3rd Enron trader guilty of price manipulation

Forney could face 5 years in prison for crime

Associated Press

August 6, 2004

SAN FRANCISCO -- A former Enron Corp. trading executive pleaded guilty yesterday to charges of manipulating energy markets during California's power crisis.

John Forney, 42, of Ohio is the third Enron official to plead guilty to manipulating electricity prices from the company's now-defunct trading office in Portland, Ore. The crisis played a role in Pacific Gas & Electric Co.'s bankruptcy and will leave California consumers paying abnormally high electricity prices for years.

Forney, the former manager of Enron's trading desk, faces up to five years in prison for one count of wire fraud. He remains free on $500,000 bail pending a yet-to-be-scheduled sentencing hearing.

"With the guilty plea of John Forney, we have now obtained convictions of the top three Enron executives most directly responsible for manipulating the energy markets in California at a time unique in our history, when the lights were going off and the grid was in danger of shutting down," U.S. Attorney Kevin Ryan said.

Ryan said that as part of the guilty plea, Forney is expected to cooperate with the continuing investigation into Houston-based Enron, and reveal details about how other energy firms may have played a role. Four employees of Reliant Corp. have already been charged with deliberately shutting down power plants to increase the price of California electricity.

Forney's attorney, Edwin Prather, said his client admitted guilt "to accept responsibility for his actions."

"It was a good opportunity for John and his family at this time to certainly right the wrong he had a part in and for them to move on with their lives," Prather said.

Former Enron executives Timothy N. Belden and Jeffrey S. Richter also have pleaded guilty and cooperated with the FBI. Belden was expected to testify against Forney at his trial, which had been scheduled for later this year.

Forney pleaded guilty to one count of wire fraud -- specifically, that he promised to supply energy Enron did not have and that he improperly collected electrical grid management fees for Enron.

Enron's scheme to charge fees for services it did not provide was known inside the company as "Forney's Perpetual Loop," the indictment said.

Forney also took part in other schemes -- known within Enron as "Death Star," "Get Shorty," "Ricochet" and others -- that had the effect of inflating consumer prices.

Prosecutors also accused Forney of concocting a scheme that involved buying energy from California and later selling it back to the state at inflated prices, making it appear the energy was generated elsewhere. He had been charged with 11 counts of conspiracy and fraud.