|
|
Enron Mail |
Wes, expense the amortization to Office of the Chairman not West Power or
Origination. Regards Delainey ---------------------- Forwarded by David W Delainey/HOU/ECT on 06/19/2000 11:57 AM --------------------------- From: Tim Belden on 06/19/2000 07:30 AM PDT To: David W Delainey/HOU/ECT@ECT cc: Subject: Re: Fort James Amortization I try to run clean, conservative books. To that end, I assessed every single originated transaciton when I took over the group in 1999. Edith Cross and I turned over every rock that we could find, booked things properly, and moved on. I know nothing about this amortization that's been going on. Perhaps there were two payments to Fort James -- one being the payment that west power trading expensed in 1997 associated with the in money Wauna/Halsey position and the other associated with the overall alliance. West Power Trading very clearly liquidated the payment associated with Wauna/Halsey in 1997. I have the DPR from March of 1997 to prove it. If this payment was capitalized for some reason after West Power Trading expensed it, then I'm not sure what to do. It seems odd for us to pay for the same bad position twice. If the amortization is associated with the second payment to Fort James -- the alliance payment -- then we have a different kettle of fish entirely. I don't understand why it was ok for the amotization to hit the industrial group but when we do a one-time amortization of the balance it all of a sudden switches over to the West Power Trading group. How come last month it was "proper" for the charge to hit the industrial group and this month it is "proper" for the charge to hit West Power Trading. The charge should hit whoever's rc it was who thought that paying Fort James a bunch of money was a good idea. If that person is no longer around the charge should either hit that person's successor or it should hit a management book. To your point about who benefits from the termination of this deal. Clearly, it is a good idea to terminate these deals and remove bad positions with a lot of uncertainty from the West Power Trading books. Having said that, I have a hard time feeling good about the "benefit" that West Power Trading has received from these deals. In 1999 I was told that this was largely a legal question. A memo written by Jake Thomas on April 7, 1999 memorializes this line of thought. We established a $500k legal reserve, rebooked the deals, took most of the positive value to the book to offset large losses associated with other old deals and granted the remainder, about $1 million, to Jake in origination. The entity that has benefited the most from these deals is West Origination. Finally, I can't see how this expense belongs to West Power Trading. I would like to understand how all of the accounting worked before I can accept an expense on my rc. If you want to deal with the expense separately and have a discussion about granting origination for terminating this deal then let's do that. That discussion needs to reflect history, and include the origination that was granted in 1997, 1999, and include the legal reserve of $500k. Give me a call when you get a chance. David W Delainey 06/16/2000 05:11 PM To: Tim Belden/HOU/ECT@ECT cc: Subject: Fort James Amortization Tim, my understanding is that partnership fee (the $11.0M) has been amortized for the last several years and expensed to the Industrial groups (McConville and Ondarza). As you are aware, I sued them for breach. The settlement involved the elimination of all existing transactions between Ft. James and Enron including the Wauna and Halsey power contracts. It is my understanding that the benefit of the elimination of those shorts resides in the Portland shop. The elimination of the shorts would not have occurred without the lawsuit on the alliance and the settlement I originated. It seemed logical to charge the Portland office with the remaining un-amortized fee of $1.8M as a cost of eliminating the shorts for no cost and no future contingent liability. Lets discuss. Regards Delainey ---------------------- Forwarded by David W Delainey/HOU/ECT on 06/16/2000 07:00 PM --------------------------- From: Tim Belden 06/16/2000 05:09 PM To: Wes Colwell/HOU/ECT@ECT, David W Delainey/HOU/ECT@ECT, John J Lavorato/Corp/Enron cc: Paula Harris/HOU/ECT@ECT Subject: Fort James Amortization Edith Cross and I looked at the Fort James deal in great detail in early 1999. When the deal was closed, west power trading booked an in the money position and an offsetting expense of about $11 million. This money has already liquidated from our book. In fact, I have a copy of the 3/31/97 DPR that reflects this liquidation. At that time, west power trading also paid a 350k credit reserve, 247k to the finance book, and 1.3 million in origination. I have also heard about a "partnership" fee that Enron paid to Fort James around the same time. I'm not sure what this fee was and who benefitted from it. It had nothing to do with the west power trading book. On John's recommendation I called Wes to see if we could figure this out. Wes, please give me a call back to discuss. I think that someone needs to look at the actual journal entries from March of 1997 to see why an expense of $11 million was deferred. This is not my problem. I should not receive this expense. Until this is resolved, I would greatly appreciate it if the writedown of the deferred account does not hit west power trading's expenses.
|