The Skinny: June 17, 2004

GUTSY COMMISSIONERS I: High praise for the staff and commissioners of the Port of Bellingham for slapping awake Georgia-Pacific Corporate in Atlanta.

Last month’s condemnation proceeding against G-P’s 38-acre wastewater treatment lagoon, timed to stop the clock on a state Department of Ecology plan for Bellingham Bay, itself started a clock that told Atlanta this town—or its Port Authority anyway—means business down on the waterfront.

The Port declared its intention to purchase the entire 137 acres of G-P’s waterfront holdings plus an additional 100 acres of timbered land in the county. Local G-P officials seemed relieved to see it go.

The purchase price, as suggested in this column some weeks ago, is exactly $0. The Port’s cleanup will buy the site.

The Port has 120 days after its announcement of intent to purchase in which to do due diligence on the site and determine levels of contamination there. Environmental groups should be standing near as the sunshine pours in on the fullest disclosure yet of how contaminated certain sections of the G-P site may be.

“The challenge is to ensure that the cost of environmental cleanup does not exceed the value of the land,” Port Commissioner Scott Walker said, describing how the next four months will help his agency assay the extent of those costs. “We hope—and have a strong suspicion, or else we would not be doing this—that the value will exceed the cost. But if it turns out the value is equal to the cost and the Port makes no money at all, then I think we will have still fulfilled our role on behalf of the public,” Walker said.

Clearly, out of 137 acres of industrial land, some of it will be useful for future purposes.

The deal marks what is perhaps the most excellent outcome, as a public agency takes control of a parcel of land the community has strongly voiced needs public access. The Port said it will clean and manage the land in partnership (the agency hopes) with the City and County, public involvement, and private development interests.

The Port’s action last month got the attention of Atlanta, which folded the highly sought lagoon into the deal. In return, the Port agreed to stall any further legal actions designed to acquire the lagoon for a marina. Ecology in turn has agreed to stall any near term plans for a bay cleanup absent negotiations with and approval from local agencies.

For G-P, the rest of the story involves how long tissue mill operations will continue in Bellingham once the ink on the final agreement dries. Financially challenged, a shadow of its former self, the mill is given—at most—three more years of life by most analysts. Less, the Skinny thinks, as deeds change hands and liabilities are capped. The reasons—as they were last time—will be economic realities rather than political fancies.

GUTSY COMMISSIONERS II: The final stages of a hard arc for aging industry, G-P’s pulp and chemical operations here halted forever in 2001 after suffering a year of private lawsuits, citizen protests, and instabilities in markets worldwide. The catalyst for all was the faux energy crisis of 2000-01 as power prices rocketed beyond the industry’s capacity to bear.

That story got a kick last week as victims who suffered wrack-&-ruin at the hands of energy deregulation fought back.

Imagine your front door kicked in by a gang of ruthless crooks dressed as utility workers. They enter and strip the place while they joyously strangle each member of your family; some family members die, others are driven into a coma. Later on, in recovery, you find yourself sued by these unconvicted felons because you violated their contract. The cops, it turns out, are their close personal friends and—in any case—their pal the President of the United States doesn’t consider murder a crime.

That’s the story of Enron, who bilked the West Coast for at least $1.1 billion, in the process wrecking or crippling family wage industries. Three such industries were shuttered in Whatcom County—G-P is gone as an industrial player; Intalco may yet die.

Now in bankruptcy, Enron is suing utilities throughout the region for more than $500 million the company claims it is owed for contracts that were broken after utilities discovered the fraud.

Taking the lead in the fight, the Snohomish County Public Utility District is defending itself against Enron’s $122 million lawsuit. The PUD commissioners say their contract was void after Enron engaged in fraudulent business practices to drive up the cost of energy during 2000-01.

U.S. Senator Maria Cantwell (D-Wash) stepped up to directly assist by twisting loose hundreds of internal documents and hours of audiotapes that detail the fraud. She twisted them from the hands of the U.S. Justice Department and the Federal Energy Regulatory Commission.

Cantwell and the PUD unveiled these marvelously profane transcripts of Enron traders gleefully joking about stripping money from “poor grandmothers” through a series of con games dubbed “congestion,” “sidewinder,” “ping pong,” “donkey punch,” “spread play” and “Russian roulette.” The utility on Monday released an additional 750 pages of financial documents dated from January 2000 to mid-June 2001 that show Enron continuously manipulated the market on 473 of the 537 days during that period.

In one example of a “ricochet” scheme, Enron made $222,678 in a three-hour period by shipping power from California to Oregon, masking the original source of the power, and then selling it back to California for $750 per megawatt hour.

An Enron employee says, “If the line’s not congested I just look to congest it.... If you can congest it, that’s a moneymaker no matter what.”

On another tape, an Enron vice president advised a company attorney to make negotiations with Snohomish “sound like we’re in a competitive process… or some shit like that, you know… It’s all how well you can weave these lies together.” The lawyer laughed, “I feel like I’m being corrupted now.” “No,” the executive replied, “this is marketing.”

According to Dr Carl Pechman, who analyzed and transcribed the tapes, Enron showed a willful pattern of fraud; reckless disregard for the harm its trading practices caused consumers; concealed information from regulatory review; and advocated market designs (deregulation) designed to enable Enron to play games with the Western power market.

“Not only were traders in Portland well aware of Enron’s games, the recordings show that high level executives at Enron’s Houston headquarters—such as Ken Lay and Jeff Skilling—were kept apprised of Enron’s trading strategies and the profits reaped by traders,” Pechman says. Documents also show that Enron maintained five separate sets of accounting records to conceal its robbery.

Lay and Skilling, meanwhile, were scuffing up Lincoln’s desk in the Oval Office with their shinola-stained cowboy boots along with their frathouse buddy the President as they schemed on how best to institutionalize their fraud into the nation’s energy plan. Enron Chairman and CEO Lay wrote pal Vice President Dick Cheney a memo offering recommendations on “the kind of individuals we think you should be looking for” to head the proposed plan.

Similar“individuals” were caught hee-hawing on videotape, congratulating one another on how they “fucked California.” Still others reveled in the “poor grandmothers” who had exorbitant power rates “jammed right up (their) ass.”

“Burn, baby, burn. That’s a beautiful thing,” one inside trader cheered as he watched wildfires destroy a Southern California power plant, which meant supply would diminish and prices could rise.

None of these villains has yet to be indicted. With the help of the Justice Department, FERC buried the evidence.

On the warpath, Cantwell used her knowledge of existing evidence to demand a new investigation. Cantwell castigated the FERC for not obtaining the accounting records and tape transcripts itself and then for obstructing Snohomish’s attempts to get the information.

“The criminals at Enron who stole from us should be locked up, not the audio tapes which provide evidence of their crimes,” Cantwell raged. “You have to ask yourself, what has FERC been doing with all this evidence of illegal activity? Whose side is FERC really on?”

Not on the public’s, according to a recent Congressional report on the commission.
“FERC’s experience with Enron demonstrates the agency is no match for the sophisticated, competitive, profit-driven companies it regulates,” the report concluded. “FERC must do far more to be vigilant, to incorporate an aggressive enforcement ethic into its everyday work, [and] to effectively coordinate with other agencies,” the report said of the federal oversight agency that recently claimed sole jurisdiction over ramming yet another gas pipeline (GSX) through northern Whatcom and San Juan Counties.