Union Tribune

May 10, 2002 

Subpoenas OK'd for Enron hearing on price manipulation

By TOBY ECKERT 
COPLEY NEWS SERVICE 


WASHINGTON A Senate committee yesterday authorized
subpoenas for those who wrote and received Enron Corp.
memos that detail apparent power-price manipulation in
California, as Democrats made a concerted effort to fan the
political flames sparked by the documents.

"I don't think there's any doubt that somebody ought to go to
jail, and that we ought to find a way through public policy to fix a
system that needs to be addressed," said Senate Majority Leader
Tom Daschle, D-S.D.

Some California Republicans also joined calls for a Justice
Department investigation of "possible collusive activity by
Enron."

Gov. Gray Davis kept up his offensive as well, suggesting that the
state may press for even larger refunds from power providers in
light of the disclosure of Enron's internal documents. 

Long before the memos surfaced, California demanded nearly $9
billion in refunds.

The Senate Commerce, Transportation and Science Committee
gave Chairman Ernest Hollings, D-S.C., authority to issue
subpoenas in case the Enron attorneys linked to the memo balk
at appearing at a hearing next week, a Hollings spokesman said.

"My understanding right now is that all of these witnesses said
they would testify voluntarily, but, as we know, people have
changed their minds about that in the past," said David Sandretti,
a spokesman for Sen. Barbara Boxer, D-Calif., who requested the
action.

Neither the attorneys nor an Enron spokesman could be reached
for comment.

A Senate Commerce subcommittee, as well as the Senate Energy
Committee, have scheduled hearings on the issue for
Wednesday. Federal Energy Regulatory Commission Chairman
Pat Wood is expected to appear before the Energy Committee.

The December 2000 Enron memos, released Monday as part of a
wide-ranging investigation by federal regulators, detail how
Enron traders sought to increase prices in California by creating
phony congestion on the power grid, evading price caps and
other maneuvers. 

The memos also suggest that other power companies engaged in
similar tactics.

Called to testify at the Commerce hearing is Richard Sanders, an
Enron vice president and assistant general counsel who was
listed as the recipient on the memos. Also called are Gary
Fergus, Jean Frizzell, Christian Yoder and Stephen Hall, who
were listed as the authors and have been identified as atrorneys.

"I trust that this hearing will bring to light more facts to help us
in our demand for refunds and renegotiations of long-term
contracts," Boxer said.

House Democrats from California, Washington and Oregon
pressed for similar action by the House Energy and Commerce
Committee, but met resistance from the Republican chairman,
Billy Tauzin of Louisiana.

The committee has investigated financial irregularities by
Enron, which declared bankruptcy in December.

"We need to investigate and find out what actually they were
doing that put our communities, that put our seniors, that put
California and other states at risk," said Rep. Susan Davis, D-San
Diego.

Filner doubtful

The Federal Energy Regulatory Commission, which is heading
the price-manipulation investigation and which released the
Enron memos, "is not going to go deep into this," said Rep. Bob
Filner, D-San Diego. "FERC is the Federal Enron
Rubber-stamping Commission."

Committee Chairman Tauzin gave little hope for such a hearing,
though he stopped short of ruling one out.

Press aide Ken Johnson said, "Frankly, our resources are
stretched pretty thin right now. But if it can be demonstrated
that the law in some way needs to be strengthened, you can
certainly make the case for considering a hearing. But right now
we don't know that."

California Republicans who serve on the committee Reps.
Mary Bono of Palm Springs and George Radanovich of Mariposa
called for a Justice Department investigation in a letter to
Attorney General John Ashcroft. Democrats called for a similar
probe earlier in the week.

"With the new evidence of possible collusive activity by Enron,
we hope the Department of Justice would take appropriate
enforcement action under the antitrust laws that were put in
place to protect competition," the Republicans wrote.

But a spokesman for Radanovich said the congressman was
skeptical about whether Enron is culpable at all.

"So far, this is just political smoke and mirrors," Brian Kennedy, a
Radanovich aide, told Scripps-McClatchy Western Service. "The
congressman believes that when all the facts are on the table,
they will find that the Enron people simply outfoxed Davis and
the California Independent System Operator under the rules,
and there was no illegal activity. But he is reserving judgment."

Revision possible

Meanwhile, California's governor said that, in light of the memos,
"We may have to recalculate how much is owed California" to
remedy alleged price-gouging by power sellers.

The state demanded $8.9 billion in refunds from an array of
power sellers last year. But the issue has been mired in
protracted proceedings at FERC.

Davis said the state would also continue trying to renegotiate
costly long-term electricity contracts with power sellers, even
as he has stepped up calls for FERC to take action on that front.

In another development, Army Secretary Thomas White, who
was a top executive for an Enron trading arm that may have
participated in one of the schemes detailed in the memos, denied
any knowledge of wrongdoing by traders.

White was vice chairman of Enron Energy Services from 1998
until he became Army secretary in May 2001.

The memos mention Enron Energy Services in an example of
how to artificially increase scheduled electricity on California's
power grid. Enron would then get a bonus from the Independent
System Operator, which manages the grid, by helping to relieve
the congestion.

White told the Reuters news agency that he "never knew about
the trading strategies that were internal to the wholesale group.
These trading strategies were not part of my business."

The consumer group Public Citizen called for White's
resignation. He was already under fire for being slow to divest
his Enron investments after becoming Army secretary.