Death Star (business)
The Death Star strategy, named after the Death Star, was the name Enron gave to their practice of shuffling energy around the California power grid to receive payments from the state for "relieving congestion." According to the company's own memo they would be paid "for moving energy to relieve congestion, without actually moving any energy or relieving any congestion."
For example, if the California power grid was congested with energy flowing south, Enron would schedule energy to be transmitted north to Oregon. They would receive a payment from California for apparently relieving congestion on the grid. Then Enron would schedule the energy to be transferred back to its point of origin, but not through California. Ultimately the energy would end up right back where it started, and Enron would be paid by California without actually putting any electricity on their grid.
Similar business practices by Enron
"Fat Boy": This scam (aka "Inc-ing") also involved overscheduling power transmission – for example, to a company subsidiary that didn't really need all of it. Then Enron would sell the "excess" power to the state at a premium.
"Ricochet": Also called "megawatt-laundering" (by analogy to money-laundering), Ricochet was the power equivalent of a real-estate land flip: buy in-state power cheaply, flip it out-of-state to an intermediary, then re-sell it to California at a highly inflated "imported" price.
John Forney, a former energy trader who invented various strategies such as the "Death Star," was indicted in December 2002, on 11 counts of conspiracy and wire fraud. His supervisors, Timothy Belden and Jeffrey Richter, have both pleaded guilty to conspiring to commit wire fraud and currently are aiding prosecutors in investigating this scandal. On August 5, 2004 John Forney plead guilty to conspiracy to commit wire fraud and in 2007 was given 2 years probation and a $4,000 USD fine.
- Kranhold, Kathryn; Bryan Lee and Mitchel Benson (2002-05-07). "New Documents Show Enron Traders Manipulated California Energy Costs". Free Preview (The Wall Street Journal). Retrieved 2008-08-21.
- "Former Enron Trader Pleads Guilty". CBS News. 2004-06-16.