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Jul 08, 2004
CONTACT: Doug Heller - 310-392-0522 x309
Indicting Ken Lay For Securities Fraud Is Not Enough; Former Enron Chairman Must Account For Energy Crimes
Group Calls Indictment A Hollow Victory If Bush Administration Fails to Go After Billions Stolen During Cal. Energy CrisisSanta Monica, CA -- The indictment of former Enron CEO and Chairman Ken Lay provides cold comfort to California taxpayers and electricity ratepayers who lost billions of dollars as a result of the Ken Lay-driven energy deregulation disaster and the related crimes, said the Foundation for Taxpayer and Consumer Rights (FTCR). In January 2002, FTCR, a California-based nonprofit and nonpartisan group, issued a detailed study of the California energy crisis Hoax: How Deregulation Let the Power Industry Steal $71 Billion From California. Click here to download the report.
The group called on the Bush Administration to follow these indictments with a commitment to require energy companies to pay the $8.9 billion that the State of California has demanded in refunds as a result of the Enron and other energy company crimes. To date, President Bush and his Federal Energy Regulatory Commission have blocked significant refunds to California.
"Ken Lay set America on the disastrous path towards energy deregulation and used it as license to steal," said FTCR's Executive Director Douglas Heller. "While seeing Ken Lay in handcuffs provides a visceral pleasure for Californians who lost so much as a result of his schemes, the indictment is only a hollow victory so long as the Bush Administration continues to stonewall efforts to get the stolen money returned to California."
None of the 11 counts on which Lay were indicted addresses the manipulation of California energy market, the profiteering by his company during the state's crisis or any aspect of the conspiracy to use deregulation to gouge California taxpayers and ratepayers.
According to FTCR, Ken Lay was the mastermind behind federal legislation -- the Energy Policy Act of 1992 -- signed by President Bush, Sr. that opened the door to deregulation and was a chief instigator of the debate in California that eventually led to the state's miserable deregulation policy. Deregulation became the tool with which Enron and other energy companies to steal billions from California. Under the deregulation law, energy companies manipulated the unregulated electricity marketplace using strategies first explained in an infamous December 2000 memo written by Enron lawyers. The memo described schemes with names like Fat Boy, Death Star and Get Shorty that the companies' energy traders used to push electricity spot market prices to all time highs and create the illusion of shortages and congested transmission lines.
Through recently released tapes of Enron employees, it has become clear that Ken Lay was being informed of the illegal market manipulation. In one transcribed conversation, an Enron employee asks for information about the (illegal) "over-scheduling of load and making buckets of money on that," noting that they needed "to prove how valuable it is to Ken Lay and Jeff Skilling."
The Bush Administration's failure to prosecute that element of Ken Lay's apparent crime is likely the result of the administration's continued allegiance to the deregulation ideology proffered by Lay, FTCR argued. The Bush Energy plan, key portions of which were likely drafted by Ken Lay and Enron employees, continues to advocate a complete decimation of the FDR-era utility regulation law, known as the Public Utility Holding Company Act, a consumer protection law reviled by Ken Lay and the energy industry.
"By limiting the indictment to the securities fraud charges, the Bush Administration seems to be intentionally ignoring the massive energy crimes that Ken Lay and the industry conducted under the guise of deregulation. The administration won't take on those crimes because it would lead to an indictment of the deregulation ideology that they continue to pursue as a legitimate energy policy, despite the fact that it created one of the biggest economic disasters in American history with the California energy crisis," said Heller.
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