Electricity Buyer for State Fined for Lapse

The Department of Water Resources has agreed to pay a $69,500 fine for belatedly disclosing potential conflicts of interest with 52 energy consultants hired at the height of last year’s electricity crisis.

If the negotiated settlement is approved by the Fair Political Practices Commission on Thursday, the fine will be paid by the department, not individual employees, DWR spokesman Oscar Hidalgo said.

The proposed fine is a compromise, both in the amount and in who would be responsible. In January, state sources said FPPC investigators were proposing fines totaling $100,000 against department director Tom Hannigan, deputy director Ray Hart, former general counsel Susan Weber and personnel director Greg Rowsey.

Thrust into the emergency job of buying electricity for 27 million Californians in January, DWR did not require the dozens of consultants it hired to submit personal conflict-of-interest forms until July.

Ten spot market traders filed their statements of economic interest more than 100 days past the filing due date, according to documents prepared by FPPC investigators. Such a failure resulted in “serious public harm,” they wrote.

“For a significant length of time, DWR’s violations deprived the public of the ability to monitor whether these decision-makers had conflicts of interest,” wrote the FPPC enforcement division.

But because the penalties occurred in the context of a crisis, the FPPC proposed less than the maximum fines.

DWR was thrust into the job of buying electricity in January 2001, when three major utilities became short of cash and blackouts threatened the state.

The department quickly hired dozens of consultants to buy electricity on the spot market, negotiate long-term power contracts, and serve as financial and energy market advisors. Months later, it was discovered that several consultants owned stock in companies with which they did business. In July, five consultants were fired.

According to FPPC documents, DWR officials asked the department’s attorneys for advice on conflict-of-interest laws around March 1, 2001. DWR legal staff then spent more than two months studying whether consultants, as defined in DWR’s conflict-of-interest code, must disclose their financial interests. “Because of the demands on the agency and their own lack of familiarity with the energy industry, the staff’s research was complex and time-consuming,” concluded FPPC investigators.

The settlement was negotiated for DWR by attorney Joseph Remcho, a former member of the FPPC and a former law associate of current FPPC chairwoman Karen Getman, who was appointed by Gov. Gray Davis. Remcho said Getman was not involved in the negotiations conducted by the FPPC enforcement division.

DWR first sought legal help from the state attorney general’s office, Hidalgo said. But the attorney general, which is conducting its own investigation of DWR’s operations, told the department to hire private attorneys.

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Times staff writers Tim Reiterman and Virginia Ellis contributed to this report.