Catching Corporate Criminals

The corporate crime wave that began with the Enron accounting scandal has eroded America's confidence in big business, cost tens of thousands of people their jobs and sucker punched an already swooning stock market. The Securities and Exchange Commission and the Justice Department have opened multiple investigations, and Congress and the president have joined the fight by approving the most sweeping corporate fraud legislation since the crash of 1929.

President Bush:

The corporate crime wave put President Bush on the defensive, and his first response was to set up a new Corporate Fraud Task Force by executive order. Aimed at rooting out and prosecuting white-collar criminals, the task force will live within the Justice Department, with Deputy Attorney General Larry Thompson as its head. The way these crimes are investigated will not change, but the persons and entities already investigating such cases as Enron and Arthur Andersen will be consolidated and reorganized.

The president also signed into law strong new rules for corporate America, saying, "Free markets are not a jungle in which only the unscrupulous survive, or a financial free-for-all guided only by greed." The administration was eager to enact new laws after the scandals threatened to damage the White House politically, and drove markets down. The records of Mr. Bush and Vice President Dick Cheney, both former corporate executives, have come under intense scrutiny as well.

Source: AP, Reuters

Congress

In overwhelming votes, both the House and Senate passed compromise legislation aimed at restoring confidence in big business and the markets. The rush to crack down saw congressional Republicans in a virtual competition with their Democratic rivals to see who can be tougher on corporate crime.

The new rules were approved by President Bush and include criminal penalties and harsh jail terms for wrongdoers, plus an independent board that will oversee accounting firms. It amounts to the most far-reaching overhaul of corporate accountability since the Depression.

In the compromise measure, House Republicans accepted most of the stricter parts of the version passed by the Democratic-controlled Senate. Republicans had been against the Senate's decision to allow investors more time to sue corporations for fraud.

The new laws do not, however, require corporations to count as a business expense lucrative stock options they shower on top executives. Many analysts believe such a provision is necessary, but the administration has opposed it.

Source: AP, Reuters

Justice Department

The Justice Department works closely with the Securities and Exchange Commission to investigate corporate crime, most recently dealing with the unraveling telecom giant WorldCom and energy trader Enron, both of which went bankrupt in the wake of accounting scandals. President Bush's newly-created Corporate Fraud Task Force sets up a separate division within the department to handle these cases. They were previously handled by the criminal division, which has a money-laundering section and a fraud section.

Essentially a reorganization, Justice Department officials say the new task force adds oversight, guidance and muscle to the government's investigations by including FBI director Robert Mueller and putting Deputy Attorney General Larry Thompson in charge.

Source: AP, Reuters

Securities and Exchange Commission

The corporate accounting scandals have resulted in Securities and Exchange Commission investigations of several big corporations, including WorldCom, Adelphia and Xerox.

The SEC is a government agency set up to protect investors by making sure they have free access to important information about public companies. It was created through an act of Congress in 1934, in response to hearings over the Great Crash of 1929.

The commission oversees stock brokers and investment advisors, as well as the stock exchanges, mutual funds and holding companies they deal in. The SEC has the power only to pursue civil charges or administrative actions, and those found guilty may face penalties, but not jail time. The SEC frequently works with the Justice Department and other law enforcement agencies when criminal charges are deemed necessary.

The commission received increased powers, including the ability to bar guilty individuals from heading publicly traded companies, when President Bush signed new corporate fraud legislation. It also got about $300 million to hire more auditors and investigators.

Source: SEC, Associated Press, and Reuters

Got Juice?
California May Be Saddled With Severe Power Shortages This Summer
by Jason Leopold , ZNet, April 17, 2004

LINK

Get ready for another jolt this summer. California energy officials are expected to issue a startling report next week warning that the state is going to be terribly short of electricity, which could result in a repeat of the energy crisis that wreaked havoc on consumers and businesses in the Golden State three years ago.

Last month the National Weather Service predicted that above normal heat and dryness will blanket much of California this summer meaning that demand for power to keep air-conditioners humming will likely outstrip the state's supply. The state is relying heavily on consumers to implement conservation measures in order to avoid issuing power emergencies and rolling blackouts.

A draft summer outlook report prepared by the California Independent System Operator, the state agency that manages supply and demand, expects demand for juice during a hot spell to peak at 44,422 megawatts, a 3.6% increase from last summer, mostly due to 195,000 new homes that were built in the state the past year and two-dozen old power plants that were permanently idled. As a result, California has 873 megawatts less than it did last summer.

The ISO report says the state will have just 1,176 megawatts to spare under normal weather conditions, but that's assuming that all of the state's power plants are operating, which is a rarity. The worst-case scenario, according to the ISO report, is that California could be short 1,654 megawatts meaning that a summer of unprecedented power emergencies and rolling blackouts are likely. One megawatt can light about 1,000 homes.

Exacerbating an already tough situation is major transmission line constraints. The state's high-voltage electrical highway is prone to severe bottlenecks and is in such dire need of an overhaul that soaring demand this summer could make it difficult to send power from North to South and vice versa. Moreover, the transmission line constraints hinders the state's ability to import resources from the Pacific Northwest, the ISO report says.

Californians already got a preview of what's in store for this summer. On March 8, a volatile part of the electrical superhighway known as Path 26 overloaded due to a spike in demand and resulted in a power outage that affected about 70,000 people in Southern California. A few weeks later, on March 30th, the day the ISO finished preparing the draft report, the agency issued its first "stage 1" power alert of the year when power reserves dipped below 7%, a result of record high temperatures and a boon in air-conditioner use. Consumers, it seemed, never really learned the lessons of the 2000-2001 energy crisis: conserve or face blackouts.

But it's not just consumers that are at fault. The fallout from the energy crisis three years ago left the state vulnerable to future electricity shortages. The crisis (and the Enron bankruptcy) destroyed the merchant power industry and made it virtually impossible for the private sector to get backers to finance the construction of new power plants to offset the supply/demand imbalance because California is too risky a place for the electricity industry to do business. That, combined with a horribly flawed market design that still hangs in limbo and to this day is still ripe for manipulation will eventually wind up leaving California in the dark if lawmakers fail to take quick action to fill the supply side gap and clean up the mess left by the energy companies that illegally exploited deregulation's loopholes to boost their profits.

Two bills currently being debated in the state Legislature aim to solve those issues, but lawmakers can't seem to agree on either of the plans and they aren't close to reaching a resolution. Both bills contain elements of deregulation. One bill is sponsored by Southern California Edison, the Rosemead utility that helped write the state's original deregulation law that resulted in an energy nightmare; the other bill is sponsored by the private energy sector. For consumer groups, that spells deja vu.

"People have forgotten the history, and we've gone through a time warp," Matt Freedman, an attorney with San Francisco consumer group The Utility Reform Network, told the Los Angeles Times March 21. "The Legislature appears to think the energy crisis was a one-time phenomenon that can never be repeated."

Gov. Arnold Schwarzenegger said last year when he was elected following the successful recall of Gov. Gray Davis, whose ouster from office was due, in part, to his poor handling of the energy crisis, that finding a solution to the state's energy woes was one of his top priorities.

Schwarzenegger "remains focused on bringing new energy investments to California, and he's also said that California should keep a 15 percent reserve to protect against blackouts,' the governor's spokeswoman, Ashley Snee, told the San Francisco Chronicle April 14.

But Schwarzenegger, the former Mr. Universe, doesn't have a plan in place and he has yet to lift a finger to try and design one. Schwarzenegger may think that he can rescue the state from an energy meltdown at the last minute like he does in his action movies. But by the time he acts the state will already have faded to black.

California Energy Plan
Schwarzenegger Pulls a Cheney; Aides Refuse to Identify Energy Team
by Jason Leopold, ZNet, May 03, 2004

LINK

A few days before Arnold Schwarzenegger was sworn in as the 38th Governor of California last year he stood on the steps of the capital building in Sacramento waving a broom over his head, an obvious symbolic gesture in which Schwarzenegger promised to clean up the political mess left by his predecessor, Gray Davis.

"I enter this office beholden to no one except you, my fellow citizens," the Republican governor said when he was sworn in on Nov. 18, 2003. "I pledge my governorship to your interests, not to special interests...to those who have no power...to those who've dropped out - too weary or disappointed with politics as usual - I took this oath to serve you...I did not seek this office to do things the way they've always been done. What I care about is restoring your trust in your government."

That was then. This is now.

In a page torn straight out of President Bush and Vice President Dick Cheney's playbook on government secrecy, Schwarzenegger's aides have refused to disclose the names of individuals who helped the governor draft a plan to retool California's energy market, a plan that appears to benefit the very same special interests Schwarzenegger said he wasn't handcuffed to during his campaign. Moreover, for the energy proposal to work, it relies heavily on piecemeal components of the state's old deregulation law that sparked the energy crisis and wreaked havoc on consumers three years ago.

Refusing to identify the governor's energy advisers is identical to the stonewalling tactics employed by Vice President Dick Cheney, who, three years ago rounded up a handful of individuals, including Ken Lay, the former chairman of disgraced energy corporation Enron, to help him draft a National Energy Policy for President Bush. Cheney's team of advisers became known as his energy task force.

When Cheney released President Bush's National Energy Policy in May 2001 it turned out to benefit major energy corporations at the expense of the environment and consumers. Cheney has since refused requests from Congress to identify the people he met with. The vice president was sued by conservative watchdog group Judicial Watch and environmental group The Sierra Club in order to force Cheney to reveal the people he met with while drafting the energy policy. The case made it's way to the Supreme Court last week and justices are expected to decide later this summer whether Cheney should be forced to release the names of individuals on his energy task force.

Now it appears that Schwarzenegger's staff is also operating under a veil of secrecy. On April 27, Schwarzenegger's aides released a letter the governor wrote to Michael Peevey, president of the California Public Utilities Commission, in which Schwarzenegger called for the state to return to a fully competitive, deregulated electricity market.

Copy of the Letter

In a teleconference with reporters Wednesday, April 28, to discuss the plan, one of Schwarzenegger's aides (who instructed reporters that his name could not be used for attribution) was asked who advised Gov. Schwarzenegger on his energy plan.

The aide refused to disclose the names of the individuals the governor met with nor would he say how many meetings took place before Schwarzenegger formulated an energy policy. The aide would only say that the governor had "many, many" meetings with consumer groups, legislators and experts in the energy sector.

But officials with three of California's most prominent consumer rights groups, all of whom spent the past four years at the forefront debate surrounding the state's energy issues, said they never met with Gov. Schwarzenegger or anyone from his staff to discuss the governor's future electricity plans for the state.

"We never met with him, never," said Bob Finkelstein, the executive director of The Utility Reform Network, a San Francisco based consumer. "Either somebody in (Schwarzenegger's) office decided they knew what the consumer groups were going to say about his plan or the governor came to the conclusion that he didn't care about consumers."

Finkelstein said consumer groups are wary of Schwarzenegger's energy plan because it calls for a complete return to retail competition, which was supposed to reduce electricity costs for consumers and businesses, but ended up costing the state as much as $70 billion due to a flawed design that allowed energy companies to manipulate the market.

"It's almost 10 years to the day since we unleashed competition in California," Finkelstein said. "If we do it again following the same pattern history will repeat itself and we can't afford to do that again."

The issue is of particular concern now because the state's grid operator said it's likely there won't be adequate supplies of power come this summer if high temperatures blanket the state, which is what the National Weather Service is predicting.

Still trying to find out who Schwarzenegger met with, Doug Heller, the executive director of The Foundation for Taxpayer and Consumer Rights in Santa Monica, said he, Finkelstein and Michael Shames, the director of San Diego based consumer group Utility Consumers Action Network took part in a conference call hosted by a few of Schwarzenegger's aides just 15 minutes after the same aides briefed reporters April 28.

Heller, Finkelstein and Shames asked one of the aides whether consumer groups were consulted before Schwarzenegger's letter made it's way to PUC President Michael Peevey.

Heller said one aide, Dan Skopec, Schwarzenegger's Deputy Cabinet Secretary for Energy, assured them that consumer groups were consulted before the governor put his plan in writing.

"We asked what group he met with but Skopeck said he couldn't tell us because it was privileged information," Heller said. "But if they didn't meet with the three of us than who did they talk to?"

Skopec could not be reached for comment. But Terri Carbugh, a spokeswoman for Schwarzenegger, said it's very likely that there was a miscommunication between Schwarzenegger's aides and the consumer groups and reporters.

"This is a governor that favors open government," Carbaugh said. "I can't imagine that the people he met with would be a secret."

Heller, however, is not so sure.

"I suspect that Schwarzenegger is doing what politicians do," Heller said. "Get advice from the donors and interests that support him and don't tell anyone about it. The fallout is that he is putting forward an agenda to force small business and consumers to pay high interest rates and setting the stage for the next set of blackouts and energy company gouging."

By late Friday, Carbaugh was unable to round up a list of names of the people who met with Gov. Schwarzenegger and helped him draft his energy plan because the governor's advisers who are privy to the information had already left for the weekend.

Schwarzenegger's Energy Team and the Recall Campaign
by Jason Leopold May 13, 2004

LINK

One of the many missteps that led to the unraveling of Gray Davis' decades long political career was the way in which the former governor of California handled the state's energy crisis. Sure, Davis may have publicly vilified energy companies such as Enron for ripping off the state and manipulating the market, but he operated under a veil of secrecy behind the scenes, refusing to allow anyone outside his administration to scrutinize his so-called solutions to the crisis.

When Davis and his team of energy advisers negotiated more than $40 billion in long-term energy contracts for the state as a way of putting the brakes on soaring wholesale power prices, he refused to publicly release the details of those contracts. It wasn't until Davis was sued by a handful of newspapers forcing him to disclose the terms of the long-term contracts that the state was able to see just how bad of a deal he made for consumers. Moreover, many of the people Davis hired to negotiate the contracts had a conflict-of-interest because they held financial stakes in the same companies they were negotiating with on behalf of California. Many of those long-term contracts have since been renegotiated but a bulk of the deals still left in place means California will pay the highest price for electricity in the country for the next decade.

Now, after promising not to repeat the same mistakes as his predecessor, Arnold Schwarzenegger, the Hollywood action star who unseated Davis during a contentious recall election last year, is on track to make an already bad situation worse. Late last month Schwarzenegger released the blueprints of his long-awaited energy plan, which calls for the state to return to a fully, competitive deregulated electricity market. That's a hot-button issue because, according to Attorney General Bill Lockyer, the market is still ripe for manipulation and there are no safeguards in place to protect consumers should another energy crisis hit. Furthermore, California's grid operator says in the event of a heatwave this summer the state's power supplies could be dangerously low creating the potential for blackouts and that could send power prices through the roof again. It was just two weeks ago that California's grid operator was forced to ask a state utility to cut power to some of its large business customers because high heat caused a spike in demand for power and overloaded one a transmission line.

Instead of confronting the issue with a set of policy directives that benefits consumers and businesses, Schwarzenegger has surrounded himself with a who's who of free-market advocates who put the interests of big business before that of consumers, arguably the ones that were most affected by financially by the energy crisis, when it comes to policy decisions about the future of the state's electricity market. Worse, it's unclear if Schwarzenegger ever bothered to meet with consumer groups before releasing his energy plan.

Like Davis, Schwarzenegger is beginning to operate under a veil of secrecy on policy decisions that affect Californians. Case in point: when an aide to Schwarzenegger was asked April 28 who helped the governor draft his energy policy the aide refused to identify the names of the people involved in the discussions, in what appeared to be a move that was identical to the stonewalling tactics Vice President Dick Cheney has employed over the past three years to keep the names of his energy task force secret. Consumer groups said they were left out of the discussions with the governor because they opposed the governor's energy plan. Dan Skopec, a senior member of Schwarzenegger's administration who handles energy issues, said the governor did consult with consumer groups, but he wouldn't reveal what groups he met with. But after a weekend of discussions, Terri Carbaugh, Governor Schwarzenegger's spokeswoman, agreed to reveal the names of the people who worked on Schwarzenegger's energy policy.

It's now clear why Schwarzenegger's aides wanted to keep the identities of the people they consulted with under wraps. Cronyism. Some of the people advising Schwarzenegger contributed heavily to his campaign last year. One of Schwarzenegger's energy advisers, Dan Emmett, a real estate developer, contributed $21,200 to Schwarzenegger's "Total Recall" campaign. Larry Mendonca, another adviser, works for consulting firm McKinsey & Company, a firm that also contributed to Schwarzenegger's campaign.

On top of that, none of the people on Schwarzenegger's energy team happen to be consumer friendly. What these people are telling the governor are things that will ultimately keep big businesses happy. For consumer groups, that's like deja vu all over again.

The team, according to Carbaugh, is: Ralph Cavanaugh watches the power industry for the National Resources Defense Council and his participation in discussions with the governor are limited to the environment. James Sweeney and Severin Borenstein are free-market advocates who teach energy issues at Stanford University and UC Berkley and helped write Schwarzenegger's energy plan. Sean Randolph is president of the San Francisco-based Bay Area Economic Forum, a group that represents business and government interests. Sunny McPeak is Schwarzenegger's Business, Housing and Transportation secretary. Terry Tamminen is Schwarzenegger's secretary of the California Environmental Protection Agency, or CalEPA.

Still, there's a fundamental disagreement between the state's leading consumer groups, The Foundation for Taxpayer and Consumer Rights, The Utility Reform Network and The Utility Consumers Action Network, on whether or not Schwarzenegger received advice on energy issues from consumer groups.

Schwarzenegger was "dead wrong in terms of consulting consumer groups. They

did not consult with any of the three California consumer groups who were most involved in energy matters," said Michael Shames, executive director of San Diego-based UCAN. "So who did he consult with?"

Carbaugh said Dan Skopec, Schwarzenegger's aide on energy issues, "has paper records of input from consumer groups." But Carbaugh said she doesn't know what consumer group provided the advice or what those "paper records" say.

Enron's Trading Schemes
New Documents Reveal What Was Known
by Jason Leopold, ZNet, June 07, 2004

LINK

Federal energy regulators have just released more than 400 pages of documents that suggest former Enron chairman Ken Lay and former chief executive Jeff Skilling were aware that Enron's west coast traders may have broken the law by using manipulative trading tactics in California to boost Enron's profits during the height of that state's power crisis.

Moreover, one of Enron's most powerful Washington, D.C. lobbyists, who met with several members of the Bush administration in the spring of 2001 about Enron's opposition to price controls on electricity sales in California, was told by Tim Belden, the mastermind behind Enron's notorious trading scams, less than a year earlier that Belden and other traders working at the company's West Coast trading desk in Portland, Ore., spent the better part of 2000 and 2001 breaking the rules governing California's power market "when opportunities presented themselves to make money."

"There's really two--two things that happened--two areas... in terms of things blowing up," Belden told Shapiro, Enron's vice president of regulatory affairs and one of the company's lobbyists, in August 2000. "One is our day-ahead scheduling practices and then the other is our real-time operations. Um, we've been doing and have been doing for two years a lot of activity in, you know, there's black, there's white and there's gray. Um, we have been endeavoring into the gray area when opportunities present themselves to make money. We have now moved out of the gray area into the clearly what's legal area... not even legal, but what's, um, there's like the letter of the law, the letter of the rules and the spirit of the rules. Um, we've been exploiting the letter of the rules--or literally interpreted--interpreting the rules, um, in California when we can make money..."

The documents released by FERC--more than 400 pages of transcripts of recorded conversations between Enron traders, company attorneys and Enron's public and governmental affairs departments that took place at the height of the California electricity crisis in 2000 and 2001--provide the most vivid portrait to date of the company's questionable trading practices that set off California's power crisis. A copy of the transcripts can be found at "http://elibrary.ferc.gov/idmws/nvcommon/NVViewer.asp?Doc=10152323:0"

California's electricity crisis wreaked havoc on consumers and businesses from the summer of 2000 to June of 2001, resulting in three days of rolling blackouts, hundreds of emergency power alerts and forced the state's largest utility, Pacific Gas & Electric, into bankruptcy. The crisis cost the state more than $70 billion.

State Attorney General Bill Lockyer said last week that he expects to file a multibillion lawsuit against Enron as a result of the company's manipulative trading practices detailed in the transcripts..

California is also seeking $9 billion in refunds from a handful of energy companies for overcharging the state during the power crisis. That issue is expected to be taken up by the 9th Circuit Court of Appeals in San Francisco because FERC said California was only entitled to roughly $3 billion in refunds.

In the conversation between Shapiro and Belden, Shapiro urged Belden to pull back on his trading schemes in California, such as artificially clogging transmission lines, Sending power out of state and submitting false data to the state's grid operator, and to begin working more closely within the law because of the severe political risk associated with Enron and the billions of dollars the company reaped from California's electricity crisis to fill its coffers.

But despite the fact that Shapiro was in the know about Enron's questionable trading practices, he continued to lobby powerful Washington lawmakers urging them not fix the market problems in California saying the crisis was the state's fault for not building enough power plants, according to public documents from the House Governmental Affairs Committee.

Belden, however, told Shapiro that he would continue to exploit the rules in California, believing that he may be breaking the law as a result, as long as it didn't cause the lights to go out in the state. He added that if Skilling were forced to testify before a commission about the inner workings of the West Coast trading desk that it could hurt Belden's career.

"I know there's a lot of political risk and I know that we got a ton of money in our book and then -- if Jeff Skilling ah, has to go in front of some commission and explain the activities of the West Power Group, that's probably not so great for my career," Belden told Shapiro, according to the transcripts.

This is the first revelation that an Enron lobbyist was briefed on the company's manipulative trading practices and it appears likely that other executives were also in the know. Shapiro wielded enormous influence with members of the Bush administration. On May 23, 2001 he met with White House economic adviser Robert McNally and Energy Secretary Spencer Abraham's chief of staff about Bush's National Energy Policy and Enron's opposition to price controls in California.

The meeting between Shapiro and McNally came at a crucial time for Enron. The company's most senior executives recognized that Enron stood to lose hundreds of millions in profits and its standing on Wall Street if California lawmakers were successful in getting federal energy regulators to rewrite the rules in California's power market. Judging by the events that followed, it appears that Bush and Cheney were in Enron's corner.

Four days before Shapiro met with McNally and Abraham's staff, on May 17, 2001, Vice President Dick Cheney was interviewed by the television news program Frontline. When asked if companies like Enron were behaving like a "cartel" and manipulating the California power market Cheney responded with a resounding "no."

"The problem you had in California was caused by a combination of things-an unwise regulatory scheme, because they didn't really deregulate. Now they're trapped from unwise regulatory schemes, plus not having addressed the supply side of the issue. They've obviously created major problems for themselves . . ."

That same day, May 17, 2001, Cheney and Bush unveiled the details of the National Energy Policy, in which Cheney adopted seven of Ken Lay's suggestions, according to published reports. Had the intimate details of Enron's trading schemes been known to California officials it most certainly would have derailed Bush's energy policy, which called for keeping many of deregulation's key components in place, and forcing key players, like Cheney, to return to the drawing board to draft a new policy.

But there's more.

On May 17, 2001, Enron Chairman Ken Lay called a secret meeting at the Peninsula Hotel in Beverly Hills, Calif., in an effort to get some of the state's rich and famous to lobby the California Legislature about getting "deregulation right this time." LLay apparently paid close attention to Enron's trading profits. A few months earlier, Sue Mara, an Enron governmental affairs employee phoned Bob Badeer, an Enron trader, with a question from Ken Lay. Following public comments by Davis about the state of California's energy crisis, Mara said Lay personally wanted to know if Davis's comments had affected the price of power in the forward market, That Lay would be interested in such minute details contradicts the former chairman's public statements that he had no idea about the shenanigans taking place inside of Enron.

California's current Governor, Arnold Schwarzenegger, who unseated Davis in a contentious recall election last year, attended the meeting at the Peninsula Hotel with Lay as did former Los Angeles Mayor Richard Riordan and junk-bond king Michael Milken and other luminaries. Lay handed the attendees a seven-page document that contained so-called solutions to the state's electricity crisis.

Twelve days after Lay met with Schwarzenegger and Cheney was interviewed by Frontline, and eight days after Shapiro met with McNally, President Bush agreed to meet with Gray Davis at the Century Plaza Hotel in West Los Angeles to listen to Davis's plea for much-needed price controls on soaring power prices. Bush refused saying the free-market would eventually correct the problems.

But it was already clear within Enron that the company would no longer be able to earn, in what Enron governmental affairs employee referred to on the transcripts as "bucketloads of cash," from California. Weeks earlier, California, under Davis, signed $42 billion in long-term electricity contracts with more than two-dozen energy companies and no longer bought the bulk of its power needs in the open market, where earned its biggest windfall.

In June 2001, shortly after the details of the long-term contracts were revealed, Skilling and Lay summonded Belden to Houston to discuss the company's West Coast trading division, which Belden said in one recorded conversation accounted for 80 percent of Enron's profits in 2000 and 2001, to determine if anything could be done to salvage the operation, according to one person working with the Justice Department on the investigation.

It's unclear what came out of that meeting, but two months later Jeff Skilling resigned from Enron. Just three months earlier, on March 9, 2001, he flew to Portland to take Belden and other senior traders out to dinner at Higgins restaurant to celebrate Enron's successful first quarter earnings. On the transcripts released by FERC, traders said they made upwards of $10 million a day in 2000 by utilizing many of the trading scams developed by Belden.

What's surprising about those scams Enron traders pulled in California is how well-known it was within the company's Houston headquarters, according to the transcripts. Indeed, one public affairs official at Enron instructed a trader based in the company's Portland, Oregon trading division to lie to a Wall Street Journal reporter who wanted to write a story about Enron's lucrative trading desk.

"The thing is anything they'd ask you, you'd have to lie because you wouldn't want to tell them the truth...," an unidentified Enron employee in the company's governmental affairs department said to an Enron trader. The governmental affairs employee then attempts to talk the trader out of doing the interview with the Journal. "I wouldn't do it (the interview). 'Cause first of all, you'd have to tell 'em a lot of lies, cause if you told 'em the truth..."

"I'd get in trouble," the trader says, interrupting the governmental affairs employee.

"You'd get in trouble," the governmental affairs employee said.

Still, on July 18, 2000, The Wall Street Journal printed a story under the headline Energy Traders Reap Big Profits on High Prices, which explained the excitement of being an energy trader during a period of volatile energy prices, apparently the same story that was discussed between the Enron trader and the governmental affairs employee. It's now known, according to the transcripts, that skyrocketing power prices discussed in that story were directly caused by Enron's manipulative tactics. and was not a result of regulatory restrictions that were left in place in California's wholesale electricity market.

Perhaps the most prescient part of the transcript is when John Forney, a senior Enron trader who worked closely with Belden and was indicted on conspiracy charges, fears that he may be sent to jail. In a conversation Forney had with Belden, Forney seems to have misgivings about one scheme he just pulled that involved California and Canada.

Belden seems to brush off Forney's concerns, according to the transcripts, and Forney says he can't believe that none of his Enron colleagues seem to be concerned about the possibility of going to jail as a result of the schemes he and other traders have pulled.

"I only want to go to jail once," Forney says.

"Yeah," Belden says. "Once in this country."

Forney is expected to appear in federal court in San Francisco in October.

Jason Leopold is the former Los Angeles bureau chief of Dow Jones Newswires where he spent two years covering the energy crisis and the Enron bankruptcy. He just finished writing a book about the crisis, due out in December through Rowman & Littlefield.

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