January __, 2000



Via Facsimile

MEMORANDUM TO:	Paul Simons 
	(Enron Europe Limited) 
	 
	Mark Taylor 
	(Enron North America Corp.)
 FROM:	Kenneth M. Raisler 
	David J. Gilberg
 RE:	Enron Online/Credit Product

This memorandum summarizes the proposed procedures we discussed during our 
meeting on January 13, 2000 for use in connection with the credit derivatives 
product (the &Product8) to be offered by Enron Capital & Trade Resources 
International Corp. and its affiliates (collectively, &Enron8) through &Enron 
Online8.  These procedures, which we will be assisting you in preparing, are 
designed to reduce Enron,s exposure to those entities on whose credit the 
Product will be based (the &Reference Entities8) as well as Enron,s exposure 
to other related types of liabilities.  We have previously outlined these 
areas of exposure in our memoranda dated December 15, 1999 and December 22, 
1999.  
1. Disclosure * All Reference Entities should be advised, by letter, of the 
fact that they will be included in the list of entities that will be the 
subject of the Product.  These disclosures will of course be separate from, 
although related to, the disclosures to be provided to counterparties to 
transactions in the Product.

? This disclosure should inform the Reference Entity of the introduction of 
the Product, and describe the general nature of the Product and the manner in 
which it will be traded (e.g., through Enron Online).

? In general, however, Enron need not request that the Reference Entities 
consent to or acknowledge their inclusion in the list of the Reference 
Entities, except as set forth below in paragraph 2. 

  2. Consent * Enron should, however, obtain the prior consent of certain 
types of Reference Entities before including them in the list of Reference 
Entities.

? In particular, consent should be obtained from any Reference Entities with 
which Enron has a significant trading relationship that includes advice or 
other services that could result in Enron being considered a fiduciary of the 
Reference Entity or that could otherwise give rise to common law duties that 
could be violated if the Reference Entity does not consent to the arrangement.

? Enron need not seek consent from those large and sophisticated 
counterparties to which Enron merely provides prices and with which Enron 
trades on an exclusively arms, length basis with no advisory or similar 
services being provided and with no fiduciary obligations.

? Where consent is sought, Enron should include a request that the Reference 
Entity acknowledge its receipt of the letter and its consent to being 
included in the list of Reference Entities.  If a Reference Entity fails or 
refuses to execute the letter, Enron will need to make a determination, on a 
case-by-case basis, as to whether it is comfortable including that entity on 
the list of Reference Entities.  However, it should be recognized that, by 
requesting consent, Enron may be limiting its ability to treat an entity as a 
Reference Entity in the absence of consent.

3. Chinese Wall * We understand that it will not be feasible to construct a 
complete &Chinese Wall8 between the operations related to the Product and 
Enron,s other trading activities.  This is due primarily to the fact that 
activities related to the Product will utilize the same credit function as 
Enron,s other trading activities.  However, Enron should implement a modified 
Chinese Wall between the trading operations.  This approach would enhance 
Enron,s ability to defend successfully against any claims of impropriety or 
breach of duty by facilitating Enron,s ability to demonstrate that 
information had not been shared by other traders with those trading the 
Product. This could be accomplished through a number of procedures.

? First, Enron should maintain the maximum possible degree of physical 
separation between personnel responsible for pricing and trading the Product, 
on the one hand, and Enron,s other trading activities, on the other hand.  
Even if personnel involved in the Product are located on the same floor as 
other traders, it would be prudent to place them in a separate area of the 
floor set off by partitions or similar features.

? Second, procedures should be developed to prohibit the flow of information 
between Product traders and other traders if such information is material to 
the creditworthiness of trading counterparties and is not in the public 
domain.  In addition, all trading personnel should be instructed with respect 
to the procedures through training programs.

? Finally, senior supervisory officers of Enron should be assigned to monitor 
communications between the groups of traders and to review and make 
determinations on requests by traders to communicate information that would 
otherwise be prohibited under the procedures.  These procedures will be 
similar to those that have been developed in connection with Enron,s equity 
trading activities.

4. Restricted List -- Enron should establish and maintain a &restricted list8 
of those entities on which Products may not be traded.

? Initially, the list could be used to exclude those entities on which it is 
not feasible for Enron to offer Products due to the nature of its 
relationships with such entities; e.g., those entities with respect to which 
Enron might be considered a fiduciary and which have not consented to their 
inclusion and those entities about which Enron has or regularly receives 
material, non-public information.  In addition, those entities with which 
Enron has entered into confidentiality agreements will most likely need to be 
excluded, depending on the terms of such agreements.

? Enron should also establish procedures to monitor its receipt of 
information regarding Reference Entities on which Products are listed.  
Pursuant to these procedures, Enron should suspend the listing of quotations, 
and therefore the issuance of new Products, with respect to a Reference 
Entity, if Enron is in possession of material, non-public information 
regarding such Entity of a type, or in situations, that render suspension 
necessary or advisable.  This would include situations in which Enron is 
considering an investment in or a joint venture with a Reference Entity.  In 
addition, the procedures should provide for Reference Entities to be excluded 
or deleted for reasons unrelated to Enron,s possession of information as 
well; e.g., where Enron has reached or exceeded its credit limits with 
respect to such Entities. 

? The procedures should state that Enron may close out an open position for a 
Product held by a counterparty, if the counterparty specifically requests 
Enron to do so.  The procedures should also address the pricing of the 
closing transaction, however, and establish a mechanism for such pricing that 
minimizes Enron,s potential exposure to liability as a result of its 
effecting a transaction while in possession of material, non-public 
information. 

? Enron should provide training to the appropriate personnel, which should 
include instructing such personnel not to furnish Product counterparties with 
any notification or explanation of a Reference Entity being placed on the 
restricted list. 

As noted, we will be assisting you in developing these procedurew, which will 
need to be integrated into Enron,s existing policies and procedures.  In 
addition, as we have advised you in our prior memoranda, there are no 
procedures that will fully insulate Enron from the potential liabilities 
arising in connection with its offering of the Product.  However, the 
implementation of the types of procedures described above should assist Enron 
in mitigating such risks and defending against claims that might be made by 
Reference Entities.
Please call us if you have questions on these or other issues.
  

K.M.R. 
D.J.G.