TRANSCRIPT OF DEPUTY ATTORNEY GENERAL LARRY THOMPSON
NEWS CONFERENCE REGARDING THE ENRON INVESTIGATION
THURSDAY, OCTOBER 17, 2002
MR. THOMPSON: Good afternoon. I'm here with Corporate Fraud Task Force members Kevin Ryan, who is the United States attorney for the Northern District of Georgia (sic), Assistant Attorney General Michael Chertoff, Commodities Future Trading Commission Chairman James Newsome, Federal Energy Regulatory Commission Chairman Patrick Wood. And I believe we have Leslie Caldwell, the head of our Enron Task Force, and Assistant United States Attorney Patrick Robbins, from the Northern District of California.
We're here to announce that the former chief of Enron's California energy trading operation, Timothy Belden, has been charged in an information with conspiring to submit false information to the California power authorities that fraudulently benefitted Enron at the expense of energy customers. Belden will appear before U.S. District Judge Martin Jenkins at noon, Pacific Time, to offer his plea, pursuant to his agreement with the Department of Justice.
Today's charges demonstrate our significant progress on the energy trading front in this investigation. And it's remarkable. In the course of only four months, the department has achieved today's charges against a central actor in the Enron energy trading scheme.
The information charges Belden with conspiracy to commit wire fraud. That conspiracy ran from 1997 to 2001, while Belden was first director of Enron's California energy trading desk, and then vice president and managing director in charge of Enron's West Power Trading Division. In that position, Belden oversaw Enron's marketing and supply of electricity to wholesale energy customers and consumers throughout the western United States.
The conspiracy charged in the information was aimed at exploiting the changes in California's wholesale energy market that followed its restructuring in 1996. Those changes created statewide power authorities intended to manage a free marketplace for California's energy supply. And as a transition measure, California put price caps on energy produced within the state and paid fees to electricity generators and marketers, such as Enron, for eliminating congestion on California's power grid. And when California's energy market fell into a crisis in 2000, the power authorities were forced to turn to out-of-state suppliers, including Enron, to purchase additional electricity.
The information charges that Belden and others conspired to defraud California electricity consumers and customers through a variety of schemes designed to artificially increase payments from the California power manager to Enron. As charged in the information, Belden and his co-conspirators took advantage of California's system by submitting false schedules and bid and other information that made it appear that certain parts of the energy grid were congested -- when in fact they were not -- and then took payment for relieving that congestion.
The information further charges that Belden and his co- conspirators exploited California's pricing rules to falsely represent electricity generated within California as more expensive than out-of- state energy.These schemes charged also include misrepresenting the nature and amount of the energy that Enron proposed to supply. And while Enron benefited from the overall rise in electricity prices, the information charges that a portion of these increased revenues was due to the execution of the schemes charged in the information. This conspiracy charged in this information allowed Enron to exploit and intensify the California energy crisis and prey on energy consumers at their most vulnerable moment.
Now, in addition to the agreement to plead guilty, Belden also agreed to forfeit $2.1 million in compensation from Enron and agreed to cooperate with the investigations into this matter by the department as well as those undertaken by our Corporate Fraud Task Force members, the Commodities Futures Trading Commission and the Federal Energy Regulatory Commission. And I might add that the department's investigation into this matter is active and is ongoing.
I want to commend United States Attorney Kevin Ryan and Assistant United States Attorney Patrick Robbins of the Northern District of California for their outstanding work in this case. I also would like to thank Assistant Attorney General Michael Chertoff of the Criminal Division, FBI Deputy Director Bruce Gebhardt, and the head of our Enron Task Force, Leslie Caldwell, and really the entire task force for their work on this matter to date, including attorneys with the Justice Department's Antitrust Division, and specifically, even though I have thanked the FBI generally, specifically the FBI agents in San Francisco for the great work that they did on this case.
I also want to extend the thanks of the entire Department of Justice to our colleagues in the Corporate Fraud Task Force, our colleagues at the CFTC and FERC, for their great cooperation and their successful efforts in this investigation.
Deputy Director Gebhardt of the FBI will have a few comments, after which I will try to answer any questions that you may have.
Bruce?
MR. GEBHARDT: Thank you, Mr. Thompson. Thanks for complimenting the FBI in San Francisco, since I used to be the SAC in San Francisco. They learned it all from me.
White-collar crime has a devastating impact on both the economy and the individual victims. The FBI's corporate fraud initiative targets individuals or businesses who commit crimes such as illegally manipulating securities and commodities markets to reap profits. We are committed in the FBI to dedicating whatever resources are necessary to investigate conspiracies such as this one, which involved -- this particular one, which involved the manipulation of the California energy market. While the FBI has redirected its mission to concentrate on the prevention of terrorism, our efforts are unwavering in the investigation of schemes that prey upon innocent individuals, communities and, in this case, an entire state.
Today's plea agreement only illustrates the FBI's commitment to the timely investigation of fraudulent schemes that adversely impact our economy and the investing public. This is by no means the end as we continue to work on all facets of the Enron investigation.
I would like to recognize our partners, the United States Attorneys Office, Northern District of California; the Federal Energy Regulatory Commission, and the Commodities Future Trading Commission for their outstanding contributions to this case, which was truly a partnership.
Again, I would like to stress that the investigation of white- collar crime remains a high priority within the FBI and we will continue to dedicate whatever resources are needed to ensure that the people are not victimized by these types of fraudulent schemes.
Thank you, Larry.
MR. THOMPSON: Thank you, Bruce.
Questions?
Yes, sir?
Q Does this guilty plea today support California's claim that its state's citizens were overcharged billions of dollars for electricity by Enron and other energy firms and should get a refund?
MR. THOMPSON: With respect to the issue of the refund, that's in the matter -- that's in the hands of the Federal Energy Regulatory Commission.
And, Patrick, if you have any comments on this after I complete the answer to this gentleman's question.
I think, as you know our practices, we have to let the charges, the allegations and the information stand on their own. And it would be improper, inappropriate for me to comment at all
beyond what's in the information.
To the extent that your question may have any bearing on regulatory matters, I'll turn it over to Patrick. If you have any comment or if you –
MR. WOOD: I think my only comment, Larry, is that it's a pending case before our commission that is being adjudicated as we speak, and these issues have been raised in that proceeding.
Q But is this -- but the guilty plea says that Enron manipulated California's power markets and caused prices to rise. California says we want the money back because we think they caused our prices to rise.
Doesn't this support their claim? I'm not saying you're going to give them -- and order their refund, but doesn't this seem to support their allegation?
MR. THOMPSON: Without getting into a FERC matter, what he is saying is that it's a pending regulatory matter within a regulatory commission, and I think it would be improper to go beyond what we have said while that matter is pending.
Yes?
Q Yes. The information here mentions other executives, other officials at Enron. Is there any indication that Mr. Belden was dealing with people that are higher up than him at Enron?
MR. THOMPSON: Mr. Belden is cooperating. And as I said, the investigation is active and ongoing.
Beverly?
Q Sort of a corollary, I guess, to her question. Will Mr. Belden's cooperation extend beyond the purely California situation into other aspects of your Enron investigation?
MR. THOMPSON: Well, he's cooperating in the investigation. And -- I think that's all I had better say at this point. He's cooperating in the Enron investigation.
Yes.
Q Mr. Thompson, you identify the situation falling into crisis in 2000, but the
conspiracies existed before that. Can you -- I mean, it seems like they took advantage of the crisis. But you said that the behavior he engaged in predated the crisis.
MR. THOMPSON: Well, I'm not going to comment beyond what's in the information, although if you will read the information, the information describes in some detail the California power situation and the change in the regulatory and administrative structure out there. But beyond what's in the information, I'm not going to comment on it.
Yes, sir. Right here.
Q Are you expecting further indictments or charges in this -- connection with this? Because there were trading partners. And in particular, are you looking at Portland General Electric and Avista, who have been widely reported as partners of Enron in some of these transactions?
MR. THOMPSON: I can't comment beyond what's in the information. Mr. Belden is cooperating, and the Enron investigation is ongoing.
Yes, ma'am, in the back.
Q A follow-up to that. Will his plea today implicate any co- conspirators by name, or any other companies?
MR. THOMPSON: The information makes reference to the fact that it's alleged that he conspired with – there were other co- conspirators. And beyond that, I think it would be improper to comment.
Yes, sir.
Q You said a portion of their profits were due to this scheme. Could you give us a better idea of what portion are we talking about here?
MR. THOMPSON: I'm not in a position to do that. The information does describe the fact that the – Enron's revenues increased from, I believe, $50 million to approximately $800 million at some point in time. But beyond that, I don't think we should comment.
Q So are we -- are we attributing the bulk of that to this scheme?
MR. THOMPSON: I can't comment beyond what's in the information.
Yes, sir, in the back.
Q What role did the Enron memos released by FERC earlier this spring play in getting Mr. Belden to reach this --
MR. THOMPSON: I can't comment on any specific evidence that we have used in the investigation.
Yes, sir.
Q Mr. Belden worked for UBS Warburg. Was he still an energy trader when he worked for Warburg, and do you know what period of time he worked for that company? When he left Enron?
MR. THOMPSON: I don't know, and I think it would be inappropriate for me to comment about specific evidence or specific information beyond the pleading that was unsealed in court today.
Q A follow-up question, sir?
MR. THOMPSON: Yes, sir.
Q Is the grand jury investigating any sort of market manipulation beyond California, such as Oregon or Arizona?
MR. THOMPSON: Now, you KNOW it would be improper for me to comment -- (light laughter) -- tocomment on grand jury investigations. (Laughs.)
Yes, sir.
Q What sort of sentencing recommendation are you likely to make in this case?
MR. THOMPSON: There is a plea agreement. And I think it would be appropriate for me to ask the U.S. Attorney for the Northern District of California to talk specifically about the plea agreement.
Kevin?
MR. RYAN: Thank you, Larry.
Well, under the terms of the plea agreement, he faces up to five years in prison, a fine of $250,000. He's forfeited $2.1 million, and he is liable under the terms of this agreement for restitution in total amount of losses that were incurred during the time that he was involved in this criminal activity. Obviously, it's up to the judge to sentence the individual at the conclusion of the case. And also, part of the sentence will be dependent upon the level of his cooperation with the ongoing investigation.
MR. THOMPSON: Yes?
Q Larry, while these matters and other activities were allegedly going on at Enron, Enron executives were contributing large amounts of money to a political party and politicians whom I won't mention. Is the task force examining these payments and Enron's access to the energy policy-making apparatus of this country?
MR. THOMPSON: For lots of reasons -- and I think you would understand -- it would be inappropriate for us to comment on the direction of the investigation. I think the best thing to say here is that the investigation is active, it's ongoing, and the investigation seeks to uncover all inappropriate and criminal conduct that was involved by Enron and Enron employees.
Q But there's no thought to any special counsel investigation or a sealed special counsel investigation -- (off mike) -- that you can talk about?
MR. THOMPSON: I don't think that that is necessary.
And with respect to the active and ongoing investigation, no rock is going to be not turned over. We have professional and career agents and prosecutors who are involved in his matter who are fully capable of investigating and ferreting out all the wrongdoing that occurred by Enron and its employees. And I have complete confidence in their professionalism, their talent and their ability to undertake the investigation in a completely thorough and ethical manner.
Yes?
Q You have a strong case against Mr. Belden. Why not indict the company itself at this stage? Can you do that?
MR. THOMPSON: This was the appropriate charges to announce and bring at this point in time. And the investigation is active and ongoing.
Q Was Mr. Belden the prime actor in these fraudulent schemes?
MR. THOMPSON: As the information suggests, he was a significant participant in the scheme that's outlined in the information. The information suggests that he conspired with others, and beyond that, I think it would be inappropriate for me to comment on.
Yes?
Q He was charged and pleaded guilty to one count of conspiracy to commit wire fraud. Does that one count consist of the series of things that are then delineated? Was the conspiracy those several different schemes?
MR. THOMPSON: Those -- yeah, those were various parts and acts within the conspiracy that's charged in the information.
Stephanie?
Q Given the vast amount of federal resources, if I can change the subject now to the sniper case,
devoted to the hunt for the sniper, what progress can you report? And also if Mr. Gebhardt would talk about the efforts to find the sniper and whether there have been recent set-backs.MR. THOMPSON: Well, as you know, there -- all law enforcement is doing everything that it possibly can to identify this person and bring this person to justice. I was told and understand that there were over – there were over a thousand law enforcement agents from federal, state and local agencies who are working on the case. I know from the standpoint of the federal government, there is a significant number of FBI agents, ATF agents, Park Police, Secret Service agents, and they are working very hard and working in a very intense manner to identify this -- this perpetrator. We certainly express our sympathy to all the victims of this horrible -- these horrible incidents. But I can assure you that we are doing everything we possibly can to identify the person who is responsible for these horrible and evil acts.
Bruce, do you want to add anything to what I just said?
MR. GEBHARDT: It's a round-the-clock operation.
MR. THOMPSON: It's a very, very intense and active operation.
Yes, sir.
Q Getting back on Enron for a moment, Mr. Belden's guilty plea, do you consider this a major breakthrough in the government's investigation of the manipulation of the western energy markets that could lead to other individuals and firms who may have taken part in this manipulation?
MR. THOMPSON: I consider this a significant development, especially in the time period that we have been investigating this matter. And as I said, he is cooperating with our investigators, and the investigation is active an ongoing.
Yes, sir.
Q Back to the sniper if I could for just a second, I'm wondering if Mr. Gebhardt could address why the FBI would be interested in sending investigators down to Guantanamo Bay.
MR. THOMPSON: I don't think we should comment on where the FBI has deployed its resources.
Yes, ma'am.
Q If I could ask a question about -- going back to Mr. Belden, it said that -- in the paper -- that Enron committed -- that Enron was able to commit the wire fraud through an account at Bank of America in San Francisco. Can you elaborate at all on how you worked with them, what kind of records they've turned over to you?
MR. THOMPSON: I cannot elaborate on any specific bit of evidence beyond what's --
STAFF: Last question.
MR. THOMPSON: -- beyond what's in the information.
Yes, sir.
Q Yeah, back on energy for a moment. There's another case at the FERC that involves El Paso Natural Gas in which a ALJ has found that the California gas market was manipulated. Is your department taking a look at that case also?
MR. THOMPSON: Is the Department of Justice?
Q Yes.
MR. THOMPSON: I can't comment on any particular matter -- any particular case that's under investigation, and you shouldn't take that comment to mean anything but the fact that I can't comment.
(Laughter.)Thank you.
END.