Message-ID: <28460442.1075849851906.JavaMail.evans@thyme> Date: Fri, 24 Nov 2000 09:25:00 -0800 (PST) From: sheila.glover@enron.com To: sally.beck@enron.com, brent.price@enron.com, gary.hickerson@enron.com Subject: Re: Debt Trading Losses Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: 7bit X-From: Sheila Glover X-To: Sally Beck, Brent A Price, Gary Hickerson X-cc: X-bcc: X-Folder: \Sally_Beck_Nov2001\Notes Folders\Egm\Glover, sheila X-Origin: BECK-S X-FileName: sbeck.nsf Sally, Brent and Gary, In a meeting with Bryan, Jeff, Gary and Markus on Monday, November 20th, I showed Bryan a copy of the monthly price verification procedures and the book administrator's Price Verification Comparison Spreadsheet . I also showed Brent this information later in the day, as he had to leave before we all left. Therefore, I find Bryan's Operations' bullet wrong and misleading. This is not the statement that was made and agreed to on Monday when we all met. This statement is also not consistent with what is actually in the attachment. You will receive a copy of the price verifcation spreadsheet for the last six months on Monday. Please call me or Theresa with questions. Sheila ---------------------- Forwarded by Sheila Glover/HOU/ECT on 11/24/2000 05:14 PM --------------------------- Bryan Seyfried 11/24/2000 12:24 PM To: Sheila Glover/HOU/ECT@ECT cc: Sally Beck/HOU/ECT@ECT, Brent A Price/HOU/ECT@ECT, Gary Hickerson/HOU/ECT@ECT, Jeff Kinneman/HOU/ECT@ECT, Tom Doukas/NA/Enron@ENRON, Theresa T Brogan/HOU/ECT@ECT Subject: Re: Debt Trading Losses ok, sorry for the miscommunication, can I get copies of the price verification memo for the debt book for the last 6 months pls. From: Sheila Glover 24/11/2000 17:06 To: Bryan Seyfried/LON/ECT@ECT cc: Sally Beck/HOU/ECT@ECT, Brent A Price/HOU/ECT@ECT, Gary Hickerson/HOU/ECT@ECT, Jeff Kinneman/HOU/ECT@ECT, Tom Doukas/NA/Enron@ENRON, Theresa T Brogan/HOU/ECT@ECT Subject: Debt Trading Losses Bryan, I think the second bullet is misleading. The bullet is not reflective of what is actually stated in the attached document. There is a month-end price verification process on the Credit book. Trader pricing is compared to prime broker pricing. Where the mark is greater that 2 points, the difference is discussed with the trader. Trader must then amend the mark or provide third party substantiation for the illiquid position. The Price Verifiaction Comparison Spreadsheet with broker quotes is filed and maintained by Risk Management. The Operations break-down in the process relates to: Triplets excluded from the monthly price verification process and not escalated, prioritized to management Telewest pricing relied on a price from the prime broker which was manually sourced and not current Price Verification Comparison results should be formalized and distributed to senior management. Thanks. Sheila ---------------------- Forwarded by Sheila Glover/HOU/ECT on 11/24/2000 10:13 AM --------------------------- Bryan Seyfried 11/23/2000 01:31 AM To: Richard Causey/Corp/Enron@ENRON, Rick Buy/HOU/ECT@ECT, John Sherriff/LON/ECT@ECT cc: Michael R Brown/LON/ECT@ECT, Fernley Dyson/LON/ECT@ECT, Sally Beck/HOU/ECT@ECT, Ted Murphy/HOU/ECT@ECT, Mike Jordan/LON/ECT@ECT, David A Wall/Risk Mgmt/LON/ECT@ECT, Jeff Kinneman/HOU/ECT@ECT, Gary Hickerson/HOU/ECT@ECT, Sheila Glover/HOU/ECT@ECT, Brent A Price/HOU/ECT@ECT, Richard Sage/LON/ECT@ECT, Bryan Seyfried/LON/ECT@ECT Subject: Debt Trading Losses We have discovered two positions in the Debt Trading book which were not being marked to market. The current mark of the 2 positions results in approximately $4.7 million loss. The details are in : The primary control issues are: ? Trader did not adjust price to reflect the effect of market movements ? Operations did not perform monthly price verification processes ? Desk management failed to recognize that the marks on these two trades had not moved over the term of the transactions (Q1 '00 - Nov 15th) The losses have been recognized and a full review of the book is ongoing by Operations. The trader has been relieved of his responsibilities and we will implement the steps agreed with Operations to ensure that we have a robust approach to controls for the Debt Trading book going forward.