When an email with an attachments arrives, the attachments are appended to .dat files (although the email is encrypted just fine). Email attachments are converted from the original file format/extension to a .dat file when the sending encryption platform is GPG.
GPG has been found to be the cause of the corruption of the attachments in email. Upon uninstalling GPG and leaving PGP Desktop installed, both email and attachments are encrypted correctly.
To resolve this issue, uninstall GPG and run PGP Desktop only.
Leave GPG installed and do not install any additional encryption applications.
This error occurs when GnuPG (GPG) and PGP Desktop/PGP WDE 10.2.x and installed on the same system.