Inaction from California's Action Hero

In the wake of last week's arrest and federal criminal indictment of former Enron Chairman Ken Lay for fraud and insider trading, major California politicians lost no time in publicly attacking the man who once had the Bush Administration's ear on national energy policy. It was Lay's Enron Corporation, after all, which led the manipulation of California's public energy market in 2000 and 2001, helping to provoke an artificial energy crisis that sent the state into a downard spiral of escalating budget deficits.

U.S. Senator Diane Feinsten's office issued a statement calling the Lay indictment "another step forward in holding the leaders of Enron accountable for their many misdeeds, which included taking advantage of California by manipulating the energy market for financial gain." Her senate counterpart, Barbara Boxer, was more succinct: "I think if there is enough evidence to indict Ken Lay, then there is enough evidence to get California our money back." The two Senators were joined in their sentiments by several members of the California Congressional delegation.

Three weeks ago, California Attorney General Bill Lockyer – a potential candidate in the 2006 gubernatorial race – gave his own official take on the Lay/Enron situation, filing a complaint against Enron in state court, seeking an estimated $9 billion in restitution from the company for "a number of unlawful, unfair, fraudulent and manipulative trading schemes to the detriment of the people of the State of California." A month earlier, in an op-ed in the Sacramento Bee newspaper, State Treasurer Phil Angelides – another potential candidate for governor in the next election – placed Enron among corporations whose "corruption, mismanagement and fraud [have] bilked American investors out of trillions of dollars..."

In fact, there is only one major California politician conspicuously absent in the reaction to the Enron scandals: Governor Arnold Schwarzenegger, who beat former Governor Gray Davis in a recall election sparked largely by the state budget collapse linked to the 2000-01 energy crisis.

Asked late last week if Schwarzenegger had issued a statement concerning the Lay indictment, a spokesperson in the Governor's press office said that he had not, nor had he heard of any plans for Schwarzenegger to make one. Asked if the Governor had issued a statement concerning the Attorney General's Enron lawsuit, the same spokesperson answered not that he could remember. Asked if Schwarzenegger had made a statement concerning the infamous Enron telephone tapes, the spokesperson said, simply, no.

For a politician who campaigned as a movie action figure hero who would protect defenseless California taxpayers against corruption and greed, it is his silence on the Enron tapes that has the potential to cause Schwarzenegger the most difficulty.

The roots of California's energy crisis began in the late 1990's, when the legislature simultaneously deregulated the state's energy market and consolidated energy transmission under one state-controlled institution. Supporters said the two moves would promote competition in the energy market and drive down consumer prices. Instead, energy companies quickly learned how to manipulate the market, creating a false energy shortage crisis throughout the West Coast and then using the ensuing panic to bilk West Coast consumers out of billions of dollars.

Although the broad outlines of the market manipulation scheme have been known since 2001, intimate details came to light this spring when the Snohomish County Public Utlities District headquartered in Everett, Washington released court-ordered tapes it had obtained of telephone conversations to and from Enron's Portland, Oregon office. The conversations – made at the height of the company's energy market manipulation and punctuated with laughter while Californians suffered under blackouts – showed a callousness and a greed not revealed publicly in American life since the days of the robber baron railroad magnates.