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Deregulation - 2002 - Page One
Enron Electrical Workers TestifyAFL-CIO – aflcio.org – January 6, 2002
When Enron Corp. went from the one of the world’s largest energy trading companies to bankruptcy court in an incredibly swift fall, nearly 1,000 members of Electrical Workers Local 125 at Enron-owned Portland (Ore.) General Electric saw most of their retirement savings evaporate, as did more than 11,000 other Enron employees around the nation.
Two of those IBEW workers told a Senate panel Dec. 18 that their Enron 401(k) plans—bulging with company stock—became virtually worthless, while Enron executives were bailing out by selling off more than $1 billion in Enron stock.
“Little did those of us working hard every day to make the company successful know what was going on at the top of Enron,” said Robert Vigil, an electrical machinist working foreman. “We trusted management’s glowing reports of strong financial growth and opportunity. Then in October, Enron’s house of mirrors came crashing down.”
That was when word of the company’s business irregularities began coming to light.
“This is an energy company that morphed into a trading company involved in hedge funds and derivatives. It took on substantial risk, created secret off-the-books partnerships and, in effect, cooked the books under the nose of accountants and investors,” said Sen. Byron Dorgan (D-N.D.), chairman of the Senate Commerce, Science and Transportation Committee’s Consumer Affairs, Foreign Commerce and Tourism subcommittee, which held the hearing.
“At the time when executives, board members and other insiders were selling over $1 billion in stock and profiting handsomely,” Dorgan said, “employees and investors were being set up to take a financial beating.”
At a Dec. 12 meeting before the House Financial Services Committee, AFL-CIO Secretary-Treasurer Richard Trumka said Enron “is a story of people so shameless and greedy that literally as the bankruptcy papers were being drawn up, they were still passing what remained of the firm’s cash out to themselves—$55 million on the last working day before they filed for Chapter 11.”
Enron’s contributions to workers’ 401(k) accounts were in company stock, and the energy giant encouraged workers to put their own 401(k) contributions into Enron stock, according to Vigil, IBEW Local 125 member Donald Eri and other Enron workers who testified at the Senate hearing.
Worth more than $80 a share one year ago, Enron stock is worth less than $1 a share today. While company executives were cashing out as the stock began to decline, workers had few options to protect their investments.
“The plan prohibits any employee under age 50 from trading the company’s contributions. In other words, the company puts in its own stock, and until we reach age 50, we hold that stock….Until very recently, even after age 50, we could only trade 25 percent of the company’s contributions per year,” Vigil said. In October, as Enron stock was plunging with the news of the company’s suspicious dealings, the company locked workers out of their 401(k)s, preventing them from recasting their portfolios. Enron claimed the lock-down was planned long before the stock dive as part of a change in plan administrators and also claimed it was in effect only from Oct. 29 to Nov. 12.
“It seems strange to me that as soon as the really bad news came out on Enron, we found ourselves unable to move out of the stock. I have seen that Enron says we were only locked out of our accounts for 10 trading days….But as early as Sept. 26, my co-workers were finding that they could get access to their accounts, but they could not conduct any transactions. As the truth about Enron started to come to light—and as the officers at the top cashed out—we, the employees, had no choice but to ride the stock into the ground,” Vigil said.
Also appearing before the panel, Damon Silvers, AFL-CIO associate general counsel, testified on several securities, stock trading and investment reforms and other measures that could help protect workers from future Enron-like catastrophes, including stronger rules covering stock, securities and investment practices by 401(k) and pension trustees; requiring greater independence of auditors and analysts who are charged with monitoring a fund’s practices and performance; and establishing clear conflict of interest guidelines for auditors and analysts.
Enron’s Insurance LimboHouston Chronicle – by L. M. Sixel – January 6, 2002
Mike Black has skin cancer and was planning to have an operation Thursday.
But he had to cancel the surgery when he discovered his health insurance plan is in limbo.
Like the rest of the 4,500 workers laid off from Enron Corp. Dec. 5, Black had health insurance coverage through the end of December and was planning to continue his coverage under the federal rules set up by the Consolidated Omnibus Budget Reconciliation Act.
But he found out this week Enron failed to finish all the necessary paperwork so the laid off workers could participate in COBRA beginning in January.
COBRA requires employers to offer health insurance to their terminated employees for up to 18 months. Though COBRA is very expensive -- the employee pays the entire cost of the plan, which is usually subsidized by an employer -- it is designed to provide seamless health care coverage for the recently laid off worker.
But Enron officials said the company hasn't been able to process the COBRA paperwork fast enough. The company planned to have the COBRA information mailed to workers 21 days after they were terminated but it's taken longer than Enron expected, said Enron spokeswoman Karen Denne. The layoffs and bankruptcy filing were so sudden that the company didn't have time to prepare in advance.
Employees should receive the COBRA paperwork by Jan. 15, Denne said. If they don't, they should contact the benefits office.
A benefits consultant in Houston said she isn't surprised about Enron's delay. COBRA can be a "paperwork nightmare." Documentation has to be sent to not just all employees but to all the employee dependents who are covered, she said, asking not to be identified.
But to employees like Black, the delay is devastating. When his insurance coverage couldn't be verified, Black said he couldn't afford to pay for the operation out of his own pocket.
"I'm still waiting for my second unemployment check," he said.
Black is frustrated because he can't get any information about COBRA insurance from Enron. He said that when he calls the company's benefits office, employees there don't know the answers to his questions. Neither does the plan administrator, and the insurance company seems to be in the dark, too, he said. It seems as if "they're all pointing fingers at each other," said Black, who was a systems programmer at Enron.
Enron could have done it faster, he said, suggesting that arranging COBRA coverage is low on the company's priority list.
It's not an unusual problem, said Matt Isbell, president of COBRA Resources, a company that conducts COBRA training seminars in Kalamazoo, Mich.
Companies have at least 44 days to notify an individual employee that they can buy COBRA coverage, Isbell said. And depending on a company's plan documents, that waiting period can be even longer if the clock doesn't start until the last day of regular insurance coverage.
During that time, employees have to foot their own medical bills, he said. But once the employee applies for COBRA and pays for it, the bills are reimbursed.
Black knows that but he's worried that Enron may convert its bankrupty filing from a Chapter 11, which provides protection from creditors while undergoing reorganization, to a Chapter 7, which would liquidate the company. If that happened, health insurance would disappear and so would COBRA, leaving the 54-year-old with a bunch of unpaid bills.
Candace Womack found out she had no insurance when her husband went to the pharmacy Wednesday to fill several prescriptions. Womack had just had heart surgery and was released from the hospital New Year's Day.
Instead of paying the $10 co-pays, her husband had to pony up $250 to pay for antibiotics and blood pressure medicine because Womack's insurance had been canceled. Womack worked in software support for Enron until she lost her job last month.
Now she's worried about how she'll pay for the follow-up medical visits to her surgeon.
Like many of the laid-off employees, Womack carried the insurance for her family. Her husband is self-employed, and it's usually much more expensive to buy an individual insurance policy than it is to pay for a company subsidized plan like Enron's.
"I'm getting a little ticked about the situation," said Womack, who is 51.
Womack said the disaster she faces now is in such sharp contrast to when she lost her job in the mid-1990s. Then, she had been working for First Interstate bank and was able to sign up for COBRA coverage before she even walked out the door.
More Deregulation Losers Than WinnersSan Francisco Chronicle – by David Lazarus – January 6, 2002
It's going to take state and federal investigators a while longer to figure out who was naughty and nice in California's energy crisis. The facts are still coming to light even as the last blackout fades into memory. But it's not too soon for a tallying of who walked away from the power crunch a winner and who's still smarting from a swift kick in the pants.
Let's look at the various players:
PG&E: For many Northern Californians, the energy crisis began and ended with Pacific Gas and Electric Co.
The utility may not have been responsible for the worst abuses of the state's predicament, but it was the one sending out bills to consumers, lobbying for higher electricity rates and, ultimately, fending off creditors in bankruptcy court.
So did PG&E emerge from the mess a winner or a loser? The answer is both.
The utility squandered an enormous amount of goodwill - some might argue it had precious little to begin with - with its single-minded behavior throughout the worst of the state's power woes.
It suffered a series of PR disasters, nearly all of its own making. These included bonuses for senior executives before and after the bankruptcy filing, millions of dollars being funneled from the bankrupt utility to its parent company, hardball negotiating tactics with state officials and insider trading by PG&E bigwigs.
Yet it now seems clear that PG&E also rode out the energy crunch with shrewdness and more than a little good luck. Its decision to seek bankruptcy protection instead of cutting a bailout deal with Gov. Gray Davis allows the utility to now restructure its corporate operations and, it hopes, reduce regulatory oversight.
It's too soon to say whether PG&E will emerge from bankruptcy with everything from its Chapter 11 wish list. But the mere fact that the utility can now negotiate a stronger position for itself with creditors and officials speaks to its eye-on-the-ball approach to turning adversity into opportunity.
Still, the utility was its own worst enemy throughout California's energy troubles. It may take years for PG&E to win back the public's trust.
ENRON: Loser. Big time.
The Houston energy behemoth, which invented the notion of trading power as a commodity and played an influential role in deregulating California's electricity market, crashed and burned this month in the biggest bankruptcy in U.S. history.
Californians probably wouldn't find themselves gloating so freely had Enron and its politically connected chairman, Ken Lay, not behaved so cavalierly during the state's darkest days, virtually shrugging off a bad situation that the company had helped create.
Enron's demise - caused by shady bookkeeping and a failed merger attempt with Dynegy Inc. - sent a clear signal to the rest of the energy industry that corporate arrogance will not be tolerated when it comes to necessities like electricity and natural gas.
And because the company was such a major proponent of deregulation, Enron's downfall almost certainly will put the brakes on efforts nationwide to open energy markets to competitive forces.
The question now is how much deregulation is enough to spur construction of new plants and lower power prices, and how much official oversight is required to make sure that a California-style meltdown doesn't happen again.
Thanks to Enron, it's a safe bet that most states will err on the side of caution.
OTHER POWER COMPANIES: On the financial front, these guys made out like high rollers in Vegas. But they didn't win any popularity contests in the process.
Sure, the companies all proclaimed innocence from wrongdoing, but, like the man said, they did protest too much. Dynegy, Duke Energy, Mirant, Calpine - each waddled from California's energy mess with fat pockets and a lingering stench of misbehavior.
Did they illegally manipulate power prices during the state's most desperate shortages? The investigations remain inconclusive (so far). But it's clear that each profited handsomely by jacking up prices as per California's dreadfully conceived market rules.
Like bad houseguests, the power companies raided California's fridge and broke the furniture, and then chided the state for having invited them in the first place.
Californians were left wondering: Where did you learn your manners?
GOV. DAVIS: The governor stood tall last January in his State of the State speech and vowed that "never again will we allow out-of-state generators to threaten to turn off our lights with the flip of their switch." Out-of-state generators proceeded to turn off our lights with a flip of their switch, and Davis' threats of retaliation suddenly rang very hollow indeed.
Now, let's be fair: Davis was not responsible for California's bungled experiment with deregulation - he inherited the fatally flawed system from others.
But the governor was slow to grasp the enormity of the state's predicament and for too long found it easier to blame federal authorities for their inaction than to take steps toward stabilizing California's energy resources.
When he finally did act, it was not, as he'd threatened in January, by seizing power plants but instead by turning the state into the country's single largest buyer of electricity. This was a boon to California's cash- strapped utilities, but it suddenly left taxpayers on the hook for billions in overcharges.
The dust has yet to settle on Davis' handling of the energy crisis. A poll last month found that 54 percent of Californians now approve of the way the governor is handling his job, up 25 percent from July, when the energy crisis was still the story du jour.
On the one hand, he is to be credited with keeping his hand on the tiller as the state navigated treacherous waters. On the other, it's going to cost a fortune repairing the boat.
The governor lost out by allowing his innate sense of political caution to override his understanding that Californians were thirsty for strong leadership.
But, like PG&E (how's this for irony?), the governor also ends up a winner by having survived the energy ordeal and moving on to other matters.
And you can't say that the man doesn't learn his lessons. After the Sept. 11 attacks, he wasted no time in announcing that he was in charge and taking steps to keep the peace.
CONSUMER ADVOCATES: California's energy crisis was a star turn for consumer activists normally accustomed standing on the sidelines of current events.
Some activists, like The Utility Reform Network in San Francisco, made a point of doing the heavy lifting in tackling absurdly complex matters and thus became indispensable to legions of journalists eager to sound knowledgeable about arcane policy affairs.
Others, such as Medea Benjamin of Global Exchange and Harvey Rosenfield of the Foundation for Taxpayer and Consumer Rights, became adept at grandstanding and serving up sweet little sound bites that seemed to put the whole ugly fiasco into perspective.
The consumer advocates were clearly winners at the end of the crisis, not least because, for the most part, they played a valuable role in defending the public's interest and maintaining an open debate.
Meanwhile, a handful of academic experts, such as Severin Borenstein at the University of California Energy Institute, enjoyed uncustomary celebrity as explainers of the inexplicable.
At the height of the crisis, Borenstein's voice mail warned people that because of the large volume of calls he was receiving, he might not be able to get back in a timely fashion.
Nowadays, there's no such warning on his voice mail. Borenstein's 15 minutes is up.
THE PUC: The energy crisis was not the best moment for California's Public Utilities Commission.
Like the governor, the PUC spent an awful lot of time demanding that federal authorities do something instead of taking prompt and effective action.
When the PUC finally did act, imposing the largest electricity rate increase in state history, the measure seemed months too late and millions of dollars too severe.
Infighting and political intrigues on the commission only exacerbated California's regulatory response to the problem, growing so intense over time that now, it's said, Gov. Davis is no longer on speaking terms with his own appointee, PUC President Loretta Lynch.
The PUC is still trying to keep itself in the game, though. It announced this month that it will look into the impact of Enron's bankruptcy on California's financial well-being.
What, if anything, the commission intends to do about the problem, however, was not revealed.
THE PUBLIC: Last but not least, the consumer.
Consider yourself a winner for having gotten through this whole nasty episode with your lights still on, your power bills stable, and your business and political institutions generally sound.
And consider yourself a loser for being saddled with an electricity market so dysfunctional, lawmakers still have no clue how to untangle things.
Can the blackouts and runaway power costs happen again? They can, unless steps are taken to address fundamental flaws in the state's energy system.
But that's a whole other chapter in this ongoing saga.
Commissioner on Duke Payroll May Resign10News, San Diego – January 5, 2002
CHULA VISTA, Calif. -- After months of controversy over his dealings with Duke Energy, San Diego Port District commissioner David Malcolm appears set to resign, 10News reported.
Chula Vista city councilman Steve Pedilla Friday told 10News that he had been assured by Malcolm that a resignation was forthcoming. That resignation is expected to be announced sometime late Friday afternoon, 10News reported.
"Frankly, the situation was just out of control," Pedilla said. "It was damaging the city of Chula Vista, it was damaging the Port District, I'm certain it was damaging Mr. Malcolm and his family, it was damaging the council and the leadership of this city. At that point, you have to put the interest of the citizens first." Pedilla joins Chula Vista city councilwoman Mary Salas in calling for the port commissioner's resignation. Salas has been pushing for Malcolm's resignation since July, 10News reported.
"When I found out that he did have a contract with Duke Energy, and that contract called for him to place the interests of Duke Energy before that of the port or the city of Chula Vista, I felt that that was -- in the least -- very unethical and a breech of the public trust," Salas said. "I felt that it was imperative that Mr. Malcolm resign."
10News was unable to contact Malcolm directly, but Pedilla said that Malcolm had said that he had made a "mistake in judgment" and that he felt it was time to set things right.
Malcolm has been the subject of a number of 10News reports focusing on his relationship with Duke before and after the energy giant signed a "sweetheart deal" with the port for use of the South Bay Power Plant.
Just recently it was uncovered that Malcolm had been receiving $20,000 a month from the company.
Enron Is a Cancer on the PresidencyL. A. Times – by Robert Scheer – January 3, 2002
Finally, a reporter had the temerity to question Bush on Friday regarding the ignominious collapse of Enron Corp. run by Kenneth L. Lay, a Bush family intimate and top campaign contributor. Bush expressed concern "for the citizens of Houston who worked for Enron who lost life savings" and added: "It's very important for us to fully understand the 'whys' of Enron."
Sure is, but did Bush never ask "Kenny Boy"--his nickname for Enron's chairman--what was going on?
After all, not only was Kenny Boy one of Bush's major contributors, but it was Lay and Enron that Bush turned to for critical advice on how to further exploit U.S. natural resources. The media, which had hounded Bill Clinton on his Whitewater connections, have allowed Bush to maintain the fiction that his--and his father's--administration had nothing to do with the debacle that is Enron.
Given the intense interest in the list of those who slept over in the Clinton White House, it's odd that no attention has been paid to Kenny Boy's sleepover in the early years of the senior Bush's White House.
Those early Bush years were crucial for Enron, beginning with the passage of the 1992 Energy Policy Act, which forced the established utility companies to carry Enron's electricity sales on their wires.
At the same time, Wendy Gramm, who served under the elder Bush as chair of the Commodity Futures Trading Commission, allowed for an exemption in the trading of energy derivatives, which, as the Washington Post reported, "later became Enron's most lucrative business."
Once that was accomplished, Gramm, wife of Texas GOP Sen. Phil Gramm, resigned from her government post to take a position on the Enron board. As one of the members of the board's audit committee, she now is expected to be a key figure in the lawsuits and federal investigation revolving around Enron's collapse. Recently, the chief executive of Arthur Andersen, Enron's outside auditor, told a congressional committee that the accounting firm had warned the Enron audit committee of what he termed "possible illegal acts within the company."
Wendy Gramm is also mentioned in a bank lawsuit alleging insider trading as having sold $276,912 in Enron stock in November 1998. Her response is that she sold the stock to avoid the appearance of a conflict of interest, given that her husband was chairman of the Senate Banking Committee.
Yet she was still very much on the Enron board and being rewarded with future stock options when her husband last year pushed through legislation that exempted key elements of Enron's energy business from oversight by the federal government. Phil Gramm had obtained $97,350 in political contributions from Enron over the years, so perhaps he was acting on his own instincts and not his wife's urgings. The exemption was passed over the objection of the Clinton administration.
Wendy Gramm also directs the regulatory studies program at George Mason University, which has received $50,000 from Enron since 1996. Her academic institute is highly influential in arguing for deregulation, conveniently joining her corporate and academic interests.
Unfortunately for true-believer deregulators, the Enron collapse shreds their panacea. Surely no one, least of all Wendy Gramm, who has said she was kept unaware of the company's chicanery in hiding debt and conducting secret private deals to the detriment of stockholders, could argue today with a straight face that Enron was in need of less government oversight.
The fact is that there would be no Enron as we know it were it not for Republican-engineered changes in government regulation that permitted Enron its meteoric growth.
It's true that the corporation had its allies among the Democrats; campaign finance corruption and influence peddling are generally a cover-all-your-bets bipartisan activity. But in this case, the amounts given to Democrats were puny and late, and there's no doubt that Enron rode to power primarily on the strength of Lay's influence with the Bush family. This fact is not mitigated by Enron now hiring Clinton's former lawyer and various top Democratic lobbying groups, except to note that these hired guns have no shame.
The Bush family ties to Kenny Boy Lay are just too intimate and lucrative to ignore.
There also are at least four Enron consultants and executives who hold high positions within the Bush White House, and some of them may be drawn into the investigations that cannot be avoided, despite the distractions of the war on terror.
As John Dean once famously said of the Nixon administration, there is a cancer growing on the presidency, but in this case it's name is Enron, and it won't go away by being ignored.
Duke ShreddedCoastal Alliance - plantexpansion.org – January 2, - 2002
The Shredder (regular column in the SLO New Times weekly, which is known to rip apart anything or anybody in the pubic domain, including the rich and those who want to get rich off the rich.)
Issue of Nov. 29-Dec. 6, 2001
Royally Screwed Duke
What a great name for a reigning despot. Or a power company. Duke Energy sure acts like royalty. And now the Morro Bay City Councilmembers are finally acting like enraged peasantry. It's about time. I thought that after kissing the Duke's butt for so long, their mouths would be filled with so much silk dander and sequins they'd choke.
The two have been battling over revenues, expenses, and reimbursements (money) for months. Then on Monday, the city said screw this noise and decide to become an "official intervenor" (a mob with pitchforks) in the California Energy Commission's review.
That means the city gets to be a legal party (a lawyer's hoe-down) in the California Energy Commission's review of the mess, which could lead to a lawsuit (no, that's not an attorney's costume), which would then give me even more to write about (yes, I would).
A Duke mouthpiece told me he thinks Duke has lived up to obligations ("Go away"). He would not comment any further ("Right now"). He said Duke is here to serve the people (hairless bipeds who pay energy bills). He said Duke is a good neighbor (I don't know what that means). Then he wouldn't say anymore.
Then he just turned his silk-and-sequined posterior my way.
Then I got out my pitchfork.
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