----- Forwarded by Richard B Sanders/HOU/ECT on 02/05/2001 11:27 AM -----

	"Fergus, Gary S." <GFergus@brobeck.com>
	12/20/2000 08:59 PM
		 
		 To: "David J. Noonan (E-mail)" <djn@pkns.com>, "Jean Frizzell (E-mail)" 
<jfrizzell@gibbs-bruns.com>, "Meringolo, Peter" <PMeringolo@brobeck.com>, 
"Michael L. Kirby (E-mail)" <dcastro@pkns.com>, "Richard B. Sanders Esq. 
(E-mail)" <richard.b.sanders@enron.com>, "Susan Bisop (E-mail)" 
<sbishop@gibbs-bruns.com>
		 cc: "Mike D. Smith (E-mail)" <msmith1@enron.com>, "Molland, Michael E." 
<MMolland@brobeck.com>, "Conner, Randall " <RConner@brobeck.com>, "Andy 
Pickens (E-mail)" <apickens@gibbs-bruns.com>
		 Subject: Status Report


Here is a summary of recent developments:

Another Class Action Natural Gas Complaint Against El Paso and others (Los
Angeles)
 Berg v. Southern California Gas Company. Class action anti-trust and
unfair competition.   This is a conspiracy case alleging that the Southern
California Gas, SDGE and El Paso  conspired not to compete in the
delivery of natural gas in Southern California.  The  complaint alleges
that the conspiracy resulted in discouraging new power plants and drove
up the cost of electricity by controlling the supply of gas.
 <<Berg Gas Complaint.pdf>>
Copy of Rojoin Electricity Complaint
 I do not believe I include a copy of this complaint before.  It is a
class action involving the retail electrical market.
 <<Rojoin.cmplt.PDF>>
California AG Investigation
 Here is a copy of my email to the California AG describing our
agreement re preservation of data:
Rich,
 As promised, here is my summary outline of what we discussed
regarding preservation of data:

1. In Portland, we proposed to handle business email related to the
topics in your preservation letter by instructing employees not to delete
any email sent or received for 24 hours.  Email that is personal and does
not relate to the business topics you have identified can be kept, discarded
etc. at the employee's pleasure.  Each day there is a backup made that will
capture the email in those employees mailboxes.  After 24 hours, each
employee is free to manage their email box as they deem appropriate to the
business needs (e.g. keep, discard).  From our conversation, I understand
that you agree that this is an acceptable procedure.

2. With respect to the hard drives on individual computers, you would
like to get an organizational chart for Portland that would enable us to
discuss 6-12 individual's computers that would be copied using ProQuest
Drive Image Pro 4.0.  In addition, there may be some other individuals that
you would like to have us use a software product called Robocopy to copy
files from their hard drives onto the network.  Until we figure out which
computers to copy etc. we will not begin this process.  We discussed that
because of the holiday period, it may not be practical to get this started
until after the new year.

3. Outside of Portland, we have proposed making a snapshot backup along
business function lines reasonably called for by the subject matter of your
request.  We propose not to backup any other business units or functions.
On a going forward basis, those business functions that related to the
subject matter of your request would be instructed not to delete business
email.

4. We believe that relevant database  backups have been and will
continue to be made and preserved.

5. When an employee runs out of hard disk space on their computer, it
is an acceptable practice to copy files form their hard disk to the network
(where they will be backed up) and then delete those copied files to make
sufficient work space for the employee to work.

6. For EES, I explained that their IT services are outsourced so we do
not have as detailed information immediately available.

As I mentioned on the phone, all of these discussions and efforts being made
are done without waiving any objections that any of the Enron entities may
have to your request including scope, burden, jurisdiction, relevance,
privilege, privacy, vagueness etc. and Enron specifically reserves each and
every right and objection it or its employees may have.

Please let me know if your general understanding of our conversation is
different than the above.
CPUC Subpoena
 Jeff Richter and Tim Belden have been working on getting the EPMI
data correctly gathered.  They hope that by the middle of next week the
Enron technical types will have figured out where all the data is and have
assembled it for production.  Because Jeff Richter will be gone until after
the New Year, we will not be producing any data to the CPUC until early next
year.
 Jeff and Tim are focused on having a common set of reliable data
that will be used for all subpoenas, discovery requests etc.  We also
discussed once we have the data collected that we use one of our experts to
help with the analysis so that we are not creating files and records for
which we will need to claim a privilege at a later point in time.  In other
words, since we are keeping the backup tapes for the systems in Portland any
analytical work that Tim or Jeff do for us will be recorded on the backup
tapes.
Tim Belden
 FYI Tim and his wife are expecting their first child with a due date
of December 25th.  He will become out of pocket for a short time thereafter.
FERC Reporting
 A question arose regarding whether Enron needed to file a report to
FERC concerning sales out of market that exceeded the soft caps.  This was a
requirement that was requested by the ISO in an emergency application on
December 8th.  The order granting the relief did not seem to include the
reporting requirement.  The first cut at the data for the report showed that
Enron made $1.0M over a weekend by buying power at $500 and selling at $700.
A later cut at the data came up with a different answer.  When consulted by
Christian Yoder and Steve Hall, I made the unilateral decision not to file
the report.  It was unclear whether we needed to do so and I had not seen
and did not trust the data.  Later Dan Watkiss confirmed that he believed we
did not need to file the report.  However, beginning January 12th this
report will have to be filed for sales over the soft cap.  Since this report
requires a breakdown of costs vs. sales price, it is the same data that the
PUC has been requesting and we anticipate will be requested in the
litigation.  Tim Belden and Jeff Richter are working on a standard reporting
method.
Hiring of Chief Operating Officer for ISO
 Tim Belden has been approached by the current Chief Operating
officer of the ISO requesting a job.  Apparently the COO and the current ISO
board are not getting along.  The issue raised by Tim to Mark Haedicke and
Richard was whether they saw a problem with this hire.  One of the key
issues would be what was the business purpose for the hire.  Obviously,
Enron does not want confidential ISO information from this person.  Also, if
this person will be a witness in the litigation there is a risk that if his
testimony would be favorable to Enron it would be viewed as purchased.  On
the other hand if his testimony would not be favorable at a time when he was
employed by Enron that could be harmful.  There is also the question raised
whether this is a bona fide request for employment or whether other motives
could be in play.  Tim will be meeting with the COO on Friday.  He has
instructions to make sure that he is not given any confidential data and
that no commitment will be made then without consulting the litigation team.
Potential for Criminal Investigation
 The news of the investigation and all of our involvement has raised
questions in the mind of some employees as to whether there is a risk of
personal liability for them (civil or criminal).  I reported that all we
know is that there is an investigation under way by the California Attorney
General.  We have no reason to believe right now that they are focused on
Enron or that Enron or any employee is a target.  I said that at this stage
of the investigation (including our investigation) we do not know enough
facts to evaluate the risk for individual employees.  We have not reviewed
the trader tapes to know what has been said on those tapes.  If we learn of
facts that are specific to an employee, Mark has asked that we notify him
immediately.  We did provide some of this same information to traders we
interviewed early in the process.
Analysis of EPMI data
 I have taken a look at the deviation of the ISO energy flow on a
daily basis from its day ahead schedules and compared those deviations to
EPMI's.  The source of the data is public information that was available to
decision makers at the time.  The comparison shows that generally speaking
the ISO was short in its projection by a magnitude of 5-10 times the amount
that EPMI was out of balance.  There are some exceptions, but those are
rare.
Approaching Federal Judge for More Time
 Dave Noonan has pointed out that we should look carefully at the
assigned federal judge and decide who from the defense group locally in San
Diego would be in the best position to make the motion.
Holiday Contact List
 Dave Noonan suggested and I concurred that it makes sense for all of
you who receive this report to email me with your contact information and
schedule over the holiday period.  I will have a composite list made up and
distributed.

Thanks
Gary






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 - Berg Gas Complaint.pdf
 - Rojoin.cmplt.PDF