Guilty Plea Fuels Power Crisis Probe
Federal authorities issued a warning Friday that executives at Enron Corp. and other companies that may have manipulated California’s power market are in serious peril now that a former top Enron official has admitted conspiring to inflate prices.
U.S. Atty. Kevin Ryan said the negotiated guilty plea of former Enron Vice President Timothy N. Belden on Thursday was a major breakthrough in a swift-moving, 4-month-old investigation to determine whether crimes were committed during the state’s 2000-2001 energy crisis.
Ryan said Belden’s admissions and his cooperation with federal investigators would offer an important “window into the upper management of Enron,” which was a leading player in the state’s power market until the Houston-based company declared bankruptcy late last year.
“He did not act without the help and approval of others,” Ryan said at a news conference. “To Mr. Belden’s co-conspirators, and they know who they are, they should be very concerned.”
Federal officials declined to say whether their investigation has turned up evidence that other companies adopted the trading strategies that Enron allegedly employed, or conspired with Enron to drive up prices in the wholesale energy market. And they refused to say whether Belden’s former supervisors at Enron, including former Chairman Kenneth L. Lay and former Chief Executive Jeffrey K. Skilling, are targets of the investigation.
“We are looking at the individuals who were part of the decision-making process,” said FBI spokesman Andrew P. Black. “And if they are shown to be part of this [conspiracy], they will be indicted.”
Enron spokesman Mark Palmer said only that the company is cooperating with all investigations. Lawyers for Lay, Skilling and former President Lawrence G. Whalley said their clients have nothing to fear from the investigation.
The companies that sold power to California during its energy crisis -- including AES Corp., Calpine Corp., Duke Energy Corp., Dynegy Inc., Mirant Corp., Reliant Resources Inc. and Williams Cos. -- have denied using manipulative trading ploys or withholding electricity to drive up prices.
“We conduct our business in California and elsewhere above board, appropriately and with integrity,” said Pat Mullen, a spokesman for Charlotte, N.C.-based Duke Energy, which owns several power plants in California.
At Friday’s news conference, federal prosecutors and the FBI offered the most detailed description yet of their ongoing investigation into Enron’s role in California’s energy crisis.
The U.S. attorney’s office and the FBI office in San Francisco received a referral from the Justice Department’s Enron task force in May after federal energy regulators released memos and other documents in which Enron attorneys described trading ploys to inflate prices. The documents indicate that other companies were assisting Enron or imitating its trading tactics.
The Federal Energy Regulatory Commission in August opened investigations into the trading behavior of Enron subsidiary Portland General Electric Co. as well as Spokane, Wash.-based Avista Corp. and El Paso Electric Co. after FERC staff found evidence that the companies may have assisted Enron in its illicit trading practices. The companies have denied wrongdoing.
Officials said about 10 FBI agents and analysts were assigned to the case, and they found that Enron’s power-trading operation in the West and headed by Belden generated $800 million last year, up from about $50 million in revenue in 1999.
Although they did not specify how much of those revenues were illegally generated, federal officials pointed to the jump in the price of wholesale power -- from $24 to $40 a megawatt-hour in May 2000 to as high as $1,500 several months later.
“That’s the impact on the good people of the state of California,” said Mark Mershon, the special agent in charge of the San Francisco FBI office.
Belden, 35, pleaded guilty to one count of conspiracy to commit wire fraud and agreed to forfeit $2.1 million in “criminally derived” compensation from Enron.
“He is the first domino to fall,” said California Public Utilities Commission member Jeff Brown, who for many years was San Francisco’s public defender. “You start at the bottom and work your way up.”
