Home Energy and Environment What Really Happened to “Kal-i-forn-nee-a” (A Lesson for the Rest of America)

What Really Happened to “Kal-i-forn-nee-a” (A Lesson for the Rest of America)

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People are all a-Twitter, even here at BV, about how Arnold is appearing to look “independent” again.  Not so fast. I say, no political stars for Arnold! Arnold now opposes further gas exploration off the Santa Barbara coast.  But there is already extensive oil drilling there, and not without incident either.  So his new-found oppo doesn’t halt gas drilling off the otherwise beautiful coast.

Ka-li-for-nee-a has had a bumpy ride. A good deal of it was the vast conspiracy by energy barons, and possibly even Arnold Schwarzenneger, to rig California markets, bring Gray Davis to his knees and then recall him. What the emboldened energy robbers put California through foretold the banking collapse, and numerous other lesser collapses which caused untold harm to people nonetheless.

Ever since Ken Lay and the energy market extortionists in the Enron mold got through with California, we knew this collapse of California’s economy was coming eventually.  Many remember that initial round of market rigging.  But many are unaware that Ken Lay and the energy pirates conspired to further loot California’s treasury by a second round of energy deregulation, causing energy prices to further skyrocket, plunge people into darkness and even laugh at what they were doing to Grandma (again).  The  players were already laughing. This skulduggery began before Arnold announced his run to replace Gray Davis in the notorious California Recall, normally reserved for real wrongdoing.

We still do not know Arnold’s role in the energy market scandal.  But we do know that…  

Enron orchestrated a meeting on May 17, 2001, to which, at the behest of Ken Lay, Republican LA Mayor Robert Riordan invited Arnold and other high-powered leaders.  The thing is, though, that at the time, Arnold was just an actor. Why invite Arnold?  Most of all why do so in the midst of an energy crisis in California?  What is not widely known is a crucial fact, revealed in a piece by Juan Gonzales here. Just a few weeks before, Lt. Governor Cruz Bustamante filed a $9 billion civil suit alleging price gouging by California’s major electric utilities. This may be why, later during the recall movement, the corporate media, Republican recall candidates and Republican operatives come down upon Bustamonte with a vengeance. It wasn’t just Bustamante.  Gray Davis requested the FERC investigate the big power companies, including Enron, and force it to return the $9 billion stolen from California.  In the spiraling upward and contrived energy “market,” power companies forced a poison-pill energy contract upon he state, or the lights might go out.  Indeed they had been manufacturing blackouts and brownouts to bring the state begrudgingly to its terms.  Exposed for their fraud, energy companies could not be surprised that the state of CA wanted the money back.  The federal government wouldn’t help (surprise).  When Arnold was sworn in, talk of the FERC investigation and the return of the 9 billion extorted from the state of California disappeared.

So, to rewind a bit, shortly after the worst of the early blackouts, Arnold, who later feigned amnesia about the meeting, did meet with about 11 others, including Ken Lay, Enron officials, Mayor Riordan, and some business leaders.


Doug Heller of the Foundation for Taxpayer and Consumer Rights worries that Schwarzenegger has been swayed by Ken Lay, the former Enron Corp. chief executive who pushed for California’s 1996 electricity market reforms. Schwarzenegger was among the 12 men and one woman who met with Lay at a Beverly Hills hotel in May 2001. The meeting was organized with the help of then-Los Angeles Mayor Richard Riordan, a Schwarzenegger friend who was a leading Republican candidate for governor at the time. Heller thinks Schwarzenegger should “come clean” about the Lay meeting before he is inaugurated. Schwarzenegger has said he doesn’t recall the meeting, but appears unapologetic about his Enron connections – his transition team includes a former Enron adviser, Robert Grady, now a San Francisco venture capitalist.

There are more references here, here and here. The last one, from the Contra Costa (CA) Times, says this:


In 2001, he met with business leaders, including the future governor of California, Arnold Schwarzenegger, to push a “solution” to the energy crisis that would keep the state on track to deregulation.

During a second round of proposed deregulation eagerly pushed by Ken Lay, Arnold was right in the thick of it endorsing, supporting the furthering of the deregulation free-for-all which was laying waste to California’s and citizen’s household budgets.  And then there was the recall.  

As the Enron tapes revealed here everyday people, the rate payers of California, were mercilessly exploited by the energy thieves, who mostly got away with it. The short summary is this:

So, to sum up, Enron and a number of other energy companies engineered a rigged energy market in California.  They held Gov Gray Davis hostage to negotiating for an energy “deal” which bound Calif to high prices on into the future.  Faced with months of blackouts and brownouts and millions of customers screaming for relief, Davis did what he thought he had to do for his customers to have lights on.  And then some of the same people bringing Davis to his knees, used their own Machiavellian tactics as an excuse to get rid of Davis.  This was a take-down of a lawfully elected governor, one more in the Tom Delay/Karl Rove Playbook. That was Chapter 1 of a figurative throwing “the book” at Arnold and his state’s (including the legislature) mismanagement. Chapter 2 involved the 2/3 rule implemented in California guaranteeing that because a 2/3 vote was needed for any tax or budget issue, CA would be ground to a halt. Chapter 3 ushered in the Car Tax Cut, which hurt Virginia, but was embraced by Arnold, and then decimated state revenues. Chapter 4 tells of unrestrained spending.  In Chapter 5, enter Wall Street to cause a bubble no one, least of all a state burdened by the above, could survive.  The whole sorry tale reads like a work of bad fiction, except that it happened.  

  • jack russell

    They have the ultimate political gridlock in that it takes a 2/3 vote to pass a budget.  And since no one party ever gets 2/3 of the seats, it is nearly impossible to pass a budget.

  • KathyinBlacksburg