Wednesday, February 01, 2006

Enron Tapes: Some People Thought Lay and Skilling Were In Charge

by Tom Bozzo

An anonymous comment pointed me towards the interesting case of the Snohomish County Public Utility District (vicinity of Everett, Washington, home of the Boeing widebody jet assembly lines). The Snohomish County PUD had entered into a power delivery contract with Enron, which the PUD sought to terminate as Enron technically defaulted in the course of its collapse. A timeline [PDF] is here. Enron eventually sued the PUD for termination charges of $117 million plus interest. The PUD then sought to void the claim by demonstrating that the contract charges were unjust and unreasonable, based on evidence of Enron's efforts at market manipulation, notably a variety of audio recordings of conversations involving Enron traders and other employees. Based on that evidence, they've made some headway with federal regulators. A provision in the 2005 energy bill would prevent the Enron estate from recovering payments from contracts found to be tainted.

There is some information regarding the big bosses in the communications obtained by the Snohomish County PUD. Some people within the organization clearly thought that Lay and Skilling were being less than forthright regarding the condition of the firm — something dramatized effectively, if from an outside perspective, in The Smartest Guys In The Room. They evidently didn't create the impression of being Bernie Ebbers-style leaders. I couldn't easily locate a document identifying the parties here [PDF transcript], but the context suggests that 'Susan' is an employee of Enron's energy trading business and 'Don' is an outsider (anyone out there know for sure?):
SUSAN: Yeah, and that's what we didn't realize and they were just lying to us, telling us that the other groups were doin' OK, and were, you know, turnin' the corner into profitability and this that and the other, you know, all the new things they were gettin' into. And that was just all - I mean, I - I - I - I just see, ah - see it now, all the times that we wer just lied right to our faces. Right here on the floor. Very informal meetings they just downright lied.

DON: Next thing that happens, all these guys are go on to, ah, other - will they ever get anybody for criminal charges, I mean, there's gotta be -

SUSAN: Well, if the SEC finds out something. You know they're doing the SEC investigation, so maybe.

DON: Where's Skil -

SUSAN: He's - he's probably the worst one of them all. He was m - manipulating it all.

DON: You'd think there'd be some responsibility somewhere. You know, I - I - I said - told somebody the other day, I said, You know, I - as far as I'm concerned, nothing happened at Enron that Ken Lay didn't bless.

SUSAN: Well, ah, yeah, ah, see, even if - if he wasn't aware, then he should have been aware, so it's his fault too.
(Edited to correct typos in the transcript excerpt. There are other posts related to the Enron trial here and here.)
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