Enron Trader Pleads Guilty to Manipulation
A former high school math teacher who became one of Enron Corp.’s most valued energy traders pleaded guilty Tuesday in U.S. District Court to manipulating the California power market.
Jeffrey Shawn Richter admitted to conspiring to commit wire fraud and lying to the FBI and prosecutors during an interview in September. He agreed to cooperate with investigators probing the state’s energy crisis, which saddled the big utilities with billions of dollars of debt and left California with some of the highest electricity rates in the country.
Richter, 33, is the second high-ranking Enron trader to be convicted in connection with the gaming of the California power market.
He was a key lieutenant of Timothy N. Belden, the head of Enron’s West Coast electricity-trading operation. Belden pleaded guilty in October to wire fraud conspiracy and since has been aiding the U.S. attorney’s office in San Francisco and the FBI in their market manipulation investigation.
The plea agreement with Richter, who ran one of the California trading desks in Enron’s Portland, Ore.-based operation, gives prosecutors more inside information about the buying and selling of electricity by Enron and other energy companies as prices shot to record heights during the energy crisis of 2000-01. Sentencing was postponed to give prosecutors more time with Richter, who agreed to testify against others if needed.
“This begins to tighten the circle,” said Philip Chabot Jr., a lawyer for the city of Tacoma, Wash., who questioned Richter as part of a civil complaint against several power sellers filed with the Federal Energy Regulatory Commission. Richter invoked his constitutional right against self-incrimination during the deposition, as did Belden and another top California trader, John Forney.
“Between Belden, Richter and Forney, you have a 360-degree view of what was going on in Enron,” Chabot said. Prosecutors are believed to be building cases against Enron executives and well as traders at other companies.
Energy companies have largely denied wrongdoing in the California market. Traders have said they legally exploited loopholes in poorly designed markets -- a contention that prosecutors have been working to discredit for more than six months.
Enron declined to comment on Richter’s plea.
“This is the second top Enron trader who has now admitted that Enron’s manipulation of the California energy markets was illegal,” U.S. Atty. Kevin V. Ryan said in a statement Tuesday.
FBI Agent Mark Mershon, who runs the bureau’s San Francisco division, said the agency “continues to pursue those who manipulated the California energy markets, who engaged in criminal behavior, and who in the process affected the lives and finances of many millions of our residents.”
Richter told a federal judge that he conspired with others at Enron to manipulate prices through a variety of schemes. Noticeably absent in the legal filings and statements was any acknowledgment that the conspiracy extended beyond Enron to rival companies, as investigators are trying to establish.
In one scheme, Richter and others at Enron would tell California energy authorities that the company would be delivering more power than the company actually planned to deliver. Those false statements created the appearance of congestion on key transmission lines between Northern and Southern California, which prompted state agencies to pay Enron fees to reduce the congestion.
“You needed to have congestion” for the load-shifting scheme to work, Richter told U.S. District Judge Martin Jenkins. “I participated in the false statements.”
In a separate scheme, dubbed “Get Shorty,” Richter and his cohorts would sell emergency back-up power in the day-ahead market but would not line up any electricity to meet the commitment. The next day, Enron would buy cheaper power in the hourly market to cover the commitment, and then would pocket the price difference.
Richter joined Enron in 1997 after teaching math for a year at a high school in Houston. Richter soon moved to the Portland trading floor, a high-tech operation where more than 100 traders cut electricity deals around the clock.
Richter was promoted in January 2000 to head the short-term trading desk, which bought and sold electricity in California’s spot markets. A second trading operation, the real-time desk, was headed by Forney, who has been attempting for months to negotiate a deal with prosecutors.
Jenkins found Richter guilty of the two charges, each of which carries a maximum five-year prison sentence. Richter’s false statement to the FBI was that he hadn’t intended to deceive anyone when he submitted power schedules in the schemes, according to court documents.
The eventual sentence will depend in part on how helpful Richter is, prosecutors said. He was released on an unsecured bond of $500,000.
Richter declined to speak with reporters after the hearing. Neither prosecutors nor Richter’s attorney, Terry Bird, would say what cooperation they expected from Richter, who moved to Houston to work for UBS Warburg before it closed its Houston-based trading floor.
UBS Warburg bought the trading operation from Enron, which filed for bankruptcy protection in 2001.
