Lockyer Sues Enron; FERC to Review Tapes
The uproar over tapes in which Enron Corp. energy traders bragged of exploiting “Grandma Millie” and other Californians intensified Thursday as state Atty. Gen. Bill Lockyer sued the disgraced company and U.S. regulators said they would review the new evidence of market manipulation.
“We want our money back. Grandma Millie ought to get her money back,” Lockyer said Thursday, announcing a lawsuit that seeks to recover “potentially hundreds of millions of dollars” for Enron’s alleged gaming of the system during the 2000-01 energy crisis.
Just hours earlier, the Federal Energy Regulatory Commission said it would review the tapes as potential evidence in regulatory proceedings, including California’s major refund case from the energy meltdown.
The actions demonstrate the deep public anger that has resulted from the tape recordings, in which energy traders laid out strategies for exploiting weaknesses in the state’s electricity marketplace. In colorful and often crude language, traders spoke openly of stealing from Californians -- the fictitious Grandma Millie, among them -- and even expressed the wish that a large earthquake would push the state into the ocean.
At one point, two Enron employees said they hoped that a wildfire would destroy California power lines, together chanting: “Burn, baby, burn.” Details from the tapes were published by The Times a month ago, but public ire grew with the subsequent airing on television and radio news programs of excerpts in which traders could be heard laughing about the state’s predicament.
“These taped conversations indicate that this corrosive attitude seeped down from the corporate offices to the employees at the front line,” FERC Chairman Patrick H. Wood III said Thursday.
The tapes came to light after a Washington state utility involved in its own legal battle with Enron obtained them from the Justice Department.
Lockyer’s 20-page suit accuses Enron of violating the state’s Unfair Competition Law and the commodities fraud statute, and seeks a return of unjust profits.
Meeting with reporters in Santa Monica, Lockyer didn’t spell out exactly how much he hoped to recover, but he maintained that it could total more than $1 billion. He suggested that the tone of the recorded conversations might influence a jury in setting damages.
“I was alarmed at the callousness, the greed you hear oozing all over those tapes,” Lockyer said.
According to Lockyer’s suit, filed Thursday in Alameda County Superior Court, Enron and its subsidiaries engaged in a “startling array” of fraudulent behavior. This included efforts to create false congestion on power lines, improperly skirt price caps and promise to provide power that the company never intended to make available.
“While the state reeled from the combined impact of sky-high power prices, supply shortages and rolling blackouts, the Enron defendants enjoyed massive, unprecedented profits,” Lockyer said in the complaint.
The litany of charges is not new. Such tactics have long been alleged in legal proceedings against Enron.
In June 2003, FERC took away Enron’s rights to trade electricity, citing its “inappropriate trading schemes” throughout the Western energy markets.
Two former Enron energy traders -- Timothy N. Belden and Jeffrey S. Richter -- have pleaded guilty to federal fraud-related charges for market manipulation in California. In December, former trading manager John M. Forney was charged with 11 counts of fraud in federal court. He awaits trial.
Karen Denne, an Enron spokeswoman, said the Houston-based company hadn’t seen Lockyer’s suit and wasn’t prepared to comment. Referring to the announcement at FERC, she said: “We are continuing to cooperate with all investigations.”
Lockyer also had choice words for FERC, which in May ordered the state to pay $270 million in refunds to energy wholesalers, including $23 million to Enron.
“If FERC had been aggressive from the beginning, we wouldn’t have to file these lawsuits,” he said.
In Washington, Wood said Thursday that FERC’s legal staff would recommend whether the nine hours of recordings and other documents that recently surfaced should become part of various cases involving Enron at the federal agency.
Enron, which filed for bankruptcy protection in 2001, has a prominent role in several matters at the federal energy panel, including an investigation into bidding practices during the energy crisis and California’s overall refund case.
California officials, including Lockyer, have demanded a refund of $8.9 billion for alleged overcharges from various energy companies during the meltdown of the state’s electricity markets. FERC officials have signaled that their figure is closer to $3 billion.
Although that case is ongoing, the federal panel has invited energy companies to a conference later this month in an attempt to settle the many remaining disputes.
