Knappster: Enron-linked scandal looms for Nevada officials

By George Knapp

A seemingly innocuous motion filed this week in a Las Vegas courtroom may set the stage for our town's next big political scandal. Knappster has hinted a few times over the past year that the Enron debacle eventually might come back to haunt certain local public officials. That time appears to be drawing near.

The motion filed by Nevada Power Co. seeks to force the Colorado River Commission to make public thousands of records concerning its wheelings and dealings in the electricity market. In particular, the power company wants to know whether the CRC, a state agency, conspired with Enron to manipulate Western energy markets, and whether any other Nevada public officials were involved in these shenanigans. The motion filed this week doesn't spell out the full picture, but let me tell you, if Nevada Power can prove even some of its suspicions, blood will flow in the streets.

We all remember Enron, right? That politically connected mega-company spread a lot of money around, both in Washington and here in Nevada, before it imploded. Along the way, it helped spark a massive energy crisis in Western states, a crisis that cost consumers tens of billions of dollars, led to rolling blackouts and brownouts, and was a major factor in California's budget crisis. Since California's economy is so tied to that of Nevada, our state also felt the effects.

A 13-month investigation of Enron by the Federal Energy Regulatory Commission (FERC) found that there was "clear evidence of market manipulation," not only by Enron, but by its many eager partners. In fact, FERC declared that Enron would never have been able to do what it did without help from other entities. And one of those entitites was the CRC.

Over the past few years, the CRC has become a high-stakes gambler, in effect, playing for keeps in the volatile energy market, like a trader buying and selling pork bellies. It might seem odd for a state agency to engage in the equivalent of a dice game while playing with public money, but that's pretty much what CRC did, and still does.

One year ago this month, FERC issued an order that the CRC would have to prove to the feds that it doesn't deserve to have its profits seized because of the tactics used in its energy dealings. That case has yet to be resolved. The CRC has said it did nothing wrong and that FERC is making "wild assumptions." Oh, not as wild as the assumptions being made by Nevada Power.

The power company has had a team of lawyers combing through CRC records for the past several months. They've sifted through more than 40,000 transaction reports, and they've zeroed in on a few thousand of those that, the power company suspects, will prove that CRC not only conspired with Enron to manipulate energy markets, but did so for the express purpose of undermining Nevada Power. The fact that some of this was going on at the same time the Southern Nevada Water Authority was contemplating a public takeover of the power company is not seen as a coincidence within Nevada Power headquarters. Bottom line, the power company wants to obtain records from the CRC to prove that CRC and other parties were out to cut the knees off the electric company, despite the fact that hurting Nevada Power would also hurt local electricity customers.

Here's the real kicker: Nevada Power already has the records it is seeking. In fact, it has most of the suspect transactions ON TAPE. It obtained the records through FERC, but FERC imposed a confidentiality agreement for the time being. Knappster has heard rumblings that some of the conversations that were recorded involving CRC honchos and other entities are incredibly blunt. Some may even spell out the ulterior motives for some of the energy transactions CRC conducted. If those tapes are ever made public, the reverberations will be felt for years to come.

It's a small wonder then that the CRC has been fighting to keep the records of its transactions private. The problem is, CRC is a public agency. The records, by definition, should be public. These are state officials spending public money to buy electricity, electricity that is largely sold to other public entities. The public has an absolute right to examine exactly what was going on. Thus far, CRC has come up with all sorts of reasons why it needs to keep the records from ever seeing the light of day, but not one of its arguments holds any water. It appears CRC may be stalling for time, which is odd coming from an agency that has proclaimed that it's done nothing wrong.

Eventually, the records and tapes are going to become a matter of public record. We will all get to read and hear what was on the minds of these high-stakes Nevada gamblers. When that happens, plop yourself down in a comfy chair, because it should be quite a show.

Movie connection

As a Tolkien diehard, Knappster was thrilled with the Oscar night performance of the The Lord of the Rings: The Return of the King, a clean sweep of 11 little statuettes. As pleased as we were, though, it was nothing compared to the elation over at Joey Cusumano's house. Longtime locals will remember Cusumano's name from the wild and wooly era from the mid-'70s to the early '80s. Cusumano's name was often linked in the media to that of his longtime friend, Tony Spilotro, the reputed rackets boss of Las Vegas.

In the years after Spilotro's murder, Cusumano was bitten by the movie bug. He hired on as a line producer for Francis Ford Coppola's stylish gangster epic The Cotton Club, and has been chasing movie projects ever since. Two years ago, he was close to a deal to produce a big-screen version of the Ted Binion story, but the project found itself in studio limbo. (As an aside, it has been resurrected, but that's a story for another day.)

While having coffee the other day, Cusumano casually mentioned to this reporter that he was rooting hard for LOTR to do well at the Oscars because his buddy, Barrie Osborne, had played a key role in developing the trilogy of films. Turns out Osborne was the producer of these megahits, and on Oscar night he accepted his trophy, then followed director Peter Jackson's remarks with a few of his own, the final winner speech of the evening.

Cusumano isn't just happy for his pal. He's happy for himself as well. He and Osborne have an agreement to develop a few film projects together. Some of this was worked out at a birthday bash thrown for Osborne at Francis Coppola's Napa estate and winery, where Osborne, Cusumano, the Coppolas and a few other friends partied for a couple of days. Cusumano isn't saying much about what joint projects the two men will pursue together, but considering that Osborne just produced three of the biggest hits in motion picture history, it would seem he's a pretty good guy to know right now.