The Whistleblower #28
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The Whistleblower

The Whistleblower #28 - Jun 04, 2002

Business lobbyists say no Enron-reform legislation will be become law. According to "For months, the skies over Capitol Hill have rained post-Enron reform proposals, but the legislation effort is slowly evaporating under the heat applied by business opponents." Reuters notes that none of the 50 proposed Enron reforms have become law and quotes an executive with the US Chamber of Commerce as saying "I think it's a distinct possibility ... of no [Enron] legislation getting to the president's desk." Keep that in mind as politicians trumpet their tough words during the Enron investigations when they come home to campaign for re-election this year.

PG&E: Wailer or Whaler? It turns out that while PG&E was whining about the impact of California's energy crisis and demanding a bailout for its utility arm, Pacific Gas & Electric, another unit of the company, its unregulated National Energy Group, was engaging in the same type of market deception as some of the out-of-sate power firms at the heart of the manufactured energy disaster. According to PG&E's website, National Energy conducted "round-trip" trades in the west during 2000 and 2001. These so-called "wash trades," in which power companies sell each other the same megawatts at the same price without actually exchanging any electricity, function to skew the energy market and deceive shareholders. PG&E, which for years has cared more about its unregulated business ventures than its utility company, may have been trying to boost the benchmark price of electricity by making electricity demand seem greater than it actually was, or the company may have been attempting to fool investors by artificially inflating its trading volumes. Either way, the sham trades were at cross-purposes with the utility's obligation to get consumers reasonably priced electricity. However, despite more evidence that PG&E was whaling on California while it was wailing about the devastation of the crisis, the Cal. PUC still backs a proposal to force ratepayers to bail out PG&E with billions of dollars in excessive consumer rates.

More CEO resignations. In issue #26, we began to chronicle the post-Enron resignations (read: firings) of executives who steered their companies straight into scandal. New additions to the roster:

Don't just get fired, get rich--Chuck Watson, CEO of Dynegy Inc.
Step 1: Make money by any means necessary. Worry about the legal issues later. If you have to, sell California the same electrons twice (subject of State of California lawsuit).
Step 2: Implement sci-fi accounting scheme ("Project Alpha," the subject of SEC and U.S. Attorney's Office investigation, increased the company's revenues while reducing its federal tax obligation).
Step 3: Embroil your company in scandal, necessitating your own removal. Remember, you can't make it to the top without making enemies. So what if they're your own company's shareholders.
Step 4: Resign, and then cash $33 million dollar severance check.

L. Dennis Kozlowski, CEO of Tyco International. Amid growing concerns of -- guess what --questionable accounting practices, as well as a criminal investigation of his financial activities as CEO, Kozlowski resigned from this large manufacturing firm Monday. According to a NY Times report, Tyco shareholders have lost $80 billion in connection with the company's precipitous decline. Reminder to Tyco: time to change your website; it still calls The Koz CEO and Chairman.

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