The Al Capone of electricity - Ken Lay's true crimes

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Wed, 24 May 2006 01:38:29 -0400 (EDT)

Greg Palast palast

The Al Capone of electricity - Ken Lay's true crimes

 

 

 

 

THE AL CAPONE OF ELECTRICITY

Ken Lay Will Get Away with His Real Crimes

 

By GREG PALAST

 

 

 

Seattle Post-Intelligencer

 

Wednesday, May 24, 2006 -- Al Capone cut throats, machine-gunned

people to build his gang and went to jail -- for not filing his taxes

properly. Likewise, Ken Lay, buccaneer of the power industry, will go

down -- if the jury doesn't buy his alibi -- for not filing his SEC

forms properly.

 

And just as Capone went up the river leaving us a permanent legacy

of organized crime, so Lay, whether or not he's sent to the slammer,

has left us, with the connivance of a few well-placed politicos, an

electricity system that is little more than a playground for

power-industry predators.

 

We've been here before. In the 1930s, a character named Samuel

Insull created the first giant power holding companies. Insull played

fast and loose with his account books, fast and loose with cash for

politicians and pocketed millions by gouging electricity customers.

Insull was indicted, like Lay, for crimes against his stockholders.

 

In 1933, President Roosevelt made Insull's power piracy a crime.

FDR signed the Public Utility Holding Company Act and laws that capped

the profit of electricity monopolies. The act required them to keep

lights on by accounting for all maintenance expenses, barred " trading "

electricity and, most important, banned donations by the power giants

to politicians.

 

Fast-forward to January 2001. The George W. Bush administration,

within 72 hours of his inauguration, issued an executive order lifting

the Clinton Energy Department's effective ban on speculative trading

in the California power market. The state was still in crisis, facing

blackouts and 300 percent increases in power bills, the result of

" deregulating " its electric system, as first suggested by Lay.

 

Instead of a " free " market, California's electricity bidding

system became a fixed casino where Lay's operatives and a tight-knit

cabal of corporate cronies jacked up prices through such tricks as

" death star, " " ricochet " and " kilowatt laundering. "

 

In one instance, Enron " sold " the state 500 megawatts of

electricity to go over a 15-megawatt line. Enron knew that sending

that much power through those wires would have burned them to a crisp.

To prevent this Enron-designed blackout, the state scrambled for other

sources of electricity, which Enron and friends sold them at a big

mark-up.

 

California's Independent System Operator put the cost to consumers

of this " gaming " at $6.3 billion in a six-month period. Under the

Roosevelt rules, when utilities were regulated to a fare-thee-well,

the gaming rooms would have been busted.

 

Instead, the games have been institutionalized. For example, TXU,

the corporate alias of Texas Utilities, has seen earnings per share

rise 500 percent in five years. The reason: So-called deregulation

allows the company to sell electricity at a price based on the

sky-high cost of oil although much of its power is produced from

cheaper coal or uranium. In effect, deregulation has become

de-criminalization of price gouging.

 

Even more sinister than Bush's hasty executive order allowing

Enron to resume speculation in the California power market was his

appointment of Pat Wood as chairman of the Federal Energy Regulatory

Commission, the government's electricity cops. The choice of Wood was

suggested, in secret, by Enron.

 

This put Lay one step ahead of Al Capone who had to buy the cops.

Lay just had them appointed.

 

Wood may have been as honest as the day is long, but on his watch,

Enron and the industry treaded through the power market like Godzilla

through a kindergarten. And it continues under a new chairman, also

suggested by Enron.

 

What about the $6.3 billion filched from the wallets of California

consumers, let alone the larger sums taken in by power profiteers

nationwide? The Lay-blessed federal regulators barely batted an eye.

 

Lay's brainchild of deregulation was coupled with his other grand

idea: a massive increase in industry largesse to politicians. By

unsubtle, but perfectly legal, means around FDR's prohibition on

political donations, Enron PACs and its executives became the top Bush

funders.

 

Capone never lived to see armed robbery made legal. But Lay, even

if convicted, can leave the courthouse for the Big House knowing power

profiteering is now as legal as prayer. On July 14, 2005, Roosevelt's

Public Utility Holding Company Act, bulwark of consumer protection,

was repealed by a Congress fattened with utility industry cash.

 

 

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On June 6, Penguin Dutton will publish Greg Palast's new book,

ARMED MADHOUSE: Dispatches From the Front Lines of the Class War.

Armed Madhouse includes the Project Censored Award-winning story of

The Governator of California and the Enron chief, " When Ahnold Got

Lay'd. " Order it today at

http://www.gregpalast.com/armedmadhouse/preorder.html

 

Palast, an internationally recognized expert on Enron and

electricity market manipulation, is co-author of " Democracy and

Regulation, " the United Nation's guide to control of the utility industry.

 

View his investigative reports for Harper's Magazine and BBC

Television's Newsnight at www.GregPalast.com.

 

 

 

 

 

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