Message-ID: <19826008.1075852636684.JavaMail.evans@thyme> Date: Thu, 6 Sep 2001 11:58:55 -0700 (PDT) From: h..douglas@enron.com To: alan.aronowitz@enron.com, a..shankman@enron.com Subject: RE: Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: quoted-printable X-From: Douglas, Stephen H. X-To: Aronowitz, Alan , Shankman, Jeffrey A. X-cc: X-bcc: X-Folder: \JSHANKM (Non-Privileged)\Deleted Items X-Origin: Skilling-J X-FileName: JSKILLIN (Non-Privileged).pst The structure is as follows: Enron Market Claims Trading Corp. ("EMCT"), a= Texas corporation and 100 percent subsidiary of Enron Global Markets LLC (= "EGM"), organized Enron (Bermuda) Limited ("EBL"), a Bermuda corporation an= d 100 percent subsidiary of EMCT, to serve as the Enron partner in Global R= isk Strategies (Bermuda), Ltd. ("GRSBL"), a Bermuda organized entity that i= s treated as a partnership for U.S. tax purposes and in which EBL possesses= a 75 percent interest. Essentially, EGM through two entities (a U.S. enti= ty and a Bermuda entity) has organized a Bermuda based partnership (that is= , GRSBL) to engage in the claims trading activity. In turn, the consequenc= e of Enron holding its interest in the Bermuda based claims trading busines= s in this manner is that income derived from such claims trading business w= ill not be currently taxed by the U.S. and, in fact, will never be taxed so= long as the earnings from the activity are not repatriated from EBL to EMC= T (i.e., from the Bermuda entity to the U.S. entity) - this will reduce EGM= 's effective tax rate because Bermuda does not tax this activity (we applie= d for and obtained a tax exemption). Conversely, however, should GRSBL not= earn income and instead generate a loss, such loss would not provide a U.S= . tax deduction and this would operate to increase the EGM effective tax ra= te (this is similar to the point discussed at the Monday meeting several we= eks back related to EGM's Singapore business). Finally, in order to obtain= the tax benefit mentioned above, it is important that transactions underta= ken by GRSBL be executed outside of the U.S. (essentially, we will lose the= tax benefit if GRSBL conducts business in the U.S.). However, transaction= s that need (for nontax reasons) to be conducted in the U.S. can be underta= ken by EMCT and (handled in this fashion) not taint GRSBL (since GRSBL is i= nsulated from EMCT by EBL). Accordingly, by organizing the claims trading business in the tiered subsid= iary form described above, we have structured the business in a fashion tha= t minimizes the tax consequences to EGM and this will, in turn, work to red= uce the effective tax rate of EGM. I would be delighted to speak in detail= regarding this should you have additional questions and can be reached at = x30938 or on my cell phone at 713.817.5052. Best regards. SHD. -----Original Message----- From: =09Aronowitz, Alan =20 Sent:=09Thursday, September 06, 2001 12:32 PM To:=09Shankman, Jeffrey A. Cc:=09Douglas, Stephen H. Subject:=09RE:=20 Jeff: I will have Steve send you a note on this. Steve, please call me about this= when you get back to the office later today. Alan -----Original Message----- From: =09Shankman, Jeffrey A. =20 Sent:=09Thursday, September 06, 2001 11:12 AM To:=09Aronowitz, Alan Cc:=09Douglas, Stephen H. Subject:=09RE:=20 What tax reasons? What is the structure? =20 -----Original Message----- From: =09Aronowitz, Alan =20 Sent:=09Thursday, September 06, 2001 10:18 AM To:=09Shankman, Jeffrey A. Subject:=09RE:=20 Jeff: I just tried to call you on this matter. I left you a voice mail. This company was set up for tax reasons to indirectly hold 100% of the shar= es of the new Bermudan company formed last week to trade insurance claims. Let me know if you have any other questions. Regards, Alan -----Original Message----- From: =09Shankman, Jeffrey A. =20 Sent:=09Thursday, September 06, 2001 9:32 AM To:=09Aronowitz, Alan Subject:=09 Alan, I didn't know we were setting up a sub of EGM for GRM. I've gotten a= question from Whalley about it. Can you fill me in? Jeff