News Column

Attacks on FERC Chair Nominee Come from Defender of Market Manipulators; Enron's Ken Lay Recommended Lead Attacker to Serve on FERC

June 12, 2014

WASHINGTON, June 12 -- Public Citizen issued the following statement by Tyson Slocum, Director:

Recent attacks against Norman Bay, President Barack Obama's nominee to serve as chairman ( the Federal Energy Regulatory Commission (FERC), are led by an individual with direct ties to entities accused of manipulating power markets. The lead attacker, Bill Scherman, has made a recent career defending companies on the wrong side of the law, and was recommended to serve on FERC by Enron's Ken Lay.

The Senate must reject these baseless attacks against Bay and confirm him as FERC chair.

In January, Obama nominated Bay to be FERC chair. Bay currently serves as director of the commission's Office of Enforcement, where he directed the largest market manipulation cases since Enron. Scherman, currently a partner at Gibson Dunn & Crutcher LLP, was one of the attorneys representing two Wall Street banks that Bay's office charged with manipulating markets. Scherman defended both JPMorgan and Barclays in FERC proceedings that together required the companies to pay $720 million in civil penalties and refund $160 million to consumers.

Shortly after Bay's nomination, Scherman attacked Bay's prosecution of his Wall Street clients, writing in the opinion page of The Wall Street Journal that his Wall Street clients are "forced to fight with one hand tied behind their backs." Omitted from Scherman's attacks on Bay, however, are the facts: His clients engaged in years-long strategies to manipulate electricity markets that raised prices for consumers by hundreds of millions of dollars.

Scherman even defended elements of Enron's tactics. Scherman was quoted in a Nov. 27, 2013, article in SNL FERC Gas Report as being skeptical about FERC's constant referencing of Enron in current Wall Street market manipulation settlements:

"William Scherman, a former FERC general counsel who is an attorney at Gibson Dunn and Crutcher LLP, painted a much more dire picture, accusing his former agency of 'sprinkling ENRON dust' on all the targets of its enforcement actions by beginning all its legal briefs with the words, 'In the aftermath of ENRON.' The problem, according to Scherman, is that none of the strategies ENRON was accused of using to manipulate markets were ever litigated in the courts."

Scherman's attacks also reflect his long-time adherence to the failed policy of "free markets" for electricity, which earned him inclusion on a list of candidates whom Enron's Lay recommended as possible FERC commissioners in 2001. Bay's ( strong record of enforcement gives hope that, as FERC chair, he will not overlook market manipulation because of an ideological commitment to 'free markets.'

At a time when the complexity of FERC jurisdictional power markets has given sophisticated financial traders abundant opportunities to manipulate prices, it is imperative that FERC have a chair committed to enforcing the requirement that all electric rates be just and reasonable. Attacks on Bay's stellar performance as director of enforcement appear to be driven by vested interests seeking a FERC more permissive of lax enforcement.

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Source: Targeted News Service

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