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Enron Mail |
Mark,
Unfortunately, I have been completely buried on the LDC sale process, but I finally had the opportunity to speak with Bruce Lundstrom a couple of nights ago regarding the tentative plans for the South American legal organization. As I told Bruce, I really had not had the opportunity to think very much about the proposed structure and wanted to give it some more thought before formulating a final opinion. Given the differences in our time zones these days, I thought it might be better to send you this e-mail rather than trying to catch you by phone. Bruce indicated that you wanted to keep the SA legal group integrated so that services can be dispensed to the various business functions without being allocated specifically to the various business units operating within the region. As you and I discussed a couple of weeks ago, I agree with this (so-called "Enron Europe Model") approach. It seems to me to be the best way to maximize group cohesiveness, improve the budgeting and fee monitoring process, facilitate recruiting, and maintain regional legal expertise and core competencies. Bruce also wanted my thoughts on the idea of having this group report into the Global Asset group general counsel, rather than to you directly. As I told Bruce, I have absolutely no problem, personally, in reporting into him, if that is what's finally decided. The only thing I wanted to think about was whether the structure makes sense given the nature of the region and its legal activities. That said, and after thinking through it, I do have some concerns about moving the group one step "down the ladder" within your organization (actually, since the group currently reports into the Enron Corp Office of the General Counsel, I guess it would be moving down at least two rungs). Regardless of whether I, or in the longer-term someone else, is the general counsel of this regional legal group, I would suggest that you have it report into you directly, rather than through any one business unit. First, this is a large group, the largest of the old "EI" groups, covering a big geographic area. Even after the Gas LDC's and Elektro are sold, the South American legal group will still have a total of 29 lawyers: 13 Enron lawyers (counting 1 in Houston, 5 in Sao Paulo, 2 in Rio, 2 in BA, and 3 at Vengas in Caracas [since Vengas is effectively controlled by Enron]) and 16 other lawyers within the group's supervisory responsibility at Promigas (4), TGS (5), Transredes (6), and Cuiaba (1, currently a vacancy following Ann Birosel's departure). In all, we have individual legal groups located in eight different cities in Brazil, Argentina, Bolivia, Colombia and Venezuela. Second, the group covers a lot of different areas of activity, much of which is unrelated to the Global Asset function. As I told Bruce, most of the senior Enron lawyers in the group are focused on supporting the origination functions for the region. I understand these functions will continue on the business side under Joe Kishkill, Orlando Gonzalez and Brett Wiggs, who will report to Delaney/ Lavorato and not to McDonald/Hughes. The major assets are operated within the joint venture companies (TGS, Transredes, Cuiaba, BBPL, Vengas) almost all of which have legal groups that work closely with Enron's. As asset sales efforts are expected to increase and we are expected to start construction on two power projects in Brazil, I told Bruce that I would recommend that one or two of the gas unit lawyers (certainly Vicky Martinez and maybe Paula Porto) be moved to focus on the the Global Asset management function, to give it more transactional flexibility and native Portuguese language capability. Subject to whatever is ultimately decided about the BA office, I assume the trading function will also continue to exist within the region, and that the trading lawyers will continue to be represented there as well. None of this is to suggest that these groups of lawyers should be permanently assigned to particular functions and not made available for other functions. It just doesn't seem to me to be very practical, functionally, to have these origination and deal activities reporting into you through the one side of Enron Wholesale that is not directly related to the origination, trading and other "deal" side of the business. Bruce explained to me that he was concerned that good lawyers would be "picked off" by other business groups and not available to work on the asset side of the business, and that this somehow partially justified moving all the lawyers underneath the Global Asset group, at least initially. I am not sure I fully understand the logic of that, but to be fair to Bruce, it was late here and I might have been a little slow. It seems to me, however, that the Enron Europe Model handled that pretty well by having all of the lawyers available for work in different areas, as the need arises, and by having the regional general counsel perform the role of the "honest broker" in allocating attorneys to the different constituencies. I really don't see the need to do something radically different in South America, especially given the obvious comparisons between the two regions. Third, I think the business guys might question the reporting structure. One of the advantages of the Enron Europe Model, as I appreciate it, is that it allows the general counsel to allocate scarce legal resources without the appearance of unfairness or favoritism. It may not be so easy to explain to one of the origination folks why the lawyer they want to use is unavailable and committed to a project on the asset side, without appearing impartial, when he knows the general counsel reports to the asset side of the business and not the deal side. It just seems to me to invite unnecessary friction going forward. Fourth, aside from appearances, I think there is an advantage in ultimately having the staffing and legal support priorities for the region set at a level that has some distance from the often competing interests of the individual components of the separate business lines. If there is a hard call to be made in allocating resources between Global Assets and the origination functions, it is just going to be easier for the decision to be made by the regional counsel in direct consultation with you, based on your understanding of Mark Frievert's priorities, than it would be to expect Bruce or any other business group general counsel similarly situated to tell their respective business group heads that they can't have the attorneys they want because another business group needs them more or has a more important or strategic priority. Finally, given the breadth of what is expected to go on down here, and the number of lawyers and countries involved, I would think you would want to receive your reports directly from the regional general counsel, rather than through any one of the other business group general counsels. That is not to say that Bruce or anyone else would not be able to report things without unduly filtering them, but to some extent that happens naturally as a reporting structure becomes more heirarchical. I know that a balance needs to be struck between having too many direct reports, on the one hand, and reducing the quality of information flowing up to you, on the other. For what it is worth, however, I would suggest that you strike the balance in this case in favor of direct reporting. Plus, it seems to be working fine in Europe, if that is to be the paradigm. As I said, I will go with whatever is finally decided, but I thought I should at least give you my thoughts on the issue. If you want to discuss it further, please feel free to give me a call. I should be back in Houston next week, for a while at least. Hope all is well, and I look forward to seeing you again soon. Regards, Randy
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