Disclosure: I worked for the Lamont campaign doing web design and production and some writing for the official blog (from 9/5/06 to 11/07/06).

Monday, March 20, 2006

 

Lieberman's Ethics Problem: Sempra

On September 11th, 2005, the fourth anniversary of the terrorist attacks on New York and Washington, most Americans' minds were elsewhere: on the human suffering we had all witnessed on the streets of New Orleans and throughout the region in the preceding days.

Joe Lieberman's mind was at least partially somewhere else entirely that day: on raising money for his campaign warchest. That day, Sempra, a California-based energy company that is Lieberman's ninth largest campaign contributor this cycle with a total of over $40,000 in donations, flew Sen. Lieberman on a corporate jet from a 9/11 memorial event in New Jersey to Minneapolis so he could attend unspecified political fundraisers in Minnesota. Sempra was later reimbursed $1,271 for the expense, but before the end of the month, Sempra Trading (the company's Stamford-based trading arm) and their executives subsequently donated tens of thousands of dollars to Lieberman's campaign, in part by funneling $10,000 through an employee-associated and funded PAC ($5,000 for the general election as well as $5,000 for the primary).

Were they seeking influence with Lieberman?

Can there be any doubt?

In 2005, thanks largely to "a strong surge in fourth-quarter profits from energy trading," Sempra Energy posted record annual earnings.

2005 may have been a great year for Sempra Trading, but it was a very bad year for many other people. Hurricane Katrina killed over a thousand, left countless numbers homeless and displaced, cost tens of billions in damage, and disrupted oil and natural gas supplies causing energy prices to soar. But volatility in prices wasn't bad news for Sempra:

The Connecticut-based unit the company calls Sempra Commodities was responsible for fully half of Sempra's total earnings last year, indicating how far the locally based company has come from its roots in the regulated utility industry.

The trading unit's $460 million in profits represented a 44 percent increase over the previous year, with most of the higher earnings coming from from strong gains in trading electricity and natural gas.

"The trading book was remarkable," said Paul Justice, an analyst at Morningstar Investment Service in Chicago. He rates Sempra's shares three stars out of five; he doesn't own any Sempra stock.

"We've got so much volatility in natural gas prices," Justice said, "and they've been able to step up and develop one of the strongest positions in the industry."...

“We really make money when there are high prices and volatility," [CEO Donald Felsinger] said.


Extremely high energy prices leading to a politically-connected energy trading company posting obscenely high profits.

Yeah, I know what you're thinking. I saw that movie, too.

But the similarities between Sempra and Enron are not just limited to aesthetics.

In California, where they own the San Diego Gas & Electric Co. and Southern California Gas Co. utilities, Sempra was sued twice in November 2005 by State Attorney General Bill Lockyer. One lawsuit was filed against the Stamford-based Sempra Trading in particular for engaging in Enron-style trading schemes:

"This is a close second to Enron," Attorney General Bill Lockyer said, referring to the now-defunct energy company that used colorfully named maneuvers like Death Star and Fat Boy to boost electricity prices. "I suggest this is Enron's twin brother in terms of the extent they ripped off California consumers."

Lockyer filed a lawsuit in Sacramento County Superior Court accusing Sempra Energy Trading Corp. of engaging in more than 5,000 acts of unfair competition and illegal commodities transactions starting in 1999.

"It wasn't just one accidental event," he said at a news conference. "It was a pattern of active manipulation of the energy markets."...

He said the illegal Sempra tactics included:

- Filing false schedules with the California Independent System Operator, manager of most of California's electricity system, to create the illusion of congestion on the state's power grid and then getting paid to relieve the fake congestion.

- Getting paid by Cal-ISO to keep electricity in reserve for an emergency and then not keeping it in reserve.

- Exaggerating the amount of power it intended to generate to boost income.

- Exporting electricity from California and then selling it back to California customers at higher prices.

Lockyer said that last maneuver, known a "ricochet game," was the most egregious tactic used by the company and involved enough electricity to supply the entire state for two days at peak demand.


The other lawsuit was filed against the parent company for deliberately overstating natural gas capacity and contributing to the California energy crisis of 2000-2001, the same crisis that Enron was involved in manipulating.

As if this all wasn't enough, Sempra is also involved in an ongoing fundraising scandal in another Democratic New England senate primary race.

David Messer, President of Sempra Trading, who has already maxed out to Lieberman this cycle, is a key name in the fundraising scandal in the Rhode Island race between Matt Brown and Sheldon Whitehouse. The short version is this: Brown allegedly had a scheme going whereby three state Democratic parties (in Hawaii, Massachusetts, and Maine) would contribute large amounts to the Brown campaign, and then contributors such as Messer would in return donate large sums to the three state parties. Messer had already maxed out to Brown's campaign, so this was ostensibly a way of getting around the $2,100 contribution limit.

In Hawaii, there have been calls for an investigation of the contributions, seemingly intended to skirt campaign finance law.

And in a yet another campaign finance scandal in Idaho involving Sempra's building of a $1 billion coal power plant in the state, there have been calls for gubernatorial candidate Rep. Butch Otter to return the $6,000 in donations he's received from the same Sempra Energy Employees PAC that's given $10,000 to Lieberman.

These are the same contributors who flew Joe Lieberman out to Minnesota that day in September 2005, doubtless seeking influence on some piece of legislation or another, whether it was a thank-you for Lieberman's support of the Energy Bill passed a month earlier (he was the only New England Democrat to vote "aye"), with pending moves in the Broadwater LNG terminal proposal in Connecticut, or with something else entirely.

The only question is, did they get what they paid for?
Comments:
Impressive post. Great work.
 
Impressive indeed. Have you sent this off to any of the media outlets? If not, you should.
 
I saw it at the Daily Kos too, as a private diary and later frontpaged. Unfortunately Markos really dropped the ball, as did the entire Daily Kos community. Pity.
 
Scarce, please email me if you can. Thanks.
 
David Messer = Dave the Knife. We need some disinfectant to get rid of Lieberman
 
You'll like this - this blog headline made the front page of Sempra's intranet news mag on 3/24/06.
 
Foolish paranoia chasing trumped up charges. This post is everything wrong with a blog.
 
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