where are SKILLING and LAY?
Third top Enron executive arrested
A former top trader at failed energy giant Enron has been arrested over charges that he helped manipulate California's energy market, which three years ago saw the state suffer rolling black-outs.
At the time John Forney was the head of Enron's "real-time" power-trading operations in the west of the USA.
Mr Forney is accused of being the architect of illegal trading schemes that drove up electricity prices by circumventing price caps and caused energy shortages across California.
"Our investigation of illegal activities during the energy crisis is active and continuing and remains one of this office's and the Justice Department's top priorities", said Kevin Ryan, US Attorney for the Northern Distric of California.
Enron collapsed in autumn 2001 after the company was forced to admit that it vastly overstated the value of its assets and profits and hid billions of dollars of debt.
California crisis
Mr Forney's arrest, however, is not linked to the practices which led to the downfall of Enron.
But it strengthens the case of those who argue that California's energy crisis of the years 1999 to 2001 was not caused by flawed regulation of the state's electricity market, but by outright market manipulation.
"While California consumers were suffering through blackouts... Enron was manipulating western energy markets for profit through illegal, fraudulent means," Mr Ryan said.
Mr Forney is alleged to have invented a scheme known as "ping pong", which saw cheap energy exported out of California and then re-imported at a much higher price, thus circumventing federal price caps on California energy.
Another scheme, dubbed "Death Star" by Enron traders, exploited weaknesses in California's energy management system.
Experts estimate that the energy crisis cost the state of California about $42bn.
Mr Forney is the third Enron trader arrested in connection with the Californian energy crisis.
In October 2002 and February this year, former Enron executives Timothy Belden and Jeffrey Richter pleaded guilty to conspiracy to commit wire fraud in connection with Enron's trading schemes.
Mr Forney himself is now working for American Electric Power in Columbus, Ohio. In a statement, the company said the arrest was related solely to Mr Forney's activities at Enron.
The Enron collapse
Enron's downfall came after rumours had shattered market confidence for many weeks.
In October 2001 the company finally owned up to its corporate failings and admitted that both its profits and its asset values had been hugely inflated. In December Enron was declared bankrupt.
During the following months investigators began to untangle a web of accounting tricks, phantom profits, tax evasion and dubious corporate practices.
As Enron came tumbling down, so did its auditor Andersen, which fell apart around the world amid allegations of helping Enron devise dubious accounting schemes.
So far, the investigation into Enron's accounting tricks has not yielded a single conviction.
Former chief financial officer Andrew Fastow has been indicted on 78 charges of money laundering, fraud, conspiracy and obstruction of justice.
But neither former chief executive Jeffrey Skilling nor Enron chairman Kenneth Lay, Mr Fastow's immediate superiors, have yet been charged.
The company itself, meanwhile, is being "restructured" and says it hopes to emerge from bankruptcy as a "viable, albeit smaller company".
Story from BBC NEWS:
news.bbc.co.uk
Published: 2003/06/03 19:26:18 GMT |
