Message-ID: <27797105.1075852947646.JavaMail.evans@thyme> Date: Mon, 22 Oct 2001 21:17:17 -0700 (PDT) From: john.arnold@enron.com To: larry.may@enron.com Subject: Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: quoted-printable X-From: Arnold, John X-To: May, Larry X-cc: X-bcc: X-Folder: \LMAY2 (Non-Privileged)\Inbox X-Origin: May-L X-FileName: LMAY2 (Non-Privileged).pst Larry: Hope all is ok with your current situation. I hope you know you can take a= ny time off necessary to deal with the matter. =20 =20 Congrats on the great deal Monday and I appreciate the heads up before tran= sacting that size deal. =20 I'm sorry you missed the mtg monday afternoon. I want to sum up what my th= oughts are and what I've learned over the past couple days. First of all, = I'm very disappointed in some of the current but mostly former employees of= this company. I think we, in gas trading, have made great efforts to crea= te a very strong and profitable franchise without ever compromising our int= egrity.=20 While I do not believe any fraud nor illegal activity has occurred, I do be= lieve Enron pushed the gray area more than was necessary in some of these d= ealings. And while I don't believe Fastow acted unethically or inappropria= tely in these dealings (and I may be wrong), I do think the presence of a c= onflict of interest and the appearance of impropriety should have precluded= him from these entering into these transactions. There is a reason why En= ron employees are not allowed to trade energy commodities for their own acc= ount. It is not because Enron does not trust its employees to do the right= thing; it is an effort to prevent even the slightest allegation that an em= ployee's first and foremost responsibility is not to the company. That is = where, in my opinion, Fastow errored. =20 I think employee morale has been damaged for 3 reasons over the past year. = First, we are tired of bad business deals: India, South American assets, A= zurix, broadband, etc. Second, over this period of poor business judgment,= some of the same individuals who made these decisions were very well compe= nsated. Third, I think there is a concern about the integrity of the organ= ization and the top managers. Rather than worry about the past, I prefer t= o look at the organization going forward. The truth about the LJM matter w= ill be brought forward through one or more of the following : legal courtro= om, SEC investigation, internal Enron investigation, court of public opinio= n, court of Enron employees' opinion, and investigative journalism. If any= officers of the company acted inappropriately at any time, I can almost gu= arantee they will not have a future at this company. I say that because I = do believe in the current management. The question you, as well as other e= mployees need to be asking themselves, is twofold. First, will the current= problems affect the organization's abililty to conduct business in the fut= ure? And second, has the culture of the organization changed over the past= several years whereby these probems will not happen again? As long as we= can maintain our credit rating, which I believe we can, I believe this wil= l have minimal effect to the trading business and little effect on Enron's = business. Our desire to conserve capital at this point to shore up the bal= ance sheet means we won't be buying any hundred million dollar+ assets in t= he near future, which is probably a good thing. The second question is jus= t as important. I will tell you honestly that had the management of this c= ompany of 2 years ago be in place today, I would not currently be an employ= ee here. Over the past couple years, the management turnover has been extr= emely beneficial. Gone are Pai, Hannon, Rice, Skilling, Sutton, etc. that= had, with the exception of Skilling, limited intellectual ability, integri= ty, and drive. The new management of Whalley, Lavorato, Sheriff, Fallon, a= nd Delainey, in my opinion, is one of the most capable management teams in = business today. These are people that will make the right business decisio= ns and are not afraid to act as individuals. I do believe in this team and= , so long Enron treats the trading organization well at the end of the year= which I have no reason to believe otherwise, intend to continue our missio= n to create the most dominant energy trading franchise around. =20 We all want to yell at someone for the debacle that has been created. Unfo= rtunatley, most of those people arent at the company anymore. I do encoura= ge you to go to the employee mtg tomorrow regardless of market conditions. = Enron values and needs your contributions, and thus it is important to me = that you are comfortable with the organization going forward. I think it i= s benficial to hear Enron's side of the story as well as what we read in th= e paper. =20 John