I am copying Sara on this b/c I would be interested in her input if she has a 
different take than I do.

I understand your message to mean that P&G is offering a representation from 
them that they will strictly adhere to their corporate derivatives policy 
(with a copy of the policy attached to the contract), and, in exchange for 
this, they would like the "No Reliance" representation deleted entirely.

I don't really see how such a representation helps us with the "No Reliance" 
problem.   The CFTC has ruled that in a dealer/customer context, if the 
customer relies on the dealer's expertise in entering into a trade, then the 
trade may be unenforceable against the customer.  The legal principle is one 
of fiduciary duty and doesn't really have anything to do with corporate 
authorization.  In other words, the fact that the trade is authorized does 
not change the fact that the customer is relying on the dealer's superior 
knowledge.

In its 1996 lawsuit with Bankers Trust, Procter & Gamble unwound an interest 
rate swap position when they ended up about $200 million out of the money.  
P&G argued that they were relying on BT due to BT's superior expertise in 
interest rate markets, and therefore P&G shouldn't have to pay.  The issue of 
whether or not P&G was authorized to enter into the swaps was not an issue at 
all in that case, nor would it be an issue, in my opinion, if P&G sought to 
unwind a pulp and paper swap with us based on our alleged superior expertise 
in pulp and paper markets.

The danger of having positions unwound has made the "No Reliance" clause one 
of the most important clauses in the ISDA for us.  I will look at and 
consider any particular language they may wish to propose, but conceptually, 
we can not trade with counterparties who wish to rely on our market expertise 
in deciding whether to enter into a trade. -- Bob


Robert E. Bruce
Senior Counsel
Enron North America Corp.
T (713) 345-7780
F (713) 646-3393
robert.bruce@enron.com



	Ed Quinn@ECT
	02/02/2001 04:37 PM
		 
		 To: Robert Bruce/NA/Enron@Enron
		 cc: 
		 Subject: P&G

Bob,

P&G business contact mentioned that they have inserted the following into 
their ISDA schedules:

1) a clause that states that P&G will strictly adhere to their corporate 
derivatives policy (that covers deal terms, hedged risks, etc.) and append 
the ISDA with the corporate policy....

Is this something we can consider???  Policy spells out types of deals they 
can and can't enter...therefore, they can't sue us (hopefully) if they have 
followed their policy guidelines...

Thanks.

Ed Quinn