Waxman Probes Enron, CalPERS Meeting

March 4, 2002 (PLANSPONSOR.com) - Representative Henry Waxman (D-California) wants former Enron President Jeff Skilling to tell his side of meetings with the California Public Employees Retirement System (CalPERS).

Waxman, who made his request in a March 1 letter, according to Dow Jones, wants to know the details of meetings with the nation’s largest public pension system in November 1997. 

JEDI Returns

In those meetings, Skilling and former Enron Chief Financial Officer Andrew Fastow reportedly asked CalPERS to invest in an energy partnership known as Joint Energy Developments II (JEDI II).

That partnership quickly led to the creation of Chewco Investments, one of the most controversial of the Enron partnerships.

‘Skilling came in with Andy Fastow in November 1997 and had a bunch of meetings with the investment staff of CalPERS,’ according to a Dow Jones article which quoted CalPERS spokeswoman Pat Macht as saying. ‘We said if you want us to be in JEDI II, buy us (out). They did, and we got paid in cash.’

As a result of those meetings, CalPERS agreed to invest in JEDI II – on the condition that Enron purchase CalPERS’ interest in JEDI I – a partnership formed in 1993 to invest in energy projects.

Buy Backed?

However, rather then liquidate JEDI I, Enron went looking for someone to invest $383 million to take the pension fund’s place in the partnership. It then created Chewco to buy out CalPERS’ interest in JEDI I – a move that allowed Enron to keep JEDI I off its balance sheet.

CalPERS invested in Enron Energy Services (EES) through the JEDI II partnership, while the Ontario Teacher’s Pension Plan invested in EES directly, representing a combined investment of $130 million.

However, even though the investments into EES were made in January of 1998, Enron booked them as earnings during the fourth quarter of 1997, allowing EES to show a profit, according to Enron’s 1997 fourth quarter earnings statement.

Enron admitted late last year that Chewco and JEDI I should have been consolidated and reported on its balance sheet – a revelation that led to Enron restating $618 million in earnings from 1997 to 2001.

Skilling held a 5% ‘phantom’ equity stake in EES, worth $100 million, according to Dow Jones, which last week noted that Skilling had disclosed his interest in EES prior to the CalPERS investment decision, according to CalPERS spokeswoman Macht.  At the time, EES was losing money and hadn’t secured any new business.

Waxman wants Skilling to explain whether his stake in EES had any influence in getting the pension funds to invest in the unit – and he’d like to know by March 7.