH ENRON IN THE EIGHTIES, Jeff Skilling had spent a lot of time in the Midwest, and he was self-made-at fourteen he had been the chief production director at a start-up TV station in Aurora, Illinois. (His mother would drop him off there every day after school.) "I liked being successful when I was working, and I was smart," he told BusinessWeek earlier this year. But unlike many of his Enron colleagues, Skilling wasn't deliberate and soft-spoken and happy to go home at five o'clock; he was anxious and excitable, and nothing, but nothing excited him more than what he would come to call "intellectual capital." He loved being smart, and he loved being surrounded by smart people. He graduated from Southern Methodist University, went into banking-assets and liability management-and took on Harvard Business School, where he graduated in the top 5 percent of his class. Then Skilling took the next step on what was then the new, souped-up path to American success: He joined Manhattan's McKinsey and Company as a business consultant, and that is where Ken Lay found him in 1985.
It is often said of Lay that his instincts for hiring the best are flawless, and his choice of Skilling probably saved the company. Skilling was above all an expert at markets and how they worked. While everyone else was worrying about the gluts and the shortages that defined the gas industry, he alone saw the parallels between gas and other businesses. And so in a world where credit was nearly impossible to come by, Skilling came up with what he called the Gas Bank, which contractually guaranteed both the supply and the price of gas to a network of suppliers and consumers. Enron would not be a broker but a banker. It would buy and sell the gas itself and assume the risk involved. And Enron would make money on transactions, much like an investment bank would.
Skilling worked up some numbers and found them "absolutely compelling." Then the McKinsey consultant took the idea to a meeting of about 25 Enron executives. He had a one-page presentation. "Almost to a person," Skilling says, "they thought it was stupid." Almost. After Skilling left the meeting dejected, he walked Ken Lay to an elevator and apologized. Lay listened and then said, "Let's go."
The Gas Bank was not an overnight success. For months Skilling woke up in a cold sweat, sure he had ruined not only his career but the careers of dozens of colleagues who had assisted him. In fact, he had come upon one of those divides that seem to define his life: "I believed this whole world would be different, a huge breakthrough" is the way Skilling puts it today, and even if he is typically immodest, he was right. Fairly soon after launching, the company sold $800 million worth of gas in a week. True to Skilling's character, success turned out to be a matter of old versus new: He says the joke around Enron was that if a company's CEO was under fifty, "We were in." And he was in too: In 1990 Skilling finally left McKinsey and joined Enron as the head of Enron Finance Corporation, a new division created just for him. In 1991 that company closed a deal that earned $11 million in profit. After that, says Skilling, "we never looked back."
Skilling and Lay also realized that the Gas Bank couldn't work unless it had a trading component. Myriad trades were needed to build the market that would make the project go. But by buying and selling enormous quantities of gas, Enron not only constructed a market but almost instantly came to dominate it. The company had the best contacts, the best intelligence, and the best access to supplies. That, in turn, attracted more customers who wanted to be part of the play. With so many customers in its pocket, Enron could better predict the direction of the market and could use that knowledge to make trades for its own benefit-Enron could in effect bet on which way the price of gas would go, as one might do with pork bellies or soybeans, but with startling accuracy, thereby generating profits higher than anyone could have ever imagined.
THIS CHANGE COULD NEVER HAVE OCCURRED without another change Skilling had made: He created, within Enron, a new culture to match its new trading business. The idea was to build a "knowledge-based business," which demanded a skill set not exactly prized by Enron's employees from the old HNG days. Most were deliberate, cautious, responsible, somewhat defensive people, most of them men, of course-the kind of people you'd expect to find working in an industry regulated by the federal government. But now the company needed bolder people for its bold new era: that included anyone who wanted to make money-lots of money-for themselves and for the company. "Enron was going to create a niche for itself or die," one former executive explains. "The people who had narrow views eventually were forced out, because if they had narrow views about other things, they had narrow views about the market."
Skilling wanted smart people but not just any smart people. He wanted the smartest people from schools like Harvard, Stanford, and maybe, Rice. And because his firm was now acting more like a bank than a pipeline company, he wanted to draw from the pool of recruits that would be attracted to the biggest and best investment banks, like Merrill Lynch or Credit Suisse First Boston. In addition to being smart, Enron people were also supposed to be "aggressive." You were right for Enron if you didn't want to wait until you were thirty to close your own deals or move up in an organization.
You could see what he was looking for on "Super Saturdays" at the Houston headquarters: eight fifty-minute interviews with ten minute breaks in between-the company might herd as many as four hundred people through in just one day. They were scored from 1 to 5 on their smarts, their problem-solving ability, their passion for hard work, and what at Enron was called "a sense of urgency." People who scored less than 2.5 were scratched. The shrewdest candidates knew how to work Enron before they were even hired: These were the types that automatically turned down the company's first offer, knowing Enron would come back with more. The starting salary was around $80,000. Maybe it wasn't a fortune-yet-but the signing bonus, about $20,000, was more than enough for a lease on the obligatory Porsche Boxster or one of the lofts being renovated close to downtown. (Enron people didn't live in far-flung suburbs. Suburbs were uncool and too far from the office.)
For the lucky winners, Enron offered the corporate equivalent of a gifted-and-talented program. New associates learned the latest techniques for structuring energy deals, and there were rotations at Enron offices around the globe. The hours were long, but every possible need was taken care of. A company concierge handled all the things important people couldn't be bothered with: picking up dry cleaning or prescriptions, shining shoes, cleaning the house, planning a vacation. Of course, a lot of people who worked for Enron never got to take vacations-they were too busy making money-but they could use the company gym and the company's personal trainers. If they were overweight or wanted to quit smoking, they could join Enron's Wellness Program. Massages were offered six days a week, from seven in the morning until ten at night. "They were so cutting edge," rhapsodizes someone involved with the company health care program at the time. "They really thought about the psychology and what it took to keep these people going."
Skilling handed out titles analogous to those at Wall Street firms-analysts, associates, directors, and managing directors-but everyone knew that those titles didn't really matter. Money did. Instead of competitive salaries and decent bonuses, Enron offered competitive salaries and merit-based bonuses-with no cap. "If you really worked hard and delivered results, you could make a lot of money," says Ken Rice, who stayed with Enron for 21 years until resigning recently as the head of the company's faltering broadband division. Or, as the saying goes, you got to eat what you killed. Gas traders with two or three years of experience could wind up with a $1 million bonus. And the more you produced, the closer you got to Jeff: Real hot dogs joined him glacier hiking in Patagonia, Land Cruiser racing in Australia, or off-road motorcycling in a re-creation of the Baja 1,000 race, ending at a spectacular Mexican villa. "Every time he'd speak, I'd believe everything he'd say," one loyalist says.
And why not? By 1995 Enron had become North America's largest natural-gas merchant, controlling 20 percent of the market. But at a company where the buzzword was "aggressive," that was no place to stop: Skilling and Lay believed the Gas Bank model could easily be applied to the electricity business. Firmly committed to the notion that a deregulated market meant better service at lower prices for consumers (and untold profits for Enron), they began barnstorming the country, pressing their case with entrenched power company presidents (who, with their multimillion-dollar salaries and monopoly service areas, had little incentive to change) and energy regulators (who were somewhat more receptive, thanks in part to Enron's generous lobbying efforts).
But the biggest winner of all was probably Jeff Skilling. In 1997 Ken Lay made him the president and chief operating officer of the company. By then, the division known as Enron Capital and Trade Resources was the nations largest wholesale buyer and seller of natural gas and electricity. The division had grown from two hundred to two thousand employees, and revenues from $2 billion to $7 billion. "Mr. Skilling's experience so far with the turmoil in the industry has convinced him that he is on the right track," the New York Times noted. Everyone would certainly have thought so: Enron and Skilling had totally transformed one industry and were well on their way to transforming another.
"FIRING UP AN IDEA MACHINE; Enron Is Encouraging the Entrepreneurs Within," sang the New York Times in 1999. "In the staid world of regulated utilities and energy companies, Enron Corp is that gate-crashing Elvis," crowed Fortune in 2000. Wall Street was demanding tech-size growth on a tech timetable, and Enron, in 2000, obliged with second quarter earnings of $289 million, up 30 percent from the previous year. That year the company seemed to discover a market a minute: Under Skilling, Enron was trading coal, paper, steel, and even weather. No one blinked when a London wine bar became an Enron client. People drank more in warm weather than cold, so why not buy a hedge against the usual winter downturn?
But most exciting to the financial world was Enron's entry into high-tech communications. Because of the company's marketing dominance, EnronOnline became another overnight success, handling $335 billion in commodity trades online in 2000. Enron, as usual, made its money on the spread between the bid price and the asking price. Then there was the broadband business: To Enron, trading excess capacity in large, high-speed fiber-optic networks (empty lanes on the fabled information highway) wasn't that different from trading the capacity of natural gas pipelines. So Enron created a market for what the industry calls bandwidth. Soon after, it also announced a twenty-year deal with Blockbuster to deliver movies on demand electronically to people in their homes. Enron looked like a company that couldn't lose. "Its strategy of building businesses, shedding hard assets, and trading various commodities can help it do well even in an uncertain market," BusinessWeek insisted.
There was, however, another reason Enron did so well in such a short time: the company's hard-nosed approach toward its customers. The old notion of customer service was based on the long haul-you had to nurse and coddle customers to keep them. But Enron had new markets and new ideas-customers had to come to it. Over time, the company stopping referring to its business clients as customers and began calling them "counterparties."
Skilling wanted the biggest profits on the shortest timetable: Gains were maximized by creating, owning, and then abandoning a market before it became overtaxed and overregulated. So if you wanted to launch a high-risk venture quickly-such as Zilkha Energy's new high-tech approach to drilling for oil-you got your financing from Enron because a bank would take forever to underwrite the project, if it ever would. But because Enron invented its markets and subsequently dominated them, Enron could set the terms of its deals, from the timeline to the method of accounting to whether the deal happened at all.
While many businesses used what was known in the industry as "mark-to-market accounting," for instance, Enron used it on an unprecedented scale. The company priced their deals at current market value-but it was always Enron's idea of the market value; companies that balked at their pricing didn't get deals. And while old-fashioned companies spread their profits out like annuities over a period of years, Enron took most of its profit up-front. However many millions would be made on a deal that covered several years, they went on the books in the current year. If a few analysts thought there might be something fishy about what they called "subjective accounting," investors didn't particularly care as long as the profits rolled in. As the market fluctuated and the landscape changed, the company might abandon a project that had been in the works for months because its profit margins weren't going to be high enough. "Enron is known for leaving people at the altar," says one former employee. Winning the highest possible profits for the company could even extend to Enron's attitude toward charity. When a fundraiser for the Houston READ Commission, a literacy group, called on Enron for a contribution, it was suggested that he start raising money for Enron's competing literacy charity: "Even the person who was supposed to give money away for Enron was supposed to make money for Enron," he says.
As Enron became more and more successful, the culture Skilling had created took on a dark side: The competition turned inward. As one member of the Enron family put it, "It became a company full of mercenaries." The change started at the bottom. As Enron's domination of the energy market grew, most of the recruiting frills fell away. New associates were treated much like the commodities the company traded. Global Change's Enron spies reported overhearing orders like "I need a smart person-go buy me one" or "Buy me an intelligent slave, quick." Enron had never been the kind of place where people sang to you on your birthday, but now the workaholism bordered on self-parody: A Random Acts of Kindness program lasted only a few months. It was too disruptive. People couldn't get their work done.
And, of course, Enron had a program for institutionalizing creative tension. The Performance Review Committee, which had initially been installed by Skilling in the Capital group, became known as the harshest forced ranking system in the country. Employees were rated on a scale of one to five, and those with fives were usually gone within six months. (The PRC's nickname quickly became "rank and yank.") It was a point of pride that Skilling's division replaced 15 percent of its workforce every year. As one Skilling associate put it, "Jeff viewed this like turning over the inventory in a grocery store." Skilling's approach to business-get in and get out-had become Enron's attitude toward its workers. In time, it would become many workers' attitude toward the company. Teamwork, never that valuable in a trading culture, went the way of the eyeshade and the abacus. If protocol required an Enron higher-up to come from Europe to help with a project in the Third World, he might help-or he might not, depending on whether another, potentially more lucrative project was pending elsewhere.
Everyone felt the pressure to perform on a massive scale at massive speed: "They were so goal oriented toward immediate gratification that they lost sight of the future," says one former employee. Anyone who couldn't close deals within a quarter was punished with bad PRC scores, as were the higher-ups who had backed them. Past errors and old grudges were dredged up so often as new ammunition in PRC meetings that the phrase "No old tapes" became an Enron clich?. "People went from being geniuses to idiots overnight," says one former Enron executive.
In such a hothouse, paranoia flowered. New contracts contained highly restrictive confidentiality agreements about anything pertaining to the company. E-mail was monitored. A former executive routinely carried two laptops, one for the company and one for himself. People may have been rich at Enron, but they weren't necessarily happy. One recruiter described the culture this way: "They roll you over and slit your throat and watch your eyes while you bleed to death."
BEFORE JEFF SKILLING COULD TRANSFORM ENRON from the world's leading energy company into the world's leading company, he had to make one more change: Just as he had done ten years before, Skilling had to purge the company of its remaining old order. Where Enron once prized cautious executives who dealt with tangible assets like pipelines, it now valued bold executives who dealt with intangible assets. Pipelines, power plants-they may have been Enron's pride, but Skilling wanted them gone. Expensive, long-term building projects had no place when Wall Street was devoted to quick profits and enormous returns on investment capital, and Skilling knew it. "It wasn't the time for long-term approaches," an Enron executive says of Wall Street's mood. "It was the technology era."
To rid Enron of the last vestiges of its past, Skilling had to take on Rebecca Mark, long considered his rival for the CEO's job. Mark was for many years the poster child for the Enron way: Young, attractive, aggressive-her nickname was Mark the Shark-she came from sturdy Midwestern stock but had the requisite Harvard MBA. Mark was largely responsible for the success of Enron International, the asset-heavy side of the company where she developed $20 billion worth of gas and power plants, which accounted for 40 percent of Enron's profits in 1998. For this she reaped breathtaking compensation-one Enron executive estimated $10 million-and adoring press clips, including two appearances on Fortune's list of the fifty most powerful women in corporate America.
But then Mark ran into trouble with a gas-fired power plant in Dabhol, India, one of the largest ever constructed. She had played the game the Enron way: Taking Enron into a new market, she had finagled low import taxes (20 percent instead of the usual 53) and hung in through 24 lawsuits and three changes in government. But the time and expense needed to make India and other Enron plants around the globe successful did not mesh with Enron's goals, and Skilling's impatience with Mark grew.
Forcing Mark out, however, was no easy matter. Key executives left, divisions were dismantled, but she remained. The truth was Enron didn't mind firing lower-level employees, but it hated to fire the kind of aggressive, relentless people it tended to promote. The company preferred humiliation-keeping a director in his cubicle, say, but failing to include him in the glamour deals, or kicking someone upstairs with a fancy title. (One particularly difficult executive won a few years at graduate school, gratis.) A company as smart as Enron could probably deduce too that dispatching one of the most visible businesswomen in the country would provoke a public-relations disaster. So Lay and Skilling did something classically Enronian: They gave Mark her own company. Despite Skilling's contempt for asset-heavy businesses, Enron spent more than $2 billion to buy a run-of-the-mill British water utility that could serve as Enron's entry into the emerging world of water privatization. Mark was put in charge of making Enron, yes, the world's greatest water company. Azurix, as the new business was called, looked like another sure thing: Its IPO in 1999 raised $695 million.
But Mark had to succeed on Enron's increasingly abbreviated timetable in a business fraught with political and emotional complexities. Water is not like gas or electricity-owners and governments are a lot less willing to give it up, even for lots of money. The company stumbled, layoffs commenced, and confidence evaporated. By August 2000 the stock price, which had started out at $19, had fallen to $5. Mark's resignation followed, and Azurix, much diminished, was folded into Enron. "I think it's best for Rebecca to start afresh," Lay, who had been a mentor to Mark, told the Wall Street Journal. Or as one critic put it, "They were more interested in destroying the old culture than running a business."
As 2000 drew to a close, Skilling was in total command. In December Ken Lay announced the inevitable: "The best time for the succession to occur is when the company is doing well," he told the press. "Enron is doing extremely well now." In February 2001 Jeff Skilling took over the CEO's job.
ALMOST IMMEDIATELY THE TROUBLE STARTED. Enron's domination of the electric-power market made it an instant target in the California deregulation debacle. Both PBS's Frontline and the New York Times took on Enron, portraying the company as a heartless colossus that used its influence in Washington (Lay and Enron's political action committee are the top contributors to George W. Bush) to force old people on fixed incomes to choose between buying food or electricity. Skilling and Lay appeared on camera singing belligerent anthems to the free market, while another memorable scene juxtaposed one of the company's jackallike traders against a hapless state employee in California, as both tried to buy power online. The Times reported that Lay had tried to persuade a new federal commissioner to change his views on energy deregulation. The bad press was, to say the least, ironic: Just as the media was pounding Enron for its omnipotence, Wall Street was discovering its weaknesses. By late March the stock price had slid to $50 a share from $80 in January.
Within Enron, the asset-based divisions took the rap for the decline. (The India plant continued to be enormously costly, at least in part because of constant turnover within Enron's management team.) But the California situation was more visible and therefore more damaging, despite Enron's claim that the state had never built enough power plants to service its population and never properly managed those it had. "For three months Gray Davis did a very good job of blaming us," says Mark Palmer, a vice president for corporate communications. "We were a Texas company. There was a Texan in the White House. California was a state that didn't put him in office, and his biggest contributor was a Texas energy company. Performance is going to take care of our stock price. The truth will take care of Gray Davis." (California utilities still owe Enron $500 million, another reason stockholders might be panicky.) But more problematic than the crisis itself was Skilling's all too apparent lack of contrition. Facing down his critics, he cracked a joke comparing California with the Titanic. ("At least the Titanic went down with its lights on.")
But the biggest problem was Enron's telecommunications division, which had been responsible for at least one third of its heady stock price. Investors believed that Enron could revolutionize high-speed communications, just as it had revolutionized gas and power. Enron estimated the global market for buying and selling space over fiber-optic cable would grow from $155 billion in 2001 to $383 billion by 2004-but then the tech bubble burst. So too did the much-hyped movies-on-demand deal with Blockbuster. For the first time in its confoundingly successful life, Enron had nothing new to take to market. Like the popular high school girl who suddenly packs on a few pounds, Enron suddenly looked less alluring to Wall Street.
Skilling launched a campaign to keep Enron's most important cheerleaders, the stock analysts, in the tent, but he wasn't cut out to be a supplicant. During the reporting of first quarter profits, he called an analyst who challenged Enron's financial reporting an "asshole." When the company reported hefty second quarter profits, many analysts questioned whether those profits had come from the generation of new business or from the sale of old assets. Ignoring the growing chorus critical of Enron's accounting, Skilling promised, as he always had, that innovations were just around the corner. "There wasn't any positive news," Carol Coale, of Prudential Financial, says now. "Basically, he talked me out of a downgrade."
The business press, so generous in the past, turned surly. Fortune had asked in March whether Enron was overpriced. ("Start with a pretty straightforward question: How exactly does Enron make its money?") The routine cashing in of stock options that were about to expire by key executives was portrayed in the media as a fire sale. (Skilling had sold $33 million worth, Ken Lay and Ken Rice close to four times that amount.) Then the Wall Street Journal reported on a fund run by the CFO that had been a source of strife within the company. (It was essentially risk management against Enron's possible failures.) Every negative story seemed to produce a concurrent drop in the stock price: By late August it had fallen below $40. Enron, so institutionally unforgiving, finally got a taste of its own medicine. "When Wall Street is in love with a stock, they're forgiving of something like accounting," says Carol Coale. "When a company falls out of favor, all these issues carry more weight."
This fact was not lost on people inside the company, who suddenly started experiencing an attack of conscience. Those who had looked the other way as the most powerful Enron executives dumped their wives and married their secretaries or carried on flagrant interoffice affairs now saw the error of their ways. "It just created an attitude," one executive still at Enron says. "If senior people are doing that, why are we held to a higher standard? There was a real culture of 'We're above everyone else.'"
Loyalty had never been prized at Enron, so there was no reason to expect it now. An old-fashioned, slow-moving company like Exxon could demand hardship duty in Baku with the promise of greater rewards down the road. "But," as one Houston oilman explains, "if you have to negotiate a hardship duty with someone who doesn't have loyalty and has money, then you have a corporation that's better suited for good times than bad."
As it turned out, that description applied to Jeff Skilling too. As the stock price stubbornly refused to ascend, he made no secret of his unhappiness and frustration. Then, after a trip to visit the families of three employees killed at a plant in England, he had an epiphany: Life was short; for him, Enron was over. Ever stoic, Ken Lay returned to the CEO's office, named a new president, arranged a trip to New York to calm analysts and investors, and promised a kinder, gentler Enron in the future. Trading anything and everything was out. The company, Lay says, will still innovate but "innovate much closer to our core." As for the culture: "Things like the Performance Review Committee, I think we could have applied better. By trying to categorize people into so many different categories, you ended up creating a morale problem."
That Skilling's supposedly brilliant colleagues were as shocked at the news of his departure as the rest of the business community may be testament to their lack of emotional intelligence. Despite Skilling's lengthy tenure with Enron, he'd always been contemptuous of the long haul; he'd always believed in cutting losses and moving on. But now that he was abandoning them when the company was in trouble, it was different. "Even Jeff's biggest detractors wouldn't have wanted him to walk out the door," one loyalist admits.
But on the day we meet, Skilling is looking forward, not back. "Look," he says with finality, "ninety percent of my net worth is in Enron. Were my interests aligned with the shareholders? Absolutely."
Free of falling stock prices and shareholder pressures, he is nestling himself back into the world of ideas. His eyes flash as he talks about new technologies. "The first wave never gets it right," he says. "The stand-alone dot-coms didn't work, but the technological applications will create a second wave that will change the world." Houston, he promises, will become the world's center of commodity trading, and he intends to be a part of it. In fact, he is already shopping for office space.
"This is the second wave, and Enron's got it," he says, almost breathless. "There are thousands of people running around the streets of Houston that get it."


TOO COOL


Dan/Dave,

We are working to gather as much information as possible on our exposure to relocated former and current domestic and international employees impacted by Enron's bankruptcy filing.  Lloyd has outlined our position on the urgent issues below. Please keep in mind that regardless of our obligation, the courts have only approved $15K per employee for all expenses less the $4500 payment if applicable.

We will continue to work on getting a comprehensive listing over the next couple of days.

Daniel

 -----Original Message-----
From: 	Whiteurst, Lloyd
Sent:	Wednesday, December 12, 2001 11:13 AM
To:	Brown, Daniel; Callahan, Timothy
Cc:	Pieper, Kalen; Taylor, Diane
Subject:	RE: EES Employee Issues

Daniel,

Per our conversation earlier, I am responding to some of your more urgent employee situations:

Faye Worthy -

Faye was one of the individuals who received a letter from All Relo-Services, Inc/Road Runner Moving & Storage regarding non payment of her moving bill.  A number of suppliers hand delivered invoices to Enron on Friday, November 30th.  When information was released on Sunday regarding Enron's filing for bankruptcy, many of the suppliers got extremely nervous. Faye Worthy's moving bill was for $9,293.69.  On Friday, December 7th., the moving company sent out demand letters to about 33 current and former Enron employees demanding immediate payment since Enron had not yet paid the moving bills.  We were advised that no payments could be made at this time.

Outstanding issues for Faye Worthy:

Unpaid household goods bill -	$9,293.69
Unpaid Temporary Living 	$8,400.00  ($4,500 per month - November & December unpaid)

It is my understanding that Faye Worthy was going to make the temporary living payments and Judy Gray was going to reimburse her.  The household goods bill remains unpaid.  We are awaiting instructions on how and when the outstanding invoices can be paid.

Stephen Borden

Outstanding issues:

Household goods were not delivered on 12/03/01 as scheduled.  The moving company (Xonex) decided not to release his shipment due to Enron's bankruptcy filing.  The amount of the household goods bill is $12,057.38.

New Home Closing Costs - Mr. Borden was scheduled to be reimbursed for his new home closing costs of $22,600.  Mr. Borden purchased his new home and closed on 11/30/01. He paid all of the closing costs.  When the relocation department received his reimbursement documentation, it was to late to process due to the bankruptcy filing.

Per George Wasaff and Judy Gray, they were scheduled to pay Mr. Borden $15,000 maximum including $4,500 severance for all relocation and business expenses.  Mr. Borden has $10,000 in business travel expenses that has not been reimbursed.

Recap:

Household Goods - not paid		$12,057.38
New Home Closing Costs 		$22,600.00 (Paid by Borden and not yet reimbursed)
Business Travel Expenses - 		$10,000 (Paid by Borden and not yet reimbursed)
Final Move Expenses - not paid		$235.00

Stuart Rexrode -

Outstanding issues:

Mr. Rexrode has been contacted by Prudential household goods moving company.  At this point, his shipment has not yet taken place.

Kevin Greiner -

Air shipment has been received.  His ocean shipment is currently in storage with Transportation Worldwide, Inc., (Houston, TX) pending receipt of payment.

Steven Peterson -

Since December 06, 01, shipment has been  held in storage by Transportation Worldwide, Inc. (Houston, TX).

 -----Original Message-----
From: 	Brown, Daniel
Sent:	Wednesday, December 12, 2001 8:24 AM
To:	Callahan, Timothy; Whiteurst, Lloyd
Cc:	Pieper, Kalen
Subject:	FW: EES Employee Issues

Tim/Lloyd,

As you can see from the emails below, EES leadership is extremely concerned about our exposure to both domestic and international relocations. I need to obtain the information on our folks by 11:00 a.m. today so that I can prepare and deliver a document to them.

Please let me know if this will be a problem.

Thanks,
Daniel

 -----Original Message-----
From: 	Leff, Dan
Sent:	Tuesday, December 11, 2001 3:25 PM
To:	Delainey, David W.; Pieper, Kalen; Brown, Daniel
Cc:	Blachman, Jeremy; Gahn, Scott
Subject:	RE: EES Employee Issues

Dan Brown will have a complete list of EES employees, by exposure, with $'s and explanation of situation by 12noon on 12/12/01.  Until then, he and Kalen are managing each case 1 x 1.

Once we have the info in hand, we can meet to discuss the next best steps.

Dan

 -----Original Message-----
From: 	Delainey, David W.
Sent:	Tuesday, December 11, 2001 3:08 PM
To:	Pieper, Kalen; Brown, Daniel
Cc:	Leff, Dan; Blachman, Jeremy; Gahn, Scott
Subject:	EES Employee Issues

Guys, can you please provide an update/status and plan to manage the following EES employee issues:

	a) Steve Borden - moving issues on sale of house and furniture;
	b) Faye Worthy - moving issues on furniture and apartment;
	c) Stuart Rexrode - moving issues on furniture, etc;
	d) Kevin Greiner - moving issues, etc;
	e) Steven Peterson - moving issues, etc;

Great job on Maureen.  Kalen are you aware of any other EES employee issues (such as what we spoke about on Friday) where I can help.  I believe Dan is looking at this as well.

Do we think it might be a good idea to have a meeting to discuss globally?

Regards
Delainey


Do you do expense reports and have not taken the training?

Expense Management System (XMS) - Cost: $135
         June 4th  8:30am-11:30am EB564
June 19th 1:00pm-4:00pm    EB564

The Expense Management System (XMS) is a tool used to electronically submit
your expense report for approval and payment through the Enron Intranet. It
is user friendly, accurate and less labor intensive for you and the
accounting staff.  This system will help you report your travel and
entertainment expenses.

You will learn how to:
E Create New Expense Reports
E Enter Cash Expense Receipts
E Adding Company Card Entries
E Enter Personal Car Mileage
E Foreign Currency Translation
E Reimbursement Method
E Designating your Approving Manager
E Designating your Administrative Assistant
E Submitting Your Expense Report
E Reviewing your Expense Report
E And Much More...

Please login and enroll through the InvestInMe website,
http://www.corptraining.com/index.cfm?company=enron.  If you have any
questions, please call 713 853-1816.


On May 15, 2001, National Grid filed a petition for declatory order in Docket
No. EL01-80 asking the FERC to find that it is not a "market participant"
with respect to the ARTO region in order that it can seek to become the
Managing Member of the Alliance RTO.  The filing was noticed and
comments/protests are due June 14, 2001.

National Grid, a company that operates in New England, claims that it retains
only insignificant generation assets and wholesale marketing operations in
regions remote from the Alliance region (i.e. New England and New York after
the NIMO merger is completed).  It has minor "last resort" sales obligations
which they expect to terminate by 2005.  National Grid will not be providing
ancillary services to the ARTO region.

Let me know if there are any concerns with this filing that EPMI should raise
to the FERC.


Enron Recruitment Technology is launching a new, easy to use, web-based
Employee Referral Program.

 This new site will help you to help Enron find the talent it needs.
Referrals are one of the best sources of talent for Enron in terms of quality
and fit with Enron's culture. We have found that referrals stay with the
company longer and adapt faster than those hired through other sources. This
site will help us run a world-class employee referral program with less work
and better results.

 There are also incentives for you. If you refer a candidate who is hired,
you could be eligible to receive a cash reward of up to $5,000.

 So help someone accelerate their career, make yourself some money, and help
us realize our mission of being the World's No. 1 Company.

 Check out the site - http://enron.referrals.com/promo.asp - let us know what
you think -- we want to hear from you. This application should make referring
easier for you so if you have suggestions that would enhance the program,
send us an e-mail (Referral.Station@enron.com) or contact the Referral
Station at (713) 345-3254, option 2.

 David Oxley

;


We have received a faxed copy of the Amendment to the Electronic Trading
Agreement between ENA and the referenced Counterparty dated January 11,
2000.  The original will follow by Fedex.

Copies will be distributed.


Thanks

--------------------------
Sent from my BlackBerry Wireless Handheld (www.BlackBerry.net)


I will try to find out this afternoon exactly what EES is doing and give you
an update.

---------------------- Forwarded by Chris Germany/HOU/ECT on 07/05/2000 07:36
AM ---------------------------

Craig Breslau
07/03/2000 05:55 PM
To: Susan Wood/HOU/ECT@ECT, Chris Germany/HOU/ECT@ECT
cc: Jennifer Fraser/HOU/ECT@ECT
Subject: Canfibre-Lakawana

Could you please keep me apprised of any  proposals that we make to this
counterparty.  Also, please be sure to check with credit as I believe that
there are some issues with this counterparty.

Thanks,
Craig


Glad to hear this.  read the whole story, hopefully it is true.
PL

---------------------- Forwarded by Phillip M Love/HOU/ECT on 12/11/2000
12:41 PM ---------------------------

Bruce Mills@ENRON
12/11/2000 12:03 PM
To: Phillip M Love/HOU/ECT@ECT, Kevin Meredith/Corp/Enron@ENRON, Derek
Bailey/Corp/Enron@ENRON
cc:
Subject: Fwd: Even if you don't like "forwards"-- read this one!!

True or not, I can't say, but the thought itself is chilling.
>
>
>PLEASE TAKE THE TIME TO READ THIS ONE......
>
>Even if you do not have little kids, pass this one on to everyone you can
>think of. You never know who you might save by sending this e-mail! Please
>take the time and forward this to any friend who
>has children and grandchildren!  Thanks!
>
>I wanted to share something that happened today while shopping at Sam's
>Club. A mother was leaning over looking for meat and turned around to find
>her 4 yr. old daughter was missing. I was standing there right beside her,
>and she was calling her daughter with no luck. I asked a man who worked at
>Sam's to announce it over the loud speaker for Katie. He did, and let me
>say
>he immediately walked right past me when I asked and went to a pole where
>there was a phone.
>
>He made an announcement for all the doors and gates To be locked, a code
>something. So they locked all the doors at once.  This took all of 3
>minutes
>after I asked the guy to do this. They found the
>little girl 5 minutes later in a bathroom stall.  Her head was half shaved,
>and she was dressed in her underwear with a bag of clothes, a razor, and
>wig
>sitting on the floor beside her to make her look different.
>
>Whoever this person was, took the little girl, brought her into the
>bathroom, shaved half her head, and undressed her in a matter of less than
>10 minutes. This makes me shake to no end.
>
>Please keep a close eye on your kids when in big places where it's easy for
>you to get separated.  It only took a few minutes to do - all of another 5
>minutes and she would have been out the door.
>I am still in  shock that some sick person could do this, let alone in a
>matter of minutes.
>
>The days are over when our little ones could run rampant all over the place
>and nothing worse would happen then them annoying people.  The little girl
>is fine.  Thank God for fast workers who didn't
>take any  chances.
>
>BE SURE TO FORWARD THIS TO EVERYONE, SO THEY KNOW JUST HOW SICK PEOPLE ARE
>OUT THERE!!! (This happened at the Sam's Wholesale Club in Omaha,
>Nebraska.)
>
>
>This message has been added to the story above:
>
>I received this e-mail from one of my friends today.  Let me first tell you
>that I work at the Sam's club in Lincoln, NE.  The code that was spoken of
>is called a "Code Adam" It is named after John Walsh's (of
>Americas most wanted) son Adam who was kidnapped and murdered many
>years ago. It is used in all Sam's Clubs, Wal-marts, and Wal-mart super
>centers to locate lost children.
>
>This is how it works.  If by some means you have been separated with your
>child tell the nearest employee!  The employee will page a "Code
>Adam" (missing child in the store) over the
>intercom system followed by a description of the child (height, weight,
>hair
>color, age, name, etc).
>
>When that page goes out all the exits are immediately guarded, and/or
>locked
>in some cases, also every employee will stop whatever they are doing no
>matter what it is and help look for the missing child.  This will continue
>until the child is found.  If the child is not found within a reasonable
>time then the police are notified and the store will conduct a aisle by
>aisle search.
>
>So if ever you are separated from your child now you know what to do.
>Missing children pictures hang by the exits of all Wal-mart and Sam's Club
>stores, please take a few minutes to look these over as you leave, you just
>might have seen one of the children on them and you might be the one to
>give there parents hope and give the police a new lead in finding them.
>
>Thank you.
>
>Sincerely,
>Rudy Magee
>Sam's Club #6413
>Lincoln, NE

______________________________________________________________________________
_______
Get more from the Web.  FREE MSN Explorer download : http://explorer.msn.com


For your further handling.  I don't know what this is.
m
---------------------- Forwarded by Mike McConnell/HOU/ECT on 11/09/2000
12:26 PM ---------------------------

Isabel Ruiz <iruiz@bayou.uh.edu> on 11/09/2000 11:00:05 AM
Please respond to iruiz@bayou.uh.edu
To: mike.mcconnell@enron.com
cc:
Subject: Your ISRC membership fees are overdue!

Mr. Mike McConnell
Enron Net Works

Dear Mr. McConnell:

Your organization's fees for 2000-2001 ISRC membership have not been paid. A
copy of the invoice, dated August 15, 2000 is attached for your information.
Would you kindly look into it and help us to get this settled?

We appreciate your support of the ISRC.

Sincerely,

Dan Currie

P.S. Don't forget our November 16 event on the implications of a Microsoft
breakup. We'll see you there.

-------------
Daniel Currie
Information Systems Research Center
BAUER College of Business, University of Houston

tel: 713-743-4697  fax: 713-743-4693
http://disc.cba.uh.edu/isrc.html/

A I M Center for Investment Management
http://www.cba.uh.edu/ftc/

 - Enron Invoice 2000-2001.doc


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*Penalty applies to any changes made after purchasing
 Southwest Internet Specials.

For more details, please visit us at:
http://www.southwest.com/jp/hotfares2.shtml?src=1016

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 $30 one-way, to/from  Amarillo, TX
 $30 one-way, to/from  El Paso, TX
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 $30 one-way, to/from  Midland/Odessa, TX
 $30 one-way, to/from  Phoenix, AZ
 $30 one-way, to/from  Tucson, AZ

Amarillo, TX
 $30 one-way, to/from  Albuquerque, NM
 $30 one-way, to/from  Dallas Love Field, TX

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 $30 one-way, to/from  Harlingen/South Padre Island, TX

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 $30 one-way, to/from  Norfolk/Southern, VA

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 $30 one-way, to/from  Louisville, KY
 $30 one-way, to/from  Nashville, TN
 $30 one-way, to/from  New Orleans, LA

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 $30 one-way, to/from  Reno/Tahoe, NV
 $30 one-way, to/from  Seattle/Tacoma, WA

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 $30 one-way, to/from  Las Vegas, NV
 $30 one-way, to/from  Oakland, CA
 $30 one-way, to/from  Phoenix, AZ
 $30 one-way, to/from  San Jose, CA

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 $30 one-way, to/from  Nashville, TN

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 $30 one-way, to/from  St. Louis, MO

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 $30 one-way, to/from  New Orleans, LA
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 $30 one-way, to/from  St. Louis, MO

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 $30 one-way, to/from  Houston Hobby, TX

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 $30 one-way, to/from  St. Louis, MO
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Las Vegas, NV
 $30 one-way, to/from  Burbank, CA
 $30 one-way, to/from  Los Angeles, CA

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 $30 one-way, to/from  St. Louis, MO

Los Angeles, CA
 $30 one-way, to/from  Las Vegas, NV
 $30 one-way, to/from  Sacramento, CA

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 $30 one-way, to/from  Birmingham, AL
 $30 one-way, to/from  St. Louis, MO

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 $30 one-way, to/from  Albuquerque, NM
 $30 one-way, to/from  Dallas Love Field, TX
 $30 one-way, to/from  El Paso, TX

Midland/Odessa, TX
 $30 one-way, to/from  Albuquerque, NM
 $30 one-way, to/from  Dallas Love Field, TX
 $30 one-way, to/from  El Paso, TX

Nashville, TN
 $30 one-way, to/from  Birmingham, AL
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 $30 one-way, to/from  Kansas City, MO
 $30 one-way, to/from  New Orleans, LA

New Orleans, LA - Featured Destination
 $30 one-way, to/from  Birmingham, AL
 $30 one-way, to/from  Dallas Love Field, TX
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 $30 one-way, to/from  Baltimore Washington Int'l, MD

Oakland, CA
 $30 one-way, to/from  Burbank, CA
 $30 one-way, to/from  Ontario, CA
 $30 one-way, to/from  Reno/Tahoe, NV

Oklahoma City, OK
 $30 one-way, to/from  Kansas City, MO

Omaha, NE
 $30 one-way, to/from  St. Louis, MO

Ontario, CA
 $30 one-way, to/from  Oakland, CA
 $30 one-way, to/from  Sacramento, CA

Orlando, FL
 $30 one-way, to/from  Ft. Lauderdale/Hollywood, FL

Phoenix, AZ
 $30 one-way, to/from  Albuquerque, NM
 $30 one-way, to/from  Burbank, CA

Portland, OR
 $30 one-way, to/from  Sacramento, CA

Reno/Tahoe, NV
 $30 one-way, to/from  Boise, ID
 $30 one-way, to/from  Oakland, CA
 $30 one-way, to/from  Salt Lake City, UT
 $30 one-way, to/from  San Jose, CA

Sacramento, CA
 $30 one-way, to/from  Los Angeles, CA
 $30 one-way, to/from  Ontario, CA
 $30 one-way, to/from  Portland, OR

Salt Lake City, UT
 $30 one-way, to/from  Reno/Tahoe, NV

San Antonio, TX
 $30 one-way, to/from  Dallas Love Field, TX
 $30 one-way, to/from  Harlingen/South Padre Island, TX

San Jose, CA
 $30 one-way, to/from  Burbank, CA
 $30 one-way, to/from  Reno/Tahoe, NV

Seattle/Tacoma, WA
 $30 one-way, to/from  Boise, ID

St. Louis, MO
 $30 one-way, to/from  Columbus, OH
 $30 one-way, to/from  Indianapolis, IN
 $30 one-way, to/from  Kansas City, MO
 $30 one-way, to/from  Little Rock, AR
 $30 one-way, to/from  Louisville, KY
 $30 one-way, to/from  Omaha, NE
 $30 one-way, to/from  Tulsa, OK

Tampa Bay, FL
 $30 one-way, to/from  Ft. Lauderdale/Hollywood, FL
 $30 one-way, to/from  Jacksonville, FL
 $30 one-way, to/from  West Palm Beach, FL

Tucson, AZ
 $30 one-way, to/from  Albuquerque, NM

Tulsa, OK
 $30 one-way, to/from  Kansas City, MO
 $30 one-way, to/from  St. Louis, MO

West Palm Beach, FL
 $30 one-way, to/from  Jacksonville, FL
 $30 one-way, to/from  Tampa Bay, FL

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You are currently subscribed to special-offers as: dperlin@enron.com
You can unsubscribe anytime at http://www.southwest.com/email/


Hi Dale

Following discussions with Vince, Grant and Stinson, we've drawn up the
proposed budget.  We're working on the basis that Research Group headcount
will grow to 8 in the near future.

Business trips US: 8
Business trips Europe: 10

Computer software and licences: GBP 10,000
Office postage: GBP 350
Employee recruitment fees: GBP 30,000 ( = 3 x 20% x GBP 50,000)
Professional subscriptions and memberships AND books: GBP 15,000
Training courses: GBP 16,000 ( = 8 x GBP 2,000)
Conferences: GBP 8,000 ( = 4 x GBP 2,000)
Mobile phones: GBP 1,500 ( = 3 x GBP 500 = me + 2 floaters)
Hardware: GBP 10,000 ( = laptops, workstations)

Suggested allocation as follows...
RAC 20%
UK Power 20%
UK Gas 5%
Continental Power 20%
Continental Gas 5%
Global products 10%
EBS 10%
EES 10%
...unless you've got any other views on this one (I'm happy to take advice
here).

Vince has said you can give him a call if you want to discuss any of these
points further, but I'm happy to field initial queries (I'll have to get used
to it!).

Cheers,
Steve


On Friday, June 15th, a Draft Decision (by ALJ Barnett) and an Alternate
Decision (by Commissioner Bilas) were released addressing the suspension of
the PX credit and the suspension of direct access.  In short, both the Draft
and the Alternate granted SCE's Petition to suspend payment of the PX credit
as of January 5, 2001.  The Draft Decision continues by invoking Section
80110 of the Water Code (enacted under ABX1 1) and suspending new Direct
Access transactions as of July 1, 2001.  The Alternate does not suspend
direct access but requests comments on how the Commission can accommodate
the concerns of DWR with respect to continuation of direct access (besides
suspension) without violating Section 80110.

Barnett Draft Decision

The Barnett draft goes through an illustration of the PX credit with the
intent of showing that during the rate freeze period "should a direct access
customer pay less than the PX energy price to its ESP, the direct access
customer is being subsidized by the public utility and, perhaps the
utility's ratepayers."  The decision goes on to say, that "we note in the
stipulation between SCE, Enron and WPTF, there is no mention of a cash
refund to direct access customers -- the reference is to a credit." There is
no provision in the stipulation which would require SCE to make a cash
payment in lieu of a credit.  "Utility cash which is in short supply, should
be conserved to provide reliable service, not subsidize direct access."
The draft decision continues by suspending DA as of July 1, 2001 and
applying the order to PG&E as well.

Bilas Alternate

The Bilas Alternate goes through a similar analysis with respect to the PX
credit payments (without as much verbiage as to the subsidization of DA
customers).  Bilas also makes it clear that while payment of cash is
suspended, "SCE must continue to track and accrue credits for DA customers."

With respect to the suspension of direct access, the Bilas Alternate holds
off.  It appends a letter from DWR to the Commission as to its concerns
about the impact of the continuation of Direct Access on the issuance of the
bonds and asks parties to comment thereon. It is letter, DWR has set forth
what it believes will be required in the way of exit fees by DA customers to
allow the issuance of long term bonds with investment grade.

In addition, Bilas is looking for comments on getting away from the PX
credit and going to a bottoms up calculation of DA customer bills.

Comments

Comments on Both the Draft and Alternate are due on Monday the 25th.

Comments on moving to a bottoms up approach are due on July 6th.

Copies of the decisions have been faxed to Sue Mara in SF and Jim Steffes in
Houston. They are also available on the commission's web site under the
"currently open for comment" section.  If anyone would like me to fax them a
copy directly, let me know.

Jeanne Bennett


can we get a copy of gary's comments from cnbc?
----- Forwarded by Steven J Kean/NA/Enron on 12/04/2000 08:59 AM -----

	Maureen McVicker
	12/04/2000 08:48 AM

		 To: Steven J Kean/NA/Enron@Enron
		 cc:
		 Subject: Re: See Jeff Skilling's CNBC interview on IPTV

FYI -

----- Forwarded by Maureen McVicker/NA/Enron on 12/04/2000 08:48 AM -----

	Gary Hamel <ghamel@strategos.com>
	12/02/2000 06:27 AM
	Please respond to ghamel

		 To: Maureen.McVicker@enron.com
		 cc:
		 Subject: Re: See Jeff Skilling's CNBC interview on IPTV

You might be interested to know that I gave Enron a big plug last week when I
served as guest host on the evening
European news roundup broadcast from CNBC's London studios.

Gary.

Maureen.McVicker@enron.com wrote:

> >From Maureen McVicker (Steve Kean's Assistant)
>
> If you have any questions, please call me at 713-853-1808.
>
> ----- Forwarded by Maureen McVicker/NA/Enron on 12/01/2000 04:32 PM -----
>
>                     Public
>                     Relations            To:     All Enron Worldwide
>                     Sent by:             cc:
>                     Public               Subject:     See Jeff Skilling's
CNBC interview
>                     Relations            on IPTV
>
>
>                     12/01/2000
>                     03:19 PM
>
>
>
> (Embedded image moved to file: pic26924.pcx)        Public Relations
>
> Did you miss Jeff on CNBC "Street Signs" yesterday?  Not to worry.  Your
> ever benevolent communications team has arranged for Jeff's interview to be
> played on an IPTV webcast.  Just point your browser to
> http://iptv.enron.com, click the link for special events, and then choose
> "Skilling CNBC."  The interview will be available every ten minutes through
> Wednesday, Dec. 6.
>
>   ------------------------------------------------------------------------
>                    Name: pic26924.pcx
>    pic26924.pcx    Type: Corel PHOTO-PAINT 6.0 Image
(application/x-unknown-content-type-CorelPhotoPaint.Image.6)
>                Encoding: base64


Regarding proposed rate freeze for large SDG&E customers at 6.5 cents:

Adds to DWR's burden of covering the net short positions without any further
clarification of how shortfall will be funded.  The incentive these customers
now have to participate in DA and thereby remove burden from DWR is removed.

Creates incentives to increase usage and decrease conservation, exactly at
the time that just the opposite effect is desired.  Rate at frozen level
removes all price signal effect in unregulated market.

These are customers who under existing law already have had choice, as an
alternative to paying market price,  of 1) voluntarily opting in to a one
year 6.5 cent rate freeze, with a true-up, or 2) buying commodity and risk
management products in the competitive market, as many of them have already
done, and 3) reducing usage to save money.  This bill takes takes away the
last two choices/incentives.

Adopting "rates by proxy" (in a sense, indexed to PG&E and SCE rates) creates
the potential for a regulatory nightmare.

As an alternative, the Legislature should consider extending the voluntary
opt-in program under existing law.  This would preserve existing protection,
keep choices available to customers, and not unduly add to DWR's burden.

As another alternative, we could be a lot more willing to accept this IF the
"end of the rate freeze" date in (f) were specified to occur no earlier than
the date new rates are put in place (the proposed language from 18X,
remember?) and it were clear that existing DA contracts were not overturned
by this Act.


yeah, thats one reason i wasn't too worried about not knowing anyone there.
That still might turn out to be ENE all over again.

----- Original Message -----
From: <Jeff.King@enron.com>
To: <mlorenz@houston.rr.com>
Sent: Wednesday, January 23, 2002 1:54 PM
Subject: RE: Resume

> I'd stay away from Calpine.....i don't think they're doing that well.
>
>     -----Original Message-----
>    From:   "Matt Lorenz" <mlorenz@houston.rr.com>@ENRON
>    Sent:   Wednesday, January 23, 2002 11:12 AM
>    To:     King, Jeff
>    Subject:  Resume
>
>
>    Jeff
>
>    Here's my resume.  Im gonna try to push the  TXU thing by making some
>    calls.
>    If you can send it to someone there too that would  be great, the more
>    angles the
>    better.  Id certainly appreciate any help you  can give me.  I also
>    meant to ask you,
>    i don't know if we mentioned Calpine on the phone,  thats one thats in
>    town, but i dont
>    really have a contact.
>
>
>    Thanks for the help.
>
>    Matt
>
>
>
>     - MattLorenzResume.DOC << File: MattLorenzResume.DOC >>
>
>
>
> **********************************************************************
> This e-mail is the property of Enron Corp. and/or its relevant affiliate
and may contain confidential and privileged material for the sole use of the
intended recipient (s). Any review, use, distribution or disclosure by
others is strictly prohibited. If you are not the intended recipient (or
authorized to receive for the recipient), please contact the sender or reply
to Enron Corp. at enron.messaging.administration@enron.com and delete all
copies of the message. This e-mail (and any attachments hereto) are not
intended to be an offer (or an acceptance) and do not create or evidence a
binding and enforceable contract between Enron Corp. (or any of its
affiliates) and the intended recipient or any other party, and may not be
relied on by anyone as the basis of a contract by estoppel or otherwise.
Thank you.
> **********************************************************************
>


Please see attached.   Don't hesitate to call me if you have any questions or
concerns.

Stan


Hi.

You probably thought that I feel off the end of the world.  Please take a
look at this and give me a call.

Thanks,

Kay
---------------------- Forwarded by Kay Mann/Corp/Enron on 12/06/2000 06:34
PM ---------------------------

Scott Laidlaw@ENRON_DEVELOPMENT
12/06/2000 03:41 PM
To: John Schwartzenburg/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
cc: Ben Jacoby/HOU/ECT@ECT, Kay Mann/Corp/Enron@Enron, Chris
Booth/NA/Enron@Enron, Dan Shultz/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Matthew
Tezyk/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Frank R
Cervenka/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT

Subject: Westinghouse 501D5A damaged generator

john - thanx for your time on phone this afternoon.

a) just received cc of letter from westinghouse.  in it, they assert that:

"title to the existing generator passed to enron upon delivery into the
united states.  delivery occurred at houston on or about 23jul00.  as
required by the contract and incoterms 1990, risk of loss to the generator
passed to enron when the generator arrived (ddp) at houston while the
generator remained on board the common carrier.  the generator was delivered
in an undamaged condition.  title and risk of loss passed to enron before the
water damage to the generator occurred."

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

b) per the contract between enron and westinghouse:

section 15.1.2 title to Equipment - Title to the Equipment will pass to
Purchaser immediately upon entry into the united states.
section 15.2 risk of loss - Seller shall bear the risk of loss and damage
with respect to the Equipment until delivery of the Equipment to the Delivery
Point in accordance with Section 3.2.1.  Seller shall be required to inspect
the Equipment for damage at the Delivery Point.
section 3.2.1 - Seller shall cause the Equipment to be delivered to the
Delivery Point on a DDP basis in accordance with Sections 10.2.1 by the date
set forth therein.
section 3.2.2 - Seller shall be responsible for delivering the CT-Unit DDP to
the: (iii) u.s. port of export by any means of transport.
section 3.2.3 - Seller shall perform customs clearance for the Equipment
through u.s. customs and pay any import duties.
section 10.2.1 Guaranteed Unit Delivery Date - Seller will cause the CT-Unit
(author's note - includes the generator) to be delivered in an undamaged
condition in accordance with the Specification-CT to the Delivery Point (DDP)
in accordance with Schedule I below (the Guaranteed Unit Delivery Date).
(author's note - the date specified in the contract was later slipped per
agreement with enron).
section 10.2.3 Completion of Delivery - delivery of the CT-Unit to the
Delivery Point shall be considered complete for the purposes of Delivery
Liquidated Damages as it pertains to the delivery of Major Components
(author's note - includes the GT and generator) when the last Major Component
of such CT-Unit is delivered DDP to the Delivery Point in complete and
undamaged condition.  ...  Purchaser shall have the right to inspect the
Equipment for condition of the Equipment upon actual delivery.  Purchaser
reserves the right to reject damaged Equipment at any location; however, in
the event a portion of the Equipment is damaged or defective upon delivery to
the Delivery Point, Purchaser after making an initial assessment of the
damage or defect and consulting with Seller as to how such damage will affect
the installation , operation, performance, reliability, efficiency, and
warranty of the damaged Equipment may either:
(i) reasonable determine that such damage or defect is such that the
preceding criteria is so adversely affected that Purchaser cannot accept
delivery of the damaged Equipment and declare that delivery has not occurred,
or
(ii) after taking into account such criteria and Seller's proposed plan for
correcting such damage or defect in accordance with Section 9.5, declare that
delivery has occurred: in the event Purchaser discovers such a damage or
defect, it shall notify Seller of such as soon as practical.

c) facts of the case, as we know them:

common carrier ship carrying the generator supposedly arrived in port of
houston approx. 14jul00.  i.e., that was the ship's estimated time of arrival
(eta).
westinghouse is claiming that delivery occurred on or about 23jul00.
enron representative (frank cervenka) went to CTSS (i.e., the westinghouse
facility here in houston) on friday, 21jul00 to inspect the combustion
turbine.  during that inspection, westinghouse employees informed him that
the generator had salt water damage at the port.  as a result, the following
monday, 24jul00, he visited the port of houston with the siemens-westinghouse
insurance adjustor and saw the damaged generator.  note - this was just a
cursory visit to verify that in fact the unit had been damaged.  the full
extent of the damage and impact on the project was not known at that time -
e.g., repair or replace were still viable options.
enron received formal notification (faxed letter) of the damaged generator on
approx. 18aug00.
enron has already made progress payments to siemens-westinghouse in the
amount of 95% of the contract value of the gas turbine and generator.
DDP, per incoterms 1990, means delivered duty paid.
Westinghouse, despite 2 prior requests from enron, has not provided copies of
the customs clearance documentation.  i.e., we don't know the exact date that
the generator cleared customs, or if it cleared customs.
title means ownership, but does not imply either risk of loss or care,
custody, and control.  with title comes both ownership and the responsibility
for payment of taxes.

d) info not known by enron:

when did ship come into port?
when did damage to generator occur?
when, or if, u.s. customs duties were paid?

f) info known by enron:

generator is a total loss, as determined by westinghouse.
per section 10.2.3 of contract, enron was not given the formal opportunity to
inspect the damaged generator until a month after it arrived in port.  as
recalled by matt tezyk, westinghouse was then advised by enron in writing
that the generator was rejected and that delivery had not occurred.
(author's note - matt to find cc of that letter).

g) enron's assertions are that:

DDP was not satisfied.  i.e., delivery of the generator did not occur in
accordance with the terms of the contract.
title (i.e., ownership) remains with siemens-westinghouse.
risk of loss remains with siemens-westinghouse.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

john - plz assess the copy of the contract provided to you this afternoon
under separate cover.  we request a legal opinion as to whether delivery, in
accordance with the contract, of the CT-Unit occurred or not.  plz call with
any questions.  regards.  scott.


Attached please find the file detailing out the commercial terms for each
transaction as well as the receivables owed. Please call if you have
questions.

Tanya


I added a demand charge of $93,835 to the Oglethorpe ticket for December.


Yes, Global agrees.

From: Stephanie Sever/ENRON@enronXgate on 04/24/2001 04:02 PM
To: Tana Jones/HOU/ECT@ECT, Kelly Lombardi/NA/Enron@Enron, Karen
Lambert/HOU/ECT@ECT
cc: Lisa Lees/ENRON@enronXgate, Tom Moran/ENRON@enronXgate
Subject: FW: Product Type approval for 2 product types (US Residual Fuel Oil
1% and 3% Crack Spreads)

Tana/Kelly/Karen:

The product long descriptions below will fall under two new product types:
   US Residual Fuel Oil 1% Crack Spread
 US Residual Fuel Oil 3% Crack Spread

Credit (Tom Moran) has approved copying the profiles for the new product type
from the following:

 US Oil HSFO Fin Swap

Please respond no later than 10 a.m. on Wednesday, April 25.

Thank you.

 -----Original Message-----
From:  Moran, Tom
Sent: Tuesday, April 24, 2001 3:05 PM
To: Sever, Stephanie
Subject: FW: Product Type approval for 2 product types (US Residual Fuel Oil
1% and 3% Crack Spreads)

 -----Original Message-----
From:  Moran, Tom
Sent: Monday, April 23, 2001 1:08 PM
To: Lees, Lisa
Cc: Guidroz, Walter
Subject: FW: Product Type approval for 2 product types (US Residual Fuel Oil
1% and 3% Crack Spreads)

Lisa,

Please copy the existing counterparty profiles from: &US Oil HSFO Fin Swap8
and use it for these two new products:

US ResidOil Spd  NYH 1% Crack Spread
US ResidOil Spd  GC 3% Crack Spread

Regards,
tm

 -----Original Message-----
From:  Walker, Chris
Sent: Monday, April 23, 2001 12:17 PM
To: Blumenthal, Jeff; Musch, Susan; Hagelmann, Bjorn; Moran, Tom; Swinney,
John; Taylor, Mark
Cc: Lees, Lisa; Sever, Stephanie; Jones, Tana; Lambert, Karen; Lombardi,
Kelly; Sweitzer, Tara; Kenne, Dawn C.; Moorer, Torrey; Meredith, Kevin;
Lozano, Melba; Hunter, Larry Joe; Cass, Robert B.
Subject: Product Type approval for 2 product types (US Residual Fuel Oil 1%
and 3% Crack Spreads)

Your approval is needed for the following 2 product types in Datamanager:

US Residual Fuel Oil 1% Crack Spread
US Residual Fuel Oil 3% Crack Spread

Please do not approve between the hours of 6 am and 11 am..

US ResidOil Spd  NYH 1% Crack Spread     Jun01           USD/bl/m

A US Residual Fuel Oil financial Swap Transaction with Enron North America
Corp., under which the Seller pays a Floating Price and the Buyer pays the
price submitted by Counterparty on the Website (the Fixed Price) in each case
in respect of the Notional Quantity per Determination Period.  Each calendar
month during the term of the Transaction will be a Determination Period. The
Notional Quantity per Determination Period shall be the volume submitted by
Counterparty on the Website.  The Payment Date(s) will be 5 business days
after the Floating Price is determinable. The Floating Price shall be the
Index for the relevant Determination Period.
The term of the Transaction shall be from the Effective Date of 01 Jun 2001
to the Termination Date of 30 Jun 2001.
The Index for a Determination Period shall be the difference obtained by
subtracting (i) the arithmetic average of the daily settlement prices for the
prompt month NYMEX Light Sweet Crude Oil Futures Contract for each Pricing
Date in such Determination Period from (ii) the arithmetic average of the
mean of the daily quotations for No. 6, 1%S Max appearing under the heading
"New York/Boston Cargo" in the section entitled "Product Price Assessments"
for those issues of Platt's Oilgram Price Report published for each Pricing
Date in such Determination Period. "Pricing Date" means, a day on which
Platt's Oilgram Price Report is published and which is also a NYMEX trading
day.
The price is quoted in US Dollars per unit of volume, which will be the
Contractual Currency.
The unit of measure against which the price is quoted shall be Barrels per
month and the quantity shown shall be in Barrels per month.

US ResidOil Spd  GC 3% Crack Spread      Jun01           USD/bl/m

A US Residual Fuel Oil financial Swap Transaction with Enron North America
Corp., under which the Seller pays a Floating Price and the Buyer pays the
price submitted by Counterparty on the Website (the Fixed Price) in each case
in respect of the Notional Quantity per Determination Period.  Each calendar
month during the term of the Transaction will be a Determination Period. The
Notional Quantity per Determination Period shall be the volume submitted by
Counterparty on the Website.  The Payment Date(s) will be 5 business days
after the Floating Price is determinable. The Floating Price shall be the
Index for the relevant Determination Period.
The Effective Date is 01 Jun 2001. The Termination Date  is 30 Jun 2001.
The Index for a Determination Period shall be the difference obtained by
subtracting (i) the arithmetic average of the daily settlement prices for the
prompt month NYMEX Light Sweet Crude Oil Futures Contract for each Pricing
Date in such Determination Period from (ii) the arithmetic average of the
mean of the daily quotations for No. 6, 3%S appearing under the heading "U.S.
Gulf Coast Waterborne" in the section entitled "Product Price Assessments"
for those issues of Platt's Oilgram Price Report published for each Pricing
Date in such Determination Period.  "Pricing Date" means, a day on which
Platt's Oilgram Price Report is published and which is also a NYMEX trading
day.
The price is quoted in US Dollars per unit of volume, which will be the
Contractual Currency.
The unit of measure against which the price is quoted shall be Barrels per
month and the quantity shown shall be in Barrels per month.

STEPS FOR APPROVAL:

click the  START button
select  PROGRAMS
select  TEST APPLICATIONS
select ENRONONLINE CLUSTER(PROD)
 PROCEED WITH USUAL LOGIN/PASSWORD
click the Enron Online Production Cluster "START" button
select EnronOnLine (this is the EOL Datamanager)
 PROCEED WITH EOL LOGIN/PASSWORD
click on the "+" for EnronOnLine
click on the "+" for Product Types
click on the "+" for "Awaiting Approval" (OR  "Partially Approved")
select the product requiring review as stated in e-mail above
Right "mouse" click on "properties" to view product set-up
TO APPROVE:  Right mouse click on "Approved"


PRELIMINARY EARTHQUAKE REPORT
Rapid Earthquake Location Service
U.S. Geological Survey, Menlo Park, California
U.C. Berkeley Seismological Laboratory, Berkeley, California

Version 2: Updates lower and earlier versions of this earthquake report

A MINOR EARTHQUAKE OCCURRED AT 11:59 AM PDT Saturday, May 26, 2001.
THE MAGNITUDE 3.9 (ML) EVENT IS LOCATED  20 MILES E   OF LEE VINING, CA
THE HYPOCENTRAL DEPTH IS   8.6 MILES.

This event has been reviewed by Steve Walter - USGS.

PRINCIPAL EARTHQUAKE PARAMETERS
_______________________________

Magnitude              : 3.93  ML
Event Date & Time      : 05/26/2001   11:59:03 AM PDT
05/26/2001   18:59:03    UTC
Location               : 37.9855 N, 118.7600 W
            : (37 deg. 59.13 min. N, 118 deg. 45.60 min. W)
Depth                  :   13.8 km. deep (   8.6 miles)
Location Quality       : Good

32 km ( 20 miles) E   ( 84 degrees) of Lee Vining, CA
33 km ( 21 miles) SE  (139 degrees) of Bodie, CA
41 km ( 26 miles) SSW (210 degrees) of Qualeys Camp, NV
42 km ( 26 miles) NNE ( 26 degrees) of Mammoth Lakes, CA
48 km ( 30 miles) N   (352 degrees) of Toms Place, CA

ADDITIONAL EARTHQUAKE PARAMETERS
________________________________

number of phases             : 110
rms misfit                   :   0.08 seconds
horizontal location error    :   0.2  km
vertical location error      :   1.1  km
maximum azimuthal gap        : 110    degrees
distance to nearest station  :  33.   km
event ID:   51108285

EDIS-05-26-01 1224 PDT

---------------------------------------------------------
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visit our webpage at http://www.incident.com/edismail.html.

EDIS is operated by the Governor's Office of Emergency Services,
State of California. This email relay is offered by incident.com
as a public service. Because of the complexity of this system and
its dependence on other systems, we cannot be responsible for
delays or failures in transmission.
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Are you sure, I got a message this morning that said FirstEnergy Trading Corp
- no space.  Please advise.
PL


Mark, I understand that for certain short term Canadian physical deals
completed between ENA and Enron Canada through the facilities of EnronOnline,
ENA and Enron Canada have agreed to transact these deals as physical deals
but book them as financial deals.  I was asked to prepare an agreement to be
entered into between ENA and Enron Canada to reflect this agreement.  I
attach a copy for your review and comment.  Please call me to let me know if
you have any comments at your earliest convenience, as I understand that
there is some urgency in getting this agreement in place.

Thanks

Greg Johnston (403-974-6745)


Directions to our house:
1) I-45 to I-35E North at downtown
2) North on I-35E to 183 West.
3) 183 West splits at Texas Stadium. Take 114 West.
4) Take 114 West to 121 North.
4) North on Highway 121 to Highway 2499 North.
5) Take 2499 North through three traffic lights.
6) After the three lights, you will go a 2-3 miles and see a small offfice park on the left called Fountain Place or Fountain Park.
7) Immediately after passing the office park take the next left -  Spinks St.
8) Take an immediate left on Surrey. You will see the housing development at this point.
9) Take the next right on Solano.
10) Take the next left on Crestfield.
11) Take the next left on Stillwater Ct.
12) We are the fourth house on the left.   2604 Stillwater Ct.