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Sunday, Jul 12, 2009
Did the Bush administration do the disgraced company's bidding during the state's electricity crisis?
Jan 16, 2002 | Remember the California energy crisis? As the implications of the collapse of Enron spiral ever wider, increasing attention is being paid to the close connections between the White House and the Texas energy trader. So far, there has been no evidence that Bush officials tried to stave off the Enron disaster. But the real smoking gun for Enron could be its role in the California energy deregulation debacle.
Vice President Cheney has already admitted that he and Enron CEO Ken Lay discussed the California situation in some of their six meetings last year, leading some critics to believe that Bush's hands-off policy toward the Golden State's energy meltdown was adopted at the bidding of Enron, whose profits soared during the crisis. Lay was also instrumental in replacing the chairman of the federal commission that regulates energy issues with his own nominee, after the original chairman refused to kowtow to Enron's wishes on electricity deregulation. A California state Senate committee is currently calling for depositions of Enron and Arthur Andersen officials to find out if the former energy giant or its auditors willfully destroyed documents that were under subpoena from the committee. And an ongoing criminal investigation by California Attorney General Bill Lockyer is still looking into allegations that energy producers and traders, including Enron, artificially manipulated the price of energy to profit off of California's poorly constructed energy deregulation plan.
Enron officials once took pains to note that California's problems could not be blamed on energy producers but on California's partially deregulated market, which they said didn't go far enough. But it's now becoming apparent that Enron was as responsible as anyone for the shape of that deregulation plan. As the Enron mess continues to heat up, California could prove to be the company's biggest political embarrassment.
The fast-moving story took another twist on Tuesday, when Joe Dunn, a California state senator chairing a committee conducting an investigation into possible price gouging, noted that Arthur Andersen, Enron's accountant, may have destroyed documents that had already been subpoenaed by the California Legislature.
"We are requesting subpoenas to Enron and Arthur Andersen," Dunn said. "There is significant concern at this point in time that the documents that were destroyed by Arthur Andersen may have been embraced in the subpoena that was served upon Enron last June. The media reports are that those documents that were destroyed were destroyed in September or October, last fall. That would have been after the legislative subpoena was served upon Enron. If those documents were willfully destroyed after they were subpoenaed, that is very, very serious."
Dunn is hoping to call high-ranking Enron and Arthur Andersen officials before his committee for depositions later this year. He says his committee is not looking into filing criminal or civil charges against any company. His committee, Dunn says, is simply looking into "how we got into an energy crisis and whether any legislative fixes are necessary." And that process involves a hard look at Enron.
"The real questions," says Dunn, "and this is an enormous task to unravel, is what role Enron had in 1) driving up the price of a given megawatt, even though they were not the final seller; and 2) What role did Enron play in the shuffling of megawatts for the purpose of creating artificial shortage on the distribution lines."
But getting Enron to cooperate has not been easy. In fact, Dunn characterized the company's response as "disgusting. Enron has been the worst of all market participants with respect to their cooperation with our committee, and that's been true from the very beginning. They were the one and only holdout of producing documents to the committee." Dunn says it was only when Enron realized that the Legislature had the votes to pass a resolution holding Enron in contempt and threatened them with fines of $1 million per day that they handed over the documents.
Even then, Dunn says, Enron continued to give the committee the runaround. He says the company produced about 50 boxes of documents that were "woefully inadequate." His committee will be reviewing Enron's compliance in a public hearing sometime in the next couple of weeks, and Dunn says he is "cautiously pessimistic about avoiding further contempt hearings against Enron."
Meanwhile, Attorney General Bill Lockyer is still investigating allegations that energy producers and traders, including Enron, manipulated prices. "This investigation has been open for over a year, and it is still ongoing," said Lockyer spokeswoman Sandra Michioku. "There are some questions about pricing practices, and unfair business practices by many energy companies." Michioku said the attorney general's office was still "at least weeks away" from wrapping up the investigation.
And to complete the California-Enron trifecta, Rep. Henry Waxman, D-Calif., said recent revelations by Vice President Cheney seem to indicate that Cheney took marching orders about how to handle the California crisis directly from Lay.
In his response to Cheney, Waxman said Cheney's timeline "raises additional questions about the extent to which Enron may have influenced the administration's energy policies."
Enron spokeswoman Karen Denne says the company has cooperated and will continue to cooperate "with all inquiries and investigations." It's going to be busy.
