Posted on 06/03/2003 3:15:43 PM PDT by TLBSHOW
Former Top Enron Executive Arrested
By Spencer Swartz
SAN FRANCISCO (Reuters) - A former top Enron energy-trading executive was arrested by federal agents on Tuesday on charges stemming from the company's manipulation of power markets during California's energy crisis.
John Forney, 41, is the third former Enron Corp. executive charged with a federal crime in connection with Enron schemes to manipulate energy prices during California's 2000-01 energy crisis, which cost the state an estimated $42 billion.
Forney was arrested at the headquarters of American Electric Power Co. Inc. in Columbus, Ohio, where he is currently employed. His arrest was announced by Kevin Ryan, U.S. Attorney for the Northern District of California.
Forney was the head of Enron's western "real-time" power-trading operations in Portland, Oregon, from June 1999 until the end of 2000.
Forney, freed after securing a bail bond, will go before an Ohio judge June 9 who will likely order him to face charges of wire fraud and conspiracy at San Francisco federal court, the U.S. Attorney's office said. No trial date has been set.
"We believe these criminal charges are without merit and Mr. Forney looks forward to his day in court to vindicate himself," Brian Murphy, Forney's attorney said.
In February, former Enron executive Jeffrey Richter pleaded guilty to conspiracy to commit wire fraud in connection with Enron's schemes in California, following by a similar plea in October 2002 by Timothy Belden, Enron's former top West Coast energy trader.
The prosecutor's office, joined by the Department of Justice (news - web sites) and the San Francisco division of the FBI (news - web sites), said its investigation into the manipulation of California's energy market would continue.
"Our investigation of illegal activities during the energy crisis is active and continuing and remains one of this office's and the Justice Department (news - web sites)'s top priorities," Ryan said in announcing Forney's arrest.
Forney joined Columbus, Ohio-based AEP in March 2002, holding jobs in the company's commercial operations. The company placed him on administrative leave with pay, AEP spokesman Pat Hemlepp said.
The charges against Forney allege he was the architect of several illegal trading strategies used by Enron to inflate power prices, including one scheme called "ping pong" that aimed to evade federal price caps slapped on the volatile California market in 2001.
In another scheme, know at Enron as "Forney's Perpetual Loop," traders would send fictitious megawatts across the grid and then accept payment from California's grid operators to relieve the artificial congestion they created on the lines.
California energy officials have blamed the trading schemes for exacerbating a severe energy shortage during the winter of 2000-2001, resulting in rolling blackouts and sending prices to tenfold their levels a year earlier.
Enron, meanwhile, racked up huge profits prior to the company's collapse amid a host of accounting scandals and federal investigations into its business practices. (Additional reporting Leonard Anderson in San Francisco)
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