The structure is as follows:  Enron Market Claims Trading Corp. ("EMCT"), a Texas corporation and 100 percent subsidiary of Enron Global Markets LLC ("EGM"), organized Enron (Bermuda) Limited ("EBL"), a Bermuda corporation and 100 percent subsidiary of EMCT, to serve as the Enron partner in Global Risk Strategies (Bermuda), Ltd. ("GRSBL"), a Bermuda organized entity that is treated as a partnership for U.S. tax purposes and in which EBL possesses a 75 percent interest.  Essentially, EGM through two entities (a U.S. entity and a Bermuda entity) has organized a Bermuda based partnership (that is, GRSBL) to engage in the claims trading activity.  In turn, the consequence of Enron holding its interest in the Bermuda based claims trading business in this manner is that income derived from such claims trading business will not be currently taxed by the U.S. and, in fact, will never be taxed so long as the earnings from the activity are not repatriated from EBL to EMCT (i.e., from the Bermuda entity to the U.S. entity) - this will reduce EGM's effective tax rate because Bermuda does not tax this activity (we applied for and obtained a tax exemption).  Conversely, however, should GRSBL not earn income and instead generate a loss, such loss would not provide a U.S. tax deduction and this would operate to increase the EGM effective tax rate (this is similar to the point discussed at the Monday meeting several weeks back related to EGM's Singapore business).  Finally, in order to obtain the tax benefit mentioned above, it is important that transactions undertaken by GRSBL be executed outside of the U.S. (essentially, we will lose the tax benefit if GRSBL conducts business in the U.S.).  However, transactions that need (for nontax reasons) to be conducted in the U.S. can be undertaken by EMCT and (handled in this fashion) not taint GRSBL (since GRSBL is insulated from EMCT by EBL).

Accordingly, by organizing the claims trading business in the tiered subsidiary form described above, we have structured the business in a fashion that minimizes the tax consequences to EGM and this will, in turn, work to reduce the effective tax rate of EGM.  I would be delighted to speak in detail regarding this should you have additional questions and can be reached at x30938 or on my cell phone at 713.817.5052.  Best regards.  SHD.

 -----Original Message-----
From: 	Aronowitz, Alan  
Sent:	Thursday, September 06, 2001 12:32 PM
To:	Shankman, Jeffrey A.
Cc:	Douglas, Stephen H.
Subject:	RE: 

Jeff:

I will have Steve send you a note on this. Steve, please call me about this when you get back to the office later today.

Alan

 -----Original Message-----
From: 	Shankman, Jeffrey A.  
Sent:	Thursday, September 06, 2001 11:12 AM
To:	Aronowitz, Alan
Cc:	Douglas, Stephen H.
Subject:	RE: 

What tax reasons?  What is the structure?  

 -----Original Message-----
From: 	Aronowitz, Alan  
Sent:	Thursday, September 06, 2001 10:18 AM
To:	Shankman, Jeffrey A.
Subject:	RE: 

Jeff:

I just tried to call you on this matter. I left you a voice mail.

This company was set up for tax reasons to indirectly hold 100% of the shares of  the new Bermudan company formed last week to trade insurance claims.

Let me know if you have any other questions.

Regards, Alan

 -----Original Message-----
From: 	Shankman, Jeffrey A.  
Sent:	Thursday, September 06, 2001 9:32 AM
To:	Aronowitz, Alan
Subject:	

Alan, I didn't know we were setting up a sub of EGM for GRM.  I've gotten a question from Whalley about it.  Can you fill me in?

Jeff