Subject: Enron Corp. Strategy
From: [email-masked]
To: [email-masked]
Cc: [email-masked], [email-masked], [email-masked]
Date: Wed, 17 Oct 2001 13:14:12 -0700 (PDT)

Dear David:

Thanks so much for your voicemail message confirming your agreement and assurance that the Enron HR Global team will ensure compliance with the strategy approved by the Enron Corp. Board of Directors relating to the use of separate lines of business to manage Enron's risks, liabilities and costs.

As you know Enron maintains many separate lines of business with separate assets, directors, officers, employees and payrolls.  This provides a protective shield described or known as the "corporate veil".  Thus, in the event of litigation, only the assets of the individual business are subject to said litigation, its attendant risks, liabilities and costs if Enron adheres to basic corporate principles and the separate line of business is truly a separate entity.  If the corporate veil is pierced and other Enron entities, including Enron Corp. are successfully subjected to the risks, liabilities and costs of said litigation, then all of the assets of Enron would be at risk.   Further, litigation, risk management, accounting and finance, tax, treasury, and many other Enron Corp. groups work diligently to ensure compliance with this strategy.  All filings with the federal government, including the 10K and Proxy Statements, reflect this strategy. In addition, there are certain Enron benefits, namely the Enron Corp. 1994 Deferral Plan, which require all participants in said plan be an employee of Enron Corp.

One of the additional ways Enron minimizes said risks is to ensure that employees are employed and paid by the proper employer.  Thus, Enron has many payrolls and Enron Corp. is not a master payroll company.  As you know, the pipelines are regulated by the FERC (Federal Energy Regulatory Commission) and separate payrolls are necessary for each pipeline.  Further, Enron has separate payrolls for it union companies, its third country nationals and its expatriates.   These payrolls are in addition to the local payrolls of Enron in those countries in which we do business around the world.

Thus, it is imperative that each of the Enron entities properly reflect their respective directors, officers, and employees.  Here in the United States, each of our separate lines of business have separate Federal Employer Identification Numbers.  During times of Enron reorganization and movement of Enron employees from one Enron entity to another, if this movement results in a change in the employee's employer, under the U.S. Tax laws, FICA Withholding for both the new Enron employer and employee begin again.  The employee may file a new W-4 form to alleviate some of the tax consequences or the employee can wait until he/she files the income tax return for the year in question and receive a refund.  The Enron employer does not receive a refund or any credit when it must pay the employer's portion of FICA even though it has been paid in whole or in part by another Enron employer.  This payment by the Enron employer is a small amount to pay in comparison to the overall risks.

As we discussed, any changes with respect to this strategy, including the impact on payroll, Enron employers, and Enron employees must be reviewed and approved by the Enron Corp. Board of Directors due to the significant risks to Enron Corp., its subsidiaries, divisions, and affiliates.  

I appreciate your enthusiasm for compliance with this important strategy and respectfully request your immediate assistance in communicating this strategy to your team and assuring that they in turn make sure that all of the Enron employees who are not currently employed by the proper Enron employer are transferred as soon as humanly possible in order to minimize the risks.  I understand that failure to place the employee in the proper company has an impact in many areas around Enron, including PRC, compensation, ibuyit, ipayit, and benefits, just to name a few. 

If you have any questions, please contact me at 713-853-7224.

Thanks so much for your help.

Sharon