Did Ken Lay and Arnold Schwarzenegger Collaborate to Screw Californians on Energy?

By Meteor Blades

Based on 34 faxed pages of Enron memos, investigative journalist and best-selling author Greg Palast said in a story posted at his site yesterday that Arnold Schwarzenegger was part of a small group that met secretly with Enron CEO and George Bush friend Ken Lay in May 2001. The purpose: to wreck a plan by Gray Davis and Cruz Bustamante to recover $9 billion ripped off by Enron and others in California’s 2000-2001 energy crisis.

Palast’s book The Best Democracy Money Can Buy is an impressive scorcher that followed on years of work for the BBC and London Observer. But his current story has a serious problem. Something seems to be missing. Since we haven’t seen the memos Palast obtained from the Foundation for Taxpayer and Consumer Rights (FTCR), we don’t know what that something is.

The way his story now reads, Palast seems to be saying that the California Recall plan was developed all the way back in May 2001, before Los Angeles Mayor Richard Riordan had been edged out by Bill Simon in California’s Republican gubernatorial primary 10 months later. That stretches credulity. At the very least, it doesn’t account for all the other players in the Recall – Ted Costa, Darrell Issa, for instance. (Both Riordan and Simon were invited to Enron’s secret meeting, but only Riordan showed.)

Perhaps what Palast has seen in those internal memos is a story of a continuing relationship among Schwarzenegger, Ken Lay and other energy barons. Maybe Schwarzenegger met with them or e-mailed them after May 2001. Maybe he meets with them on a regular basis. If that’s the case, the memos themselves, not just Palast’s take on them, should see the light of day.

Let’s backtrack.

The Enron meeting was first reported in mid-August this year. Arnold Schwarzenegger and two handfuls of other California heavy hitters met in one of these rooms at the swank Peninsula Beverly Hills Hotel.

In case that date doesn’t ring a bell, it followed by just a little more than a week two days of rolling blackouts in California. Those power outages were just one element of what we now know was a mostly concocted, manipulated, greed-fueled energy crisis that is one of the chief reasons Gray Davis won’t be governor come Wednesday. Enron wasn’t the only energy company engaged in "gaming" Californians for billions of dollars, but it led the pack.

So, what was Schwarzenegger (as well as former Riordan and junk-bond felon Michael Milken) doing at that meeting? Arnold hasn’t said. In fact, he still hasn’t even admitted he was there seven weeks after the story was broken separately by Managing Editor Richard Brennenan at the Berkeley Daily Planet and Jason Leopold, former bureau chief for Dow Newswires.

Given all the apologies, “I don’t remembers” and other last-minute campaign details needing attention, don’t expect him to tell us now.

Leopold wrote on August 18, 2003:

The 90-minute secret meeting Lay convened took place inside a conference room at the Peninsula Hotel. Lay, and other Enron representatives at the meeting, handed out a four-page document to Schwarzenegger, Riordan and Milken titled "Comprehensive Solution for California," which called for an end to federal and state investigations into Enron's role in the California energy crisis and said consumers should pay for the state's disastrous experiment with deregulation through multibillion rate increases. Another bullet point in the four-page document said "Get deregulation right this time -- California needs a real electricity market, not government takeovers."

For Schwarzenegger and the others who attended the meeting, associating with Enron, particularly Ken Lay, the disgraced chairman of the high-flying energy company, during the peak of California's power crisis in May 2001 could be compared to meeting with Osama bin Laden after 9-11 to understand why terrorism isn't necessarily such a heinous act.

Schwarzenegger may get away with saying he can’t remember ever claiming to admire a fellow Austrian named Adolf Hitler, but the FTCR won’t let him off the hook for the Enron meeting

Says FTCR's senior consumer advocate Douglas Heller: "You don't meet with America's most well-known corporate crook in the middle of California's biggest financial disaster and not remember. Mr. Schwarzenegger should come clean about what happened at that meeting and if he shares Ken Lay's views on energy regulation."

Palast says the internal memos show that ”Schwarzenegger knowingly joined the hush-hush encounter as part of a campaign to sabotage a Davis-Bustamante plan to make Enron and other power pirates then ravaging California pay back the $9 billion in illicit profits they carried off.”

As with everything about the California energy situation, it’s a complex weave. In a nutshell, the energy companies, with help from the Bush appointees on the Federal Energy Regulatory Commission, want to get away with refunding pennies for the dollars they stole from Californians.

As Palast puts it: "Problem: the slap-on-the-wrist refunds won't sail if the Governor of California won't play along. Solution: Re-call the Governor."

Maybe Enron did have a role in the Recall. A look at certain elements of Schwarzenegger’s
detailed energy plan certainly is enough to give any sensible Californian the heebie-jeebies. But that’s a long way from saying that the Recall plan was put together 15 months before the gubernatorial election that reelected Gray Davis.

If Ken Lay, Enron and Schwarzenegger conspired in the Recall, their plans surely had to be developed after Bill Simon imploded in the November 2002 election, not in May 2001. If Palast has memos indicating that is what happened, there are a lot of people who would like to read them.

Posted October 05, 2003 12:15 AM | Comments (67)