Fire UBS Warburg, Group Tells Gov. Davis

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Company Linked to Enron, Officials Hostile to California Maintains $60 Million Consulting Contract from CA Utility Commission

Santa Monica, CA — The Foundation for Taxpayer and Consumer Rights (FTCR) today called on Governor Davis to fire UBS Warburg, a consulting and investment banking firm hired by state regulators this summer, with as much as $60 – $170 million in ratepayer money, to help it arrange a ratepayer bailout of bankrupt Pacific Gas & Electric.

In a letter raising a series of objections, including the company’s purchase of Enron‘s energy trading operation and the fact that Senator Phil Gramm, whose hiring the company announced earlier this week, blamed Californians for the energy crisis even though it was Texas-based Enron (on whose board his wife served) that instigated and profited from the crisis, FTCR said:

“Now Phil Gramm and the remnants of the Enron arm that created such schemes as ‘Death Star’ and ‘Ricochet’ work for the state of California, and you should fire them…The State of California simply should not employ a company to consult on energy issues whose operations include an energy trading firm whose manipulation of energy prices brought fiscal chaos and blackouts to California and whose personnel include former politicians with ties to Enron who blamed Californians for the debacle.”

Gramm Defended Enron, Mocked California

In the midst of the California energy crisis created by Enron and other Texas-based power companies, Texas Senator Gramm told the San Francisco Chronicle that California is suffering “the consequences of their own feckless policies” and “environmental extremism,” while California leaders “blame power companies, deregulation and everyone but themselves” for the energy crisis. (February 20, 2001)

“Senator Phil Gramm excused Enron for punishing California and mocked state officials, but the CPUC has agreed to pay his company millions to tell us how to solve the problems Enron and lawmakers like Gramm created,” said FTCR’s senior consumer advocate Doug Heller “The CPUC should seek advice from people who want California to get out from under the shadow of Enron and deregulation, instead of turning to the ghost of Enron for the solution.”

Warburg’s Enron ties are not limited simply to Gramm or the purchase of Enron‘s energy trading operations. UBS PaineWebber, a subsidiary of UBS Warburg, administered Enron‘s infamous employee stock option program, which has left hundreds of former Enron employees with devastated portfolios and no resources for retirement. PaineWebber’s relationship with Enron was so tight that the company reportedly fired investment adviser Chung Wu for disavowing PaineWebber’s positive review of Enron and encouraging his clients to sell Enron shares just weeks before the stock plummeted.

The group also noted serious legal concerns stemming from the consulting contract with UBS Warburg.

  • The company, as owner of Enron‘s former energy trading arm, has a direct financial interest in the structure of the wholesale energy markets that Warburg is involved in developing, as part of the bankruptcy reorganization program, on behalf of the state.
  • The PUC has told FTCR organization that UBS Warburg and its employees have not and will not be required to file statements of economic interest with the FPPC, because they are not “technically” consultants.
  • The CPUC has not complied with Executive Order D-55-02 of May 20, 2002, which bans the use of no-bid contracting for large state contracts.

“After the manufactured energy crisis, hiring Phil Gramm and Warburg-Enron combines foolishness with forgetfulness and will result in bad public policy. It is inexplicable that the CPUC gave this firm a multi-million dollar contract and the Governor should move to toss it out, rather than risk the further Enronization of our energy system,” said Heller.


Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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