'Disgusting' tapes dig Enron deeper into mire

0 Comments | Sunday Herald, The, Jun 6, 2004

Enron traders joking about stealing from poor grannies; celebrating by singing a disco song while a power plant in California burns in a wildfire during the electricity crisis of 2000-01; mocking a small business owner on the brink of destruction; and dreaming that their boss "Kenny-Boy" Lay would become George Bush's energy secretary.

The audio tapes are just the latest to emerge in the tale of the Houston-based power company's gouging, scamming, manipulation, and multi-million executive salaries that cost its stockholders, creditors, employees and consumers billions of bucks.

Enron Corp lawyers return to court in New York this coming week seeking approval of the company's Chapter 11 reorganisation that has cost $1 billion in fees. Creditors would get 17 to 22 cents on the dollar in cash and stock in Prisma Energy International, the spiffy- sound holding company that will be the new Enron once sales of its last few valuable assets are finalised.

A few creditors are objecting, but the two largest, Citigroup and JP Morgan Chase are behind the plan. Judge Arthur Gonzalez could rule - and will probably approve it - by month's end. At its peak Enron, master of creative accounting, was America's seventh largest public company. When it crashed with $67bn in debt in late 2001, it was the US's largest bankruptcy.

Disgusting is the best description of excerpts of newly-released tapes of Enron traders as they talked of manipulating the market during California's energy crisis in 2000-2001. "They're f***ing taking the money back ... the money you stole from those poor grandmothers in California?" sneered one.

That was after the government intervened, imposing price caps. "Yeah, now she wants her f***ing money back for all the power you've charged right up, jammed right up her arse for f***ing $250 a megawatt hour."

A trader calling in to Enron suggested: "So what do we need? We need a blackout and then they're going to remove the cap?" Traders also seemed to discuss shutting down a generating plant just to boost prices.

"He steals he, um, arbitrages the California market to the tune of a million bucks or two a day" was the description of one colleague. And as a forest fire consumed a transmission line, further destabilising the grid, one trader chortled, "That's a beautiful sight!" and several sang, "Burn baby burn".

The tapes, routine but rarely publicised, seem to suggest top Enron executives Ken Lay, a friend of President Bush, and Jeffrey Skilling were linked to schemes exacerbating the crisis. Or so say lawyers for Snohomish Public Utility District, which wants $2bn of Enron's "illegal" profits and which released the transcripts.

Lay is not charged in any of the dozens of the criminal cases. But former CEO Skilling faces trial for alleged conspiracy, fraud and insider trading, which he denies. With the first of Enron's trials set to open tomorrow, defence lawyers were still manoeuvring on Friday to delay or dismiss the proceedings.

Surprisingly, Andrew Fastow, the former CFO who has pleaded guilty to two counts of conspiracy, was not listed as a witness against the six defendants. The reason is that he could help prove the defendants' innocence, says the defence team.

The sale was allegedly concocted to boost cash flow by $12 million and meet expected profits. On trial are former mid-level Enron executives Dan Boyle, who reported to Fastow, and Sheila Kahanek, in- house accountant.

Also charged are four former Merrill Lynch executives, Daniel Bayly, James Brown, Robert Furst, and William Fuhs.

Given the extent of recent US corporate scandals, it's perhaps no wonder that Dow Jones reports the Securities and Exchange Commission is looking for a psychologist for its demoralised burned-out staff.