Ex-Enron official pleads guilty to manipulation

David Kravets

Friday, Aug. 6, 2004 | 9:19 a.m.

SAN FRANCISCO -- A former Enron trading executive pleaded guilty Thursday to charges he manipulated energy markets during California's power crisis in 2001 and promised to aid the state and public utilities in their lawsuits seeking to recoup billions from the energy industry.

John Forney, 42, 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.

Forney admitted promising to supply energy that Enron did not have and that he improperly collected electrical grid management fees for Enron. The indictment against him said Enron's scheme to charge fees for services it did not provide was known inside the company as "Forney's Perpetual Loop."

Ryan said as part of his plea agreement, Forney is expected to cooperate with the ongoing investigation into Houston-based Enron, as well as reveal details about how other energy firms may have manipulated electricity prices. Four employees of Reliant Corp. already have 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.

Two other former Enron traders at the Portland office, Timothy N. Belden and Jeffrey S. Richter, also have pleaded guilty and cooperated with the FBI.

Forney's guilty plea came two months after transcripts of Enron energy traders showed them openly discussing manipulating California's power market during profanity-laced telephone conversations in which they gloated about ripping off "those poor grandmothers" during the state's energy crunch.