CALIFORNIA POLITICANS HANG ON TO ENRON FUNDS

LOS ANGELES (CBS.MW) -- Despite rising outrage by California politicians over Enron's role in the state's energy crisis, less than a third of the legislators who received campaign contributions from the infamous energy trader have turned over the money to ex-employee groups. Of the 42 state legislators who got money after July 1, 2000 -- the first full reporting period after California's power problems began -- only 13 said they've sent the money to charity or groups supporting ex-Enron employees, according to a survey by CBS.MarketWatch.com. Another five said they have no plans to return the money and the remaining 24 didn't respond to inquiries.

Enron's (ENRNQ: news, chart, profile) campaign contributions to California officials could become a prickly issue in state campaigns this year. Documents have shown that Enron sold electricity futures back and forth between its own companies, and tried to clog power grids, all in the name of driving up California prices. "It's really unreasonable to be held accountable for all the actions of your donors," said Kevin Spillane, a California political consultant who worked on this year's gubernatorial bid by former Los Angeles Mayor Richard Riordan, who lost in the March primaries. "But Enron's an exception. This is a major corporation involved in the California energy crisis."

Along with the legislators, there also are several key state officials who have harshly criticized Enron but have no plans to turn over their funds, among them California Gov. Gray Davis. Davis is one of several high-profile officials who got Enron money prior to mid-2000. A Davis spokesman said the governor has no plans to return the $120,000 in donations he received from Enron in the several years before during his campaigns for governor and lieutenant governor.

"We're just not sure how much it helps," Roger Salazar, campaign manager for Davis. Those politicians who are turning over their funds to employee groups are trying to distance themselves from what they say are Enron's "ill-gotten gains." Among them are California Assembly Speaker Herb Wesson and Democratic Senate caucus leader John Burton. "Thousands of people's futures were devastated by this ripoff," said Wesson, who gave away $4,500 in contributions, but says he might have kept it if the charities didn't exist. "Trust me, I wouldn't have given a damn thing back to Enron."

Enron cast a wide political net in the state. It contributed to campaigns for more than 70 percent of the sitting legislators, and helped fill the coffers for a number of statewide offices, including those of Davis and Attorney General Bill Lockyer. See full story. This sort of issue has reared its head before, as federal officials debated whether they should return monies from tobacco companies after it was determined the firms targeted children and tried to get consumers addicted to nicotine. More recently, Enron's troubled accounting firm, Arthur Andersen, shut down its political action committee last week because candidates are shying away from accepting the group's funds. Andersen used to spend nearly $1 million a year in campaign contributions.

CBS.MarketWatch.com looked at the contribution records from Enron in the last half of 2000 and all of 2001 and asked California legislators who took money during that time what they did with those funds. Along with Burton and Wesson, assembly members who turned over their contributions to employee groups included: Rebecca Cohn, Dean Florez, Alan Lowenthal, Abel Maldonado, Fran Pavley, Kevin Shelley and Joe Simitian. Also on the list are Senators Jack O'Connell, Martha Escutia, Nell Soto and Bruce MacPherson. "He didn't want the thieves to get it back," Shum Preston, aide to Shelley, said of Enron. "These were ill-gotten gains."

A few said flatly that they held on to the funds. They include Assembly members David Kelley, Lynne Leach, Bill Leonard and Ken Maddox, as well as Senator Bob Margett. "I spent the money on my campaign for the Board of Equalization," said Assemblyman Leonard. "I was spending it as fast as it came in. I didn't have it to give back." "We were in a targeted race in 2000," said Mark Reeder, aide to Assemblyman Maddox. "It would have gone straight to his re-election efforts." Many officials didn't respond to inquiries. Assembly members in this category were Roy Ashburn, Mike Briggs, Bill Campbell, Dennis Cardoza, Dave Cox, Dick Dickerson, Dario Frommer, Robert Hertzberg, Dennis Hollingsworth and Carol Liu.

Other assembly members not responding were Carole Migden, Bob Pacheco, Sarah Reyes, Keith Richman, Simon Salinas, Phil Wyman, George Runner and Rod Wright. Wright chairs the assembly's utilities and commerce committee and is not seeking re-election, according to the Secretary of State's office. Senators who didn't respond were Debra Bowen, Ross Johnson, Byron Sher, Edward Vincent, Jim Battin and Kevin Murray. Bowen chairs the senate's energy, utilities and communications panel. Among those who didn't return calls, there were 12 Republicans and 12 Democrats. The mix was much more lopsided among those who returned funds and those who said they didn't. Of the 12 who returned funds, all but two were Democrats. And all five who said they held on to the funds were Republicans.

The Los Angeles Times reported last month that Republican caucus leaders Cox of the assembly and Jim Brulte of the state Senate sought and got $50,000 in Enron contributions to the party in August 2001 as the Legislature was concluding key energy legislation. The caucuses have yet to return the funds or send them to the employees' groups.

Some who took Enron funds have harshly criticized the company for what they say is the gouging of electricity consumers in California. There also are those instrumental in setting energy policy. They include Davis, State Sen. Bowen, Attorney General Bill Lockyer, State Sen. Steve Peace and S. David Freeman, chairman of the California Power Authority, who ran a failed 2000 campaign for a state assembly seat. All have been notable figures in the electricity crisis, and all but two received contributions prior to July 1, 2000. Lockyer and Bowen were the only ones to get money after that date. None of the five indicated they would give the funds to ex-employees.

Another legislator who got roughly $2,000 from Enron was State Sen. Joseph Dunn, whose senate committee now is investigating the company's pricing practices. Dunn has frequently accused Enron of gaming the system. Dunn, who received the contributions prior to mid-2000, said he hasn't decided whether he'll send a check to the employees' funds. He doesn't feel anyone should feel obligated to contribute. "I leave that to each individual elected official," Dunn said. "That's for each of my colleagues to decide." Davis is running for re-election this year. The Enron contribution question could give his opponent, Bill Simon, ammunition in his bid to unseat the governor.

Others, such as Lockyer and Bowen, could be hit by the Enron political effect. Bowen received at least $14,000 and Lockyer got at least $15,000, records show. Lockyer and Bowen did not return phone calls seeking comment on what they would do with their Enron money. Each has said in the past they didn't feel the company's contributions were significant and did not have an effect on how they carried out their duties.

Some analysts say it might be unfair to ask politicians to be responsible for their donors' actions. "I think most voters expect politicians to take money from a whole variety of interest groups," said Ron Faucheux, editor of the trade publication Campaigns and Elections magazine. "To my knowledge, nobody's been able to make the connection between getting (Enron) money and doing anything for it." But others say those who received Enron funds face a sticky issue. Enron's campaign money may very well have come at the expense of California ratepayers. Enron's revenue tripled between 1999 and 2000, catapulting the company's sales to $100 billion, seventh largest in the U.S.

Still, those who ignore the issue, no matter how small the contribution, could find themselves with campaign headaches later on, said California political consultant Dan Schnur. "Just because you didn't give the money back doesn't mean you're corrupt. But you've given your opponent way too easy a target to hit," Schnur said. "Most members of Congress, it appears, have done that (turned the money over)." Davis officials point out that the governor stopped taking contributions from energy companies in the latter half of 2000, when the state's electricity crisis first surfaced. Several officials who took Enron funds prior to that date say the second half of 2000 should have been the stopping point for taking money. The power authority's Freeman said the prospect of unloading funds could create the wrong impression. "I view it as a kind of false gesture," Freeman said. "This retroactive morality strikes me as being false."

While Davis's office pointed out it didn't accept funds past mid-2000 from Enron, those who are sending the funds to the employees group say they are turning over all the company's contributions, going back four years or more. State Sen. Burton calculated he'd received more than $19,000 from Enron over the years, said aide Dave Sebeck. Burton ended up sending $20,000 to the Greater Houston Community Foundation. Other groups include the Enron Ex-Employees Relief Fund and the Enron Employee Transition Fund. The amount of money received by an individual politician usually never exceeded the amount Burton got. In most cases, the total received by any single person throughout their political history was no more than $6,000.

Enron didn't start contributing heavily to California campaigns until electricity deregulation was in effect in the late 1990s and the company was hoping to initiate some changes to the system. It spent more on a wide array of candidates as opposed to concentrating on a select few. Whether the decision to retain the funds will hurt any officials remains to be seen. While some analysts say the contributions were small in most cases, others say small issues can be turned into major ones by aggressive challengers. Davis in particular could be hurt, they say. The $120,000 he took is small compared to his $30 million war chest, but the number is still large enough to make an issue, analysts say. "For most of them, it really is a non-issue," said consultant Spillane. "One thing that raises eyebrows is the size of the contributions to Davis and the fact that he's accused them of gouging."

A sad aspect to this is that some IPPs that are NOT Enron-like companies have seen their stock prices toasted as a result. Life is not fair.

Absolutely. Indeed, the entire market has been hammered in large part due to distrust of the accounting machinations which have come to light. Investors don't know whether to trust the financials or not...

Enron didn't start contributing heavily to California campaigns until electricity deregulation was in effect in the late 1990s and the company was hoping to initiate some changes to the system.

What "electricty deregulation"? If the market were truly deregulated and working according to market pressure, Enron wouldn't have been able to game the system like they did. The electric "market" in CA wasn't and isn't deregulated. Enron manipulated the fake system by working the rules written by the dimwitted politicians in the California legislature, something the regulations practically begged for.

The electric "market" in CA wasn't and isn't deregulated. Enron manipulated the fake system by working the rules written by the dimwitted politicians in the California legislature, something the regulations practically begged for.

Exactly right. Davis and his cronies are heavily to blame for the failed electric market in California and are desperately trying to pin the blame on someone else.

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.