Probe of California power crisis grows : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread

07/16/2002 - Updated 09:35 PM ET

Probe of California power crisis grows

By Edward Iwata, USA TODAY

SAN FRANCISCO The Justice Department is joining other federal agencies in investigating allegations that Enron manipulated California's power market during the state's energy crisis two years ago, say people close to the case. The Justice Department also is looking at computer consultant Perot Systems, which California officials allege showed Enron and others how to "game" the state system and manipulate prices, say people familiar with the case.

The FBI and U.S. Attorney's Office are reviewing documents and talking to traders, attorneys and government officials familiar with the wild trading of energy contracts that may have led to the state's price spikes and blackouts.

While Enron has been under investigation by the Justice Department since last winter, that probe has focused on alleged accounting fraud at its Houston headquarters.

On another front, California authorities, the Federal Energy Regulatory Commission and others have targeted Enron's energy-trading practices in California.

Now, the Justice Department investigation of Enron and Perot Systems raises the stakes even more.

An indictment could lead to criminal charges of wire and mail fraud, obstruction of justice, racketeering and other violations.

Federal investigators are looking at allegations by the California attorney general's office and state lawmakers that Enron rigged wholesale electricity prices through trading that exploited "loopholes" in the power system, legal and industry sources say.

Enron traders allegedly dodged price caps and created bogus congestion in the power grid that California paid to unplug, according to documents released in May by California lawmakers and FERC.

The FBI and prosecutors also may look at accusations that Enron officials destroyed computer files and other documents requested recently by subpoena, legal and industry sources say.

Matthew Jacobs, a prosecutor in the U.S. Attorney's Office in San Francisco, declined to comment.

Enron spokeswoman Karen Denne said the Houston firm "is cooperating fully with all investigations." Perot Systems spokesman Eddie Reeves said the Plano, Texas, firm, has not been contacted by the Justice Department. Company founder Ross Perot Sr. has denied wrongdoing.

As the investigation widens, several former Enron traders and others connected to the firm's West Coast operations have been seeking plea deals or blanket immunity from future actions by the Justice Department, the Securities and Exchange Commission, FERC and the Commodity Futures Trading Commission, say legal and industry sources.

One key figure is Tim Belden, the former head of Enron's trading operations in the West. It's unclear whether Belden is cooperating with federal investigators. Belden's attorney, Paul Meltzer in Santa Cruz, Calif., declined to comment.

-- Martin (, July 19, 2002

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