- The Washington Times - Wednesday, May 8, 2002

ASSOCIATED PRESS
President Bush was expecting vigorous pursuit of an investigation that prompted Enron Corp. to acknowledge it drove up electricity prices during California's energy crisis, a White House spokesman said yesterday.
Mr. Bush has faced criticism for his close ties to the collapsed energy giant, which has been the single biggest financial supporter of his political career.
But yesterday, the administration took credit for a Federal Energy Regulatory Commission inquiry that demanded the company turn over documents revealing its practices during California's crisis.
The documents "were released by FERC, an independent agency of this government as part of an ongoing investigation launched by this administration," White House spokesman Ari Fleischer said. FERC opened the inquiry in February.
The revelation is a development "the president has noted, and he expects the investigation will be vigorously pursued wherever it may go," Mr. Fleischer said.
He used the disclosures to renew the White House call for tougher penalties for violations of the Federal Power Act.
But Mr. Fleischer declined to say whether Mr. Bush backed a call from Sen. Dianne Feinstein, California Democrat, that Attorney General John Ashcroft and the Justice Department open a criminal investigation into Enron's suspected manipulation of the state's electricity market.
Justice Department spokeswoman Barbara Comstock did not respond directly to Mrs. Feinstein's request.
"The Enron Task Force is continuing to actively investigate a wide variety of matters concerning the conduct of Enron Corp. and individuals and entities associated with it," Miss Comstock said in a statement that noted that Mr. Ashcroft had recused himself from the investigation because he received campaign money from the company in his 2000 Senate race.
A memorandum, written by Enron attorneys in December 2000, outlined practices similar to those described by California officials who claimed the energy trading company created phantom congestion on electricity transmission lines and engaged in sham sales among its affiliates to increase electricity prices.
Describing one such strategy called "Death Star," the attorneys wrote: "The net effect of these transactions is that Enron gets paid for moving energy to relieve congestion without actually moving any energy or relieving any congestion."
Another practice, called "Ricochet," allowed Enron to send power out of California and then resell it back into the state to avoid price caps that applied to transactions solely within California.
"To us, this is really the smoking-gun memo," said Sean Gallagher, a staff attorney with the California Public Utilities Commission.
"It's Enron's own attorneys admitting that Enron is manipulating the California market," Mr. Gallagher said.
Also yesterday, Enron's directors, under scrutiny by a Senate investigative panel, said executives of the company and its auditor, Arthur Andersen, hid from them the information they needed to exercise oversight and deal with problems.
"We cannot, I submit, be criticized for failing to address or remedy problems that were concealed from us," Herbert Winokur, a director and chairman of the Enron board's finance committee, said in testimony prepared for a hearing by the investigative panel of the Senate Governmental Affairs Committee.
But senators insisted that the directors shared responsibility for Enron's stunning collapse and failed in their duty to protect shareholders of the energy-trading company.


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