How Enron Did Texas | The Nation


How Enron Did Texas

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Meanwhile, a second PUC commissioner, Brett Perlman, has come under fire for previously undisclosed Enron connections. Appointed by Bush in 1999, Perlman worked until 1998 for McKinsey & Company, the consultants who helped Enron evolve from a pipeline company to a global energy trading firm. According to documents obtained by the Fort Worth Star-Telegram, Perlman described his work there as "assisting the leading US natural gas and electricity trader in developing an industrywide online electricity trading system."

Research support provided by the Investigative Fund of the Nation Institute. An adapted version of this article is being published in the Texas Observer.

About the Author

Nate Blakeslee
Nate Blakeslee is an editor at the Texas Observer.

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In just as deep with Enron is Texas Attorney General John Cornyn. Despite having accepted $193,000 from the company and its executives, Cornyn at first declined to recuse himself from the state's investigation of the Enron collapse. "This is not the time for him to recuse himself from his duty," his spokesperson told reporters shortly after Enron declared bankruptcy. One day later Cornyn changed course, announcing that he would form a task force within his office to determine the state's strategy and that he would take no part in the investigation. (Cornyn's announcement accompanied a cascade of recusals by Texas officials, including the US Attorney in Houston and several federal judges in the Houston area, all of whom cited conflicts of interest.)

Compared with the effort launched by other states, Texas's investigation of Enron has been noticeably lethargic. In Florida, for example, where public pension funds lost $334 million on Enron investments, the Attorney General began issuing subpoenas shortly after the bankruptcy was announced. Florida is now jockeying with California, New York and several other large states to become the lead plaintiff in a class-action suit to be heard in federal court in Houston. Texas, which has lost more than $60 million in public pension funds, somewhat belatedly announced it would join the suit.

"What [Cornyn] ought to be doing is taking matters before a grand jury in Houston," said former Attorney General Jim Mattox, a Democrat. The AG also has the power to seize corporate records and review them for evidence of illegal activity. Mattox said he would have gone after both Enron and Arthur Andersen's books immediately. "There's no doubt that the state should have a major role in the investigation, but I don't think that's happening," he said. "It raises the greater question of how campaign contributions affect policy," Public Citizen's Tom Smith said. "If the Attorney General is acknowledging this as an issue, then you have to question how others can say it doesn't affect their decision-making."

Among those decision-makers is Chief Justice Tom Phillips of the Texas Supreme Court. Phillips recently told reporters that he would not be returning the $12,250 he took from the company, because to do so would imply that there was something wrong about taking the money in the first place. (In fairness, Phillips is on record calling for judicial campaign reform.) Together, seven justices on the court have taken $134,058 from Enron. One of those justices, Priscilla Owen (down for $8,600), has seen Enron connections threaten her appointment to the US Court of Appeals for the Fifth Circuit. Members of the Senate Judiciary Committee, some of whom were already opposed to the conservative Owen, have indicated that she will have to answer some tough questions.

Enron has also funneled thousands of dollars to Texas Supreme Court justices and other GOP officials through a special-interest PAC called Texans for Lawsuit Reform, of which Ken Lay has been a major funder. A handful of deep-pocketed Republicans have made the group, one of several seeking to limit access by plaintiffs to Texas courts (under the rubric of tort reform), the largest PAC in Texas in recent years. TLR and its members have been John Cornyn's single largest career contributor, pitching in a staggering $1.98 million over the past five years. Nowhere has TLR's influence been greater than on the Supreme Court, which has gradually shifted from being generally considered pro-plaintiff to what is now considered one of the most staunchly pro-defendant courts in America. According to a report by the campaign finance watchdog Texans for Public Justice, Enron has fared unusually well before the court, which has accepted two of three petitions brought by the company (both of which Enron eventually won) and rejected all three petitions brought against Enron by adversaries.

Last spring Texas politicians and ratepayers watched nervously as California's deregulation experiment imploded and Texas's own countdown to competition wound down. A series of mysterious price spikes in a pilot program last summer sent state regulators scrambling to determine if anyone might be gaming the system. The findings were inconclusive, and it's too soon to tell how competition will play out. "I think we're going to have to come back to the legislature to make the whole process more transparent," said Public Citizen's Tom Smith.

"In the old vocabulary of politics there used to be an element of populism that was conservative," said Bill White, a Houston businessman and longtime Democratic Party funder. "Before they would make a dramatic change in the way people got electricity, people would take it slow and careful." That was not the Enron way. "Their executives, with their high-profile civic and political activities--part of what it did was, it gave them this aura, sort of 'These people are the new establishment, and these are smart people who play their cards well,'" he said. "And it turned out they were spending money they didn't have."

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