- The Washington Times - Friday, May 10, 2002

Attorneys for the California lieutenant governor plan to file court documents soon that could cause Enron Corp.'s directors to forfeit the multimillion-dollar bonuses they paid each other shortly before declaring bankruptcy and force them to pay damages out of their personal assets.
The legal maneuver is a rare phenomenon in civil cases that courts normally reserve for when there is evidence of criminal conduct by a corporation's top executives.
"The liability for the conduct flows directly to the individuals that engaged in it," said Michael Aguirre, attorney for California Lt. Gov. Cruz Bustamante. "If corporate officers were aware of these practices, then they become personally liable for the wrongdoing."
The bank accounts and other financial assets of the corporate directors could be frozen by the courts after the "prejudgment motion" that Mr. Aguirre and other attorneys are preparing.
Depending on the outcome of the litigation, the money and, perhaps other property, could be seized to pay Enron's debts and liabilities.
"Individuals that act illegally implicate the corporation but they also implicate themselves," Mr. Aguirre said.
He referred to both the "retention bonuses" paid to Enron's directors and to new evidence this week that the company joined other energy companies in manipulating West Coast energy prices to increase their profits.
The Enron documents released Monday night described how the energy trading company sought to cash in on California's energy crisis in 2000 and 2001. During the crisis, wholesale energy prices shot up tenfold. California is seeking $9 billion in overcharges for electricity.
The Senate Energy and Commerce Committee plans to meet next week to investigate the charges. Members of the California congressional delegation held a press conference yesterday to condemn Enron and other energy companies they accuse of extracting large profits from consumers concerned about an energy shortage. They also called for a criminal investigation.
The evidence of market manipulation came from documents Enron's new management turned over to federal and state investigators this week. The documents show Enron consciously created congestion on power lines to cause shortages and transferred electricity out of state to avoid price controls. They then profited from the higher prices consumers were forced to pay because of the apparent shortage.
They also gave names to their manipulative strategies, such as "Death Star," "Fat Boy," and "Get Shorty," according to the documents.
"It's stunning that they can be so cynical in the way they named their various strategies," said Rep. Maxine Waters, a California Democrat. "They made a joke of it, of raping us, of taking our taxpayers' money."
She agrees with California officials' plans for freezing the assets of Enron executives.
"That would be fine with me," Mrs. Waters said.
Rep. Bob Filner, a California Democrat, advocates imprisonment for executives of Enron and any other corporations that defrauded consumers.
"California is in great debt because of the criminal action to which we were subjected," Mr. Filner said. "They stole $40 [billion] to $50 billion from us."
He also said the energy executives should be forced to repay the company's liabilities from their personal assets.
"I want to take the assets they stole from California and other people," Mr. Filner said.
Mr. Aguirre said the bonuses Enron's executives paid each other months before declaring bankruptcy probably qualify as a "fraudulent transfer" that could be seized by a court.
"It would be very hard to believe that they weren't," he said.
Although he refused to name the corporate directors who will be subject to his prejudgment motion, a lawsuit filed May 2 in California Superior Court by Mr. Aguirre on behalf of the state's lieutenant governor names 14 executives from energy companies.
They include Keith Bailey, chief executive of the Williams Companies, A.W. Dahlberg, chief executive of Southern Co., R. Steve Letbetter, chief executive of Reliant Energy and Richard B. Priory, chief executive of Duke Energy.
Enron executives will be added to the list with the prejudgment motion, Mr. Aguirre said.
"That's what we're doing right now, identifying which Enron executives we're going to add to the complaint," Mr. Aguirre said.
The Justice Department is conducting its own investigation of Enron and other energy companies. Although Justice Department officials have not decided whether they will try to seize personal assets of the corporate directors, they have not ruled it out as a possibility.
"It's way too premature to say," said Bryan Sierra, Justice Department spokesman."We'll take a look at any tool we have."
In a March 7 policy statement, President Bush called on the Securities and Exchange Commission to use its authority to force corporate directors to repay funds they receive fraudulently.
"If anyone is illegally manipulating markets, they need to be held accountable," said White House spokeswoman Claire Buchan.


Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.

 

Click to Read More and View Comments

Click to Hide