Enron Corp. Strategy

Dear David:

Thanks so much for your voicemail message confirming your agreement and ass=
urance that the Enron HR Global team will ensure compliance with the strate=
gy approved by the Enron Corp. Board of Directors relating to the use of se=
parate lines of business to manage Enron's risks, liabilities and costs.

As you know Enron maintains many separate lines of business with separate a=
ssets, directors, officers, employees and payrolls. This provides a protec=
tive shield described or known as the "corporate veil". Thus, in the event=
of litigation, only the assets of the individual business are subject to s=
aid litigation, its attendant risks, liabilities and costs if Enron adheres=
to basic corporate principles and the separate line of business is truly a=
separate entity. If the corporate veil is pierced and other Enron entitie=
s, including Enron Corp. are successfully subjected to the risks, liabiliti=
es and costs of said litigation, then all of the assets of Enron would be a=
t risk. Further, litigation, risk management, accounting and finance, tax=
, treasury, and many other Enron Corp. groups work diligently to ensure com=
pliance with this strategy. All filings with the federal government, inclu=
ding the 10K and Proxy Statements, reflect this strategy. In addition, ther=
e are certain Enron benefits, namely the Enron Corp. 1994 Deferral Plan, wh=
ich require all participants in said plan be an employee of Enron Corp.

One of the additional ways Enron minimizes said risks is to ensure that emp=
loyees are employed and paid by the proper employer. Thus, Enron has many =
payrolls and Enron Corp. is not a master payroll company. As you know, the=
pipelines are regulated by the FERC (Federal Energy Regulatory Commission)=
and separate payrolls are necessary for each pipeline. Further, Enron has=
separate payrolls for it union companies, its third country nationals and =
its expatriates. These payrolls are in addition to the local payrolls of =
Enron in those countries in which we do business around the world.

Thus, it is imperative that each of the Enron entities properly reflect the=
ir respective directors, officers, and employees. Here in the United State=
s, each of our separate lines of business have separate Federal Employer Id=
entification Numbers. During times of Enron reorganization and movement of=
Enron employees from one Enron entity to another, if this movement results=
in a change in the employee's employer, under the U.S. Tax laws, FICA With=
holding for both the new Enron employer and employee begin again. The empl=
oyee may file a new W-4 form to alleviate some of the tax consequences or t=
he employee can wait until he/she files the income tax return for the year =
in question and receive a refund. The Enron employer does not receive a re=
fund or any credit when it must pay the employer's portion of FICA even tho=
ugh it has been paid in whole or in part by another Enron employer. This p=
ayment by the Enron employer is a small amount to pay in comparison to the =
overall risks.

As we discussed, any changes with respect to this strategy, including the i=
mpact on payroll, Enron employers, and Enron employees must be reviewed and=
approved by the Enron Corp. Board of Directors due to the significant risk=
s to Enron Corp., its subsidiaries, divisions, and affiliates. =20

I appreciate your enthusiasm for compliance with this important strategy an=
d respectfully request your immediate assistance in communicating this stra=
tegy to your team and assuring that they in turn make sure that all of the =
Enron employees who are not currently employed by the proper Enron employer=
are transferred as soon as humanly possible in order to minimize the risks=
. I understand that failure to place the employee in the proper company ha=
s an impact in many areas around Enron, including PRC, compensation, ibuyit=
, ipayit, and benefits, just to name a few.=20

If you have any questions, please contact me at 713-853-7224.

Thanks so much for your help.

Sharon

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