Was Channel 11's TXU report shocking or old news?
Channel 11 investigative reporter Robert Riggs sits on a Florida beach, talking on his cell phone while on vacation, trying to explain how his story two weeks ago caused a huge one-day sell-off of TXU stock.
"We were shocked at the reaction by Wall Street," Riggs says. Nobody, he maintains, thought his story--a look into a very complicated lawsuit brought against TXU by small energy provider Texas Commercial Energy of Garland--would spark trading five times the normal daily amount, which led to a 4.2 percent decline in the stock. "Even we thought it was a bit of an overreaction."
Market analysts agreed, and within a week the stock had climbed back up above $40, about where it stood before the report. Because of the reaction to the report, and because TXU threatened a lawsuit in the wake of its airing, Channel 11 found itself facing charges from TXU--and others who follow the energy industry--that it had hyped an old story and smeared TXU in the process.
The background, condensed as much as possible for those not immediately, wildly interested in energy market squabbles: TCE is like Reliant Energy, one of the new competitors to TXU in the now-deregulated Texas energy industry, only much smaller. The company, because of its relatively shallow pockets, had to purchase energy day to day, not buy it with years-long contracts the way TXU and others do it. This means that when energy prices soar unexpectedly--as they did during a two-day ice storm in Dallas during February 2003--a company like TCE may find itself unable to tote the note. (Refer to the final floor-trading scene between Billy Ray Valentine and the Dukes in the 1983 hit movie Trading Places for context.)
This crippled TCE, which later went bankrupt and blamed TXU for deliberately manipulating energy prices during this time, the same claim made against Enron during the California energy crisis. TCE sued, saying they had tapes of TXU traders manipulating the market (again, à la Enron). TXU denied this, and last month the case was dismissed. TCE is appealing.
Riggs and Channel 11 investigative producer Todd Bensman played portions of those tapes during their news report, which alleged that conversations between traders, although inconclusive, could be interpreted as discussions about purposely cornering the market and refusing to sell until the price had become exorbitant. The report also focused on one trader who worked for Enron in Portland with supervisors who were later indicted and convicted by the feds. Although the report says the trader is "not indicted or accused of any crime," the implication is clear: The excerpts from the tape, added to TCE's claims, married to the fact five former Enron employees work for TXU, all mean that TXU is up to something.
"The Channel 11 report suggests something nefarious is going on, but they never say exactly what it is," says a reporter who has covered this story and asks that his name not be used. "Because people worked for a bad company means they can't go back to work in that field? Please.
"I want to break an Enron story here--who doesn't? But we were all [newspapers, wire services and TV stations, including Channel 11] offered those tapes back in February, and the papers reported on them during the trial. There's not much to them. All they've got is smoke."
(Energy beat reporters for The Dallas Morning News and the Fort Worth Star-Telegram declined comment. Channel 11 says the tapes are more newsworthy now given recent Enron developments.)
TCE was thrilled with the story, immediately sending out tapes of it to local media, along with a press release suggesting that its claims were upheld by the Channel 11 report. (A neat trick, since Channel 11 credited all the allegations to TCE.) And why shouldn't TCE be excited? The lead attorney that handled TCE's lawsuit, talking about a previous case, was recently quoted in the Wall Street Journal as saying, "I was feeding a lot of information to European and U.S. papers. It was part of my strategy to affect the stock price, which I was very successful at."
TXU, on the other hand, immediately issued a press release after the Wall Street reaction saying it was contemplating legal action against TCE based on what it said in the report. Reacting to the sell-off, Merrill Lynch issued a report saying, "TCE's allegations are not new as it has been claiming that market manipulation (rather than its own adoption of a risky short energy strategy) were the ultimate cause of its failure." It then called the sell-off of TXU stock an "overreaction" and reissued its "buy" rating. Wells Fargo also advised stockbrokers that the Channel 11 report was "without merit."
Chris Schein, spokesman for TXU, says he doesn't go that far. He even called Bensman to say he was glad Channel 11 let TXU tell its side in the report. "Besides, I know the limitations of electronic media, and it's hard for them to fully look at a story this complicated." He stresses, though, that he thinks the characterization of TXU as somehow engaging in Enron-like activity, as well as the treatment of the former Enron employee who now works for TXU, "was way over the top," saying, "We shouldn't attach a scarlet letter to people just because they worked at Enron."
Riggs says not only do they stand behind the story's merits, he says the carping from others is professional jealousy at best, laziness at worst. "If they are complaining," he says, "it's because they're embarrassed they got beat on this story. And if other reporters didn't know there were Enron traders working at TXU, it's because they didn't dig hard enough. We did. " --Eric Celeste
After Moses
One strong gossip theory is that Moses, a big old white man from East Texas, didn't have it in him for the next big fight coming up on the school board: race, race, race. When the district got out from under its 30-year-old desegregation case last June, that should have been the end of color-based court-ordered quotas for teacher hiring. In fact, the district's lawyers and internal human resources staff have told the board the district must revert to national standards, which means no more quotas.
But board member Joe May, who is Hispanic, confirmed to the Dallas Observer last week he's leading a movement on the board to ignore the lawyers and stick with racial and ethnic quotas. May said, "I would sense that the vote would come down pretty close, minorities on one side and whites on the other."
Then again, Moses, age 52, could be counting his moolah. This year he crossed the tenure mark with the Texas Teacher Retirement System to retire at full benefits. Our calculation, based on formulas provided by the TTRS, shows him qualifying for a pension of about $310,000 a year--almost twice what former Dallas City Manager Ted Benavides is taking home with him.
So, let's see: You're a big old white man from East Texas. You just hit four home runs: 1) getting crazy school board under control 2) getting out from under multiple corruption probes 3) getting out from under deseg court order 4) selling record bond issue to voters.
You look ahead and see a nasty racial and ethnic fight. You could stay for that and wind up with mud up your nose. OR...you could retire a winner at more than 300 G's a year and probably pull down huge fees as a consultant to a bunch of textbook publishers.
Do the math. --Jim Schutze
Word Up
After playing blackjack all night, Cree had dug himself into a $15,000 hole. Then he started winning. Big. For an hour, he played three hands at a time, sometimes six, sometimes as many as nine, betting $5,000 a shot. By 9 a.m. he'd made almost $200,000. By the end of the week, he'd raked in around $250,000. The winner of the Scrabble tourney--David Gibson--took home only $50,000.
"When you take that amount of money and everybody thinks, 'Aw, man, that guy's rich,' well, that kinda money coming in just ain't the same as that kinda money going out," Cree, 49, says. A third of the money went to the IRS, and half of the rest went to his estranged wife. Cree was left with $80,000, a nice chunk of change that he turned into a nice chunk of real estate near a golf course in Scottsdale, Arizona.
Cree's spent the last nine years living down that story. The owner of a wholesale forklift and investment company in Dallas--"They kind of go hand in hand, don't they?"--Cree would rather be known for his Scrabble playing. To certain people--the 10,000 or so tournament Scrabble players--he is. For good reason: Cree is the highest-rated player in Texas, and always a threat to win the National Scrabble Championships, though his best finish is fifth. Maybe his luck will change at the upcoming national tournament, scheduled for July 31 through August 5 in New Orleans. After all, Cree is on quite a run. He had last August's All-Stars of Scrabble outing "in the palm of his hand," he says, before giving away the lead in the final two games. Plus, a few months ago, he set an unofficial world record by racking up 329 points when he played "blowzier" through two triple-word squares. In Scrabble, a streak of good luck--drawing the high-scoring tiles and getting the high-scoring squares--has as much to do with the game as word knowledge. Cree definitely knows something about luck. --Zac Crain
