Sara-

B&M has responded to Susan's inquiries as set forth below.

Best regards,

John
----- Forwarded by John Viverito/Corp/Enron on 09/24/2000 11:04 PM -----

	Edwin.T.Whatley@BAKERNET.com
	09/24/2000 10:54 PM
		 
		 To: Susan.Musch@enron.com
		 cc: jane.mcbride@enron.com, john.viverito@enron.com, 
Jeremy.Pitts@BAKERNET.com, Alan.Aronowitz@enron.com, 
Paul.TYO.Davis@BakerNet.com, Yukinori.Watanabe@BAKERNET.com
		 Subject: Enron: Japan-Based Trader/PE and TP Issues


Dear Susan:

We confirm that we continue to recommend the basic approaches put forward in 
the
June 23, 2000 memo:  either (1) use back-to-back transactions if it is 
essential
to have Japan-based personnel trading for ENA or other offshore affiliates or
(2)(preferable purely from the tax standpoint if acceptable in light of
operational considerations) have personnel at Enron Australia (or other
affiliate in an appropriate time zone) handle the Japan trading.  

Your description of the back-to-back trades as "mirror" transactions is 
correct
in the sense that the trades would be symmetrical in order to transfer to ENA 
or
other offshore affiliate the position it wants to take in the covered trade.
The terms might differ depending what decision is made about what mechanism to
compensate Enron Japan for transfer pricing purposes, i.e., if some margin 
were
built into the back-to-back trades to compensate Enron Japan.  As discussed in
our June 23 memo, the transfer pricing issues are potentially difficult in 
view
of the limited authority in this area, but in our view, such pricing issues
would present less exposure than structuring the operation so that it would
constitute a PE.

If you have any questions, or if we can provide further  assistance with this
matter, please let us know.

Best regards, Y. Watanabe/E. Whatley



Edwin.T.Whatley@bakernet.com   
Phone: 81-3-3796-5857 Fax:81-3-3479-4224
Registered in Japan as an Attorney at Foreign Law;  Jurisdiction of  Primary
Qualification--California; Designated Law--Washington, D.C. and All U.S. 
States
Except Louisiana

-----Original Message-----
From: Susan.Musch@enron.com [mailto:Susan.Musch@enron.com]
Sent: Monday, September 25, 2000 10:41 AM
To: Paul.TYO.Davis@BakerNet.com; Edwin.T.Whatley@BAKERNET.com
Cc: jane.mcbride@enron.com; john.viverito@enron.com;
Jeremy.Pitts@bakernet.com; Alan.Aronowitz@enron.com
Subject: Re: Trader



Paul and Ed,

I want to confirm my understanding of your advice from last week (attached
below).  I think you're advising consistent with what Ed had advised back
in June, but I'm not totally sure.  That is, it would be best to have
back-to-back trades between Enron Japan ("EJ") and Enron North America
("ENA").  Under this scenario, DD would be an EJ employee who would enter
into the trades for EJ as principal.  Then, EJ would enter into mirror
trades with ENA.  The issue, as I understand it, under this scenario is
that the NTA could assert transfer pricing issues if the trades between EJ
and ENA weren't at arms' length.  Would you please confirm that this is
your conclusion on how the trades should be structured?

 I am trying to get this structure resolved by Monday night (Houston time)
so I would appreciate your thoughts in an e-mail during your Monday.

Best regards,
Susan