Promising continued legal actions and citing a “shocking disregard for public welfare,” California Attorney General Bill Lockyer Thursday filed a civil lawsuit in an East San Francisco Bay state Superior Court against Houston-based Enron Corp., alleging unfair business practices and violations of the state’s commodity law. In a move to get around Enron’s bankruptcy protections, Lockyer said he hopes to have a jury trial under way in a California court before the end of this year.
As the 67th legal action taken by Attorney General Lockyer since the state’s 2000-2001 energy crisis, the lawsuit is the first to single out only Enron, which has been in Chapter 11 bankruptcy since December 2001. While promising more suits, Lockyer also announced that his office has concluded seven settlements so far with a total value to the state of $2.42 billion. He also said his office is very close to announcing other settlements, particularly separate ones with Houston-based Reliant Energy and San Diego-based Sempra Energy.
In a related matter, the state official said that Sen. Dianne Feinstein (D-CA) on Thursday sent a letter to the Federal Energy Regulatory Commission Chairman Patrick Wood, asking that the federal regulatory panel revoke Enron’s license for wholesale power sales retroactive to before the western wholesale energy market meltdown, thus, opening the possibility of another $1-$2 billion in refunds. (FERC revoked the Enron license going forward last year.)
Thursday’s lawsuit filed in Alameda County Superior Court — a geographical region that Lockyer once represented in the state legislature — was necessary because Lockyer alleges that FERC has not done its job and it was made possible in part by a new state law (SB 434) that was effective last Jan. 1. Sponsored by Lockyer, a long-time former member of both houses of the state legislature, the new law expands the investigative and enforcement powers related to California’s securities and commodities fraud laws.
Kicking off a press conference in a Santa Monica, CA, hotel where a national meeting of state attorney generals was ongoing, Lockyer played excerpts from the latest tapes of a former Enron Portland, OR-based trader talking cynically to another energy power trader in the Pacific Northwest referring to California and some of the public sector energy players as being “stupid” and referencing a “Grandma Millie” who was a universal reference to western retail power consumers.
“You heard prior discussions of what they were going to do to ‘Grandma Millie’,” Lockyer told reporters. “Well, I’m Grandma Millie’s lawyer, and I intend to pursue her interests aggressively in every possible legal setting.”
The new lawsuit alleges Enron and various named trading subsidiaries engaged in “market manipulation and various illegal practices” under California law, including the newer law allowing charges of commodity fraud. The attorney general called the evidence his office has compiled “very compelling that California consumers should be entitled to well in excess of a billion dollars and probably closer to $2 billion in profits Enron took illegally.”
In essence, the California lawsuit relies on charges of “unfair business practices” combined with “illegal trading schemes.” Lockyer said. Basically, his office is charging Enron with withholding power supplies or causing that to happen as a means of driving up wholesale prices and pocketing hundreds of millions of dollars in excess profits.
In citing an action last month from FERC ordering California to refund $23 million to Enron for power purchases made by the state’s wholesale electricity-buying apparatus, Lockyer said it was another example of the federal agency’s “insensitivity and inactivity.” He said FERC seemed to be “in bed” with who he called the “energy generators and the energy pirates,” rather than protecting consumer interests.
“I want to get Enron and its [former] executives before a California jury, and have that jury see what these folks did, and let them make a judgment based on the record,” Lockyer said. “It would make the record clear permanently about the illegal activity that occurred and render the appropriate restitution through refunds, with punitive damages.
“If nothing else, that will help us say to potential future market manipulators, we’re going to do that with you as well. We don’t think we’re going to be swept into the bankruptcy process because of the state claims, and we think we might be able to get some Enron’s assets before everyone else divides up the carcass.”
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