Subject: SA Legal Organization
From: [email-masked]
To: [email-masked]
Cc: [email-masked]
Date: Thu, 30 Nov 2000 02:31:00 -0800 (PST)

Mark,

Unfortunately, I have been completely buried on the LDC sale process, but I 
finally had the opportunity to speak with Bruce Lundstrom a couple of nights 
ago regarding the tentative plans for the South American legal organization. 
As I told Bruce, I really had not had the opportunity to think very much 
about the proposed structure and wanted to give it some more thought before 
formulating a final opinion. Given the differences in our time zones these 
days, I thought it might be better to send you this e-mail rather than trying 
to catch you by phone.

Bruce indicated that you wanted to keep the SA legal group integrated so that 
services can be dispensed to the various business functions without being 
allocated specifically to the various business units operating within the 
region.  As you and I discussed a couple of weeks ago, I agree with this 
(so-called "Enron Europe Model") approach.  It seems to me to be the best way 
to maximize group cohesiveness, improve the budgeting and fee monitoring 
process, facilitate recruiting, and maintain regional legal expertise and 
core competencies. 

Bruce also wanted my thoughts on the idea of having this group report into 
the Global Asset group general counsel, rather than to you directly.  As I 
told Bruce, I have absolutely no problem, personally, in reporting into him, 
if that is what's finally decided.  The only thing I wanted to think about 
was whether the structure makes sense given the nature of the region and its 
legal activities.

That said, and after thinking through it, I do have some concerns about 
moving the group one step "down the ladder"  within your organization 
(actually, since the group currently reports into the Enron Corp Office of 
the General Counsel, I guess it would be moving down at least two rungs).  
Regardless of whether I, or in the longer-term someone else, is the general 
counsel of this regional legal group, I would suggest that you have it report 
into you directly, rather than through any one business unit. 

First, this is a large group, the largest of the old "EI" groups, covering a 
big geographic area. Even after the Gas LDC's and Elektro are sold, the South 
American legal group will still have a total of 29 lawyers: 13 Enron lawyers 
(counting 1 in Houston, 5 in Sao Paulo, 2 in Rio, 2 in BA, and 3 at Vengas in 
Caracas [since Vengas is effectively controlled by Enron]) and 16  other 
lawyers within the group's supervisory responsibility at Promigas (4), TGS 
(5), Transredes (6), and Cuiaba (1, currently a vacancy following Ann 
Birosel's departure). In all, we have individual legal groups located in 
eight different cities in Brazil, Argentina, Bolivia, Colombia and Venezuela.

Second,  the group covers a lot of different areas of activity, much of which 
is unrelated to the Global Asset function. As I told Bruce, most of the 
senior Enron lawyers in the group are focused on supporting the origination 
functions for the region.  I understand these functions will continue on the 
business side under Joe Kishkill, Orlando Gonzalez and Brett Wiggs, who will 
report to Delaney/ Lavorato and not to McDonald/Hughes. The major assets are 
operated within the joint venture companies (TGS, Transredes, Cuiaba, BBPL, 
Vengas) almost all of which have legal groups that work closely with Enron's. 
As asset sales efforts are expected to increase and we are expected to start 
construction on two power projects in Brazil, I told Bruce that I would 
recommend that one or two of the gas unit lawyers (certainly Vicky Martinez 
and maybe Paula Porto) be moved to focus on the the Global Asset management 
function, to give it more transactional flexibility and native Portuguese 
language capability.  Subject to whatever is ultimately decided about the BA 
office, I assume the trading function will also continue to exist within the 
region, and that the trading lawyers will continue to be represented there as 
well.

None of this is to suggest that these groups of lawyers should be permanently 
assigned to particular functions and not made available for other functions.  
It just doesn't seem to me to be very practical, functionally, to have these 
origination and deal activities reporting into you through the one side of 
Enron Wholesale that is not directly related to the origination, trading and 
other "deal" side of the business. Bruce explained to me that he was 
concerned that good lawyers would be "picked off" by other business groups 
and not available to work on the asset side of the business, and that this 
somehow partially justified moving all the lawyers underneath the Global 
Asset group, at least initially.  I am not sure I fully understand the logic 
of that, but to be fair to Bruce, it was late here and I might have been a 
little slow.  It seems to me, however, that the Enron Europe Model handled 
that pretty well by having all of the lawyers available for work in different 
areas, as the need arises, and by having the regional general counsel perform 
the role of the "honest broker" in allocating attorneys to the different 
constituencies. I really don't see the need to do something radically 
different in South America, especially given the obvious comparisons between 
the two regions.

Third, I think the business guys might question the reporting structure.  One 
of the advantages of the Enron Europe Model, as I appreciate it, is that it 
allows the general counsel to allocate scarce legal resources without the 
appearance of unfairness or favoritism.  It may not be so easy to explain to 
one of the origination folks why the lawyer they want to use is unavailable 
and committed to a project on the asset side, without appearing impartial, 
when he knows the general counsel reports to the asset side of the business 
and not the deal side. It just seems to me to invite unnecessary friction 
going forward.

Fourth, aside from appearances, I think there is an advantage in ultimately 
having the staffing and legal support priorities for the region set at a 
level that has some distance from the often competing interests of the 
individual components of the separate business lines.  If there is a hard 
call to be made in allocating resources between Global Assets and the 
origination functions, it is just going to be easier for the decision to be 
made by the regional counsel in direct consultation with you, based on your 
understanding of Mark Frievert's priorities, than it would be to expect Bruce 
or any other business group general counsel similarly situated to tell their 
respective business group heads that they can't have the attorneys they want 
because another business group needs them more or has a more important or 
strategic priority. 

Finally, given the breadth of what is expected to go on down here, and the 
number of lawyers and countries involved, I would think you would want to 
receive your reports directly from the regional general counsel, rather than 
through any one of the other business group general counsels.  That is not to 
say that Bruce or anyone else would not be able to report things without 
unduly filtering them, but to some extent that happens naturally as a 
reporting structure becomes more heirarchical. I know that a balance needs to 
be struck between having too many direct reports, on the one hand, and 
reducing the quality of information flowing up to you, on the other.  For 
what it is worth, however, I would suggest that you strike the balance in 
this case in favor of direct reporting. Plus, it seems to be working fine in 
Europe, if that is to be the paradigm.

As I said, I will go with whatever is finally decided, but I thought I should 
at least give you my thoughts on the issue. If you want to discuss it 
further, please feel free to give me a call. I should be back in Houston next 
week, for a while at least.  

Hope all is well, and I look forward to seeing you again soon.

Regards,
Randy