Lawyer says he warned Enron officials

Memo points to 'deceptive' practices dealing with California's deregulated electricity markets

? Enron Corp.’s energy trading practices in California were deceptive and possibly illegal, a lawyer hired by the company to review its activities in the state said Wednesday.

In testimony before the Senate Commerce consumer affairs subcommittee, Stephen Hall said he told Enron officials of his concerns in a face-to-face meeting in December 2000.

Hall was one of the authors of a memo written just before the meeting that described how Enron’s strategies drove up power prices during the California energy crisis, which stretched into the first half of 2001.

Hall said his supervisor at the Stoel Rives law firm even edited his memo “to emphasize the deceptive nature of certain of these strategies.”

Richard Sanders, Enron’s assistant general counsel, told senators he quickly ordered the practices stopped even though he “was not confident that (Hall’s memo) completely or accurately described many aspects of the trading practices.”

Federal regulators released the memo last week and an additional Enron document in which other company lawyers questioned Hall’s description of the strategies. Those memos prompted hearings Wednesday by the subcommittee and the Senate Energy and Natural Resources Committee.

Hall’s memo said traders coined such colorful terms as “Death Star,” “Get Shorty,” “Fat Boy” and “Ricochet” for trading strategies that sought to maximize profits in California’s newly deregulated electricity markets.

Describing “Death Star,” Hall 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.”

Sen. Max Cleland, D-Ga., said the practices showed the company was “like a lion on the prowl for unsuspecting prey.”

California officials have said for 18 months that Enron and other energy companies took unfair advantage of California’s deregulation by manipulating power supplies to force prices to all-time highs. Wholesale power rates increased tenfold.