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.
In one such transcribed conversation, responding to a newspaper headline about then-President Bill Clinton's plans to "ease California's power crisis," an energy trader identified only as "Matt" said flatly "there is no crisis," adding that Californians were "on the ropes today. I exported like a fuckin' 400 megs. ... I bought it all. I'll see you guys – I'm taking mine to the desert."
"Fuck 'em, right?" replies a second energy trader, identified only as "Tom."
In another recorded conversation, an energy trader identified as "Kevin" recalls, "There's a guy he was in yesterday, he's some consultant for some fucking other business we're supposed to be starting somewhere. ... He's like, I'm in California now and my small consulting business, my energy costs have gone from $100 to $500 a month. It's unbelievable, I don't know what to do. I just turned from my desk, I just looked at him, I said, 'MOVE.' ... It isn't getting fixed any time soon."
"That's the best thing about it," replies an energy trader named "Bob". "That's so beautiful."
After the two traders share a moment of laughter over the situation, "Kevin" explains the situation of Californians at the time. "They're so fucked and they're so, like totally."
"Kevin" and "Bob" participated in the most callous – and the most widely-quoted – conversation in the recorded series, the infamous "Grandma Millie" exchange.
"So the rumor's true?" "Kevin" asks. "They're fucking taking all the money back from you guys? All the money you guys stole from those poor grandmothers in California?
"Yeah, Grandma Millie, man," "Bob" replies.
"Yeah," says "Kevin," "now she wants her fucking money back for all the power you've charged right up – jammed right up her ass for fucking $250 a megawatt hour." The two traders join in raucous laughter.
The exchange was so politically potent that it ended up quoted – in expletive-deleted form – in Attorney General Lockyer's civil complaint against Enron.
Governor Schwarzenegger's movie hero image cannot be overemphasized as a primary component of his stunningly successful jump into California politics. Taking a composite of his leading man characters in movies like "Eraser" and "6th Day," "The Running Man," "Predator," and the last two movies of the "Terminator" series, he typically plays an idealistic CIA operatives or small-unit military commander (or cyborg) who rebels – and takes the little man's side – when his institution is taken over by greedy, corporate types. Schwarzenegger has already been taking political hits because of his reported part in a private, undocumented Los Angeles meeting in the spring of 2001 with Kenneth Lay in which the former Enron chairman was either pushing a plan to "solve" California's energy crisis or trying to gain support to quash a private lawsuit against Enron based on the corporation's actions that allegedly brought about that crisis. The details of that meeting have never been made public.
Schwarzenegger's inaction on the Enron issue is understandable, politically. Even before the release of the tapes, public support for the pariah corporation in California would be the kiss of death for any politician. And especially with the filing of the Lockyer complaint, any action now by the governor against Enron would be viewed as weak reaction to his Democratic rivals. The only thing Schwarzenegger can hope is that California voters may not notice the most prominent politician in the state standing silent in the corner during one of the year's biggest political fights.