[Congressional Record (Bound Edition), Volume 150 (2004), Part 12]
[Senate]
[Pages 15739-15740]
[From the U.S. Government Publishing Office, www.gpo.gov]




                             ENERGY CRISIS

  Mrs. FEINSTEIN. Mr. President, I rise today to set the record 
straight regarding the Western energy crisis. Ken Lay, the former CEO 
of Enron, appeared on CNN's Larry King Live on Monday, July 12. Larry 
King asked him:

       Did Enron's problems or fortunes or misfortunes have 
     anything to do with hurting California and its energy 
     problem? Because a lot of politicians in California blamed 
     Enron.

  Lay responded:

       Well, they do, and I still think to this day falsely, 
     Larry. I mean, California, for the most part--I mean, 
     California, California regulators, politicians, et cetera, 
     caused the problem in California.

  Let me set the record straight. During consideration of California's 
legislation that deregulated the energy market, Enron was at the center 
of the lobbying effort that crafted the bill.
  Once the legislation was passed, Enron took full advantage of the 
loopholes it helped to create to manipulate and game the Western energy 
market. I would not argue that the system was perfect, but I would 
assert that Enron had a huge hand in creating such a flawed system, 
which it used to its benefit.
  Enron, and other energy companies, created a business environment in 
which the bottom line mattered more than the public good.
  As I have stated on this floor before, energy traders were completely 
unconcerned with customers having electricity as long as it meant that 
they got an extra bonus that day.
  And the fault does not lie solely with Enron. Other companies were 
also involved with gaming the Western energy markets, including, but 
not limited to: Dynegy, Reliant, Williams, El Paso, Duke, BP Energy, 
Portland General, AES, Mirant, CMS Energy, American Electric Power 
Company, and Sempra Energy Trading.
  The recently-released Enron tapes demonstrate the callousness of 
these companies:
  One trader complained: ``They're [expletive] taking all the money 
back from you guys? All the money you guys stole from those poor 
grandmothers in California?''
  A second responded: ``Yeah, grandma Millie, man.''
  The first responded: ``Yeah, now she wants her [expletive] money back 
for all the power you've charged right up, [expletive phrase], for 
[expletive] $250 a megawatt hour.''
  The good news is that the figures responsible for running Enron are 
beginning to be brought to justice. For instance, Ken Lay, along with 
former Enron CEO Jeffrey K. Skilling and former Enron Chief Accounting 
Officer Richard Causey, were indicted by the U.S. Department of Justice 
on charges of conspiracy, securities fraud, wire fraud, bank fraud and 
making false statements.
  The indictment alleges that at various times between at least 1999 
and 2001, Lay, Skilling, Causey and other Enron executives engaged in a 
wide-ranging scheme to deceive the investing public, the U.S. 
Securities and Exchange Commission and others about

[[Page 15740]]

the true performance of Enron's businesses.
  The alleged scheme was designed to make it appear that: Enron was 
growing at a healthy and predictable rate, consistent with analysts' 
published expectations; Enron did not have significant write-offs or 
debt and was worthy of investment-grade credit rating; and, Enron was 
comprised of a number of successful business units, and that the 
company had an appropriate cash flow.
  These actions had the effect of inflating artificially Enron's stock 
price, which increased from approximately $30 per share in early 1998 
to over $80 per share in January 2001, and artificially stemming the 
decline of the stock during the first three quarters of 2001.
  The indictment also alleges that Lay had a significant profit motive 
for participating in the scheme.
  As stated in the indictment, Lay received approximately $300 million 
from the sale of Enron stock options and restricted stock between 1998 
and 2001, netting over $217 million in profit, and was paid more than 
$19 million in salary and bonuses.
  Lay received a salary of over $1 million, a bonus of $7 million and 
$3.6 million in long term incentive payments during 2001 alone.
  Additionally, Lay sold 918,104 shares of Enron stock during the 
period of August 21 through Oct. 26, 2001, to repay advances totaling 
$26,025,000 he had received from a line of credit extended to Lay by 
Enron.
  At that same time, California was overcharged by at least $9 billion. 
Now we at least know where some of that money went.
  Yet even if Enron is forced to pay back the almost $2 billion it 
overcharged California, bankruptcy will protect the company from paying 
back much more than 20 cents on the dollar.
  It is my hope that as the evidence mounts against Ken Lay that the 
truth about his, and Enron's, role in the Western energy crisis will 
leave no doubt in anyone's mind that the crisis was manufactured by 
unethical, greedy corporations.
  California has suffered enough as a result of the crisis--it does not 
need to suffer further from Ken Lay's mistruths.
  Mr. President, thank you for letting me set the record straight.

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