Enron Raked in Profits During Calif. Energy Crisis, Top Trader Testifies

A former top Enron Corp. trader who pleaded guilty to gaming California's power market during that state's energy crisis in 2000-2001 testified Wednesday that the company bought cheap power in the Northwest to sell in California, allowing Enron to rake in big profits.

Timothy Belden, who ran Enron's Western power trading desk in 2000 and 2001, had earlier testified that California's "dysfunctional" market in the aftermath of electricity deregulation left it ripe for high prices. Enron pocketed almost $1 billion over nine months in late 2000 and the first half of 2001.

"The chaos drove high prices and the high prices drove our profits," Belden said Tuesday in the fraud and conspiracy trial of company founder Kenneth Lay and former Chief Executive Jeffrey Skilling.

On cross-examination Wednesday, he said his trading team correctly surmised in early 2000 that California prices would rise.

His responsibilities grew as Enron's wholesale trading group absorbed the struggling retail group, a move company executives touted as one promoting efficiency but prosecutors contend was an improper shift to hide retail losses.

Belden, however, said he never met Lay and only met personally with Skilling once at a dinner with several of his colleagues.

Belden's initial testimony Tuesday was overshadowed by that of former high-ranking Enron trading and retail energy executive David Delainey, who said he felt pressure from Skilling to go along with murky accounting maneuvers to hide losses and misuse reserves to pad earnings.

Delainey said he initially thought a clever solution to a $200 million retail loss was to move it to another Enron business unit awash in profits.

But he got "increasingly cold feet," the one-time chief executive of Enron's struggling retail services unit testified, because he knew it was wrong to manipulate reported financial results by hiding one division's losses in another division's success.

"There's no business purpose to this other than to hide the loss and I knew that was not proper," Delainey said in some of the most bruising punches thrown so far by government witnesses in the fifth week of the trial.

Delainey also told jurors Enron wrongly raided reserves from the wholesale division, which encompassed its energy trading franchise, Enron North America, to meet or beat earnings targets under pressure from Skilling, though he never said his boss ordered him to break the law.

"It was standard operating procedure," Delainey said. "At Enron in Houston, we tended to be pretty fast and loose with our rules."

Delainey had yet to be cross-examined. Belden initially testified for the prosecution Tuesday.

Both Delainey and Belden have admitted to committing crimes. Delainey in October 2003 pleaded guilty to insider trading for selling millions of dollars in stock when he knew of earnings manipulations. Belden in October 2002 pleaded guilty to conspiracy for orchestrating schemes to manipulate California's power market.

Enron, which crumbled into bankruptcy proceedings in December 2001, had four core business units: Enron Wholesale Services, which included trading unit Enron North America as well as global assets; Enron Energy Services, which packaged energy services for mostly industrial companies; Enron Broadband Services; and Transportation and Distribution, which included natural gas pipelines and Portland General Electric, an Oregon utility.

Prosecutors contend Lay and Skilling repeatedly lied about Enron's financial health while knowing fraudulent accounting propped up the company before it failed.

The defendants say there was no fraud at Enron, and negative publicity coupled with diminishing market confidence fueled the company's swift collapse.

Skilling faces 31 counts of fraud, conspiracy, insider trading and lying to auditors, while Lay faces seven counts of fraud and conspiracy. If convicted, both could serve decades in prison. Only Skilling faces allegations of improper stock sales.