11/28/2005
Ask Why?
Today in History : 2001 - Enron, the largest US energy-trading concern collapses after its credit is downgraded to junk-bond status and its smaller rival, Dynegy Inc., backs out of a $9bn deal to buy the troubled company.
According to the Snohomish County Public Utility District, which obtained audiotapes of trader conversations from the Justice Department and transcribed them, traders openly discussed creating congestion on transmission lines, taking generating units offline to pump up electricity prices and overall manipulation of the California power market.
For example, in one transcript a trader asks about "all the money you guys stole from those poor grandmothers of California." To which the Enron trader responds, "Yeah, Grandma Millie, man. But she's the one who couldn't figure out how to (expletive) vote on the butterfly ballot."
Conversations that involve Forney, Belden and Richter appear throughout the transcripts. In one of those transcripts, a trader says to Richter, "So, uh, somebody's figured out how to set congestion?" Richter: "Well, we ... we can set it if we want. I mean, it's not a hard game to do ..." In another, an Enron trader identified as David discusses shutting down a steamer from a generating unit to increase prices.
"I was wondering, um, the demand out there is er ... there's not much, ah, demand for power at all and we're running kind of fat. Um, if you took down the steamer, how long would it take to get it back up? "Oh, it's not something you want to just be turning on and off every hour. Let's put it that way," another trader says. "If we shut it down, could you bring it back up in three — three or four hours, something like that?" David asks.
"Oh, yeah," the other trader says. "Well, why don't you just go ahead and shut her down, then, if that's OK," David says.
There's one for the "the best market is an unregulated market" crowd...
12:50 Posted in Bizness | Permalink | Comments (3) | Email this | Tags: South Africa
Comments
Re your unregulated market comment:
I am working as a consultant to the Hedge Fund/Credit Derivatives financial market in London. This is a trillion dollar unregulated market - some of which works well, however the activities they get up to are many times stunningly borderline (maybe not as bad as Enron). And as for the basic things - things like just keeping track of how much liabilities they hold - at times, this is simply held on an excel spreadsheet with incorrect data and/or formulas. Crazy stuff - and something they can only get away with being unregulated. I suspect after a few spectacular hedge fund blowups, regulation may become reality for this sector too - and depending on how strict the regulations are, it could very well be a good thing.
Posted by: Anon | 11/28/2005
I suppose because these transcribed tapes relate to Enron everybody is going to put the worst possible spin on them, especially those with an agenda. However, I'd like to draw your attention to another, possible way of reading these selected transcriptions.
The first comments appear to demonstrate that the people involved are actively boasting about defrauding people. I work in a largely male environment (SA mine) and comments in a similar vein are often made. We'll joke about ignoring safety rules (there's plenty of unemployed out there after all) or pumping tailings into a national park. The problem is not one of my colleagues or I would ever actually do these things, it's macho humour at its worst, but hardly evidence of criminal intent.
The second conversation appears to be about a technical issue. I work with these every day. If your purpose in life is to optimise an operation you need to look at what the drivers and possible hinderances are to that operation. I'd be very surprised if a half decent engineer, hired to reduce congestion, couldn't figure out how to increase it. However, knowledge of how to sabotage something is completely different to actually doing it. For the rcord, I could name three things I could do this morning to bugger up the operation of the mine on which I work but I have no intention of actually doing them.
And finally we get to the third piece of evidence. The spin put on the conversation is that these people want to cut supply to force up demand, but what if they are discussing a way to cut costs (something we are all expected to do out here in industry)? Having machinery working to no purpose wastes money. Could not these two be discussing how to save on their budgets?
So there you have it three different interpretations of the conversations above. One example of (sick) humour and two examples of engineers actually doing their jobs. Now, I don't know the details of the Enron saga and maybe this is evidence of malpractice. What I do know is that it is very easy to take transcribed conversations and put whatever spin one wishes to the words. Without the rest of the conversation and its tone one has to rely on the selected words alone and that is most definately not the whole picture.
As a final thought, how many of your telephone conversations could be taped, transcribed and selectively published for use as evidence against you? I suspect, that like all of us, the number is quite a few.
The Remittance Man
Posted by: The Remittance Man | 11/29/2005
Interesting observations Remittance Man and I can see where you're coming from. However, if you checkout the doccie, you will see that these tapes leave little to the imagination - these punks were deliberately fraudulently interdicting supply in order to create spikes in demand and hence prices.
You are right on the ego part though, throughout the doccie they stress this was an essential element in Enron's rise and fall.
Posted by: someamoungus | 12/02/2005
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