Enron Gets 2nd Chance to Turn Over Documents

Acting five hours after Enron Corp. sued to stop a legislative investigation of its business practices, a state Senate committee Wednesday gave the electricity wholesaler a second chance to turn over documents and rid itself of a contempt citation.

But officials at Enron, a major player in the California power market, brushed aside the gesture, saying it fell far short of meeting the company’s objections.

“Our position has not changed. . . . The issues we had at the beginning of the hearing, we still had at the conclusion of the hearing,” spokeswoman Karen Denne said.

The Houston-based electricity wholesaler claimed in a letter to the Senate investigative committee that it was being singled out as a “political scapegoat” for the energy mistakes of California officials.

In the suit, Enron charged that the committee’s investigation went far outside the law, an allegation denied by Chairman Joe Dunn (D-Santa Ana). He also denied the scapegoat charge.

The lawsuit was filed in Superior Court 62 minutes before the select committee investigating market manipulation was to finalize its earlier finding of contempt against Enron.

Enron appears to be the last of eight power sellers to refuse to make documents available to the committee. Seven others also had held out, but in the last two weeks have said they will provide the records or are negotiating to do so.

Dunn said the committee must examine the hundreds of thousands of documents, including what Enron called its “most closely guarded secrets,” to determine whether price gouging occurred and whether remedial legislation is necessary.

Gov. Gray Davis and other officials are convinced that the wholesalers overcharged the state $8.9 billion during the energy crisis. A federal mediator has said the overcharges are closer to $1 billion.

But at Wednesday’s hearing, an angry Sen. Steve Peace (D-El Cajon), a sponsor of California’s flawed 1996 deregulation law, charged that by suing the committee, Enron was trying to “precipitate a constitutional crisis” between the judicial and legislative branches of state government.

“You just went to war with the state of California and the people of California!” Peace shouted at Michael Kirby, a San Diego attorney representing Enron. “You are already at war economically. Now you are at war politically.”

Kirby replied that Enron was merely trying to defend its right to due process against what he called unlawful violations by the committee.

He complained that Enron was held in contempt on June 28 but that the company had never been given a chance to present its objections.

“An accused criminal has been given more opportunity to have a hearing on their objections than I have [in this committee],” Kirby told the lawmakers.

Sen. Debra Bowen (D-Marina del Rey), also an attorney, told Kirby that legislative subpoenas are far different than those issued in the court system and are not subject to the same restrictions because lawmakers must deal with policy issues, not matters of guilt or innocence.

In their suit and testimony to the committee, Enron representatives charged the committee had ventured far out of its jurisdiction and that only the Federal Energy Regulatory Commission could legally undertake a wholesale price investigation and impose sanctions.

The committee asked for a vast array of documents, including those involving business decisions and transactions in other states. But Enron claimed that the committee had no authority to issue subpoenas outside California and that the subpoenas themselves were flawed.

The company asked the court for an injunction against further investigation by the committee and proposed that a “neutral” arbitrator or judge try to fashion a compromise.

Dunn suggested that the lawsuit was an effort to intimidate the committee. But he insisted it “will not impact our investigation.”

Under contempt procedures, last used in 1929, the committee can find an individual or entity in contempt. It then reports its recommendations to the full Senate, which must ratify the committee’s action. The Senate also can impose sanctions, ranging from possible jail terms to heavy penalties.

Dunn offered Enron what he called a “middle ground” that would give the company an opportunity to change its mind and comply with the subpoenas instead of facing an immediate report to the Senate.

Under Dunn’s recommendation, approved on a bipartisan 5-0 vote, the report of Enron’s failure to comply would be compiled and written, but it would not be delivered to the full Senate until Monday at the earliest.

If Enron were to reverse itself and agree to provide the records the committee wants, sign a confidentiality agreement and create a Sacramento repository for its records, the committee would hold the report back.

If compliance continued, Dunn said, the committee’s contempt finding would be purged.

Dunn said he decided to give Enron a second chance because his “No. 1 priority is to get the documents. Contempt is the last resort.”

Denne, the Enron spokeswoman, noted that the company recently established a document repository in Sacramento for records of its California operations, but not the disputed documents involving business elsewhere.

She contended that the confidentiality agreements proposed by the committee failed to “guarantee that these documents would remain confidential.”

Another wholesaler, Mirant, also had been held in contempt by the committee. But Dunn said that since its June 28 citation, Mirant had become cooperative. The committee agreed to review Mirant’s citation in a month and possibly erase it.