Lockyer’s Goal Is to Make Them Pay

After two years of digging into whether Californians were scammed by energy companies, after more than 110 legal actions launched in courts and before federal regulators, California Atty. Gen. Bill Lockyer has not produced the headline-grabbing criminal conviction that federal prosecutors have obtained.

But Lockyer can point to something that he says is even more gratifying: a tidy pile of money.

The state of California has settled several civil lawsuits against energy suppliers for nearly $450 million in cash, assets and other concessions. And it has used litigation as a weapon to persuade electricity suppliers to renegotiate costly long-term power contracts with the state.

The lawsuits were generated by Lockyer’s Energy Task Force, which was created in 2000 with a budget of $3.5 million. (That has since grown to $9.1 million.)

“We’re mainly focused on getting the money back,” Lockyer said. “If you just were to look at return on investment, $3.5 million to result in a recovery of more than $400 million is pretty good.”

Lockyer, a Democrat, likes to talk tough -- at times drawing criticism for his unrestrained comments. For example, last year he lashed out at former Enron Corp. Chairman Kenneth L. Lay, saying, “I would love to personally escort Lay to an 8-by-10 cell that he could share with a tattooed dude who says, ‘Hi, my name is Spike, honey.’ ”

He still calls the state’s major electricity and natural gas suppliers “the four horsemen of the energy apocalypse,” though their number extends far beyond four to include AES Corp., Duke Energy Corp., Dynegy Inc., El Paso Corp., Mirant Corp., NRG Energy Inc., Reliant Resources Inc. and Williams Cos. as well as Enron. The companies have vigorously defended their behavior during California’s energy crisis.

In a proceeding before the Federal Energy Regulatory Commission, California contends that the state was overcharged by nearly $9 billion for electricity in 2000 and 2001. FERC, which acts as a sort of national utility commission, has limited the time period and the type of suppliers from which refunds might be wrung, leaving state officials to estimate a potential recovery of $1 billion to $2 billion.

Lockyer describes the pace of the state’s twin civil and criminal investigations as “frustratingly slow.”

He ran into early resistance, for instance, in his efforts to subpoena documents from Enron, the world’s largest energy trader before it collapsed into bankruptcy protection. It took a year to get Enron to comply, and then Lockyer suddenly found himself facing an opposite problem: an excess of material to sort through.

Indeed, the disgorgement was so complete that investigators have been left pawing through old pizza boxes, along with important lawyer notes and other documents.

The task force’s offices in Sacramento, San Francisco and Oakland still are crammed with more than 400 boxes of documents and more than 400 computer disks, each equivalent to at least six boxes of paper data, said Lockyer spokesman Tom Dresslar.

The investigation is being led by a veteran of Lockyer’s office, Senior Assistant Atty. Gen. Thomas Greene, who until recently headed a team pressing the state’s antitrust case against software giant Microsoft Corp. Greene is being assisted in the energy probe by 16 lawyers, five analysts, one auditor and 13 legal secretaries.

The digging has paid off.

After federal regulators released two memos in May from Enron lawyers describing questionable trading schemes in California, with names such as Death Star and Fat Boy, Lockyer quickly followed with his own explosive disclosure of Enron documents.

Among them: working notes from meetings in October 2000 in which Enron traders educated their lawyers about the trading strategies that the company was using in California to boost profits. The notes contained tantalizing fragments of conversations such as “schemes=$10m total.”

Enron’s trading tactics, documents show, included playing markets off each other, creating phony congestion on electricity transmission lines and submitting inflated estimates of electricity needs, only to cut those requests at the last minute.

Lockyer has used the documents to bolster the state’s case for electricity refunds.

And then there are the settlements. The largest came in late October from Williams Cos., which Lockyer valued at $425 million. Settlements with Calpine Corp. and Constellation Energy Group Inc. brought in $17.75 million, he said.

Although California is pursuing a criminal investigation, Lockyer said his approach differs from that of federal prosecutors, who like to zero in on individuals and get them to implicate others.

“We want to know how all the pieces fit together before we take action,” Lockyer said.

At this point, Lockyer said, he is happy to let federal prosecutors bring the criminal charges, as they have against former Enron energy trader Timothy Belden, who recently pleaded guilty to conspiracy to commit wire fraud.

“If the feds really do that, that’s fine with me,” Lockyer said. “We think the more serious problem is the billions that were drained out of the state and the lack of investor confidence in California.”