Once hailed as a national model for helping industry voluntarily lower air emissions, the Southern California-based RECLAIM emission credits program crashed last Wednesday with the arrest on criminal fraud charges of one of its founders. A number of major western energy companies are listed as victims of what authorities call a basic $80 million Ponzi scheme. One of the victims, San Jose, CA-based Calpine Corp., told NGI on Thursday that it has settled with the emissions credit exchange for an undisclosed amount.

Under the “RECLAIM” (Regional Clean Air Incentives Market) program championed by the four-county South Coast Air Quality Management District (AQMD), large industrial operators, such as power plants and refineries, had an incentive to invest in emission-lowering technology so they could then trade credits for the reduced pollution.

A for-profit Automated Credit Exchange, founded by a former Cal Tech whiz kid economist, Anne Sholtz, 39, was the principal trading mechanism for the emission credits. Sholtz’s exchange filed for Chapter 11 bankruptcy protection in 2002 amid a host of lawsuits filed by many of the exchange’s clients, including San Diego-based Sempra Energy and Houston-based Reliant Energy.

On Wednesday, Sholtz was arrested by federal agents in a northeast Los Angeles suburb and detained pending the posting of a $100,000 bail. She was assigned a court-appointed attorney, saying she could not afford one of her own. Authorities allege that in 2002 alone $13 million passed through Sholtz’s personal bank account.

Federal authorities, including the U.S. Environmental Protection Agency’s criminal investigations unit, allege that Sholtz engaged in fraudulent trades and other illegal transactions while acting as a third-party broker in the system she helped establish under EonXchange, the parent company for her emissions trading brokerage business, according to a report in Thursday’s Los Angeles Times.

Having reduced its 2002 earnings by $11.5 million because of emissions credits it discovered did not exist, Calpine settled with the Automated Credit Exchange, but the deal was undone less than three months later when the exchange filed for bankruptcy, a Calpine spokesperson said. While not disclosing details of the latest settlement, the spokesperson said the information should be divulged in an upcoming filing by Calpine to the Securities and Exchange Commission.

“For us this whole story has now come to an end,” said the Calpine spokesperson, adding that Calpine has set up a reserve to cover final transactions and details on it will be included in the SEC filing.

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