The exciting cocktail of credit derivatives and Enron Online raises 
significant novel legal risks for Enron.  As most of you will by now know, 
probably the most significant risk would arise in a situation where Enron has 
confidential information about a reference entity and wrongfully uses that 
information in pricing the credit derivative on that entity.  This could well 
result in legal proceeding against Enron.  In practice, an allegation of 
misuse of confidential information can be very difficult indeed to defend 
without adequate procedures in place to safeguard that information.  In 
fact,  Enron's credit trading will, as you know, rely strictly on publicly 
available financial information and will not involve the use of confidential 
information, unless the reference entity has specifically consented.  
Nevertheless, to avoid the appearance of impropriety, we are taking 
additional steps to consider confidentiality agreements we have in place with 
potential reference entities before deciding whether or not we will quote 
prices on such entities.

Against this background is the ever-present risk of "insider dealing".  This 
crime - which in the UK carries a maximum prison sentence of 7 years and an 
unlimited fine - is committed where a person (or member of their family etc) 
deals in the securities (shares, bonds or derivatives on them) of a listed 
company on the basis of unpublished (confidential) price-sensitive 
information.  We do not expect at this time to deal in publicly traded bonds 
as part of EnronCredit.com, but insider dealing is relevant to the conduct of 
Enron staff and could affect other parts of our business.  In addition, SFA 
rules in the UK require the safeguarding of confidential information, the 
misuse of which is a serious disciplinary matter.

In order to ensure the success of this new business and that confidential 
information is not misused either by Enron or its staff, we are now 
introducing important new policies and procedures in Europe and in the US.  
These procedures have been drawn up specifically for your credit trading 
group by lawyers in London, Houston and New York and are attached.  Please 
familiarise yourself, and any future member of the group,  with these 
procedures. Once you have read and understood the attached procedures each 
one of you is required to confirm this to me in writing (or by note mail).

Please note that similar procedures have been distributed to the key business 
heads in Europe who may have confidential information about reference 
entities (similar procedures are being disrtibuted to US business heads).  
This requires them to safeguard confidential information and to abide by the 
Restriced List procedure described below.  Nevertheless, you should treat 
your group as being within a Chinese Wall and see it as your personal 
responsibility not to solicit or accept from anyone in Enron information 
about reference entities which may be confidential. 

Thank you for your co-operation in implementing these important new 
procedures.  I look forward to receiving your confirmation mentioned above 
(which is also described in the procedures). 

Best regards

Paul