Bankrupt Firm May Pay Less In Real Dollars To Resolve Gaming, Gouging Claims
(SACRAMENTO) – Attorney General Bill Lockyer today announced a $1.52 billion settlement with Enron to resolve market manipulation and price gouging claims against the architect of gaming strategies that powered the plundering of California ratepayers during the Energy Crisis of 2000-01.
“After masterminding one of the largest ripoffs in history, Enron collapsed under the weight of its own greed and corruption,” said Lockyer. “Still, with this settlement, Grandma Millie and the rest of California will squeeze justice from this corporate turnip. All things considered, this is a good resolution for the state’s ratepayers.”
Besides Lockyer, who represented the people, other California parties to the proposed settlement include: the California Department of Water Resources (CDWR), the California Public Utilities Commission (CPUC), the Electricity Oversight Board (EOB), Pacific Gas & Electric (PG&E), Southern California Edison (SCE) and San Diego Gas & Electric (SDG&E). Washington Attorney General Rob McKenna and Oregon Attorney General Hardy Myers also are parties to the settlement.
Before it becomes final, the settlement must be approved by the Federal Energy Regulatory Commission (FERC) and the Enron bankruptcy court.
The proposed settlement calls for the California parties to receive an $875 million unsecured claim in the Enron bankruptcy proceeding, plus $47.5 million in cash. The California parties would provide the Washington and Oregon attorneys general $22.5 million each from the unsecured bankruptcy claim. Additionally, Lockyer and the other attorneys general would receive a combined $600 million penalty, which would be a subordinated claim in the bankruptcy proceeding.
The amount ultimately paid by Enron under the settlement will not be known until its Chapter 11 bankruptcy proceeding is completed.
Funds paid to the California parties under the settlement would resolve the state’s and utilities’ claims for refunds now pending before FERC. The money would compensate businesses and individuals for overcharges, reduce the financial burden of PG&E ratepayers under that utility’s bankruptcy settlement, and reduce all utility ratepayers’ obligation to retire bonds sold by the state to finance power purchases at the height of the Energy Crisis.
Aside from resolving the refund claims, the proposed settlement would end a lawsuit filed by Lockyer against Enron. The enforcement action alleged the Enron-devised market manipulation games with exotic names such as Fat Boy, Death Star, Get Shorty and Ricochet violated California’s commodities fraud laws. Lockyer’s complaint was on hold pending resolution of Enron’s bankruptcy proceeding.
Lockyer filed the lawsuit in the wake of the release of audio tapes and transcripts of Enron trader conversations that provided disturbing evidence of the firm’s market behavior.
On the tapes, the traders not only brazenly talk about exporting power and gaming the market, they spew profanity-laced boasts about bringing California to its knees, inflicting financial pain on “Grandma Millie” and Enron’s influence with President Bush. Seeing profit in destruction, they express hope fires will torch California power lines, chanting, “Burn baby, burn.” Additionally, the tapes indicate Enron’s top two executives, Ken Lay and Jeff Skilling, had some knowledge of the market manipulation and received briefings on how it enriched the company.
When he filed the lawsuit, Lockyer noted he was Grandma Millie’s lawyer and was seeking justice for her and all California ratepayers. In the complaint, he said, “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, and extracted millions of dollars in ill-gotten gains from utilities and their customers ... And through it all, the Enron defendants displayed a shocking disregard for the public welfare, as numerous telephone conversations involving their personnel vividly demonstrate.”
The Enron settlement is the 10th produced by Lockyer’s Energy Task Force, working in cooperation with the CPUC, EOB, Governor’s Office, CDWR, PG&E and SCE. The 10 settlements have a combined value of $4.9 billion. Of that total, an estimated $3.64 billion represents ratepayer relief.