CRAWFORD, TEXAS — There was no public celebration of the president’s July 6 birthday in the central Texas town where George W. Bush bought a ranch months before he began to campaign for the presidency. George and Laura were in Washington, and this hardscrabble farm community was dead as always during the dog days of summer.
But Bush was here exactly a week earlier, after his fund-raising dinner at the Century Plaza Hotel in Los Angeles. Supporters paid $2,000 a plate to listen to Bush make a stump speech and Dennis Miller attempt political humor. Miller wasn’t funny, but Bush raised $3.6 million, topping off the $1.6 million he collected in San Francisco earlier the same day. Then Bush headed back to the ranch for the night. Despite the 1:30 a.m. arrival, Bush, unlike Bill Clinton, prefers his own bed.
So you might say that $5.2 million made its way from California to Texas that night. It recalled the summer of 2000, when Enron made a science of moving money from California to Texas. When elaborate schemes like Ricochet, Death Star, Fat Boy and Forney’s Perpetual Loop queered West Coast energy markets for Enron wise guys Ken Lay, Jeff Skilling and Andy Fastow.
Enron and the California energy crisis it helped create three summers ago weren’t mentioned in the press coverage of Bush’s fund-raising trip, amid optimistic speculation that Bush could carry California in 2004. But the tale of Enron is not as stale as Bush would have it. Two days before the oilman-president landed in Los Angeles, the Federal Energy Regulatory Commission barred Enron from trading electricity. So much for beating a dead company. The real news was FERC’s 2-1 vote holding California to long-term energy contracts signed in a desperate attempt to control electricity rates in 2000 and 2001 — while Enron and other power hustlers squeezed obscene profits out of California ratepayers.
Dissenting FERC Commissioner William Massey couldn’t believe what his colleagues had done. Massey, the only Clinton holdout on the commission, told New York Times reporter Richard A. Oppel Jr. that the decision made no sense. “These contracts contained absolutely unprecedented prices that were negotiated in an environment that was horribly tainted by epidemic market manipulation. And they are simply not entitled to be respected by the commission.”
That view is seconded by Robert Bryce in Pipe Dreams: Greed, Ego, and the Death of Enron. “The contracts were fraudulent,” he said in an interview.
Nor did the contracts pass the Department of Justice smell test. In early June, the feds indicted John Forney for allegedly designing the schemes that rigged the California power market. The same John Forney credited with devising Forney’s Perpetual Loop, which allegedly moved electrical current in a circle — and cash in a straight line from California to Texas.
In upholding the contracts, FERC Chair Patrick Wood III and Commissioner Nora Brownell ruled that the state of California failed to meet the high standard of proof that would justify releasing it from the high-dollar deals. That’s no surprise considering where these two commissioners came from. Pat Wood — a former Texas public-utilities commissioner who had worked with Enron for years — was Lay’s handpicked candidate for the commission.
Wood replaced Curtis Hebert as chair of the commission — and to know Hebert’s story is to know a lot about Bush’s Enron politics. In 2001, Lay had a widely reported “come to Jesus” talk with Hebert. According to Hebert, Lay told him that if he didn’t get behind the restructuring of the national energy grid into regional markets, Enron could no longer support him. (Evidently, Enron’s support was required to hold a position on the commission.)
Mind you, Hebert wasn’t a land-reform communist. He was a free-marketeer whom Clinton put on the commission at the urging of Mississippi Senator Trent Lott. It was Bush who named Hebert chair of the commission. Hebert — just like Bush, Cheney and Lay — opposed the temporary caps that would ultimately end soaring rates and rolling brownouts in California. Governor Gray Davis openly complained that Hebert was a slave to ideology. Senator Dianne Feinstein wanted Hebert’s head. “I think Hebert is a problem,” Feinstein said in March 2001. She suggested that a change of leadership on the board might be necessary.
But Hebert couldn’t meet Lay’s demands, and it was Lay who got Hebert’s head. Hebert got crossways with Lay on two basic issues. Hebert opposed organizing the national electricity grid into four large regional markets, which would have helped Enron. (He believed in free markets, but was a states’-rights conservative.) Hebert also was investigating the derivatives and long-term energy contracts that were keeping Enron awash in California ratepayers’ cash. Lay called Hebert and told him things had to change.
Shortly after hearing from Lay, Hebert was no longer chair of the commission. Ken Lay’s candidate, Pat Wood III, was anointed, appointed and named chairman. And Hebert resigned. (Lay met with Vice President Cheney at the time. Feinstein requested a private meeting with Cheney and was denied, in a letter that misspelled her name.)
But Lay wasn’t done. He handed Bush’s former director of personnel Clay Johnson III a list of potential nominees for another seat on the commission, then made numerous phone calls on behalf of Pennsylvania energy regulator Nora Brownell. He even leaned on Bush political strategist Karl Rove to move her nomination through the Senate.
In the end, Bush and Lay’s two FERC appointees had to abandon Lay for their own political survival. They finally changed their no-price-caps position and ended the utility-rate crisis in California. And that pulled the plug on Enron, which was surviving largely on the inflated revenues generated by its West Coast energy trading.
So how do Wood III and Brownell get away with kicking Enron’s corpse — when it no longer matters — while saddling the state of California with energy contracts based on rates Enron inflated three years ago?
Could it be the residual ideological wattage of a president who was a creation of Ken Lay & Co. in the first place? Six months ago, Wall Street Journal columnist Al Hunt did the numbers we’ve been doing in Texas for some time and concluded that Lay and company had $700,000 invested in Bush’s political career since he declared his candidacy for governor of Texas in 1993.
Like the municipal official in Milan Kundera’s The Unbearable Lightness of Being, Ken Lay has been airbrushed out of history’s official portrait. Pat Wood said he never sat down and drank a beer with him. Vice President Cheney went to court to keep his meetings with Lay out of the public record.
And Bush himself now suggests he hardly knew Lay, even while he has the audacity to take his own millions out of California, just as Lay did not so long ago.
Advertising disclosure: We may receive compensation for some of the links in our stories. Thank you for supporting LA Weekly and our advertisers.