The Wall Street Journal

June 3, 2004 7:32 a.m. EDT

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Calif To Sue Enron In State Court Over Mkt Manipulation


DOW JONES NEWSWIRES
June 3, 2004 7:32 a.m.

(This article was originally published Wednesday)

SAN FRANCISCO -- California plans to sue Enron Corp. (ENRNQ) over the bankrupt energy trader's alleged market manipulation during the western U.S. electricity crisis of 2000-2001, a spokesman for the state's Department of Justice said Wednesday.

"The action will focus on the various gaming strategies with the colorful nicknames we all know," the spokesman, Tom Dresslar, said in an e-mail to reporters.

The dollar amount of the suit hasn't been determined, but the state will seek actual damages as well as penalties, Dresslar told Dow Jones Newswires. Enron owes creditors over $60 billion.

The gaming strategies, with names such as "Fat Boy" and "Death Star," were described by internal Enron memos that federal energy regulators released in 2002.

"We will bring the case in state court under both the Unfair Competition Law (Business and Professions Code section 17200), and under our new authority pursuant to SB 434, which took effect January 1, 2004," Dresslar wrote.

Under California Senate Bill 434, the Attorney General can investigate and enforce violations of California securities and commodities fraud statutes, jurisdiction of which previously had been the state's Corporations Commissioner exclusively.

The date of the filing hasn't been determined, though "it will be in the near future," Dresslar wrote.

Late last month, Enron sued the defunct California Power Exchange for the return of $136 million it had to deposit to trade power in California before the company went bankrupt. The exchange ran the state's main day-ahead market for electricity before the Federal Energy Regulatory Commission closed it in 2001. Trustees for bankrupt exchange maintain that Enron's $136 million deposit should be used for refunds to utilities.

California Attorney General Bill Lockyer criticized Enron's lawsuit when it was filed.

   -By Mark Golden, Dow Jones Newswires;415-765-6118; mark.golden@dowjones.com
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