RE:

So far this quarter we've spend about 18 million on a reserve that Randy Petersen/Credit are making us take on an option we have associated with the MTBE project. In essence, Randy P doesn't understand how we trade options at Enron, and I'll be having a conversation with Rick about this. We've spent almost 5 million in getting out of physical positions since no one will buy from or sell to us. We can't manage the physical positions and obligations we have since there is no money available to the crude group (to purchase physical or post LC's in the case of a sale). Wev'e also spent about 10+ million closing down books and getting out of positions as the market gives us the chance. More than half the books have been closed and we will close/consolidate four more tonight. As you know, getting out of any positions costs money, and the market smells blood.

Because the crude and products markets have been moving significantly recently, we can't manage our options position by getting out of them. Again, nobody will buy from us or sell options to us, so we have to try to neg. gamma trade it.

That is the 30 second version of the cluster I'm trying to close, hope it helps.

So, can we change the severance program as I've outlined?

-----Original Message-----
From: Fallon, Jim
Sent: Tuesday, November 20, 2001 1:19 PM
To: Shankman, Jeffrey A.
Subject: RE:

Mike said in the budget meeting that it bleeds every day and we cannot get off of it - I did not understand what that meant.

-----Original Message-----
From: Shankman, Jeffrey A.
Sent: Tuesday, November 20, 2001 1:17 PM
To: Fallon, Jim
Subject: RE:

what do you mean?

-----Original Message-----
From: Fallon, Jim
Sent: Tuesday, November 20, 2001 1:15 PM
To: Shankman, Jeffrey A.
Subject: RE:

What is going with the crude position?

-----Original Message-----
From: Shankman, Jeffrey A.
Sent: Tuesday, November 20, 2001 1:01 PM
To: Joyce, Mary; Fallon, Jim
Cc: Oxley, David; Whalley, Greg
Subject:

As you guys go through working up a severance program, I started thinking about some equity issues. If the average tenure of an employee at Enron is about 3 years, why not come up with 2 plans--1 for long serving employees who have been long dedicated to the company, and a second one for the more recently hired? It doesnt' make sense to me that someone who has been here under a year at $100,000 base should be entitled to 11 weeks even before they sign the waiver. I would also not change the program in whatever form you ultimately settle on for the longer serving employees, rather just scale back the program for the newer employees.

Regards,

Jeff