A report by Public Citizen, the consumer advocacy group founded by Ralph Nader, charges that Enron Corp. used its political connections to its advantage in the electric deregulation battle and was “completely dependent on the removal of government oversight.” Meanwhile, in an interview with the news media, former CEO Jeffrey Skilling said that his resignation last August had nothing to do with a belief that the company was failing. He also said the past few months have been the worst of his life.

In its 28-page report, “Blind Faith: How Deregulation and Enron’s Influence over Government Looted Billions from Americans,” Public Citizen charges that Enron used 874 subsidiaries based in offshore tax havens, such as the Cayman Islands, to “park a lot of cash away from government officials.” Whether those offshore locations were part of Enron’s off-balance sheet financing practices, which have attracted congressional and regulatory scrutiny, is still to be determined. However, “the action came at the height of high West Coast energy prices, which would have allowed Enron to funnel billions in excess profits to offshore accounts,” Public Citizen said in its report.

Public Citizen policy analyst Tyson Slocum said, “Enron pushed a very specific agenda that sought to remove government oversight over a significant portion of its business operations, which allowed it to … manipulate deregulated state wholesale markets in California.” The report by Public Citizen charged that Enron’s primary business strategy was to “get government off their backs,” said Slocum. Public Citizen also targeted Sen. Phil Gramm (R-TX) and his wife, Wendy Gramm, who sits on Enron’s board of directors. Wendy Gramm is the former head of the Commodity Futures Trading Commission (CFTC).

Public Citizen noted in its report that Sen. Gramm advocated commodities trading provisions in the Commodity Futures Modernization Act of 2000, which includes deregulated energy trading language by excluding energy trading companies from the act’s jurisdiction and from CFTC oversight. Gramm was chairman of the Senate Banking Committee when the bill was passed. Sen. Gramm, in a statement, said he “did not participate in the development, drafting or negotiation of any provision in the (legislation) designed to affect the regulation of energy futures.” The senator’s only role, said his office, was in “assuring participation by (the) Securities and Exchange Commission in the regulation of single-stock futures and providing legal authority for over-the-counter ‘swaps.'”

Wendy Gramm is criticized by Public Citizen for pushing through regulations exempting over-the-counter energy trading from CFTC oversight shortly before leaving the Commission in 1993. Five weeks after her departure from the CFTC, Wendy Gramm joined Enron’s board and was a member of the Enron audit committee.

Public Citizen’s Slocum said that both the senator and his wife should be called before Congress to testify about their knowledge of Enron’s practices. The report may be found on Public Citizen’s web site at www.citizen.org.

With two attorneys and two spokesmen by his side, former Enron CEO Skilling told The Wall Street Journal, The New York Times and Houston Chronicle in Washington, DC, that “the last two months have been the worst two months of my life.” Skilling said he answered questions from the House Energy and Commerce Committee on Dec. 20 and had previously spent two days answering questions from the Securities and Exchange Commission. He did not disclose what he was asked, but said he did not commit “any illegal acts.”

When asked what responsibility he thought was his regarding the company’s bankruptcy, Skilling said that he concluded, based on the information available to him, that “we made the correct decisions given the information we had.”

Skilling told reporters he had no financial interest in any of the Enron-related third-party financial vehicles, and noted that having former CFO Andrew Fastow managing the partnerships was supposed to benefit Enron. The LJM entities, part of the off-balance sheet transactions being investigated, were Fastow’s idea, said Skilling.

However, a spokesman for Fastow said in a statement that the LJM entities were formed “at Enron’s request in order to benefit Enron.” Fastow’s spokesman said the entities were reviewed by Enron’s accountants and lawyers and approved by Enron’s board and managers.

When Skilling was asked about Enron’s financial vehicles, he responded that Enron had “hundreds” of highly qualified people to handle the transactions. He did not disclose whether he was aware of the details of those vehicles. He called Enron’s bankruptcy a “perfect storm” of events, speculating that questions about the quality of Enron’s accounting and self-dealing “caused a loss of confidence in the financial community,” leading to Enron’s debt being downgraded.

In news related to Enron’s auction of its trading arm, now set for Jan. 7, Charleston, SC-based Eco-Tankship Inc. said it is “contemplating a bid” to oppose the auction, which was approved last week by Southern District of New York bankruptcy court Judge Arthur Gonzales (see Daily GPI, Dec. 21). Alexander Schizas, CEO of Eco-Tankship, said he has notified counsel for the creditors committee, the debtors in possession and the U.S. trustees of the company’s interest in moving to oppose the sale.

“The particulars of the opposition surround Schizas’ request for full disclosure by Enron regarding the auction,” said Eco-Tankship in a written statement. The company contends that Enron must disclose that it does not have proprietary rights to the Internet-based trading of liquefied natural gas (LNG) in its physical form and as futures and options on futures. Schizas’ group owns the lnghub.com web site, established in March 2001 to trade LNG.

“With the increased interest in the utilization of this clean-burning fuel for power generation the world over, Schizas is seeking to ensure that ‘if and when’ the Enron trading division resumes operations, that he and Eco-Tankship will not find themselves in a protracted legal battle over who has rights to trade this commodity and the financial contracts,” said the company. Schizas claims that he individually filed a utility patent application covering the trading of LNG in June 2001.

“In light of the debacle surrounding Enron and the disclosure issues therein, I believe that full disclosure in this regard will protect the prospective bidders in addition to our own interest,” Schizas said in a statement. “We are waiting to hear from counsel and trust that they will see the need for an expedient resolution to this issue.”

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