Enron Tapes Hint Chiefs Knew About Power Ploys
By Jonathan Peterson
Times Staff Writer
May 18, 2004
WASHINGTON Enron Corp. employees spoke of "stealing" up to $2 million a
day from California during the 2000-01 energy crisis and suggested that
their market-gaming ploys would be presented to top management,
possibly including Jeffrey K. Skilling and Kenneth L. Lay, according to
documents released Monday.
The evidence of apparent scheming in one recorded conversation, traders
brag about taking money from "Grandma Millie" in California is in a
filing by a utility in Snohomish County, Wash. The municipal power unit
north of Seattle wants refunds for alleged overcharges made by Enron
during the electricity market meltdown.
The utility obtained transcripts of routinely recorded trader
discussions from the Justice Department, which seized them in its Enron
investigation.
While it has long been established that Enron engaged in market-gaming
tactics two top traders have pleaded guilty to fraud-related charges
for manipulating California's energy market and a third awaits trial
the 450 pages of recorded conversations provide another vivid look into
the organization's exploitive subculture.
They also suggest that knowledge of alleged wrongdoing may have reached
the level of Skilling, Enron's former chief executive, and Lay, the
former chairman.
In a Sept. 14, 2000, conversation, an employee named "Sue" from Enron's
governmental affairs operation checks in with a trader named "Bob" for
information that could be used in an in-house presentation to corporate
executives.
"This is the time of year when government affairs has to prove how
valuable it is to Ken Lay and Jeff Skilling," Sue said, according to
the transcript.
The Snohomish utility identified Sue as Susan J. Mara, Enron's
California director of regulatory affairs until December 2001, when she
and thousands of others lost their jobs as the result of Enron's
financial collapse.
In talking with Bob, whose identity couldn't immediately be learned,
Mara touts Enron's success in delaying a lowering of energy price caps
by state officials.
Then, still seeking helpful material for the planned executive
presentation, she asks: "Do you know when you started overscheduling
load and making buckets of money on that?"
Overscheduling load a tactic that Enron traders famously dubbed "Fat
Boy" involved purposely overstating how much electricity would be
needed in the future, creating the appearance of power shortages and
leading to inflated prices.
Mara, who is now an energy consultant, said Monday that the recorded
conversation came about as she gathered information for a budget
presentation to be made to executives at corporate headquarters in
Houston. "We had to show what our accomplishments were for the year,"
she said.
Mara said she didn't recall what the final presentation contained or
which executives heard it. The presentation was not prepared expressly
for Skilling and Lay, she said, even though her statement in the
recorded conversation implied that they would hear it.
The trading tactics discussed on the recording weren't considered
illegal or manipulative by Enron, Mara added.
Asked Monday about the transcripts, Enron spokeswoman Karen Denne
declined to comment, save to say: "We have been and we're continuing to
cooperate with all investigations."
Skilling's lawyer, Bruce Hiler, declined to comment. Earl J. Silbert,
an attorney for Lay, could not immediately be reached.
Federal prosecutors in February brought a range of fraud charges
against Skilling for his actions when he was at the helm at Enron, but
none was related to trading in the California market. Lay has not been
charged.
In a different conversation in the transcripts, Enron's West Coast
trading chief, Timothy N. Belden, discusses the profitability of the
company's strategies in California, particularly those executed by a
trading desk led by Jeffrey S. Richter:
"Well he makes & between one and two [million] a day, which never
shows up on any curve shift&. He steals money from California to
the tune of about a million "
At this point the other speaker interrupts, asking Belden to rephrase
what he just said.
"OK," Belden says. "He, um, he arbitrages the California market to the
tune of a million bucks or two a day."
Asked about the transcript Monday, Belden's lawyer, Chris Arguedas,
said that it was not possible to draw conclusions about the meaning of
Belden's remarks without a better sense of the whole conversation. "You
can't understand words spoken unless you see the context in which they
are spoken," she said.
In October 2002, Belden pleaded guilty to a federal conspiracy charge
and has been cooperating with the government. Richter pleaded guilty to
similar charges the following February.
A spokesman for California Atty. Gen. Bill Lockyer said the state was
continuing to investigate Enron. "The comments made in these
transcripts, if they're accurate, contain the kind of information that
could bolster" a case against Enron, said spokesman Tom Dresslar.
Eric Christensen, a lawyer for the Snohomish utility, said the
transcripts strongly suggest top Enron executives knew of the trading
ploys used in California.
"It was common knowledge at least in the government relations unit, and
they reported to upper management in Houston," he said.
*
Times staff writer Nancy Rivera Brooks in Los Angeles
contributed to this report.
|