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The Honolulu Advertiser

Posted on: Friday, August 6, 2004

Guilty plea by ex-Enron official

By David Kravets
Associated Press

SAN FRANCISCO — A former Enron Corp. trading executive pleaded guilty yesterday to charges he manipulated energy markets during California's power crisis in 2001. He also promised to assist the state and other public utilities in their lawsuits seeking to recoup billions from the energy industry.

John Forney, 42, of Ohio, is the third Enron official to plead guilty to manipulating electricity prices from Enron's now-defunct trading office in Portland, Ore. The crisis played a role in Pacific Gas & Electric Co.'s bankruptcy and will leave California consumers paying abnormally high electricity prices for years.

Forney faces a maximum of five years. He remains free on $500,000 bail. A sentencing date has not been set.

"We have now obtained convictions of the top three Enron executives most directly responsible for manipulating the energy markets in California at a time unique in our history, when the lights were going off and the grid was in danger of shutting down," U.S. Attorney Kevin Ryan said.

Ryan said Forney is expected to cooperate with the ongoing investigation into Texas-based Enron, as well as reveal details about how other energy firms may have played a role. Four employees of Reliant Corp. have been charged with deliberately shutting down power plants to increase the price of California electricity. California Attorney General Bill Lockyer is suing dozens of energy companies seeking billions in refunds.

Forney's attorney, Edwin Prater, said of the guilty plea: "It was a good opportunity for John and his family at this time to certainly right the wrong he had a part in and for them to move on with their lives."

A federal grand jury in San Francisco had charged Forney with 11 counts and, through a plea agreement, he admitted to one count in exchange for the government's dropping the others. As part of the deal, Forney must assist California and other public agencies in their lawsuits.

Any bonuses Forney earned from Enron as part of its illegal activity were reinvested in the company and lost when Enron declared bankruptcy, Prater said.

Former Enron executives Timothy N. Belden and Jeffrey S. Richter have pleaded guilty and cooperated with the FBI. Belden was expected to testify against Forney at his trial, which had been scheduled for later this year.

Forney, the manager of Enron's trading desk, pleaded guilty to one count of wire fraud — specifically, that he promised to supply energy Enron did not have and that he improperly collected electrical grid management fees for Enron.

Enron's scheme to charge fees for services it did not provide was known inside the company as "Forney's Perpetual Loop," the indictment said.

Forney took part in other schemes — known within Enron as "Death Star," "Get Shorty," "Ricochet" and others — that had the effect of inflating consumer prices.

Prosecutors also said Forney devised a scheme that involved buying energy from California and later selling it back to the state at inflated prices, making it appear that the energy was generated elsewhere.