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Enron Mail |
Thanks for your prompt response. I really hope that you can convince Mark
Taylor that transferring the financial confirmations to Calgary is the right thing to do. As you recall, we have been down the road of improving the service to Calgary previously. This seems to work in the short term, but as soon as there is turnover in the group, which unfortunately seems to occurs regularly, the service level starts to drop. I would like you to consider the following arguments in favor of transferring this function to Calgary when you meet with Mark. First, when the recommendation first came out to transfer to financial confirmations to Calgary, Mark Taylor's concern was our legal staff. At that time, we had one attorney who did not have expertise in the financial area. We now have three very competent attorneys. Greg Johnston has spent time in Houston and has recently attended an ISDA training course. Second, there are problems with the confirmations that are prepared by Houston and with the process itself. At the time of the Project Doorstep audit, we provided you with a list of confirmations that had not been sent out after we had approved them. As you saw from my memo, confirmations are periodically sent out without our review. Also, we have found mistakes in the confirmations themselves, including the contract date referred to in the confirmation. The first two issues cause me a lot of concern. Some of the confirmations sent out without our review were wrong, which is a big problem. We had a large number of confirmations that were never sent out, which is even a bigger problem. Third, there is no real additional control in the process by having Houston generate the confirmations. If you think about what the process is, the transactions are done in Calgary, we fax the deal sheets to Houston, the confirmation is generated using a template that has been pre-approved by legal, we review and approve the confirmation and execute them on-line if done by Enron Canada Corp., or send an e-mail if the Enron Entity is Enron North America. Houston faxes the confirms to the counterparty. If the counterparty is a trading company, Houston follows up on the status of execution. For all other entities, the Calgary office is now doing the follow-up. All these transactions are currently settled out of the Calgary office. If the transactions were done in Calgary, we would be using the same pre-approved templates that Houston is using. It is not clear to me where there is any additional control by having the confirmations done in Houston, or, conversely, why there is any additional risk in having Calgary prepare our own financial confirmations. If there is some perception that an element of risk exists by having Calgary prepare the financial confirmations, why are we allowed to prepare the physical confirmations? Fourth, there is a duplication of effort by having the preparation done in Houston while the review process is done in Calgary. Currently, Houston has staff handling the Calgary transactions. Because the confirmations are reviewed and approved here, I have similar staff who print the confirmations, route them for review, update TAGG, notify Houston when the review is complete, and then follow-up with either Houston or the counterparty on issues or execution. We are currently following up on all non-trading company financial confirmations. So, we are both printing and reviewing the transactions, following up with the counterparties, and filing these documents. As I stated before, Calgary could assume full responsibility for the financial confirmations without adding any staff. Fifth, there is an increase in the amount of time needed to get the confirmations to the counterparty by having the preparation done in Houston. Because of the number of times the information has to go back and forth, the confirmations rarely get to the counterparty within 24 hours of the transaction being done. We feel this time line could be met if we did the financial confirmations here. This reduces risk for Enron. Finally, because we are a small office, I need the opportunity to develop my existing employees so that they don't feel that they need to leave the company in order to broaden their knowledge base. Given the skill sets of the documentation group, it is difficult for them to move into other areas such as risk, logistics, or accounting, so it is important that I am able to keep them challenged within the documentation group. Because we review the confirmations, the basic understanding of the financial transactions already exists. However, I know that my employees would appreciate having full accountability and responsibility for this function, and have the opportunity to develop more expertise in the area of financial confirmations. As a final note, I report to you. I am fully accountable to you for ensuring that all the necessary controls are in place to handle this function properly. It would mean a lot to me, as well as the documentation staff, to get your vote of confidence in making the case to legal to transfer this function to Calgary. Mark Taylor has never met me or my staff, yet I get the impression that he doesn't think we are capable of handling this function. I hope that you will be able to set him straight on this. He just needs to look at the results of our annual audits to see the level of competency that exists here. If you have any questions or need any additional clarification on anything in this memo, please let me know. As you can see, the Calgary office feels very strongly about this issue, including Rob Milthorp and Peter Keohane. Please let me know how your meeting with Mark goes. Thanks, Peggy Enron North America Corp. From: Sally Beck 07/19/2000 04:57 PM To: Peggy Hedstrom/CAL/ECT@ECT cc: Subject: Re: Financial Confirm NP6050.1 I got your message and I have asked Brent to get with me when he is back in the office on Friday ( he has been in New York re: MG since Monday night). Together we will do two things: (1) devise a foolproof plan to insure an excellent level of service to Calgary starting immediately, and (2) work with Mark Taylor to understand his concerns over the movement of confirmation preparation to Calgary and to eliminate his concerns. We will keep you posted on both items. --Sally Peggy Hedstrom 07/19/2000 12:02 PM To: Sally Beck/HOU/ECT@ECT cc: Subject: Re: Financial Confirm NP6050.1 Just so that you are aware, we continue to have problems with the financial confirm process from Houston. On more than one occasion, confirmations have been sent to our counterparties prior to review by Calgary. Attached is the most recent one. We have been assured over and over that this will not happen again, however, it continues to happen. Luckily, this confirmation went out without any errors in it. I know that you are very busy, but is there any way that you can make it a priority to get resolution on moving the financial confirmations to Calgary. ---------------------- Forwarded by Peggy Hedstrom/CAL/ECT on 07/18/2000 02:10 PM --------------------------- From: Larry Joe Hunter 07/18/2000 01:15 PM To: Peggy Hedstrom/CAL/ECT@ECT cc: Diane Anderson/NA/Enron@Enron, Andrea R Guillen/HOU/ECT@ECT Subject: Re: Financial Confirm NP6050.1 Peggy, As far as I can tell, we simply screwed up on this deal. Diane Anderson, who was covering for Angie last week, was using my name to sign off on some other Canada deals which were approved from last week then signed and sent this one by mistake. We're terribly sorry for the mistake. Call me if you want to discuss. Thanks, Joe Peggy Hedstrom 07/18/2000 09:55 AM To: Larry Joe Hunter/HOU/ECT@ECT cc: Subject: Financial Confirm NP6050.1 Since Dianne Seib is currently on vacation, I am reviewing the financial confirms. For the referenced confirm, the status is currently showing 'Sent to Counterparty", although our records show that we have not yet approved the revised confirm. Can you check on this for me and let me know whether this was sent prior to receiving Calgary's approval? If you have any questions, I can be contacted at ext. 6753. Thanks Peggy
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