Transcripts show Enron traders joking about manipulating market

Thursday, June 3, 2004

HOUSTON -- Enron traders openly discussed manipulating California's power market during profanity-laced telephone conversations in which they merrily gloated about ripping off "those poor grandmothers" during the state's energy crunch in 2000-2001, according to transcripts of the calls.

The calls were obtained from the government and transcribed by a public utility district near Seattle that wants Enron to forfeit millions of dollars in ill-gotten gains over the energy trading scandal.

Investigators say the transcripts paint an even more sordid picture of the way Enron allegedly ruthlessly rigged the market at a time of widespread blackouts and soaring electricity rates in California. The transcripts also shed light on discussions that are central to the Justice Department's investigation of Enron's trading practices.

"It shows unbridled drive for profit," said San Diego attorney Michael Aguirre, who first sued Enron for unfair business practices on behalf of California consumers in November 2000. "Everything about the conversations is excessive. The language is excessive and the whole mindset is excessive."

The transcripts prompted outrage among West Coast politicians who are demanding that the Federal Energy Regulatory Commission compensate ratepayers billions of dollars for years of price-gouging by Enron.

"Now, you can see into the heart and soul of the scandal," Sens. Barbara Boxer and Dianne Feinstein of California said in a letter to FERC Chairman Pat Wood.

On the calls, traders openly and gleefully discussed creating congestion on transmission lines, taking generating units offline to pump up electricity prices and overall manipulation of the California power market.

They also kidded about Enron's hefty political contributions -- particularly to President Bush's campaign -- and how that could translate into more opportunity for profit in California.

"I'd love to see Ken Lay be Secretary of Energy," one trader said, referring to the disgraced former Enron CEO whose ties to the Bush administration have drawn criticism from Democrats.

In one transcript a trader asks about "all the money you guys stole from those poor grandmothers of California."

To which the Enron trader responds, "Yeah, Grandma Millie, man. But she's the one who couldn't figure out how to (expletive) vote on the butterfly ballot."

"Yeah, now she wants her (expletive) money back for all the power you've charged right up -- jammed right up her (expletive) for (expletive) 250 dollars a megawatt hour," the first trader says.

Energy merchants regularly tape trader conversations to keep a record of transactions.

Enron spokeswoman Karen Denne declined comment on the transcripts, but said the company continues "to cooperate fully with all investigations."

FERC spokesman Bryan Lee said Wednesday that a FERC administrative law judge's finding that Enron should forfeit $32.5 million in unjust profits is pending before the commission.

Eric Christensen, a lawyer for the Snohomish County Public Utility District, said the utility is seeking to convince the judge that Enron should be ordered to surrender as much as $2 billion in unjust profits. Boxer and Feinstein want California to receive at least $8.9 billion in refunds and an order that long-term contracts made under manipulated prices be re-negotiated.

Enron filed for bankruptcy in 2001 amid devastating revelations of hidden debt, inflated profits and shady accounting. A wave of corporate scandals followed the Enron debacle.

John Forney, a former top trader in Enron's defunct Western trading operation based in Portland, Ore., is slated to stand trial in October on charges of wire fraud and conspiracy. Two other former Portland, Timothy Belden and Jeffrey Richter, have pleaded guilty to one count of wire fraud and are helping prosecutors.

Conversations involving all three are among those in the transcripts. In one conversation, Belden notes how traders are "trying to find that right level."

Forney talks about trying to be an "honest camper" and expresses concern about getting caught. "I'm a little ... nobody else seems to be concerned anymore about it, except for me," he said.

Forney's lawyer in San Francisco, Edwin Prater, declined comment on the transcripts because he has yet to receive them. Prosecutor Matt Jacobs also declined comment on whether the transcripts would figure into Forney's case.

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