Consultants’ Stock Buys Questioned

Secretary of State Bill Jones on Monday urged California’s attorney general to investigate possible conflict of interest violations by consultants hired to help the Davis administration navigate the energy crisis.

Jones, a Republican candidate for governor, said at a Los Angeles news conference that Atty. Gen. Bill Lockyer and the state Fair Political Practices Commission should determine whether seven of the consultants have conflicts of interest because they own stock in one or more energy companies.

He also asked the state’s chief law enforcement officer to immediately determine whether the governor’s office violated state law by exempting 21 of the 45 consultants from financial disclosure requirements.

“I am gravely concerned that a cloud of illegality and collusion exists at the highest level of our state government due to the actions and the conscious policy of secrecy of Gov. Davis,” Jones said.

That brought a sharp retort from the governor’s spokesman, Steve Maviglio, who attacked Jones for engaging in campaign politics.

“The secretary of state has a five-person team bankrolled by the taxpayers attempting to dig up dirt for political reasons,” Maviglio charged.

“This is politics pure and simple being played by a candidate desperate to get his name in the paper,” Maviglio said. If there are any violations of the law, he added, “they’re going to be addressed.”

The secretary of state’s entry into the energy controversy poses yet another headache for Davis as he prepares to run for a second term next year. Already, the GOP and some power producers have begun airing commercials critical of Davis’ handling of the power crunch, forcing the governor to dip into his own campaign funds to fight back.

Jones, as the state’s chief elections officer, contends that his concerns are not just political. He noted that he appoints one of the five members of the Fair Political Practices Commission, which enforces campaign finance and conflict of interest laws.

Among other things, Jones questioned why Vikram Budhraja, head of the Electric Power Group, a Pasadena energy consulting firm, bought stock in Edison International and Dynegy Corp. in the days before he went to work for the state.

Budhraja was hired under a $6.2-million contract between his firm and the state Department of Water Resources that was signed on Jan. 18. Like two dozens of the consultants hired by the state, he did not complete a financial disclosure statement until last week, more than six months after he went to work for the department, which now buys power for the state’s three largest utilities.

The financial disclosure statement filed by Budhraja last Thursday shows that he bought between $10,000 and $100,000 worth of Dynegy stock on Jan. 11. Six days later, he bought between $10,000 and $100,000 of Edison stock.

That was the same day that Davis declared a state of emergency because of the energy crisis and ordered the Department of Water Resources to begin buying power on behalf of the state’s financially troubled major utilities.

On Jan. 22, Budhraja again bought between $10,000 and $100,000 of Edison stock. On his disclosure statement, he indicated that he began work for the state Jan. 25 and sold the stock on Jan. 29--the first opportunity he had to divest his holdings.

Jones told reporters that Budhraja’s investments in Edison grew by 44% to 47%, while his Dynegy investment increased 28% in that brief period.

Budhraja was also on retainer as a consultant to Edison International, earning more than $100,000 in the year before becoming a contractor for the state.

Maviglio said Budhraja wrote a letter to DWR Deputy Director Ray Hart saying he had no dealings with Edison International. He also was not involved in any long-term contracting with Edison.

Any profits Budhraja made from the stock are irrelevant because the stock was sold by the time he was on the job, Maviglio said.

Another consultant, Bernard Barretto, who describes himself as an energy trader/scheduler for the state, disclosed last week that he purchased stock in power producer Enron Corp. But no date or amount of the purchase was listed.

Financial disclosure forms filed last week by five other consultants show they all own stock in Calpine Corp., a major California-based power wholesaler.

Energy trader Elaine L. Griffin bought between $10,000 and $100,000 worth of Calpine stock on Feb. 1. Her contract with the state began Feb. 20. Griffin’s newly completed economic disclosure statement does not show her selling the stock. Herman Leung, who went to work as an electricity scheduler in March, bought between $2,000 and $10,000 worth of Calpine stock on Jan. 22.

Schedulers William F. Mead, Peggy Cheng and Constantine Louie also disclosed that they own stock in Calpine. Mead, in fact, said his holdings ranged between $100,000 and $1 million. But their forms contain an important omission: The consultants do not say when they purchased the shares.

Oscar Hidalgo, a Water Resources spokesman, said the agency’s attorney is reviewing all the past purchases to ensure that no laws were violated by contractors buying power or negotiating long-term contracts with companies in which they held stock.

“We’re reviewing all that to see if [there were] any problems with any past negotiations,” Hidalgo said. “We’re looking at all the records in past buys or trades so we understand who exactly did what.”

He said it’s a “very big task” that will take weeks to complete.

In the meantime, those contractors who have disclosed stock ownership have been recused from working with generators in which they have a financial interest.

The governor’s spokesman said several of the contractors who own stock in Calpine are not traders, and thus do not have direct dealings with the company.

“If you own Calpine stock and aren’t doing any business with Calpine, then you’re fine,” Maviglio said.

Calpine is one of a number of firms that negotiated long-term contracts with the state and that have come under fire from critics who say they will saddle consumers with artificially high electricity costs for years to come.

For weeks, Jones has been sharply critical of the administration’s failure to require its consultants to file conflict of interest forms, which must be completed within 30 days of a person starting work.

The governor’s spokesman said the administration was told by the state’s political watchdog agency that only consultants serving in a staff capacity or participating in decisions must file the forms.

As a result, he said, only two dozen of the 45 consultants were required to complete the paperwork--most of them “hastily and clumsily” prepared last week, according to the secretary of state.

Two of those who have not filed are Wall Street executives Joseph Fichera and Michael Hoffman, key advisors to Davis on his plans to rescue California’s debt-ridden utilities. In that role, according to their contract, they could make millions.

Maviglio said the two men, who have done extensive work for private energy companies, are “squeaky clean,” but he would not elaborate.