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Enron Chief Trader Vows To Tell All

Oct 18, 2002 | Houston Chronicle

Federal prosecutors have bagged their first criminal conviction from California's energy crisis. And they've got a witness ready to sing.

Timothy Belden, once the chief trader for Enron's West power desk, pleaded guilty Thursday to conspiracy to commit wire fraud as part of a scheme to drive up electricity prices at a time when California was desperate for power.

"I did it because I was trying to maximize profit for Enron," Belden, 35, told U.S. District Court Judge Martin Jenkins in San Francisco on Thursday, The Associated Press reported.

Employing trading strategies bearing nicknames like "Fat Boy," "Ricochet" and "Get Shorty," Belden working with other, unnamed parties -- tried to manipulate energy markets in California between 1998 and 2001.

"The conspiracy allowed Enron to exploit and intensify the California electricity crisis and prey on energy consumers at their most vulnerable moment," Deputy Attorney General Larry Thompson said.

Belden, described by prosecutors as a Houston resident, has promised to cooperate with investigators in the probe.

One California lawmaker says Belden could help prosecutors bring charges not only against former higher-ups at Enron, but officials at other energy-trading firms as well.

"I think upper management needs to be concerned, if they aren't already," said California state Sen. Joseph Dunn, chairman of a special panel investigating the power crisis. "I will be surprised if Tim Belden does not point fingers up the corporate ladder."

California officials say Belden's decision to plead could prove as pivotal for the investigation into California's electricity crisis as former Enron executive Michael Kopper's guilty plea has been for the probe into the company's accounting practices.

Prosecutors have said information provided by Kopper helped them charge Enron's one-time Chief Financial Officer Andrew Fastow with wire fraud, mail fraud, money laundering and conspiracy.

While at Enron, Belden headed the trading operation in Portland, Ore. He reported to then-Enron executives John Lavorato, Greg Whalley and Mark Frevert, who in turn answered to Enron's Chief Executive Officer Jeff Skilling.

Lavorato and Whalley now work for UBS Warburg Energy, which acquired Enron's trading business. Through a UBS spokeswoman, the two declined comment Thursday.

An attorney for Skilling did not return a telephone call, while Frevert could not be reached for immediate comment.

Belden first gained notoriety back in May, when his name appeared in a confidential Enron document detailing strategies Enron used to outwit California's power grid operator during the electricity crisis.

When pleading guilty Thursday, Belden admitted he and other Enron traders lied to California's electric grid operators about the amount of electricity the company proposed to supply during the power crisis. Belden also acknowledged that he created phantom congestion on the power grid, sent power out of state to circumvent price caps and promised to have generation and transmission services Enron didn't have available and never really intended to provide.

During Belden's tenure, revenues at the trading unit rose from $50 million in 1999 to $800 million by 2001, prosecutors said.

Belden, Dunn said, was the "mastermind" of Enron's market-manipulating strategies.

California officials already had their eye on Belden even before the confidential memos were unveiled, said Chris Schreiber, an investigator with the committee.

Belden was involved in Enron's decision to schedule to transmit 2,900 megawatts of power over a 1,500-megawatt interconnection in Silver Peak, Nev., Schreiber said. California officials believe that incident may have been a practice run for some of the market manipulating strategies used during the power crisis.

Dunn believes Belden will be able to guide investigators through the "closed world" of the energy-trading business, leading them to illegal behavior at other energy-trading firms.

"The fact Tim Belden has come forward will send a very frightening signal to a number of other companies," Dunn said.

Philip Chabot Jr., an attorney representing Tacoma, Wash., and the Port of Seattle in lawsuits stemming from the western power crisis, tried unsuccessfully to depose Belden and two other trading colleagues. All three invoked the Fifth Amendment.

Chabot called Belden "the absolute fulcrum," able to provide information from the upper reaches of Enron management down to the workings of the trading desks, as well as trading operations elsewhere.

"Tipping him in this fashion is quite a coup," Chabot said.

Belden went to work for Enron in 1997. After UBS Warburg acquired Enron's trading business in the wake of Enron's bankrupcty filing, Belden went to work for UBS in Houston. He lived in temporary quarters in Houston and left the firm last month because he did not want to relocate completely from Portland, a UBS spokeswoman said.

A former colleague of Belden's described him as a high-energy type who got caught up in his work very easily.

"He seemed like his mind was racing a mile a minute because he really loved his work," said the former Enron Capital & Trade employee. "He didn't strike me as criminal-minded, but rather was dedicated to making money for the company."

As part of his plea agreement, Belden, who was paid a total of $5.5 million in 2001, promised to turn over $2.1 million in salary and bonuses, "which represents the portion tied to the fraud." He faces a possible sentence of five years in prison and a $250,000 fine, but his sentence could be reduced significantly if he cooperates with investigators.

California officials hailed Belden's guilty plea Thursday.

"It's about time," said Steve Maviglio, a spokesman for California Gov. Gray Davis. The governor "has been saying for more than two years somebody ought to to go to jail for the manipulation of the markets."

California officials argue that Belden's guilty plea bolsters their argument that out-of-state electricity producers should refund the state billions of dollars for overcharging for power during the electricity crisis.

Davis urged investigators to continue their probe. "Every time they ... uncover a new rock, something else seems to crawl out indicating market manipulation."

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