Broker, Trader, Lawyer, Spy Read Online Free PDF Page A

referrals and mutual assistance to a group of executives whose business affiliations and loyalties extend across national borders and around the world. The group was poised to take advantage of the new opportunities available in the global economy. In the coming years, Barbour Griffith and Rogers would represent clients from all over the world, including the governments of Equatorial Guinea, Eritrea, Honduras, Serbia, and Qatar. The business wouldprove lucrative: Eritrea, a desperately poor country bordering Sudan in eastern Africa, for example, would sign a contract to pay the lobbying firm $65,000 per month for “strategic counsel and tactical planning” in Washington. 3
     
    F OR D ILIGENCE, THE global network of connections paid off, and business started to accelerate. Through a contact who had formerly worked at the CIA, the Diligence team landed a high-paying assignment working for Enron, the Houston-based energy trading firm. Enron had spent years lobbying in state capitals and in Washington for energy deregulation, which would allow anyone to buy and sell electrical power just like other commodities. The huge company was politically well connected with the newly elected administration—President George W. Bush famously nicknamed his fellow Texan, Enron’s CEO Kenneth Lay, “Kenny Boy”—and it was posting huge numbers. In July 2001, it reported earnings of $50.1 billion, more than triple the year before. But before long, those numbers, like much of the firm’s operations, would prove nothing more than a mirage.
    What no one knew at the time was that Enron was hiding more secrets than just its bogus accounting. Buried deep inside Enron was a corps of intelligence veterans, spies who reached out to Diligence for help vetting the companies that the energy giant wanted to acquire. But soon the Enron intelligence team had a much bigger idea. The company’s traders could make more money if they could determine in advance when power plants would be turned off for maintenance.
    Power plants can’t run ceaselessly. Periodically, they have to be taken off-line for inspections and repairs. This maintenance is done at regular intervals, but not always with public notice. And when the plants go down, sometimes for days at a time, the price of electricity in an entire region can go up, following the time-tested laws of supply and demand. The less electricity in the market from the power plant, the more expensive the remaining electricity will be.
    For an energy trader, advance notice of a power plant shutdown could be a powerful way to make money. Armed with a schedule, Enron traders could make bets in the energy markets based on nearly certain knowledge that electricity prices would rise, by how much they would increase, and when it would happen. These bets—a sure thing, in some cases—could be worth millions of dollars.
    Enron approached Diligence with a proposition. It wanted to know when the power plants would be going on and off. Enron’s intelligence officers had already developed a checklist of things a plant would do just before a shutdown. For one thing, plants tended to let the supply of coal on their property run low just before shutdown—no sense investing in expensive inventory that the plant wouldn’t be using anytime soon. Also, even routine plant maintenance requires specialized employees to visit the facility. To accommodate them, plant owners frequently brought in portable toilets to set up around the grounds. And all those new workers require a place to stay. In the rural areas of Europe where power plants are frequently situated, the one or two local hotels were bound to be booked to capacity during the maintenance project.
    For a spy, all these preparations are easy to detect. In late 2000 and 2001, Diligence set about gathering intelligence on as many as a dozen of continental Europe’s biggest power plants. Baker won’t say exactly where the plants were, but another person familiar with the