Enron Inquiry Investigation. Former Enron manager Tim Belden, who led Enron’s wildly profitable power trading operation in Portland, has emerged as a focus of an expanded investigation into alleged electricity price manipulation that may have worsened the Western power crisis of 2000-01.
Federal prosecutors opened a criminal investigation of Enron’s role in the power crisis in May. They are presenting evidence to a grand jury in San Francisco. It is the Justice Department’s second inquiry into the Houston-based energy company. The department is also investigating Enron’s financial irregularities and resulting December 2001 collapse.
“Clearly, Belden was the guy pulling the strings for Enron,” said Christian Schreiber, an investigator for a California State Senate committee that is pursuing its own investigation of the power crisis. “He had the ears of top management at the California ISO (the state agency responsible for managing the state’s power grid). He was also tied into top management at Enron.”
Belden will be near the top of the agenda when the Senate committee meets today in Sacramento, Schreiber said. The committee, which has battled for months to force Enron to release pertinent internal documents, will discuss evidence that Enron, at Belden’s direction, used strategies to mislead California regulators early in the power crisis.
“He was looking for ways to destabilize the market,” said Robert McCullough, a Portland-based consultant who will testify before the committee.
Federal and California investigators also want to know how much Belden and other traders in Portland told top Enron executives, including former Chief Executive Jeffrey Skilling.
The California committee obtained an internal Enron e-mail indicating that Skilling invited Belden and six other company managers to dinner March 14, 2001, at Higgins Restaurant in downtown Portland. Skilling was in Portland for a number of meetings with the Enron traders and other company employees.
controversial energy-trading practices
The meetings came about three months after two lawyers representing Enron in Portland wrote memos describing controversial energy-trading practices used by the company’s Portland traders. The strategies worsened power shortages and contributed to higher prices.
A former Enron power trader said the Higgins dinner, which was discussed widely within the company afterward, was a casual affair. “He came up here for a meet and greet,” the trader said. “He got up there and told us that everything was A-OK, things couldn’t be better, the standard company line.”
Five months later, Skilling resigned unexpectedly as CEO. Two months after that, Enron admitted it had concealed debt and inflated earnings. On Dec. 2, the company filed for bankruptcy.
Belden’s attorney could not be reached for comment. Belden has refused to testify in hearings and depositions, citing his Fifth Amendment rights against self-incrimination. Enron officials and Skilling’s lawyers also did not return phone calls Monday.
Enron had a major presence in Portland. In addition to 125 power traders, the company also had several hundred employees working at Enron Broadband, a telecommunications company that has since been disbanded. Enron also owns Portland General Electric, Oregon’s largest private utility.
But in terms of profitability, the other operations paled in comparison to the power traders. After analyzing Enron’s internal documents, the Federal Energy Regulatory Commission has reported that the power traders earned $2 billion in profits in 2000 and 2001. Some of the traders argue their success propped up the entire company even as Enron Broadband and many other of its ambitious, far-flung operations were faltering.
Enron rewarded the power traders’ success. It paid Belden a $5.2 million bonus in the 12 months preceding its bankruptcy, according to the financial documents included in Enron’s bankruptcy filing. A second Enron trader, Michael Swerzbin, who also was invited to dinner with Skilling in March 2001, got a $2.6 million retention bonus from the company in the fall of 2001, the documents show.
Federal prosecutors launched the second Enron investigation early this summer. “The Department of Justice got involved after the trading memos were released in May,” said Schreiber.
The internal Enron memos, dated Dec. 6, 2000, outlined several complex trading strategies designed to increase power prices and manipulate the system nominally overseen by California state regulators. The memos added fuel to charges that power traders and generators took full advantage and worsened the power crisis by raising prices and creating the illusion of shortage.
The 13-month crisis led to unprecedented wholesale price increases that forced California’s largest electric utility into bankruptcy and led to double-digit rate increases for ratepayers all over the West.
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