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The Whistleblower

The Whistleblower #25 - May 17, 2002

Prosecute Crimes in the Suites. Executives should be put behind bars if they cover-up corporate decisions to defraud shareholders, pensioners, employees and other investors. Earlier this week FTCR and California State Senator Martha Escutia introduced legislation, known as SB 1452 , that will (1) protect whistleblowers and (2) obligate executives and upper management in corporations to alert law enforcement if they know of a financial fraud being committed in their company. If SB 1452 were current law, Ken Lay and the other Enron executives, who were cashing out as they were sinking the Enron ship, would be under indictment today.

"It's time to stop listening to the excuses." -- Cal. Senator Joe Dunn. The market was manipulated, the regulators were complicit, and without a reinstatement of regulatory oversight, another California energy crisis and other Enrons lurk around the corner. California State Senator Joe Dunn, testifying before a US Senate Committee on Wednesday, outlined the earliest days of market manipulation in California and the tools that can be used to hold power companies and regulators accountable for the unmitigated failure of deregulation. Of course, late last month, the US Senate handed electric companies a "get-out-of-jail free" card. The Senate approved energy legislation that does away with 65 years of energy industry oversight (from which Enron received a special exemption prior to the California crisis!) and rejected attempts to add new consumer protections and regulatory controls. Senator Dunn's provocative testimony and recent revelations of market manipulation by the power companies should move Senators to revisit and rewrite their recent energy bill. A copy of Senator Dunn's testimony is available at:

And the award for "Obviously Not Getting It" goes to… Federal Energy Regulatory Commission Chair Pat Wood, for his comments to Senators on Wednesday. Wood, America's energy regulator-in-chief, said, "I continue to believe that competition is superior to traditional cost-based regulation for providing reliable and adequate electricity supplies at the lowest reasonable cost to the nation's electric customers." Chairman Wood stands by his faith in the market, despite the fact that the country had not seen as much volatility, profiteering and fraud during a century of regulated energy services as it did in two years of deregulated "competition."

Should Cal Gov. Davis authorize more than $250,000 in taxpayer money to pay legal fees for an appointee who broke the law? A California Superior Court recently found Public Utilities Commissioner Henry Duque (who was appointed by Davis's predecessor, Pete Wilson) guilty of a conflict of interest and ruled that he is "excluded" from office, not allowed to perform the duties of a Commissioner. Last year, Davis's Department of General Services (DGS) authorized the Cal. PUC to spend more than $90,000 in taxpayer money to cover Duque's defense costs, mostly to pay high priced lawyers as much as $350/hour. This year the DGS authorized another $176,000 to pay Duque's lawyers. Even though Duque has lost in court, it appears that he will still have access to the taxpayer money to fund an appeal. Considering the severe California budget crisis, the last place taxpayer dollars should go is to the lawyers of a government official who has violated the law. If readers of this newsletter have a better way to spend $250,000 of taxpayer money during this time of budget cutbacks and tax hikes, contact Governor Davis and suggest it. E-mail the Governor ( ) and note that "Instead of defending Duque, use that $250,000 to........"

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