NSM Bankruptcy Claim

Attached for your review and comment is a draft of the indemnification 
portion of a claim by Enron entities in the NSM bankruptcy.? I have tried to 
make the claim as big as possible, which makes it rather vague and 
wishy-washy.? Maybe you can suggest changes.

At the risk of differing with Lisa and Paul, I really do not understand why 
this is a good idea.? It seems to me that any claim by Enron is an unsecured 
claim, way down in priority, clearly behind all of the bondholders, at least 
to the extent of their security.? I don't understand how this claim creates 
any threat to the plaintiffs or settlement pressure on anyone.

In addition, I hate saying the things we have to say to state a claim.? In 
the litigation, we consistently say that we did nothing wrong, we were 
victims too, the few people who did sue us should see their mistake and 
dismiss us.? Now we propose to file a public document saying the opposite:? 
that we fear the suits that have been filed and we expect more, producing 
tens--maybe hundreds--of millions of dollars of exposure.

While we should continue to move this aspect of Enron's claim along, so we 
are ready to file if we want to, I think we should consider a conference call 
among Lisa, Paul, Richard, and me to talk through the wisdom of the 
indemnification claim.? (I don't worry nearly so much about a fraud claim on 
Enron's securities purchases, because that does not go against our litigation 
position, although I still don't see what good such a claim would do.)

Steve Howard 
Milbank, Tweed, Hadley & McCloy LLP 
showard@milbank.com 
213-892-4478; 213-892-4748 (fax) 

 <<NSM Claim.doc>> 

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 - NSM Claim.doc