Posted on 11/16/2005 9:18:54 AM PST by NormsRevenge
SAN DIEGO - At a critical point in Sempra Energy's $23 billion antitrust trial, California Attorney General Bill Lockyer's office threatened to file a separate lawsuit intended to leverage a settlement that would mean tens of millions of dollars in fees for Lockyer's longtime political ally and friend Tom Girardi and others on the legal team, lawyers and sources close to the case said.
Girardi, his Los Angeles law firm Girardi & Keese and its employees contributed more than $260,000 to Lockyer's political campaign between 2001 and 2004 and gave him gifts, including plane trips, sports tickets and $325 in cuff links, according to state documents.
Even as the class-action case against Sempra, which owns the Southern California Gas Co., is being tried in San Diego, Girardi is the key figure in parallel high-stakes mediation talks in which the state stands to gain long-sought concessions that could be worth about $1 billion in Sempra Energy's energy contract - a settlement that could bring $100 million or more in legal fees to Girardi and other plaintiffs' attorneys.
In an interview Monday, Sempra Energy's attorney accused Lockyer of trying to influence the jury in the case with his threats and the company raised the specter of the threatened lawsuit in a Securities and Exchange Commission filing and in closed chambers with presiding San Diego Superior Court Judge Ronald S. Prager. The issue of a lawsuit being filed in San Diego was raised again Tuesday morning in the judge's chambers.
A source said, "The judge is very concerned about if there's a suit and a press conference and it's in the media in San Diego there could be some impact on the jury."
As questions were being raised about his role, Lockyer late Tuesday announced he will file a lawsuit today in Sacramento against a Sempra Energy affiliate, alleging that it "manipulated wholesale electricity prices on a large scale during the California energy crisis of 2000-01 through widespread use of Enron-devised schemes."
Lockyer spokesman Tom Dresslar said any claims the attorney general is trying to influence the class-action lawsuit in San Diego are "completely without merit."
"We are not going to comment on any statements allegedly made in closed chambers, and not comment on any private discussions we've had with Sempra," Dresslar added. "Whatever the ultimate outcome, whether we decide to bring litigation or settle our claims arising out of the energy crisis, the attorney general's motivation will be to obtain the most justice possible for the businesses and consumers who got ripped off."
Girardi did not return repeated phone calls.
Sempra Energy spokeswoman Jennifer Andrews called the announcement of the lawsuit against the Sempra Energy affiliate, now known as Sempra Commodities, "old news," adding that the issues in that case already were addressed through a settlement with the Federal Energy Regulatory Commission.
"The action by the attorney general amounts to no more than commercial blackmail," Andrews said. "The timing of the action is appalling and irresponsible given the class-action trial under way in San Diego."
Andrews said that for several weeks the company has been negotiating "in good faith" with state officials, including the Attorney General's Office, and other parties.
"But in recent days, officials in the Attorney General's Office repeatedly have threatened that if our company did not agree to the state's terms, the attorney general would file a lawsuit," she said. "It appears that this lawsuit is making good on that threat."
Robert E. Cooper, the Gibson, Dunn & Crutcher attorney representing Sempra Energy in the class-action trial, said in an interview Monday that there would be no justification for the attorney general to file a lawsuit in San Diego.
"Such a lawsuit would be disruptive and designed to influence the jury."
Cooper said outside intervention by Lockyer's office at this point in the trial would be uncalled for, and that the press attention it would attract would put tremendous public pressure on the jury in a case in which plaintiffs are seeking up to $23 billion in damages.
The class-action lawsuit representing most consumers and businesses throughout California alleges a "massive conspiracy" between executives with Sempra Energy and El Paso Natural Gas beginning at a Sept. 15, 1996, meeting in Phoenix to manipulate and limit the supply of natural gas to the state, triggering the energy crisis. El Paso is no longer part of the lawsuit, as part of a broader 2003 settlement.
The state for several years has been trying to rewrite Sempra's contract, which was agreed to by the state at high rates in the midst of the energy crisis, but the company has resisted citing its $1.3 billion investment in new energy-generating plants since 2001. Sempra Energy is a publicly traded Fortune 500 company and the parent of Southern California Gas, which has customers in Los Angeles and the San Fernando Valley, and San Diego Gas & Electric Cos.
Pierce O'Donnell, an attorney for the plaintiffs, said he first heard of the state's threatened lawsuit in the judge's chambers, and had no independent knowledge of such an action.
He emphasized that "the state of California is not a party" to the class-action suit, and also that jurors are sworn not to read newspapers or watch television during the trial.
The threatened state litigation also was viewed as leveraging efforts to drive the months-long, increasingly strained settlement talks with Sempra Energy, with escalating dollar amounts benefiting not only California ratepayers, but potentially also the plaintiffs' team of lawyers.
Sempra Energy in the regulatory filing with the SEC said it anticipated state action if the settlement negotiations broke down.
"Sempra Energy and its subsidiaries have been engaged in settlement negotiations with multiple parties seeking to achieve a comprehensive resolution of many of these proceedings, but there can be no assurance that these negotiations will be successful or that they will continue. A settlement could be concluded or negotiations abandoned at any time in the future.
"Based on statements made in the course of these negotiations, it is likely that, if the negotiations are unsuccessful, additional litigation and legal proceedings will be instituted against Sempra Energy and its subsidiaries by the California Attorney General, regulatory agencies and other parties," the filing said.
Cooper said arguments in the class-action, antitrust lawsuit, known as the Continental Forge case, filed in September 2000, deal with a subgroup of Ventura County ratepayers so that a jury in San Diego would not have to rule on matters potentially affecting their own interests.
The case is being tried before a jury after a summary judgment motion by Sempra Energy was rejected in October 2004. By filing a separate state lawsuit against the company involving San Diego ratepayers, the jury's impartiality could be compromised, Cooper said.
The state litigation was characterized as involving claims that SDG&E and Sempra Energy failed to have an adequate gas-supply system in place, resulting in brief curtailments of natural gas to two power plants in the winter of 2001 during the California energy crisis.
While no electrical outages resulted in San Diego, there were some brief shifts to fuel oil to keep the power plants operating. Cooper said he hadn't seen a complaint document.
Former San Diego County District Attorney Paul Pfingst said the state's lawsuit could raise significant conflict of interest issues if it was intended to force a settlement including renegotiation of Sempra Energy's state contract, and to benefit political or personal associates of the attorney general.
"There are potential conflicts whether the action discussed by the attorney general is intended to influence a separate piece of litigation, and the attorney general might benefit, because of a relationship between the attorney general and plaintiff," said Pfingst, a Republican who said he's maintained amiable ties to Lockyer despite an Attorney General's Office search of one of his deputy district attorney's offices during his tenure.
"If the attorney general had a relationship with plaintiffs and intervened to favor one side or another, it would present some considerable (conflict) issues. If that party is someone the attorney general might have a relationship with, the motive of the civil suit might be in question."
El Paso, a Houston-based company that transports natural gas, agreed to a $1.625 billion settlement in July 2003, which also ended all private suits and regulatory action against the company. That settlement, the largest in connection with the energy crisis, also resulted in millions of dollars in legal fees for five firms, including Girardi & Keese, and Pierce's firm, O'Donnell Shaeffer Mortimer.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.