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SUBJECT:  Texas Pacific's failed attempt to acquire PGE from bankrupt Enron and Warren Buffett's current attempt to acquire PacifiCorp from Scottish Power.   Why both efforts will fail and how Warren Buffett evolved from being the admired sage of Omaha to running a sophisticated financial shell game in which he now needs to acquire regulated utilities to stabilize an insurance pyramid scheme involving 50 separate domestic and international insurance companies sufferring from aggressive accounting procedures.

Note:  Blog Created September 2007 with Updated Comments

Copyright and updated October 10, 2005

PORTLAND, Ore., --  Note that substantially all the text listed are small excerpts quoted from the noted media source with interpretations limited to the analysis and commentary section.  References are sorted by date. Also note that most of the references regarding PGE occur prior to March 16, 2005.

Only "official references" accompanied by a valid link to a credible source will be considered for addition. 

Click here to See five minute video of Bill Testifying before the Public Utility Commission on April 28, 2004 regarding Texas Pacifi'c proposed acquisition of PGE.  Note that this direct hard hitting testimony was intended to "wake up" the commissioners and prevent a legal debacle for all parties involved. It is a Windows media file able to be viewed on most PC's running Windows XP but unfortunately not a MAC. Click here to see Bill Thanking Elliott Spitzer for his comments related to Portland General Electric at the TD Waterhouse Institutional Investment Services National Conference in San Diego on February 3, 2005. 

Summary Comment by Bill Parish Followed by Detailed Supporting References

Together PacifiCorp and PGE provide electricity to the majority of Oregon's businesses and consumers, serving 700,00 and 500,000 customers respectively ranging from industrial users, of which Intel is the largest, to residential customers.  In 2003 former Oregon Governor Neil Goldschmidt and his lobbying partner Tom Imeson maintained PacifiCorp as their firms largest client, earning roughly $1 million in annual consulting fees.  During 2003 Tom Imeson also screened public utility commission candidates for Governor Ted Kulongowski,, the three commissioners that would be responsible for voting regarding any future takeover of utilities.  Imeson had been head of Kulongowski's transition team when he was elected Governor and other than Goldschmidt himself has been Governor Kulongowski's closest advisor. 

Later during the summer of 2003 the Texas Pacific Group announced its bid to acquire PGE from bankrupt Enron, naming Neil Goldschmidt as Chairman. Shortly before this announcemennt Mr. Goldschmidt's wife Diana voted along with 4 other members of the Oregon Investment Council to invest $300 million in Texas Pacific, making Oregon's public employees the largest single investor in Texas Pacific.  In order to accept the job with Texas Pacific, Goldschmidt resigned his engagement with PacifiCorp yet what was not known publicly at the time was that PacifiCorp itself was for sale.

Many now believe that Buffett was simply waiting for the Texas Pacific deal to close, effectively greasing the regulatory wheels, after which he could purchase PacifiCorp from Scottish power followed by purchasing key service territory from Texas Pacific. TPG would then spin off the remaining pieces to another utillity, pocketing close to $1 billion by its own estimates, in less than 3 years.  Although Texas Pacific stated it would be a long-term owner, executives stock options were set to fully vest in 3 years.  Goldschmidt boasted that this engagement was all about public service yet did not highlight he stood to make almost $10 million in 3 years.

While many have a positive opinion of Buffett, most are unable to answer even the most basic questions regarding what Berkshire Hathaway is and perhaps therein lies Buffett's genius.  Investors think of Sees Candy, Benjamin Moore Paints and Dairy Queen yet such businesses represent a very small part of the overall fund.  Buffett's fund is also largest shareholder in the bond rating company Moody's in addition to extensive media holdings and related advertising budgets in consumer related businesses, giving him enormous media clout and making it almost impossible for mainstream journalists to accurately report what he represents.  Interestingly, seventy five percent of Buffett's gross revenues and net income come from two areas, insurance and financial products (including a massive speculation against the US dollar) and McLane, Walmart's distribution system purchased from WalMart in 2003..

My personal perspective is to wish Mr. Buffett luck yet also advise him that Oregon, after surviving Enron's collapse and its impact on Portland General Electric, Enron's largest operating subsidiary purchased in 1997, is not interested in bailing out another public relations genuis playing a sophisticated financial shell game.  Neither myself nor any of my clients own any Berkshire Hathaway shares or financial interests, direct or indirect, other than standard broad market based index funds, other than one client owning less than 5 shares of its class B stock. 

Berkshire Hathaway's shares trade at about where they were in 1998 and have not paid a dime of dividends, therefore, some shareholders are becoming restless.  Meanwhile, the CEO's of Buffett's various companies are profiting greatly, Buffett himself noting that they all have net worths in excess of $100 million each.    

2005 October 11  Letter from Bill Parish to Securities and Exchange Commission Chairman Christopher Cox Regarding Berkshire Hathaway's attempt to acquire PacifiCorp


Christopher Cox
Chairman - SEC
450 Fifth Street N.W.
New York, NY 20549

cc: Eliot Spitzer - NY Attorney General
      John Bogle - Founder Vanguard Funds
      Bill Gates Sr. - Gates Foundation
      Lee Beyer - Chair Oregon Public Utility Commission
      Fred Stickel - Publisher, The Oregonian
      Other Interested Parties, Posted on Website 10/10/05

Dear Chairman Cox,

On May 26, 2005 I sent Warren Buffett of Berkshire Hathaway a letter indicating concern over his proposed acquisition of PacifiCorp. The letter specifically referenced concerns regarding the Berkshire Hathaway holding company, adding that I had no interest in speaking with executives from its subsidiary Mid America. Soon after I received a letter from David Sokol, Chairman of Mid America, offering to discuss any particular concern regarding the proposed acquisition. 

My specific objective was to engage Mr. Buffett and demonstrate that it was not appropriate for him to hide major accounting irregularities at Berkshire Hathaway.  Many might argue that General RE, which he has owned for 7 years, is a shining example of this.  One could also wonder how so much energy could be spent on Martha Stewart when Mr. Buffett's $130 billion fund's shareholders now include many retirement plans, both public and private, for example the $600 million investment by CalPers, and he stubbornly refuses to make the multi-billion write-down to what is clearly "impaired" goodwill at General RE.

Oregon has seen enough creative finance via Enron and doesn't need to bail out a fund with 50 domestic and international insurance companies, $20 billion bets against the US dollar and other unacceptable risk factors.

Not getting a response from Mr. Buffett, I then decided to throw out a specific test to him, inspired by a speech from former Oregon Republican Governor Dave Frohnmayer before the Portland City Club to see how Buffett would respond. 

Frohnmayer's speech involved the rarely considered Machiavellian corollary, that is challenging "means" aimed at a good or noble "end," in this case testing Buffett with an imperative proposal designed to provoke a response to see how he would respond and whether his fund would be a credible owner of PacifiCorp.

This test involved a four paragraph follow up letter stating that I would not support the PacifiCorp merger unless additional protections were added given the expected repeal of PUHCA, specifically the creation of a non profit foundation aimed at financial oversight in this area that would be exclusively controlled by myself.

Buffett would have two choices, the first being to inquire about more specific aspects of my concerns and how they might be addressed and the second choice would be to use my demand to discredit my efforts as nothing more than self-interest.

Copied on this four paragraph letter to Buffett were NY Attorney General Eliot Spitzer, John Bogle, founder of Vanguard Funds, previous SEC Chairman Bill Donaldson and Bill Gates Sr., one of Buffett's close personal friends, to avoid any perception of self interest.  They are also copied on this letter.

Continuing the test, this brief four paragraph letter was followed up with a phone call to Sokol on August 2, 2005, which I recorded.  During this long conversation I repeatedly told Sokol that it really was not important that I be involved with this non profit entity or anything else but rather than Berkshire Hathaway step up and support additional financial protections given that with PacifiCorp they would obtain a "footprint to the West Coast." 

Sokol responded, why should we be held hostage?  I stated because Berkshire Hathaway will be the biggest beneficiary of PUHCA repeal, gaining a footprint to the West Coast, and Sokol himself was instrumental in its repeal.  Sokol was clearly upset because he now knew that my proposal indeed had nothing to do with self-interest, my concerns were legitimate and that the original brief letter to Buffet, on which both the NY Attorney General's office and SEC were copied, was designed only to get his attention. 

The test was now adequately framed to see how Sokol and Buffett would respond.

A few weeks later David Sokol then sent me a very threatening letter, accusing me of attempting a Class C felony, extortion, and also threatened other actions, completely ignoring our long phone conversation on August 2nd in which I repeatedly said my involvement was not necessary on any level. 

While some many criticize my method, given the history of Enron, I felt it important to test management at Berkshire Hathaway given its plan to acquire Oregon's second largest electric utility.   Compounding this concern is Berkshire Hathaway's attempt to continue collecting federal and state taxes charged to ratepayers that are never remitted to the government. 

My overall summary comment is this. Imagine how difficult it is for investment advisors like myself doing outstanding work with respect to advancing key SEC initiatives, in particular accounting initiatives, when the top executive at a major firm like Berkshire Hathaway, in this case David Sokol, dishonestly and dishonorably attempt to intimidate me with legal and other actions.

In July the Oregonian, the state's largest daily, asked me for a 600 word opinion piece on Buffett and Berkshire Hathaway's related attempt to purchase PacifiCorp.  Strangely, key word searches in the paid archive for terms used in the article, including Berkshire, yield nothing.  In addition, there has been almost no coverage regarding Berkshire Hathaway's other businesses and how they might impact PacifiCorp.

In the Oregonian's defense, it must be very difficult given the large number of Buffett's companies that do extensive advertising, ranging from Sees Candy to Benjamin Moore Paint, and the high pressure tactics demonstrated by Mr. Sokol's response to my concerns.  Oregonian publisher Fred Stickel is copied on this letter.

Although these retail companies do exert media clout, 75 percent of Berkshire Hathaway's gross sales and net income come from insurance/financial products and McLane, Wal-Mart's distribution system Buffett purchased from Wal-Mart in 2003.  High risk insurance coupled with creative accounting and the low margin Wal-Mart centric distribution company, McLane, are simply not a good mix for PacifiCorp.

Perhaps it is up to the SEC to provide the news story, that being a Wells notice to Mr. Buffett himself?  Indeed, this would be my recommendation so that the Oregon Public Commission wakes up and does its due dilligence on Berkshire Hathaway rather than adopting a narrow scope focused on one subsidiary, Mid America.

In any event, please do encourage Mr. Sokol and Mr. Buffett to send me a written apology for unfairly attempting to intimidate me.  Command and control may be an effective internal policy at Berkshire Hathaway yet it is inappropriate for our free market based economy predicated upon adequate disclosure.  Such an apology posted up on my website should send the appropriate message to local media representatives, public officials and others who might have been impacted by Mr. Sokol's efforts to discredit my fine reputation.

My track record on supporting the SEC is clear, strong and documented in my website archive going back to 1998, coincidentally the year in which Mr. Buffett purchased General RE and became responsible for its operations.  This has been an unmitigated disaster for Mr. Buffett, especially given that his fund hasn't paid a dime of dividends since 1998 and remains at roughly the same price.

During this time I have learned that a little creativity can yield excellent results, for example succesfully managing a change in the accounting for stock options at Microsoft.  Here is a link to an article I wrote for Barrons one month before the change occurred.

Again, my hope is that you will provide Mr. Buffett a Wells notice and require him to write down at least half of the goodwill with respect to his acquisition of General Re.  This should be a minimum starting point if Berkshire Hathaway expects to acquire one of Oregon's economic crown jewels, PacifiCorp. 

Respectfully and with increased admiration for those who took on Enron early,

Bill Parish

2005 October 1  Chapman gets sweet deal from CEO of Sees, by Juliet Hyams, Northwest Examiner

Chapman grade school graduate and long-time CEO of  Sees candy Charles Huggins is offerring a $25,000 matching grant for the Portland, Oregon based school auction this year.  Warren Buffett is quoted in the article as stating "Chuck combines the discipline of a fine analytical mind with intuitive marketing saavy and a moral sensibility that is rare in the 21st century, I wish I could clone him."

Analysis and Commentary:  Not disclosed in the article is that Huggins sister company at Berkshire Hathaway is attempting to acquire PacifiCorp, the electric utility serving many Portland schools whose electric bill was $3.1 million for the year ending June 30, 2005.  Many believe a public utility corporation similar to what Buffett enjoys in his home town of Omaha Nebraska would lower power rates 20 percent. Also not disclosed is that Berkshire Hathaway is attempting to continue a practice of charging schools and other power users for state and federal taxes that will never be remitted.  Yes indeed, Mr. Huggins has marketing saavy as he samples a Sees chocolate with a broad smile on the front page of the Northwest Examiner.

2005 September 5  E.ON eyes Scottish Power takeover, BBC News

Weekend newspaper reports suggested that E.ON had hired investment bank Lazard to advise it on a possible bid for Scottish Power.  Rival German utility operators have also been reported as potential suitors for Scottish Power.

Analysis and Commentary:  Clearly, Scottish Power will be sold, making an excellent opportunity for the State of Oregon to establish a public corporation and provide a long term solution to the utility crisis impacting Oregon's businesses and consumers.  Thinking that stability can be achieved otherwise is simply naive.

2005 August 8  Berkshire Hathaway Quarterly 10Q Filing for the Quarter ending 6/30/05 Analysis and Commentary:

A few highlights from the Berkshire Hathaway 10Q report include the following:

1)  10Q Balance Sheet, Printed Page 3:  Berkshire Hathaway shows an asset called goodwill with a balance of $23.2 billion and this amount represents 26 percent of shareholders equity.  This is significant because goodwill is the amount Mr. Buffett has paid in excess of appraised asset values for various busineses.  Prior to 2002, accounting rules required goodwill to be written off ratably over several years.  Now, however, goodwill is only required to be written off if it is deemed "impaired" by management.

In a chapter right out of Enron's playbook, Mr. Buffett has creatively determined that no such impairment has occurred and therefore he has not written off any goodwill since 2001.  What this means is that Berkshire Hathaway's net income is grossly inflated, perhaps as much as $6 billion over the last few years.  In order to verify this observation one need only look at one such company purchased, his reinsurer General RE.

When Buffett bought General RE he had to recognize roughly $12 billion in goodwill yet even after very significant declines in General RE's business subsequent to the purchase, multi billion dollar underwriting losses and resignations from top executives resulting from fraudulent transactions with insurance giant AIG, he stubborly refuses to "write-down" this asset as impaired.  This is rather remarkable because numerous other companies have taken dramatic write-downs, including Time Warner AOL's $50 billion write-down.  Clearly, there appears to be some form of double standard regarding Buffett.

Also noteworthy is the management discussion in the annual 10K report on printed page 46, in which Buffett booked a "one time reduction of $70 million in pension expense at General RE during the third quarter, resulting from the curtailment of certain benefits at the end of 2005."  This dipping into the pension fund via revised assumptions basically allowed Buffett to add $70 million to General RE's bottom line. 

What Buffett is essentially doing is exactly what occurred in Japan, creating deadwood on his balance sheet, coupled with creative accounting,  in order to finance acquisitions and this could lead to disruptions in the financial system.  While many perceieved that Japan had a banking crisis, in reality it was simply an accounting crisis in which assets were not written off but rather held on the balance sheet and used as collateral for loans.  Of course the loans to banks in Japan could not be rapaid because them were based upon phantom assets. In Buffett's case, the acquisition he is now trying to legitimize is the purchase of a regulated utility, PacifiCorp.

2)  10Q Balance Sheet, Page 3.  Cash is listed as $43.2 billion yet the operative word here for an insurance driven company like Berkshire Hathaway is "float."  Unlike Microsoft which has its cash free and clear, Berkshire Hathaway must consider its float because a large part of that cash may indeed go toward settling future insurance claims.

3)  10Q Notes to Interim Statement, Printed Page 9.  Berkshire Hathaway purchased one of the nations largest medical malpractice insurance companies from GE for $825 million. See note on June 6 summarizing NY Times article clarifying that increasing premiums for physicians are not going to settling more claims but rather to profit at insurance companies like Berkshire Hathaway.  This may be good for Mr. Buffett's shareholders yet it seems odd to see him publicly claim that a key problem with rising health care costs is trial lawayers, when in reality the problem is now profits from his insurance companies.  This is particularly relevant given his close ties to Wal-Mart, having purchased Wal-Mart's distribution, McLane, in 2003.  While Wal-Mart boasts about its medical coverage, in reality many employees are now appearing on state Medicaid rolls due to the poor coverage.  One need only ask any practicing physician how they feel about Wal-Mart to verify this claim. McLane now respresents almost a third of Berkshire Hathaway's entire gross annual revenues.  This massive low margin businees is putting pressure on Buffett to create high profits elsewhere.

4)  10Q Notes to Interim Statement, Printed Page 11.  Interest expense on debt held by Berkshire Hathaway, basically a loan made to Mid America, is $81 million YTD at 6/30/2005.  The rate Berkshire Hathaway charges its subsidiary on this roughly $1.5 billion in debt is 11 percent.  Note that I had written a few articles using 11.5 percent and my opologies to management for that small error.  The point is that this rate does seem rather high, which is good for shareholders but not necessarily those customers at MidAmerica's various operating entities who indirectly bear this cost.  

5)  10Q Management Discussion, Item 2, Printed Page 40.  Berkshire Hathaway has lost $926 million YTD speculating on the decline of the US dollar.  Perhaps most unusual about this is that Mr. Buffett did not just go out and invest in foreign bonds but rather purchased speculative foreign currency contracts of more than $21 billion.  Again, this is exactly why Berkshire Hathaway is a bad fit for PacifiCorp and why PacifiCorp and its ratepayers would be the one lending stability, rather than the reverse.  These currency losses represent almost 30 percent of Berkshire Hathaway's entire pre-tax income for the quarter ending 6/30/2005.

2005 August 8  Letter to SEC Chairman Christopher Cox and NY Attorney General Eliot Spitzer on Accounting Irregularity at Berkshire Hathaway


Christopher Cox
Chairman - SEC
450 Fifth Street N.W.
New York, NY 20549

cc:  Eliot Spitzer-NY Attorney General
Dear Christopher,

Today I posted a comment on my web site that might be an excellent opportunity for your office to fix a significant accounting irregularity.  Simply put, Berkshire Hathaway needs to come clean on its financial statements regarding how it accounts for goodwill.

Please do consider the following comments in addition to formally and publicly informing Berkshire Hathaway that they are suspended from making acquisitions of assets involving publicly traded companies for 12 months due to this irregularity.

This could indeed bring tremendous credibility to your office given that Buffett seems to be enjoying a double standard on key accounting issues.

Formal Comment:  In Berkshire Hathaway's 10Q filed with your office on Friday August 5, 2005 its balance sheet shows an asset called goodwill with a balance of $23.2 billion.  This amount represents 26 percent of total shareholders equity.

This is significant because goodwill is the amount Mr. Buffett has paid in excess of appraised asset values for various businesses.  Prior to 2002, accounting rules required goodwill to be written off ratably over several years.  Now, however, goodwill is only required to be written off if it is deemed "impaired" by management.

In a chapter right out of Enron's playbook, Mr. Buffett has creatively determined that no such impairment has occurred and therefore he has not written off any goodwill since 2001.  What this means is that Berkshire Hathaway's net income is grossly inflated, perhaps as much as $6 billion over the last few years, because some assets are indeed impaired.  This is having a significant impact on investors given that Berkshire Hathaway is publicly traded and has a current stock market valuation in excess of $125 billion.

In order to verify this observation one need only look at one such company purchased by Buffett, his reinsurer General RE.  When Buffett bought General RE he had to recognize roughly $12 billion in goodwill yet even after very significant declines in General RE's business subsequent to the purchase, multi billion dollar underwriting losses and resignations from top executives resulting from fraudulent transactions with insurance giant AIG, he stubbornly refuses to "write-down" this asset as impaired.

This is rather remarkable because numerous other companies have taken dramatic write-downs, including Time Warner AOL's $50 billion write-down.  Clearly, there appears to be some form of double standard regarding Buffett.

Also noteworthy is the management discussion in the most recent 10K in which Buffett booked a  "one time reduction of $70 million in pension expense at General RE, resulting from the curtailment of certain benefits at the end of 2005."  This dipping into the pension fund via revised assumptions basically allowed Buffett to add $70 million to General RE's bottom line.

What Buffett is essentially doing is exactly what occurred in Japan, creating deadwood on his balance sheet, coupled with creative accounting,  in order to finance acquisitions and this could lead to disruptions in the financial system.

While many perceived that Japan had a banking crisis, in reality it was simply an accounting crisis in which assets were not written off but rather held on the balance sheet and used as collateral for loans.  Of course the loans to banks in Japan could not be repaid because they were based upon phantom assets. In Buffett's case, the acquisition he is now trying to legitimize is the purchase of a regulated utility, PacifiCorp.

Thank you for considering this observation.  I did make a good faith, and some might argue rather creative, effort to enter a dialogue with Mr. Buffett yet was not successful.  Best regards.

Bill Parish

Analysis and Commentary:  None

2005 August 3  PacifiCorp Deal Arrives at PUC, by Gail Kinsey, Oregonian

"We can guarantee that with Berkshire's backing, PacifiCorp will be sufficiently capitalized," Abel said during a meeting of the Public Utility Commission in Salem.

Marc Hellman, a finance and policy analyst with the PUC, said MidAmerican will have to change its acquisition proposal slightly to reflect the law's repeal but that "it doesn't change the dynamics of the state's review." Oregon regulatory law "is fairly strong," he said. "I don't see (PUHCA) repeal causing dire consequences. We'd be doing the same analysis either way."

The three-member PUC has not yet weighed in on the arguments. Generally, commissioners take about 10 months to complete their review, though the Texas Pacific application took a full year. MidAmerican has asked that a ruling be issued by Feb. 28, seven months away. PUC Chairman Lee Beyer said he would consider the company's request, but he made no promises.

Analysis and Commentary:  What the analysts and utility commissioners are not yet seeing is that the repeal of PUHCA basically transfers oversight from the Securities and Exchange Commission (SEC) to the Federal Energy Regulatory Commission (FERC).  Sadly, FERC has shown, in dramatic fashion with Enron, that it is too heavily influenced by the energy industry.  Most concerning is FERC's capacity to draft rules that could supercede state based rules, making adequate oversight impossible.

Regarding Berkshire Hathaway's capital status, of course it is by its own recognition fundamentally an insurance company and should be so evaluated.  For example, its goodwill, what somecall "deadwood' on its balance sheet  (See quarterly earnings analysis at August 8, 2005 note) representes more than 25 percent of net equity whereas goodwill at Allstate insurance represents only 4 percent of net equity.

2005 August 2 Portland Tribune, by Bill Parish, Wal-Mart buys help in utility bid

Attention Wal-Mart shoppers. Stock up now so that billionaire investor Warren Buffett and his company Berkshire Hathaway can deliver more goods, generate more profits and buy your local utility. Sound ridiculous? Not really.

Berkshire Hathaway Inc. bought Wal-Mart Stores Inc.’s distribution system, McLane Co., in 2003 — it now accounts for one-third of Berkshire Hathaway’s entire gross annual revenues. The profits earned stocking the shelves at Wal-Mart are now helping Buffett buy PacifiCorp, the state’s second largest utility.

Berkshire Hathaway calls itself a “holding company in which the most important business is insurance.” This includes a highly profitable medical malpractice subsidiary that shows Buffett’s standard mode of operation, which is good for shareholders but not consumers. Buffett does acknowledge that his reinsurance business — in essence, insuring insurance companies against catastrophic losses — is very risky. He states that a “single event could produce a loss of $5 billion.”

What seems clear to me, other than the fact that Buffett’s dependence on Wal-Mart and high-risk insurance operations won’t lend much stability to PacifiCorp, is that Buffett wants to be PacifiCorp’s bank. We need only look at MidAmerican Energy Holdings Co., an Iowa-based utility that Berkshire Hathaway purchased in 2000, to see how the “Bank of Buffet” works.

Since being acquired, MidAmerican has borrowed $1.5 billion from Berkshire Hathaway to finance growth and now is paying 11.5 percent annual interest, considerably higher than market rates. What Iowa City ratepayers really got by selling to Buffett is their own personal loan shark.

Oregonians learned a great deal from Texas Pacific Group’s failed effort to purchase Portland General Electric. We learned that former Oregon Gov. Neil Goldschmidt stood to earn more than $9 million in only three years and that his consulting firm’s largest client before the PGE deal was announced was Scottish Power.

We now also know that Scottish Power set in motion the steps to sell PacifiCorp in 2003, about the same time Goldschmidt’s partner, Tom Imeson, was screening Oregon Public Utility Commission candidates, those who would approve the PGE deal, for Gov. Ted Kulongoski.

A cynic might claim the PGE transaction was intended to simply grease the regulatory wheels for Buffett’s PacifiCorp purchase. Texas Pacific then could sell off select PGE properties to Buffett and carve up its power generation assets, and Buffett later could fold in NW Natural.

Although the players have shuffled around a bit after Texas Pacific’s failed bid, not much has really changed. Meanwhile, Buffett enjoys the benefits of Omaha Public Power in his hometown of Omaha, Neb., and rates 20 percent below those charged by comparable private electric utilities.

My advice to the anti Wal-Mart movement is to expand your scope and also take a stake in the future of Oregon’s economic crown jewels, utilities, so that we don’t wake up one morning and see them in Buffett’s private collection along with those Wal-Mart delivery trucks that threaten your neighborhood and local businesses. This will enhance your credibility by moving beyond a single issue, and probably involve the same cast of characters anyway. See complete article online at

Analysis and Commentary:  None

2005 August 1 Urum's Finite Prospects, by Jonathan Laing, Barrons

The Berkshire deal in 2004 invites particular attention, since finite reinsurance transactions have become a target of regulatory scrutiny. That probe by federal and state authorities arose partly from a 2000 deal between American International Group and another Berkshire insurance unit, General Re, that allegedly helped AIG artificially boost its reserves to satisfy policyholder claims. Two former General Re senior executives have pleaded guilty to federal criminal charges, and the investigation is still in its early stage. The inquiry is not known to have touched on Unum.

*JUST AS IN THE AIG-GEN REN DEAL*, the two parties of the Unum-National Indemnity transaction used different accounting treatment for the very same transaction, an unusual occurrence. National Indemnity accounted for the $707 million in cash that Unum sent it as a deposit on its own books. Future Unum claims that National Indemnity will be obligated to pay will come solely from the $707 million deposit and the slow accretion of interest that is built up over the years. Thus, in effect, Unum under this treatment is merely financing its own future claims through Berkshire, even though it will be able to "cede," or send, future claims to National Indemnity.

The attraction of the deal to National Indemnity is that it will be able to bank the $707 million and will have to credit the account only with an interest rate of about 3.5%. Berkshire can pocket any return that National Indemnity makes off the float above that crediting rate. And Buffett, the world's most celebrated investor, could notch annual returns well above that rate even in government bonds.

So could Unum if it just held on to the funds rather than sending them to Berkshire. But booking the payments as loss-transferring reinsurance, the company obtained a number of accounting, if not economic, benefits. For one, Unum puts off for at least a few years having to fully assume the claims cost on the restructured policies for professionals, since roughly 60% of the claims will be shipped off to Berkshire until the accreted total at National Indemnity is exhausted. This will improve Unum's apparent, if not actual, underwriting results while obviously hurting the company's investment income. But Wall Street pays a much higher earnings multiple for a dollar of underwriting income than for a buck of investment income. And today's low-interest- rate environment offers a convenient excuse for substandard investment income.

Likewise by using finite reinsurance accounting, Unum will be able to bolster certain financial metrics that are closely tracked by insurance regulators and Wall Street. The deal will allow it to increase its statutory capital and therefore the amount of new business it can write. This is a result of an item that shows up on its statutory state filings known as "deferred gain on reinsurance of inforce block of business".

Analysis and Commentary:  One might ask, if the insurance regulators can barely understand this, how will the Oregon Public Utility Commission be able to understand.  Of course to date Berkshire Hathaway has only disclosed financial information regarding its Mid-America subsidiary holding company and has provided no detailed information on its insurance and Wal-Mart related operations.

2005 July 24  Repealing utility regs may drive up rates, by N. Nokkentved, Utah Daily Herald

Some local Utah power providers are concerned that repeal of the law will lift consumer protection in place for the past 70 years. Among them is the Utah Associated Municipal Power Systems, a 48-member association of municipal electric utilities and other government units in Utah, Arizona, California, Idaho, Nevada and New Mexico that provide local retail electric or other utility services.

"We oppose the repeal of the Public Utilities Holding Company Act," said Ted Rampton, manager of government affairs, unless the repeal includes some meaningful offsetting mechanism for reviewing holding company mergers. "The act has offered a lot of protection for consumers since it was enacted in 1935," he said. And consumer protection also is the main concern of Kevin Garlick, energy director for the city of Provo. He doesn't expect the repeal to have any major effect on Provo residents, but he worries that consumers may "get marginalized by huge mergers that may result from the repeal."

The city is part of the Utah Municipal Power Agency, a group of six central Utah cities that work together to provide power to residents from a variety of sources. The agency has plenty of capacity to meet demands.

Repeal would turn over regulation of interstate holding companies to the Federal Energy Regulatory Commission. The Securities Exchange Commission now has that authority. More important, investors say, repeal would open investment opportunities in the industry. MidAmerican has long been after Congress to repeal PUHCA. "It keeps capital out of this industry," Weissgall said. "It is simply restricting the flow of capital."

But that argument doesn't seem valid, says a 2004 report by New York credit analyst Jeffrey Wolinsky, for Standard & Poor's, a Wall Street credit and investment analysis company. The need for new generation is low in most areas, the report says. And despite an estimated $56 billion in transmission infrastructure needs, "investor appetite for the debt and equity of companies with stable regulated revenues has not waned," Wolinsky wrote.

Companies may say they want the opportunity to invest in new capacity. But after the power crisis in California in 2000 and 2001, following a partial repeal of PUHCA, Hargis is not so sure they mean it.  When power demand exceeds the supply, wholesale rates go up. That was demonstrated dramatically when energy giants, including Enron, manipulated the energy market during the California crisis. Wholesale power rates in some parts of the West went from $35 per megawatt to $350 for the same amount of power. Repealing PUHCA may make it easier to pass those increased rates on to rate payers, Hargis said.

Analysis and Commentary: None

2005 July 18, 2005:  Risky business: Warren Buffett and PacifiCorp, by Bill Parish, Oregonian Op-Ed

Billionaire investor Warren Buffett is widely respected, but his Berkshire Hathaway investment fund should be prevented from purchasing Portland-based PacifiCorp. Why? Because of the unique risks associated with the fund's relationship to the insurance industry and the giant retailer Wal-Mart.

Together, these two areas of business represent 75 percent of Berkshire Hathaway's gross annual revenues and net profits. The fund has more than 50 domestic and foreign-based insurance companies, including a highly profitable medical malpractice subsidiary, and it readily acknowledges that the reinsurance business -- in essence, insuring insurance companies against catastrophic losses -- is very risky. Buffett's own analysis states that a "single event could produce a loss of $5 billion." Because of this risk, it's actually PacifiCorp that may be bringing long-term stability to such a deal rather than Berkshire Hathaway.

Buffett now also owns Wal-Mart's distribution company, McLane, which he purchased from Wal-Mart in 2003. Today, McLane represents an amazing one-third of Berkshire Hathaway's entire gross annual revenues. Wal-Mart's predatory practices are controversial here in Oregon because they tend to drive out smaller companies that form the backbone of the tax system and support schools and community services. But more importantly, Berkshire Hathaway is a bad fit for PacifiCorp because the fund has too many of its economic eggs in one basket.

While it's purchase of Wal-Mart's distribution system has dramatically increased Berkshire Hathaway's gross sales and provided more stability to its high-risk insurance operations, it hasn't done much for net profits because of the high-volume, low-margin nature of Wal-Mart's business.

And that is almost certainly why Buffett wants a captive regulated monopoly like PacifiCorp. Specifically, he wants to become PacifiCorp's banker so that he can lend money to the utility while charging high interest rates on the loans.

How can we know this? Well, we need only look at MidAmerican, the Iowa-based utility that Berkshire Hathaway purchased in 2000, to see how the Bank of Buffett works. Since it was acquired, MidAmerican has borrowed $1.5 billion from Berkshire Hathaway to finance growth, and it is now paying 11.5 percent in annual interest on those loans, considerably higher than market rates. Buffett would be fattening up the profits for his shareholders on the backs of Oregon ratepayers.

Buffett could also use PacifiCorp as a base to later acquire selected assets of Portland General Electric and/or NW Natural, potentially resulting in significant job reductions and a loss of local control. That might please Berkshire Hathaway's shareholders, including Bill Gates, whose philanthropic foundation collaborated with Neil Goldschmidt and the Texas Pacific Group in its attempt to purchase PGE. But such utility consolidation wouldn't benefit the region, and rate relief would be unlikely.

Few would challenge the level of Warren Buffett's success in the insurance industry and in helping Wal-Mart expand. But he has the comfort of knowing that when he reaches for the light each morning back in Omaha, he pays 20 percent less as a customer of the Omaha Public Power District. And when the light goes on, the Sage of Omaha might just be wondering where the Oregonians are who care about maintaining control of their economic crown jewels like what's been done in Omaha.

Analysis and Commentary:  Remarkably, this opinion piece requested by and printed in the Oregonian does not appear to be in the paid archive whereas other similar pieces do appear in the paid archive.

2005 July 16 PacifiCorp bid gives no rate cut, by Brent Hunsberger, Oregonian

Its lengthy filing with the commission also detailed $1.3 billion of investments it would make in new power plants, transmission equipment and environmental projects across the utility's six-state system. Most would take place in Idaho, Utah, Washington and Wyoming. The energy company offered no rate freezes or rate reductions, arguing instead that its expected cost savings would result in lower rate increases in the future.

Analysis and Commentary:  None

2005 July 15 Warren Buffett Biography, Gide to Investing for Beginners, by Joshua Kennon

Warren Edward Buffett was born on August 30, 1930 to his father Howard, a stockbroker-turned-Congressman. The only boy, he was the second of three children, and displayed an amazing aptitude for both money and business at a very early age.

In 1947, a seventeen year old Warren Buffett graduated from High School. It was never his intention to go to college; he had already made $5,000 delivering newspapers (this is equal to $42,610.81 in 2000). His father had other plans, and urged his son to attend the Wharton Business School at the University of Pennsylvania. Buffett stayed two years, complaining that he knew more than his professors. When Howard was defeated in the 1948 Congressional race, Warren returned home to Omaha and transferred to the University of Nebraska-Lincoln. Working full-time, he managed to graduate in only three years.

Warren Buffett approached graduate studies with the same resistance he displayed a few years earlier. He was finally persuaded to apply to Harvard Business School, which, in the worst admission decision in history, rejected him as "too young". Slighted, Warren applied to Columbia where famed investors Ben Graham and David Dodd taught - an experience that would forever change his life.

Through his simple yet profound investment principles, Ben Graham became an idyllic figure to the twenty-one year old Warren Buffett. Reading an old edition of Who's Who, Warren discovered his mentor was the Chairman of a small, unknown insurance company named GEICO.

In May 1969, he informed his partners that he was "unable to find any bargains in the current market". Buffett spent the remainder of the year liquidating the portfolio, with the exception of two companies - Berkshire and Diversified Retailing. The shares of Berkshire were distributed among the partners with a letter from Warren informing them that he would, in some capacity, be involved in the business, but was under no obligation to them in the future. Warren was clear in his intention to hold onto his own stake in the company (he owned 29% of the Berkshire Hathaway stock) but his intentions weren't revealed.

Two years later, in 1967, Warren asked National Indemnity's founder and controlling shareholder Jack Ringwalt to his office. Asked what he thought the company was worth, Ringwalt told Buffett at least $50 per share, a $17 premium above its then-trading price of $33. Warren offered to buy the whole company on the spot - a move that cost him $8.6 million dollars. That same year, Berkshire paid out a dividend of 10 cents on its outstanding stock. It never happened again; Warren said he "must have been in the bathroom when the dividend was declared".

In 1970, Buffett named himself Chairman of the Board of Berkshire Hathaway and for the first time, wrote the letter to the shareholders (Ken Chace had been responsible for the task in the past). That same year, the Chairman's capital allocation began to display his prudence; textile profits were a pitiful $45,000, while insurance and banking each brought in $2.1 and $2.6 million dollars. The paltry cash brought in from the struggling looms in New Bedford, Massachusetts had provided the stream of capital necessary to start building Berkshire.

A year or so later, Warren Buffett was offered the chance to buy a company by the name of See's Candy. The gourmet chocolate maker sold its own brand of candies to its customers at a premium to regular confectionary treats. The balance sheet reflected what Californians already knew - they were more than willing to pay a bit "extra" for the special "See's" taste. The businessman decided Berkshire would be willing to purchase the company for $25 million in cash. See's owners were holding out for $30 million, but soon conceded. It was the biggest investment Berkshire or Buffett had ever made.

Analysis and Commentary:  None

2005 July 15 Congress moves to ease utility ownership, by Jeff Kosseff, Oregonian

"This is going to be one of the most dramatic changes in our economic history that any of us have seen," Lynn Hargis, a lawyer with consumer group Public Citizen, said of a repeal. "It's going to allow Enrons all over the world to have their fingers in the utilities."  Sen. Ron Wyden, D-Ore., was the only senator to vote against the energy bill in the Senate Energy Committee, and he will be a member of the conference committee. He said a repeal would "fleece the consumer," and he criticized the energy bill as "an invitation for more Enrons and high-fliers who rip off the ratepayers."

Analysis and Commentary:  None

2005 July 15  Berkshire Hathaway (MidAmerica) Initial Application and Petition to the Oregon Public Utility Commission.

Analysis and Commentary:  This 125 document outlines the substantive facts surrounding, and various parties involved with, Berkshire Hathaway's proposed takeover of PacifiCorp.  The law firm listed as representing Scottish Power, Milbank Tweed, also represents Enron's unsecured creditors.  Report available at:

Analysis and commentary:  Berkshire Hathaway has hired Stoel Rives to respresent it locally and Scottish Power is represented by Milbank.  It does seem most unusual that Milbank is also representing Enron's unsecured creditors given the City of Portland's interest in purchasing PGE and Scottish Power aggresively opposed any such purchase. Of course it may be in the creditors best interest to sell to the City.  Unfortunately, the City tried negotiating with Steven Cooper when they should have ignored him and gone straight to the creditor's committee.  Cooper, Milbank and his collegues and other related law firms have fleeced the Enron bankruptcy as a fee mill, raking in more than $600 million in legal fees.

2005 July 14 General RE CEO Being Investigates, by Karen Richardson, Wall St. Journal

The 46-year-old Mr. Brandon, a close deputy to Mr. Buffett, took over as chief executive of General Re in 2001. He joined the company in 1989.

The Department of Justice and the Securities and Exchange Commission are examining emails and notes and asking about conversations between Mr. Brandon, Mr. Buffett and current and former General Re and Berkshire executives, the people with knowledge of the inquiries say. Officials are trying to determine what Mr. Brandon knew about the transaction -- and when -- including whether he knew AIG's reason for doing it. They are also trying to determine whether Mr. Brandon knew of an opportunity to end the deal through a so-called commutation, and thus had a deeper knowledge of the transaction.

The transaction, struck in late 2000, helped AIG improve its loss reserves without properly transferring risk to General Re. AIG earlier this year admitted the deal wasn't accounted for properly and restated past earnings to address the matter. Two former senior General Re executives, John Houldsworth and Richard Napier, last month pleaded guilty to the criminal charge of conspiracy to commit fraud in doing the deal with AIG and will be sentenced in December.

General Re originally expected the transaction to be unwound after 24 months, according to documents that New York Attorney General Eliot Spitzer included in a civil complaint filed in June against AIG. While General Re didn't write the 24-month term into the AIG contract, General Re executives referred to the limited term and their intention to commute, or end, the deal after 24 months in internal emails and notes that investigators are examining, the people with knowledge of the inquiries say.

The transaction wasn't unwound in 2002, however. It wasn't until late 2004 that half of the deal was unwound at AIG's request, people familiar with the situation say. A person familiar with Mr. Houldsworth's October 2002 email said that note might reflect only Mr. Houldsworth's understanding of the situation instead of what actually happened, and it isn't clear whether Mr. Brandon had any role in deciding whether to unwind or continue the transaction.

Another document, dated Oct. 31, 2000, suggests Mr. Brandon offered advice on how to structure the AIG transaction. That document, included in Mr. Spitzer's civil complaint, lists in point-form Mr. Ferguson's and Mr. Brandon's suggestions of how to structure the deal, referring to the executives by their initials. After the initials JPB, which several people familiar with the document say refers to Mr. Brandon, are various suggestions including: "May be best to stay away from U.S. companies to avoid large fluctuations in our reported reserves. Use non-U.S. entities. KR Dublin?"

KR Dublin refers to Cologne Re, which eventually took part in the transaction. According to the note, Mr. Brandon also suggested "funds withheld," a method of accounting for some reinsurance transactions that was also eventually employed by General Re in accounting for the AIG deal.

Analysis and Commentary:  One has to ask how a seasoned financial person like Mr. Buffett would accept large deposits from another insurance company without knowing their fundamental character.  Knowing this would be essential in terms of establishing an interest rate based upon expected maturity, etc.

While many speculate on why Buffett allowed these transactions to occur, my feeling is that he is trying to disguise the reality that General RE's goodwill is impaired and should be written down by at least $6 billion.  The notion that a small spread between what Berkshire paid to have these deposits from companies like AIG and the spread on its investments was the primary reason seems a bit naive.

2005 July 1 Oregon Business Magazine, by Bill Parish, Power Play - Warren Buffett, Wal-Mart and PacifiCorp?

Warren Buffet's biggest businesses--insurance and Wal-mart-- are a bad fit for PacifiCorp and local rate payers.

Warren Buffet is a respected and highly successful investor. But his company, Berkshire Hathaway, should not be allowed to purchase PacifiCorp. Berkshire Hathaway subsidiary MidAmerican Energy Holdings has offered $9.4 billion to buy the Portland-based utility from its current owner, Scottish Power.

Berkshire Hathaway calls itself a “holding company in which the most important business is insurance, both primary and reinsurance basis...conducted through more than 50 domestic and foreign-based insurance companies.”

To understand why Buffet wouldn’t be a good steward for PacifiCorp, it’s important to understand Berkshire Hathaway’s unique financial risks as an insurance company, and its unique financial interests as a primary vendor to Wal-Mart. We can also learn a valuable lesson from Buffet's hometown of Omaha, Nebraska, where electric utility rates are 20% below the national average, thanks to its publicly owned utility, Omaha Public Power District.

Berkshire Hathaway pays no dividend and is currently priced at $84,000 per share, roughly the same price as in July of 1998. Even Microsoft, whose founder, Bill Gates, is a Berkshire Hathaway director, now pays a respectable dividend.  Buffet is instead sitting on $45 billion in cash, mostly what insurance companies call “float” to cover future insurance claims.

In the quarter ending March 31, 2005, revenues related to insurance and financial products represented 40% of Berkshire Hathaway's gross revenues and 74% of income before taxes. Buffet acknowledges that the reinsurance business — in essence, insuring insurance companies against catastrophic losses — is very risky.  His own analysis states that a  “single event could produce a loss of $5 billion.”

Other unique Berkshire Hathaway financial risks include Buffet's $21 billion currency bet against the U.S. dollar. He notes that, “We may be wrong and, if so, our mistake will be very public.” Berkshire Hathaway is also the biggest shareholder in Moody's, providing Buffet media clout over all corporations and investment firms.

The second largest revenue producer for Berkshire Hathaway after insurance is McLane, the distribution company for Wal-Mart.  Buffet purchased McLane from Wal-Mart in 2003. It now represents one-third of Berkshire Hathaway's gross revenues but generates just 3.5% of net earnings. In addition to supplying Wal-Mart, McLane also serves 58% of the nation’s convenience stores, including 7-Eleven.

The Berkshire Hathaway fund also owns common stock valued at roughly $38 billion, with large holdings in Coca-Cola, Budweiser and Proctor & Gamble. Yet 75% of operating revenues and net earnings come from insurance and financial products, along with keeping the shelves full at Wal-Mart and strip-mall convenience stores nationwide.

Buffet notes that his biggest mistake was not investing directly in Wal-Mart stock. Still, by owning Wal-Mart's delivery system and investing in some of its biggest suppliers, you could say that Buffet is literally bringing Wal-Mart to a neighborhood near you. A critic might say, "Attention Wal-Mart Shoppers,” stock up now so that billionaire investor Warren Buffet can deliver more goods, generate more profits and buy your local utility."

Wal-Mart is controversial in Oregon and other states because it tends to drive out the small- and medium-sized companies that  form the backbone of the tax system and support schools and community services.

Although purchasing Wal-Mart's distribution system has helped pump up Berkshire Hathaway's gross sales, it hasn't done much for net profits, since this is a high-volume, low-margin business. And this is why Buffet wants a captive regulated monopoly like PacifiCorp. Specifically, he wants to become PacifiCorp's bank.

We need only look at MidAmerican, an Iowa-based utility Berkshire Hathaway purchased in 2000, to see how the "Bank of Buffet" works. Since being acquired, MidAmerican has borrowed $1.5 billion from Berkshire Hathaway to finance growth, and is now paying 11.5% annual interest, considerably higher than market rates. This business model has also worked well for Buffet's $10 billion portfolio of manufactured-home loans, with an average interest rate of 12%. Buffet is smart and tough and that has been good for shareholders, but not for ratepayers back in Iowa City.

The smart move for Buffet would be to use PacifiCorp as a base to later acquire either PGE or NW Natural. That might please Berkshire Hathaway directors, including Gates, whose philanthropic foundation collaborated with the Texas Pacific Group in its attempt to purchase PGE. But such utility consolidation wouldn't benefit the region. Rate relief would be unlikely.

Buffet's clarity and dedication to investors is admirable, yet he has the comfort of knowing that when he reaches for the light switch back in Omaha every night, it is public power that powers the switch.

That may indeed be Buffet's most instructive lesson for Oregon's Public Utility Commission. The PUC and Governor Ted Kulongoski should tune out the consultants and lobbyists, and keep PacifiCorp out of the Sage of Omaha’s hands.

Bill Parish ( is an independent fee-based investment manager who previously worked as a CPA and financial analyst.  See complete article at   MediaAmerica is the Northwest's largest producer of magazines and custom publications.

Analysis and Commentary:  None

2005 June 25 Selected References Involving Berkshire Hathaway, by Bill Parish

In August 2003, Berkshire acquired mobile home maker Clayton Homes Inc., whose subsidiaries are Vanderbilt Mortgage and Finance Inc. and 21st Mortgage Corp. link to this:

Vanderbilt Mortgage and Finance Inc. has agreed to purchase a $4 billion portfolio of manufactured housing loans from a unit of JPMorgan Chase & Co. link:

Citigroup has decided to exit the manufactured home finance market with the selling of its portfolio of related loans to 21st Mortgage Corp, a wholly owned subsidiary of Berkshire Hathaway.

Analysis and Commentary:  Berkshire Hathaway is deep broad connections with most major investment firms and it should have been no surprise that any effort to create a public utility corporation, similar to that in Mr. Buffett's hometown of Omaha Nebraska, would be difficult. 

2005 June 24 MidAmerica Seeks Furthur Mergers, by Gail Hill, Oregonian

So, what company might MidAmerican buy next? Sokol says he doesn't know. "You can only do one at a time," he said. "First and foremost, our attention is on PacifiCorp." Sokol's reticence hasn't stopped analysts and industry observers from naming names and speculating on the speculation. Companies offered up as MidAmerican's next target include Portland General Electric, Portland-based Northwest Natural Gas Co. and NorthWestern Corp. of Sioux Falls, S.D.

James Bellessa, an energy industry analyst with D.A. Davidson in Great Falls, Mont., said NorthWestern Corp. looks like a good fit in size and location. NorthWestern provides electricity and natural gas to 617,000 customers in Montana, Nebraska and South Dakota, territory that would fill in some of the blanks between MidAmerican and PacifiCorp's distribution networks. Northwestern recently emerged from Chapter 11 bankruptcy.

"That combination with PacifiCorp makes sense," Bellessa said. "You begin to paint a picture where they (MidAmerican) could become the significant utility west of the Mississippi."

Analysis and Commentary:  None

2005 June 22 Buffett to Invest More in Energy Sector, by Rebecca Smith, Wall St. Journal

Both men said that even though they support the construction of more low-emission and zero-emission power plants, Berkshire doesn't intend to move without policy-maker guidance. "We're here to participate in the dialogue but not to set policy," said Mr. Buffett, adding that shifting to cleaner sources of generation could be costly.

Analysis and Commentary:  None

2005 June 21 Buffett Outlines Plans for PacifiCorp, Editor, Idaho Statesman

MidAmerican Energy recently announced that it agreed to acquire PacifiCorp from its parent, Scottish Power, for $5.1 billion, plus the assumption of $4.3 billion in debt. The company operates as Utah Power in southeastern Idaho.
Buffett joked that Monday's audience members should urge people to visit the R.C. Willey Home Furnishings store his company owns at the intersection of Franklin and Eagle roads in Meridian.

"But if they're a Geico policy holder, tell them to make sure they drive carefully," he said in reference to another company he controls. Buffett assured his audience that he views the acquisition of PacifiCorp as a long-term investment, not a cash cow to be milked before being sold off. Regulators, while generally receptive to Buffett's homey approach, said they would reserve judgment until they see an official filing on the proposed deal.

"He was very personable. But we don't rely much on luncheon speeches," said Marsha Smith, an Idaho Public Utilities Commission member. "We have to rely on evidence in the filing. Such as whether (the acquisition) is in the public interest, whether it would benefit the ratepayer."

Lee Beyer, Oregon Public Utility Commission chairman, said Buffett's speech did not answer all of his questions.
"But then, I didn't expect it to," Beyer said. Beyer said MidAmerican Energy still has to prove that its deal for PacifiCorp "is a benefit to consumers." He said Oregon regulators recently scuttled a proposed acquisition of Portland General Electric by Texas Pacific Group because of fears that the deal was too highly leveraged. "But with Mr. Buffett, MidAmerican will have some very deep pockets," Beyer said. "So I don't think that's going to be a problem."

Analysis and Commentary:  None

2005 June 7:  Power Connection by Nick Budnick, Willamette Week

Kulongoski's appointment for powerful investment council raises questions. One year ago, allegations of cronyism spurred Gov. Ted Kulongoski to shake up the powerful Oregon Investment Council. Given that action, some are puzzled that he recently put the wife of a friend and major campaign contributor on that same council.

In May, the governor appointed Katy Durant, a longtime commercial real-estate broker, to the council. She is married to Portland hotel magnate Gordon Sondland, who headed Kulongoski's transition team in 2002. Sondland says his only interaction with the governor over his wife's appointment was "when [Kulongoski said] he thought she would be a good appointment, I said I thought...she would be a great candidate."

Council members are unpaid, but appointments to the board, which oversees the management of $61 billion in state and local employee pension funds, is considered a political plum. Durant is largely unknown in investment circles but does possess an MBA in finance and 17 years' experience in real-estate investments-an area making up 6 percent of the OIC's portfolio. State Sen. Vicki Walker, who sits on the committee that confirmed Durant, says of her qualifications, "I wasn't overwhelmed, which isn't a good thing."  Unlike many gubernatorial picks, Durant's appointment went unaccompanied by press releases or media attention. "I was hoping I'd skated right under the radar screen," Durant quipped when contacted last week by WW.

Indeed, Bill Parish, an investment manager who monitors the investment council on behalf of his clients, noticed the appointment only on the Web. For him, red flags went up because of Durant's vice-presidency with Trammell Crow, the commercial real-estate giant-an affiliation that did not show up on the state website. Says Parish, "When there are so many competent men and women available, why would Gov. Kulongoski agree to appoint the wife of someone on the governor's transition team with an obvious conflict?" Durant says she is disengaging from Trammell Crow but has no plans to leave Atlas Investments, an acquisitions and development company she and two other Trammell Crow employees founded two years ago.

Besides chairing the governor's transition, Durant's husband contributed more than $13,000 to Kulongoski's 2002 gubernatorial campaign and meets regularly with the Democratic governor-despite being a registered Republican.  Sondland is a major developer, hotel operator and financier who has as one of his partners Larry Mendelsohn, the former second-in-command at Andy Wiederhorn's Wilshire Financial Services Group. Mendelsohn was convicted last year of felony tax fraud.

Randall Pozdena, a prominent economist and former chair of the OIC, says Durant's appointment is curious given the controversy when Diana Goldschmidt served on the council. During her tenure, questions surfaced about whether her decisions benefited her husband, Neil Goldschmidt, particularly her vote to commit $300 million of state funds in 2003 to a group of Texas investors aiming to buy Portland General Electric. The day after the vote, the Texas group hired Neil Goldschmidt to run the company (see "The $300 Million Emergency," WW, Sept. 22, 2004).

In July 2004, Kulongoski told The Oregonian, "I'm interested in looking at how the board is functioning." He fired Diana Goldschmidt from the OIC two months later. Pozdena says appearances are important: "If your husband or wife is in the business, it's hard for people to imagine that there isn't pillow talk, that you share information that shouldn't be shared."  Mardi Saathoff, the governor's legal counsel, told WW Durant was selected strictly on qualifications: "She's an incredibly sophisticated, intelligent businesswoman."

Durant, for her part, told WW she won't share confidential information, and her interest in the council is altruistic: As she told the Senate committee in May, "It is important for every Oregonian to give back to our state." While Durant is an Oregon resident, her husband is not-legally, at least. They both live in Portland, have offices here, school their kids here and register their cars here. But Sondland maintains a penthouse in Seattle at one of his hotels, where he claims residency for tax purposes.

A number of prosperous Oregon businesspeople maintain residences in Washington to avoid Oregon's income tax. Asked whether this was a factor for him, Sondland declined to respond directly, instead defending his claim of Washington residency as "reflective of the facts." "I was born and raised in Seattle," he added. "I have a lot of ties to that community: We have a place up there, we have business investments up there, my mother still lives there, my sister lives there. I mean, I never left."  See complete story at:

Analysis and Commentary:  This article is relevant because the Oregon Investment Council shows no interest in the most basic discussion regarding the future of Oregon's two largest electric utilities which are vitally important to the region's economy.  Instead, the Governor appointed another insider with significant conflicts of interest.  Prior to Durant, the most recent appointee was Dick Solomon.  Solomon has been doing Chair Gerard Drummond's tax returns for years and therefore rather than add independence given two controversial resignations over conflicts of interest, Governor Kulongowski once again a strong new independent member for the five person group that makes key investment decisions for Oregon's $60 billion PERS fund

2005 June 6 Study says malpractice Payout Aren't Rising, by Jenny Anderson, NY Times

When Mike Kreidler was an optometrist in Olympia, Wash., he railed against trial lawyers. He believed that aggressive trial lawyers were the reason he faced rising insurance premiums. Dr. Kreidler, now in his second term as Washington State's insurance commissioner, has changed his mind. He has decided that the problem is not the lawyers - although they have contributed - but also the insurance companies.

A study to be released today by the Center for Justice and Democracy, a consumer advocacy group in New York, may add fuel to that debate. The study, compiled from regulatory filings by insurers to state regulators, finds that net claims for medical malpractice paid by 15 leading insurance companies have remained flat over the last five years, while net premiums have surged 120 percent.  From 2000 to 2004, the increase in premiums collected by the leading 15 medical malpractice insurance companies was 21 times the increase in the claims they paid, according to the study. (The net totals in the study are calculated after accounting for reinsurance.)

Analysis and Commentary:  This is an excellent example of why some now see Mr. Buffett as the king of government pork, very sophisticated in his ability to game the government system and achieve subsidies while at the same time arguing for defecit reduction.

2005 June 1 Power Play, by Allan Sloan, Newsweek

Now, I have to make some disclosures. First, I'll profit if Buffett's purchase of PacifiCorp succeeds, because I have a large personal stake in Berkshire Hathaway through my 401(k) plan, as do some of my Newsweek and Washington Post colleagues. Second, Buffett is a board member of Newsweek's parent, The Washington Post Co. Finally, Berkshire and the Post Co. own substantial stakes in each other.

Analysis and Commentary:  Sloan is a great business reporter and to his credit he fully disclosed his publications relationship to Buffett.

2005 May 29 Electric Shock, The Sale of PacifiCorp, by R. Ballantyne and D. Box, Times of London

Unknown to those outside the company, Russell had commissioned a review of PacifiCorp; in October 2003 a Citigroup note suggested he break up ScottishPower, with PacifiCorp the obvious target.  One fund manager at a top-five shareholder in ScottishPower said: “This ends a rather sorry episode. They paid about $12 billion for something five or six years ago and have basically received $9 billion back and the dollar has moved in their favour in the meantime.

Russell soon found out that America was no pushover, however. PacifiCorp’s first Scottish managing director barely survived the first profit warning. The complexity of dealing with the politics of six different states plus federal regulators compounded a corporate workload already groaning under the pressure of filing rules and three-monthly reporting.  Then came the Californian power cuts, which effectively ended the potential deregulation of the US market that Russell had said was the main reason for entering the market. Even so, until last week, ScottishPower and PacifiCorp seemed joined at the hip. Russell will take it personally. “His pride will be hurt,” said a former colleague, “but he will see the deal through.”

Analysis and Commentary:  None

2005 May 25 Scottish Power Sells Klamath Tribes Down the River, by Dan Bacher, Indybay News

Happy Camp, CA - Klamath Basin Indian Tribes reacted with surprise and disappointment yesterday at Scottish Power's sale of PacifiCorp to billionaire investor Warren Buffet. The Tribes, along with allies in the fishing and environmental community, have been working with the energy giant's subsidiary, PacifiCorp, to find a way to remove Klamath river dams in order to restore dwindling salmon runs.

The Klamath River was once the third most productive salmon river in America, returning as many as 1.2 million adult salmon annually. After nearly a century of dam building, diversions, and logging in the watershed, only 1/10 that number return today.

At this point the Tribes and their allies are looking to make contact with representatives from Buffet's Berkshire Inc. Leaf Hillman said, "Right now, we don't know if Mr. Buffet cares about salmon or Native Tribes, but we plan to find out soon. We are also asking Scottish Power shareholders to do everything they can to block the sale of the company until the Klamath issue
is resolved. At the same time, we need to let investors in Berkshire know what they're getting into."

Analysis and Commentary:  None

2005 May 23 Berkshire Cuts Ties to Ferguson, by Thomas Derpinghaus, Dow Jones Newswire

Berkshire Hathaway Inc.'s General Re Corp. terminated the consulting services of its former chief, Ronald E. Ferguson, after he invoked his Fifth Amendment privilege against self-incrimination in responses to regulators. Berkshire Hathaway said Mr. Ferguson had been consulting General Re and certain of its affiliates since he stepped down as the chief executive of the reinsurance company on Oct. 1, 2001.

Mr. Ferguson invoked his Fifth Amendment rights in questions posed to him by the Securities and Exchange Commission and the Department of Justice in their ongoing investigations of nontraditional insurance products. These products were, until recently, an obscure class of financial transactions that authorities believe some companies have used to manipulate their financial statements. Mr. Ferguson headed up General Re when Berkshire, the investment holding company controlled by Warren Buffett, purchased it in 1998. He stepped down in 2001 after "several years of poor results," The Wall Street Journal reported earlier in May.

Specifically, regulators are looking into a reinsurance transaction between General Re and insurance titan *American International Group* Inc. that took place four years ago and helped lead to the March departure of Maurice R. "Hank" Greenberg as AIG's chairman and chief executive. Mr. Greenberg contacted Mr. Ferguson in 2000 to strike up the deal that is now being scrutinized.  AIG did the deal with General Re to shore up its reserves at a time when investors were worried the reserves were too low.

Analysis and Commentary:  None

2005 May 20 A Finger on the Pulse of Berkshire Hathaway, Editor, SRI Media

Gen Re, a reinsurance giant with worldwide operations, is among Berkshire's largest units. In 2000, it provided a $500 million finite insurance policy that AIG used to improperly dress up its financial statements to bolster AIG's stock price. The scandal led AIG directors to force out their chairman and chief executive, Maurice Greenberg, and AIG has since reported a number of other accounting improprieties.

Greenberg, according to AIG, was directly involved in the finite-insurance deal with Gen Re. But it is not clear whether Gen Re executives knew that AIG improperly booked the deal, which in itself was legal. AIG had called the contract an insurance policy when it was in fact a loan. By mid-May, one Gen Re executive had been notified by regulators that he could face criminal charges, and Gen Re put him and a second executive on leave.

Buffett has been interviewed by regulators, but he has been described as a cooperating witness rather than a target of the investigation.

Analysis and Commentary:  None

2005 April 2  4 Tough Questions for Warren Buffett, by Chris Oster, MSN Moneycentral

1. Why did you allow two of your businesses to get involved in the dicey practice of writing "finite" insurance?

That's because two Berkshire companies, National Indemnity and General Re, are big sellers of what the industry calls finite insurance. To keep it simple: Finite insurance is insurance that carries a limited amount of risk for the company that writes the policy. The problem is that in many cases -- including a policy that Gen Re wrote for American International Group -- there's little or no risk at all for the insurer, which means the policies don't qualify as insurance. That makes them the equivalent of bank loans, which have to be accounted for like loans, not insurance

No one is saying Berkshire used the policies to burnish its own results. Rather, it's that Berkshire is helping other companies fudge theirs. The policy Gen Re sold AIG in 2000, for instance, artificially strengthened AIG's balance sheet. It's that policy -- and how AIG put it to use -- that ultimately led AIG's board to seek the resignation of Chairman and CEO Maurice R. "Hank" Greenberg. Regulators in Virginia and Tennessee are suing Gen Re, saying it sold "sham" policies to a small insurer in Virginia, policies that were meant to make regulators believe the insurer was financially sound when it wasn't.

Buffett hasn't done much to explain why the company is such a big seller of finite insurance, or to defend the legitimate uses of these policies, if there are any. Here's his chance.

2. What sort of due diligence did you do when you paid $22 billion for General Re? Sure, the Gen Re unit has been in the news a lot lately for its role in the AIG policy. But Gen Re was a problem for Berkshire and its shareholders long before Eliot Spitzer came poking around.

Consider this: Between 1998, when Berkshire paid $22 billion for Gen Re, and early 2002, the company had posted $6 billion in underwriting losses. Many of those losses are traced to policies written before the acquisition, policies for which Gen Re has had to put up additional reserves to pay claims and anticipated claims. In addition, some of the finite policies being scrutinized now were written before Berkshire acquired Gen Re. In both cases, the question is this: Why didn't Buffett's team dig a little deeper to discover these problems before putting billions of shareholder money at risk?

"He did not know what he was getting when he bought Gen Re," says Steven Dreyer, who heads up Standard & Poor's insurance-ratings service. Dreyer notes that Gen Re hasn't exactly been a growth engine, either: A decade ago Gen Re was one of the world's two largest re-insurers. "Now it's about 10th."

3. How do you explain the double standard when it comes to your board of directors? The board is independent only if your definition of independent is that not /every/ board member is a family member or a personal friend of Warren Buffett. Consider what happened in 2003, when new governance rules required that a majority of board members be independent from a company's management. Rather than truly comply with the rules, Buffett skirted them, naming onetime neighbor Donald Keough (a former Coke executive) and longtime friend Thomas Murphy (ex CEO of ABC and Disney) to the board. Those additions round out a cozy group of directors that includes Buffett's son Howard and his bridge partner Bill Gates, chairman of Microsoft. (Microsoft owns and publishes this Web site.)

It's odd behavior from a man who, in Berkshire's 2003 annual report, ripped the so-called independent directors of mutual funds for not doing their job to protect shareholders.

4. Are you planning on sending any of that $46 billion in cash back to shareholders? Not all of that money, of course, can be paid out. In order to maintain its insurance units' triple-A ratings, Berkshire needs to set aside some of that money just in case it's needed to pay claims.

Analysis and Commentary:  None

2005 January 17  If It's Ok for Bill and Warren, Jim Larew Op-Ed, Iowa Press Citizen

Buffett founded and re-portedly owns about 40 percent of Berkshire Hathaway which, in turn, is the principal owner of MidAmerican Energy Holding Company which, in turn, is the principal owner if MidAmerican Energy Company -- Iowa City's electric utility monopoly.

In response to petitions signed by more than a thousand eligible Iowa City voters, the results of a Nov-ember referendum may de-termine whether MidAmeri-can's expensive, sweetheart arrangement will be re-placed with a more cost-ef-fective publicly owned electric utility company.

It is not surprising that Gates has joined Buffett on Berkshire Hathaway's Board. After all, they have much in common. Indeed, as these two business icons realize, few places in our economy as-sure mark-ups more consistently than those imposed by privately owned electric utility companies that sell electricity in monopoly-protected jurisdictions.

Indeed, electric utilities owned by governmental en-tities and cooperatives make up more than 69 percent of electric energy delivered to Washington state customers. Gates, of course, is a native of Seattle, home of Seattle City Power, an electric utility company that is owned, operated and regulated by its consumers -- its ratepayers. As a result, Seattle's residential consumers shell out only 6.9 cents per kilowatt-hour, almost a third of Iowa City's 9.3 cents per kwh rate. Similarly, Seattle business owners pay only 6.2 cents per kwh, as compared to Iowa City's commercial rate: 8.3 cents per kwh.

Reach Jim Larew, an Iowa City attorney, at jimlarew@larew

Analysis and Commentary:  None

2003 August 1 Auditing and Oracle, by Nel Duvall, Eweek

The Oracle of Omaha was in classic form in early May, at his affectionately dubbed "Wood-stock for Capitalists." For three days of worship, 15,000 Berkshire Hathaway shareholders had come to Nebraska to hear Warren Buffett's wisdom on how to place trust and invest money in American companies.

Pausing occasionally for a swig of Cherry Coke, the sharp-witted 72-year-old blasted the lowlifes and criminals who have been unearthed like mealy bugs after a summer storm. "It prevails in almost every place," said Buffett in his no-nonsense style. "And unless there is a countervailing force, it is hard to stop."

He was, of course, referring to the ugly behavior of chief executives, financial officers and other managers of some of the largest U.S. companies. From phony accounting to "obscene" paychecks, Buffett left no doubt that the conduct of corporate America had reached its lowest point in his half-century of investing.

"What we really deplore are the attempts by corporations to solve operating problems with accounting maneuvers," he said in response to shareholders' questions. "It catches up with you, sometimes with disastrous results. You might as well face reality immediately."

Yet, while he may be prophetic, Buffett is not quite the gold standard of good corporate governance his followers hold him up to be. For Buffett, it's often a "do as I say, not as I do," approach to management. He cuts deals without following accepted rules for due diligence, gives Berkshire managers such loose reins that they are able to pile up losses for years before he will take action, and eschews many of the rules and technologies companies are deploying to get a firmer grip on financial reporting.

"There's a difference between how they manage themselves and what they look for in companies they manage," observes George Dallas, managing director of governance services at Standard & Poor's in London.

Buffett argues companies need to be more open with shareholders. Yet he remains secretive about Berkshire Hathaway's public investments and in providing details on the operation of Berkshire's subsidiaries. In annual reports, for example, Buffett doesn't offer individual sales, profits or expenses for each of his 64 companies; he aggregates most of them, making it hard to tell how any one company is doing.

When Buffett takes over a company, he lets the managers run the subsidiaries as they see fit. "They are the Mark McGwires of the business world and need no advice from us as to how to hold the bat or when to swing," he says. But this hands-off policy has allowed some managers to strike out. The $8.3 billion in underwriting losses so far at General Reinsurance is the most glaring example.

Buffett faults many corporate boards for acting as the lap dogs of chief executives. But his own board has been highly criticized by some investor groups and pension fund companies, such as the California Public Employees Retirement System, for lacking independence. Buffett is both chairman and CEO, and his wife and son are directors.

Buffett says corporations should automatically answer vital shareholder questions. However, other than in general terms, he refuses to talk about his designated successor or successors—undoubtedly, the most important question for investors. He also engages in somewhat risky trading practices, such as Berkshire Hathaway's recent purchases of $8 billion in junk bonds, without providing basic data on the companies involved or the terms.

Buffett says CEO pay, which is overseen by board members, is out of control. But he has served as an influential director for some of the corporations that have rewarded their chief executives handsomely. Berkshire is the largest shareholder in Coca-Cola, yet Buffett failed to curb the compensation of CEO Douglas Daft in 2001 that included $48 million in restricted stock and options worth up to $153 million. In his annual report to shareholders in March, Buffett admits this failing: "Too often I was silent when management made proposals that I judged to be counter to the interests of shareholders."

They came to hear what was wrong with corporate America, and Buffett and longtime friend and business partner Charles Munger rose to the occasion. Munger, known for using the odd expletive, saved his strongest criticisms for the accountants who failed to catch (or sometimes even participated in) financial dirty tricks. "The faithlessness of that profession over the last 20 years has been unpleasant to watch," Munger said.

Where Buffett really stands apart, however, is not just in his unwillingness to invest in technology companies, but his unwillingness to invest in technology for his own company as well. While many firms are turning to information systems to meet new accounting regulations, clean up financial reporting and monitor ongoing business changes, Buffett is not. He relies on fax, phone and mail to receive the financial results of his companies.

Berkshire will do whatever is necessary to comply with new regulations, he says. But more technology and more laws aren't needed, he says. Stronger ethics are.

That's noble and desirable but ignores the spectrum of human nature, says Tim Leech, a former director of risk-management services at Coopers & Lybrand, and now president of risk-management software company CARDdecisions. Leech says Buffett could possibly be a mind reader, with Godlike skills to hire only the most capable, honest people, but his own experience as a forensic accountant points to the contrary.

"Most of the people I have investigated and sent to jail for defrauding large amounts of money, their bosses all thought they were the salt of the earth, incapable of doing something like that," he says. "You've got corrupt accountants, corrupt management, corrupt lawyers, corrupt investment dealers that are hyping stocks that they know to be dogs ... the system has gone all to hell."

Institutional Shareholder Services (ISS), a governance advisory service, recently gave Berkshire a score of just 1.5 out of 100 for the quality of its own corporate governance.

The firm considers 61 variables, such as the independence of the board of directors, executive compensation, how frequently outside auditors are rotated, and whether and how much stock officers and directors own. Some factors are scored together with others. For example, ISS says that a board with both a majority of independent directors and all-independent key committees, such as compensation and audit, will get a higher score than if the company had only one of these.

Buffett's low-tech information systems and hands-off management philosophy have at times proven costly. In June 1998, Buffett announced a $21.7 billion deal to buy property and casualty reinsurer General Reinsurance for stock. The acquisition was a good fit with Berkshire's other insurance businesses and provided Buffett with more cash to invest.

General Re came with a $15 billion float, which is money that the company holds against its liabilities but does not own. Buffett has invested the floats of Berkshire's insurance companies to reap much greater rewards than the company has had to pay out in insurance claims.

Buffett did not have an executive dashboard flashing daily alarms about General Re's exposure. Losses that began with a $370 million trickle in 1998 swelled to $1.4 billion in 1999. General Re suffered another $1.4 billion loss in 2000, and while he acknowledged several times that changes needed to be made at the subsidiary, Buffett refused to step in and take control. Instead, he steadfastly expressed faith in the experience and leadership of CEO Ron Ferguson.

While the exact events of Sept. 11, 2001, were close to impossible to foretell, Buffett later agreed that it was the job of a reinsurer to anticipate and correctly price policies to prepare for disasters such as terrorist attacks. Largely as a result of damage to the World Trade Center, General Re reported an underwriting loss of $3.7 billion in 2001. Ferguson decided to retire that same year.

That system amazes most outside observers. Bruce Nearon, a technology expert at the New York State Society of Certified Public Accountants, says a company of Berkshire's size typically has sophisticated financial software consolidating results, such as a suite from enterprise software vendor SAP. Increasingly, he says, outside auditors are being provided with direct access to a company's electronic records so they can more thoroughly trace entries.

The nonelectronic controls over corporate reporting at Berkshire are balanced by a culture that sees only black and white when it comes to accounting. "There is zero tolerance for anything considered unethical or dishonest," Limas says.

*Baseline Goals:*

# Grow stock price 10% a year greater than the Standard & Poor's 500.
# Redeploy each dollar of retained earnings into a dollar of new business or investment.
# Act as example for corporate America in executive compensation and accounting for financial results. Buffett's salary: $100,000 a year.
# Give personal fortune of chairman (currently calculated at $30.5 billion) to charity, upon

Analysis and Commentary:  None

2003 May 5 Buffett Tax Angle on McLane, Editor, Forbes

Buffett also indicated strongly that Berkshire will continue to use its $16 billion in cash and $42.5 billion in additional capital to acquire companies, rather than invest in the stock market. Buffett made it clear he can make a 10% after tax return by acquiring 100% of a company because of substantial tax advantages he did not spell out in detail. McLane Company is expected to return 13% on Berkshire's investment in it; the food service distribution company makes only 1% pretax on $22 billion in revenue.

Analysis and Commentary:  Imagine the type of tax creativity Buffett could use if he acquired PacifiCorp given that currently ratepayers are billed for taxes that are never remitted.

2002 September 4  The New Warren Buffett Way, by Daniel Gross, MSN Moneybox

Of course, Buffett, whose assets are intensely concentrated in the publicly traded stock of Berkshire Hathaway, which in turn has significant holdings in insurance, had a lot more to lose from a September 2001 market meltdown than the rest of us.

What's most surprising about post-9/11 Buffett is that, while it may not be "a different country economically than it was," he is certainly acting like it is. As promised, Buffett has been doing some buying in the past 12 months. But he's not buying stocks in sound, undervalued companies the way he used to, and the way you and I still do. In making several highly publicized investments in struggling public companies, Buffett has departed significantly from his traditional /modus operandi/—and departed in ways that are potentially hazardous to common shareholders. This classic value investor is behaving more like a vulture investor.

Vulture investors are individuals and institutions that come to the aid of, or prey upon, troubled companies. Smart vultures don't simply buy common shares in a company that is trending toward bankruptcy. Instead, they'll lend money at extraordinarily high interest rates, or demand a chunk of equity in return for the loan, or demand to buy stock at a discount to the current market price. Frequently, such transactions cause a dilution of the value of the shares held by existing shareholders and create a situation in which the new investors have better claims on a company's assets and income than do existing common shareholders.

There's nothing inherently predatory about vulture investing. It's one of the iron rules of the marketplace that companies with poor financial prospects wishing to obtain capital simply have to meet more onerous terms than those with sterling balance sheets. But vulture investors, and others who specialize in distressed situations like Carl Icahn, tend to have sharp elbows, which means that common shareholders can get hurt when they move on a company.

In July, Buffett and two other investors bought $500 million in convertible notes from Level 3 Communications, Inc., one of the largest remaining fiber-optics network companies. (Buffett's share totaled $100 million.) The deal boosted Level 3's cash position by 50 percent and bolstered its status. But it came at a stiff price. The notes pay 9 percent annual interest, and the holders can convert the notes, at any time, into common stock at $3.41. The stock now trades at $5.

Buffett's transaction with the Williams Companies, the established energy concern that got into trouble with misplaced bets on energy trading and telecommunications, is more problematic. Williams staved off bankruptcy in July by striking a $900 million loan deal with Lehman Brothers and a unit of Berkshire Hathaway. But you have to dig deep into Williams' 10-Q filing <> to find the extraordinary terms of the transaction.

The one-year loan carries an interest rate of 19.824 percent. In addition, Williams committed to pay a "deferred set up fee"—a charge that the company must pay if the company assets underlying the loan are sold, or even if they are not—of at least 15 percent of the loan, or $135 million. Add it up, and Williams will be paying nearly 35 percent in interest and charges for a one-year loan.

While beneficial to Buffett's bottom line, the Williams deal isn't particularly good for Buffett's well-tended image. Karl Miller, an energy investor, told <> that the transaction, on "loan shark" terms, was a "deal with the devil." Those are probably two epithets that have never been hurled at Saint Warren the Beneficent. And you certainly won't find any mention of lending money to troubled borrowers at 35 percent per annum in the many books extolling Buffett's virtues.

Analysis and Commentary:  None

2001 March 25 Notes from the 2001 Wesco Annual Meeting, by Whitney Tilson,

General Re comment from Charles Munger. "It's one of the best reinsurance operations in the world. It has a strong distribution network and culture -- a culture of intelligence and discipline. It sees reinsurance opportunities that Berkshire doesn't. They have a huge advantage being there for so long. Gen Re's competitive advantage is that it's smarter and sees more opportunities." "I don't think its returns in the future will be as good, but a 2-3%/year advantage is a lot over time."

"Reinsurance is interesting. A lot of people get into the business because of the money. Then, reinsurance brokers -- who are very well paid and can make dumb ideas look good -- pitch them business. Boy, is this dangerous! Very smart people can make very dumb investments. Even GEICO and Gen Re get caught sometimes."

Analysis and commentary:  None

2005 March 16  Final Comment Regarding The Future of Portland General Electric and the Defeat of the Texas Pacific Group

Orchestrating the defeat of the Texas Pacific Groups attempt to purchase Portland General Electric provided an excellent opportunity to support a wide range of individuals of all political parties and business affiliations.  During the process I developed a tremendous respect for Sid Lezak, Dan Meek, Erik Sten, Ken Lewis, Joe Smith, Liz Trojan and others. This archive provides a small selected sample of news stories and other correspondence related to this effort.

Although I did make a proposal to similarly orchestrate the creation of a top quality municipial utility, this proposal did not fit with the city's plans for PGE. It is important to therefore state that, although I wish the City of Portland great success in its endeavor to make PGE a municipal utility, I will have no role in this effort, either directly or indirectly, and therefore am unable to support it.  It is also unfortunate that the concept of a private cooperative was never fully developed.

My primary concern with the City's approach is that it appears to be driven by the investment firms wishing to issue bonds to finance the transaction.  We'll just issue revenue bonds seems to be the mantra. Sadly, the City does not see that without first considering alternative financing, such as six public pensions contribution $250 million each for a top quality fixed income investment, the City is risking bankruptcy.  These bond firms will claim that the City will not be liable for the bonds and that they will be taxable yet that is what the Wall Street Journal calls the "dirty secret" of the bond industry, that is municipal bonds being issued that are not true municipals.  Any way you stack it up, the City will be deemed the issuer and this will impact its credit rating, in my opinion, when this creative accounting is fully dealt with.

Today the City of San Diego is called Enron by the sea due to its large unfunded police and fire pension fund.  Portland has a similar problem to the tune of $1 billion and, coupled with other significant financial issues including the "big pipe" sewage project, it is hard for me to understand why a common sense discussion over financing has not occurred.  This is a tremendous disservice to the police and fire workers whose pension could be compromised.  Also complicating this situation is the reality that many top executives at the City come from and have a natural career path to companies involved with the issuance of municipal bonds.  That is natural for all professionals, just as C.P.A.'s go on to be controller's at former clients.

Perhaps the greatest challenge is the reality that a 5 percent commission is earned collectively for each $1 of bonds issued. This consists of the management concession, sellor's concession and broker's commission.  If $2 billion in revenue bonds are issued, that pencils out to $100 million in fees, mostly fees you don't see.  This is a large part of how Argentina was bankrupted in the 1980's and numerous municipalities here in the U.S. in 1994, including Orange County.  Merrill Lynch indeed paid more than $500 million regarding its role in bankrupting Orange County and was also a key player in the long-term hedge fund crisis of 1998 that destabilized the global financial markets.

On a pure tactical level, I stopped supporting the City's efforts on Monday March 14th .  My sense now is that the City will be quickly outmaneuvered and Enron will "spin" new stock to creditors.  This is a very undesirable outcome and should be a wake up call for the Oregon legislature to enact a few new targeted laws to prevent a debacle.  At a minimum, the City should have a contingency plan to deal with the potential for a stock spin.

Special thanks to everyone who contributed to this effort.

Bill Parish

2005 March 16  Email to Mayor Tom Potter, by Bill Parish

cc: Commissioners Erik Sten, Randy Leanord, Dan Saltzman and Sam Adams

Dear Mayor Potter,

When you provided your first interview at cable access regarding your run for Mayor, you may recall my question as one of the joint interviewers, "What is your opinion regarding the future of Portland General Electric?"   I sincerely believed then and still believe now that this could indeed be your legacy as one of Portland's great mayors.

During the process of orchestrating Texas Pacific's defeat I was able to observe many interesting dynamics including the following. These observations are followed by a brief specific proposal to help you make a privately managed municipal utility a reality for Portland.

1)  An intense battle for the future of PGE will occur because its large advertising and public relations budget will give the winner enormous political clout with respect to print and television media.
2)  The City has many fine hard working employees and excellent leadership yet it simply does not have the tactical nor strategic orientation necessary to make PGE a municipal utility.
3) Nigel Jaquiss, Jeff Kosseff, Steve Duin and Jeff Manning deserve special credit for stellar journalism and flushing out the facts regarding TPG's proposal. They can all be trusted to fairly communicate major issues involving the city.
4)  Neil Goldschmidt masterfully used the state's largest utilities, including Pacific Power, PGE and NW Natural Gas, and its education system, including the Portland Public Schools, OHSU and the system of Higher Education, as his power base.  Some might add that good relations with the board managing Oregon's $50 billion in public pension assets might have also helped. With recent changes the City now has an excellent opportunity to bring back a more local centric orientation using PGE as the centerpiece for this effort.
5)  Proposal to orchestrate a Municipal Utility: Have me create an internal blog regarding key issues necessary to close this transaction and support all parties involved. I would not control the process but rather simply support it. The focus would be idea generation and dot connecting resulting from interacting with your legal, financial and other advisers with the specific goal of making PGE the highest quality municipal utility in the country.  This would not disrupt my business as an independent investment adviser but rather simply result in one new client, the city. My fee would be out of pocket expenses paid by the City, $1,500 per week, and a success fee paid by the firm that receives the bond underwriting equivalent to .25 percent of the transaction, payable only after the deal is successfully culminated and key targets met.

Thank you for considering this proposal Tom. This will be my last communication with respect to the future of PGE. Best regards.

Bill Parish

2005 Power Failure, by Nigel Jaquiss, Willamette Week

On Thursday, the PUC unanimously rejected Texas Pacific's proposal to buy PGE, sounding what is probably the death knell for the deal and also helping to break the grip Neil Goldschmidt has had on this state for 30 years.

When Goldschmidt resigned from his Texas Pacific obligations after last year's sex scandal, the Fort Worth-based buyout firm's proposal had to stand on its own merits, which were few. Texas Pacific compounded the sting of Goldschmidt's departure with an arrogance and clumsiness that belied the firm's brainy reputation.

Texas Pacific's 16-month dalliance with PGE was not a waste of time for Oregonians, however. The firm's own financial legwork preparing for the sale and the work of a few watchdogs revealed how poorly PGE has been run for many years. It also revealed that the utility has generated profits far in excess of the rate allowed by the PUC, leading to the conclusion that the agency has been unwilling-or unable-to protect ratepayers. (Texas Pacific declined to comment for this story.)

"Texas Pacific recognized from the start that this was a political deal and would stand or fall on politics," says utility lawyer Dan Meek. "That's why they chose Neil, who knows nothing about utilities. The PUC proceeding was just window dressing."

"Bonderman and Goldschmidt and Imeson misread this thing from the start," says Larry Tuttle, director of the Center for Environmental Equity. "They didn't have a feel for how knowledgeable people are after years of dealing with Enron. People who didn't know equity from a sheepdog three years ago can now explain Texas Pacific's double-leveraged structure."

Almost immediately, however, problems developed. Local financial adviser Bill Parish, who keeps a close eye on the Oregon Investment Council and the nearly $60 billion in public funds it manages, alerted the press that Texas Pacific's largest investor was none other than the OIC.

Parish also noted that Goldschmidt's wife, Diana, was one of the four appointed board members who controlled the OIC's billions. Just days before Texas Pacific announced its bid for PGE, the investment council had voted to invest $300 million in a new Texas Pacific fund. That vote raised the possibility that Diana knowingly directed money to a group employing her husband-which could violate state law. "Texas Pacific's decision to hire Goldschmidt without resolving the potential conflict shows arrogance, incompetence or both," Parish says. "Whatever the truth was, it gave the appearance of a cozy deal that could enrich a few at the expense of public pensioners."

Unlike Enron, which artfully cultivated allies in its successful 1997 bid for PGE, Texas Pacific earned the opposition of every customer group and interested party across the political spectrum. "With Texas Pacific, it was all or nothing," says Jason Eisdorfer, a lawyer with the Citizens' Utility Board, a ratepayer advocate.

To shore up public opinion, Texas Pacific hired the local ad agency Gard & Gerber to generate an ad campaign featuring business leaders who supported the deal. Those ads backfired. The ad campaign mobilized critics, including a pair of very energetic senior citizens, former U.S. Attorney for Oregon Sid Lezak and retired shipping executive Ken Lewis.

The pair penned op-ed pieces, buttonholed influential Portlanders and begged Kohler to save his reputation by quitting the deal. The state's power elite listened. "Having Ken and Sid on the other side made opposition to Texas Pacific respectable at the MAC Club and the Arlington Club," utility watchdog Meek says. Still, when the PUC wrapped up its nine-month series of hearings and legal arguments in December, many insiders thought the deal would go through.

"In the end, with Goldschmidt in disgrace and his web of power in tatters, the PUC perhaps had no choice but to reject Texas Pacific. As The New York Times noted last week, "An unusual alliance of corporate, consumer and environmental groups-often adversaries-opposed the deal. Only one major electricity customer, The Oregonian newspaper, supported the purchase."

Analysis and Commentary:  Perhaps it is fitting that the last reference goes to Nigel Jaquiss, clearly the reporter who did the most for flushing out the key facts regarding TPG's proposal.  Jaquiss won the Pulitzer Prize for investigative journalism for a series of stories surrounding Neil Goldschmidt, the key player in TPG's proposed buyout of PGE. See complete article at

2005 March 14  Email from Bill Parish to David Bonderman Suggesting Texas Pacific Withdrawal Its Bid for PGE

bcc: other interested parties

Dear David,

It is unfortunate that your efforts to acquire PGE resulted in such a bitter battle yet at least you now have justification for immediately withdrawing your bid with its formal rejection by the Oregon Public Utility Commission. Perhaps this is good fortune for your firm given the perfect storm of scrutiny that was about to occur.  Please do make this withdrawal official by Friday.

Do also note that in orchestrating your defeat I conducted all my efforts with competence, ethics and integrity. Key to this was supporting a wide range of journalists, industrial and political leaders, regulators, analysts and public power advocates with top quality well researched material. Not material aimed at disparaging you but rather toward finding the truth in your proposal and revealing that it was indeed not a good option for the future of Portland General Electric.

Naturally, Enron will ask that you delay your decision with the hope that in the meantime PUHCA will be repealed and numerous other buyers emerge to compete with the City of Portland.  Do keep in mind however that groups opposed to your efforts to acquire PGE are now informed, energized and ready to accelerate their efforts with the assumption you will appeal the decision. Every day you wait is simply rather foolish.

Again, no hard feelings. You can't win them all.  If in the future one of your deals does indeed make sense for most parties involved and you need a little solid advice on how to orchestrate its culmination don't hesitate to call.

Bill Parish

2005 March 14  LBO's Are Back, by Michael Santoli, Barrons

On the payoff side, private equity players cashed out of enough investments to return a whopping $36 billion in net cash to their investors in the nine months through September. Though the investors are mainly pension funds and other institutions, wealthy individuals have also been getting in on the action, through their private banks and sometimes directly.

The junk market is so obliging and high yield investors so hungry for paper that LBO firms have been rushing to issue new debt on already leveraged companies they've bought, strictly for the purposes of collecting a cash dividend. There were 77 such dividend recapitalizations last year, worth $13.5 billion, up from $6 billion in 2003 and $2 billion in 2002.

"In the last 18 months," he says, "the stars have really aligned." Initially, the accommodating markets allowed LBO firms to liquidate seasoned investments they'd held through the downturn. "Then people realized they could buy a company, dress it up, do some financing to leverage it up and within six months pay a dividend and in some cases execute a sale," he says.

This describes the dream-like environment that allowed Blackstone Group to earn four times its initial investment in the chemical company Celanese in nine months, sent Kohlberg Kravis Roberts on the way toward tripling its outlay in PanAmSat since August and let Bain Capital enjoy a 30% return in a humble Canadian phone-book printer in four months.

Analysis and Commentary: This article in Barrons supports the basic reality that "private equity" firms like Texas Pacific are nothing more than leveraged buyout firms (LBO's) in disguise in which the bulk of their profits are simply debt piled onto purchased entities, the proceeds of which go directly into the Texas Pacific's pockets in a relabeled form they call "profits."

2005 March 13, Enron: The power and the story, by Jeff Baker, Oregonian

On July 26, 1996, a pumped-up Ken Lay spoke to about 1,000 employees of Portland General Electric. Enron had just announced its plans to merge with PGE, and its CEO wanted everyone in Portland to feel as good about the deal as he did. "We have started something today that everyone in the electric industry, and everyone in the gas industry, is going to remember for a long time," Lay said. "Lay was right, but not for the reasons he imagined," writes Kurt Eichenwald in "Conspiracy of Fools" (Broadway Books, $26, 742 pages). "With the merger announcement, events had been set in motion that, in time, would lead to Enron's first major crime."

Those crimes are detailed in Eichenwald's book, the most comprehensive -- and the most readable -- of the dozen that have come out since Enron collapsed late in 2001. Eichenwald, a reporter for The New York Times who covers corporate fraud, said Lay's comments in Portland came at a time when Enron executives were feeling particularly good about themselves.

"They were riding high," Eichenwald said from his office in Dallas. "They thought they had found some magic elixir for corporate success that would allow them to keep making huge profits forever. They didn't realize that by that time the wheels already were starting to come off. The company was so poorly managed that they didn't know what was really going on." This is one of Eichenwald's big themes: Enron did plenty of crooked deals, but stupidity and hubris finally brought it down. "They could have had twice as much crime and survived if they would have had half as much incompetence," he said.

Analysis and Commentary:  TPG's brand of hubris does not seem all that different than Enron's.  What is truly surprising, however, is that magnitude of their incompetence regarding key decisions, for example designating a public employee, OHSU President Peter Kohler, to be Chairman of PGE.

2005 March 13  Texas Pacific succeeded in uniting opponents, by Jeff Manning and Gail Hill, Oregonian

When Davis and his boss, David Bonderman, showed up at the news conference in November 2003 announcing the deal, with former Gov. Neil Goldschmidt and successful businessman Tom Walsh in attendance and onboard, many viewed it as a done deal. The city of Portland, which had sought to make a bid to buy PGE, appeared to have lost.

But Texas Pacific, for all its skill and experience, continually tripped itself up. It angered much of the Oregon Investment Council and gave birth to months of conspiracy theories when in October it successfully persuaded the council to authorize a $300 million investment with the firm. Diana Goldschmidt, Neil Goldschmidt's wife, was a member of the council, giving rise to accusations of self-dealing and conflicts of interest. Texas Pacific partners declined to comment for this story.

Texas Pacific's inability to come to terms with the PUC staff or any intervenor group may have been the buyout firm's fatal error. All three commissioners -- Lee Beyer, John Savage and Ray Baum -- were relatively new to their appointments and had never dealt with a merger application before. In late December, with all the evidence in and final review at hand, they were left to sort through 15 feet of documents and countless hours of testimony without a road map.

"Universally, from the start, we felt uncomfortable with the proposal on the table," Beyer said of the Texas Pacific plan. "We tried to figure out a way to do conditions, but we'd do one condition, then have to change another. Soon, you're rewriting the application. "In some ways it was very frustrating," he continued. "We finally said, 'We can't do this; it's not our job to do this.' " The commissioners began crafting the denial. Ultimately, they agreed with the business and consumer groups. The risks were too great, they reasoned, and the benefits to customers too small.

"Electricity issues used to be a calling card for Oregon," said Julie Brandis, legislative representative for Associated Oregon Industries. "We have these low rates. Come to Oregon. What the rate hikes did was it made people take electricity off the back burner. People paid attention to who was buying PGE because they knew it mattered now."

Analysis and Commentary:  An excellent article by Manning and Hill. It is good to see Manning and Hill collaborating given the unique demands of covering this situation. Manning is one of the Oregonian's lead "investigative" reporters while Hill has been covering the OIC PGE "beat."

2005 Enron holds PGE fate again, by Ted Sickinger, Oregonian

On Thursday, Oregon utility regulators emphatically rejected the Texas Pacific investment firm's offer to buy PGE. Immediately afterward, Enron said it needed to review the decision before deciding its new course. The company previously said it would distribute new shares of PGE stock to creditors if the sale to Texas Pacific fell apart. Such a move would enable PGE to change hands without a new round of state regulatory reviews. But Enron's creditors might balk, preferring cash from a sale to stock in a newly independent PGE.

One suitor came calling Friday when Portland Mayor Tom Potter telephoned Enron chief executive Stephen Cooper. Portland, like other potential public purchasers, could buy PGE without state regulatory approval. Potter said the call was short. Cooper told him that Enron is still under contract with Texas Pacific. The contract expires May 18. Until then, or until Texas Pacific walks away and releases Enron from the contract, Enron cannot negotiate with other bidders. "We agreed to keep communicating, and that was it," Potter said.

Meanwhile, Texas Pacific has 60 days to ask the Public Utility Commission to reconsider its decision or appeal the decision in court. It also could file a revised application. Enron and Texas Pacific declined to comment Friday.

When and if the contract is terminated, Enron can bargain with other suitors, according to testimony by Enron's representatives before the Legislature in January. Aside from the city, state lawmakers and a consortium of PGE customers and business leaders are considering rival bids.

The alternative for Enron, one that its bankruptcy judge has approved, is to distribute new PGE stock to creditors. According to Enron representatives, the earliest the distribution could take place is the fourth quarter of 2005. That gives interested buyers six months to convince Enron that a cash offer is preferable and doable in short order. "We think we have a window," said City Commissioner Erik Sten, who is leading Portland's buyout effort.

Dan Vidas, a bankruptcy attorney with Dunn Carney Allen Higgins & Tongue in Portland, said most creditors will likely prefer a sale because it would put cash in their hands. While most observers say PGE has a strong financial position, its stock might not immediately list on a public exchange, making it harder to trade. And its price might limp along as the Bankruptcy Court settles disputed claims and the company works out outstanding liabilities. On the other hand, a sale creates a finite pool of dollars, with none of the opportunity for growth that stock provides.

Potter said Friday that the city would have a lot of work to do before making any formal bid. It would need to hire new lawyers, financial advisers, bankers and engineers to structure a deal and investigate PGE's assets and liabilities. The city worked with investment banker Goldman Sachs in earlier negotiations. It had hired engineering consultant R.W. Beck. And it was working with law firm Ater Wynne until the firm dropped the city and signed on to represent Texas Pacific. Merrill Lynch is likely to try to woo the city, because the banker that previously advised the city has moved to Merrill from Goldman. Sten said the city would look for a legal team that brings deep experience in complex mergers and acquisitions.

All of the outside expertise would quickly get expensive. Sten and Potter said the city could discuss its options for a couple of weeks before needing to spend significant money, but the City Council probably would consider a resolution to authorize that spending in coming days.

No firm estimate of that spending is available. But Brian Doherty, a partner with Portland law firm Miller Nash who helped form a public entity in 2002 to bid on PGE, said the estimate of due diligence work back then ranged from $2.5 million to $4 million. Northwest Natural Gas Co., which also has tried to buy PGE, and Texas Pacific each spent far more.  "You need to be pretty serious about going forward," Doherty said.

If Enron doesn't sell the company, it will wait for the Bankruptcy Court to approve enough creditor claims to permit distribution of at least 30 percent of the new PGE stock. Enron then will distribute shares to holders of the allowed claims proportionately. The remainder of the stock would be held in a reserve for disputed claims and disbursed periodically as new claims are allowed. More than 25,000 claims were filed in Bankruptcy Court against Enron, totaling more than $800 billion. By January, the Bankruptcy Court had resolved about 10,000 of them for about $20 billion. Even in the event that stock is distributed to shareholders, the city and other interested buyers could make a tender offer for both distributed and reserve shares.

Analysis and Commentary:  Sickinger answers many key questions in this excellent article. So much of the coverage regarding TPG has seemed to lean on press releases yet here Sickinger flushed out many important detailed facts.

2005 March 11 Oregon Regulators Reject Utility's Sale to Buyout Firm, by David Cay Johnston, NY Times

Oregon's utility regulators voted unanimously on Thursday to reject a $2.3 billion bid by a private equity firm, the Texas Pacific Group, for the state's largest utility, saying the firm had "failed to establish" that the deal would be in the public interest.

The chairman of the Oregon Public Utility Commission, Lee Beyer, said that "the potential harms or risks" to customers of the utility, Portland General Electric, "outweigh the potential benefits." He said the financing of the deal, including $700 million of additional debt as well as concerns that Texas Pacific would own the utility only for a short time, were major factors in the decision.

The fate of Portland G.E. has attracted attention beyond Oregon, in part because it is owned by the Enron Corporation, now operating under bankruptcy protection. Indeed, it was the only energy-producing asset that Enron actually owned. But the deal has also been considered important as a test of whether private equity firms, which by their nature do not publicly disclose their finances, could win regulatory approval to buy utilities.

Oregon's governor, Theodore R. Kulongoski, issued a statement saying he would support any owner who ensured low utility rates and reliable service, a crucial issue for the high-technology industries that Oregon has attracted over the last three decades. A bill to ease the path for a public takeover is moving through the State Legislature in Salem. The commission would have no oversight role if the city acquired the utility, Mr. Beyer said.

An unusual alliance of corporate, consumer and environmental groups - often adversaries - opposed the deal. Only one major electricity customer, The Oregonian newspaper, supported the purchase.

The decision in Oregon was the second time recently that state regulators, at the urging of corporations, have rejected a leveraged buyout of an electric utility as too risky for customers. Kohlberg, Kravis, Roberts tried to buy Tucson Electric Power, a deal that Arizona utility regulators turned down in December. In both cases, critics said the bidders expected to earn outsize profits by collecting tax money and then pocketing it. Because utilities are legal monopolies, their corporate income taxes are included in the rates charged to customers. If the utility owners, through a variety of legal maneuvers, can keep those taxes, they can make double the 10 percent or so return on equity that regulators typically authorize for electric, gas and water utilities.

Enron, which bought Portland G.E. in 1997, collected more than $665 million in income taxes that, partly because of its offshore tax shelters, were never passed on to the government. Texas Pacific's anticipated annual profits were as hgh as 38.4 percent, according to documents obtained by Willamette Week, an alternative newspaper.

Jason Eisdorfer, a lawyer for the Citizens' Utility Board of Oregon, a consumer group, said the decision showed that "every now and then, the little people can stand up and decide what is best for us." He said his reading of the decision showed that the utility commission tried to find a way to approve the deal, "but they simply could not overcome the facts on the record and the law on the books, which dictated only one result - the result we got."

Analysis and Commentary:  Johnston correctly notes that TPG stood to earn up to 38 percent per year on its leveraged buyout purchase of PGE, even though the PUC mandated maximum return is only 12 percent.  To Johnston's credit he also cited the Willamette Week article that revealed Texas Pacific's true intentions regarding PGE. A search in this archive using the term "secret papers" will lead you to a summary of this story.

2005 March 11  Oregon rejects Texa Pacific bid for PGE, by Gail Kinsey Hill, Oregonian

The unanimous decision by the three-member commission temporarily keeps PGE in the hands of corporate parent Enron and opens up a host of options for Enron and its creditors, including making PGE a publicly traded company or negotiating with another buyer, such as the city of Portland. The ruling underlined the difficulties investment firms, particularly those that rely heavily on loans to finance their deals, face when they try to buy utilities that not only are tightly regulated by state agencies but are considered economic mainstays of local communities.

Most of all, commissioners objected to the large amount of debt that would be used to finance the deal. The $2.35 billion proposal included $1.8 billion in debt -- $707 million in borrowing and $1.1 billion in assumed debt. Commissioners said the heavy debt load could reduce credit ratings, thereby raising borrowing costs and, in turn, rates. Reduced ratings could force "imprudent cost-cutting and reduced capital investment" if earnings drop, commissioners concluded.

Commissioners also concluded that Texas Pacific's intention to sell PGE within 12 years could harm customers. The relatively short holding period, a characteristic of buyout firms, could discourage the utility from investing adequately in maintenance and other areas, the ruling said.

"Enron is disappointed with the commission decision, but we need time to consider the order before we decide our next course of action," said Jennifer Lowney, an Enron spokeswoman. Enron emerged from Chapter 11 bankruptcy late last year. Under its reorganization plan, if the Texas Pacific deal collapses, Enron would issue new PGE stock and distribute the shares to Enron creditors. Eventually, the shares would be listed on a major stock exchange. The bankruptcy plan also gives Enron the right to sell PGE if a legitimate suitor emerges.

Analysis and Commentary: A good story yet since there were no management representatives from either TPG or Oregon Electric at the press conference, one would think this should be noted in the article.

2005 March 12  Utility could see more suitors if congress kills ownership law, by Jeff Kosseff, Oregonian

Congress could make PGE and other utilities more enticing to some buyers later this year when it votes on a sweeping bill that overhauls U.S. energy policy. Included in the bill is the repeal of a 70-year-old law that regulates ownership of utilities. The Public Utility Holding Company Act imposes strict federal regulations on utilities with operations in more than one state. Those regulated companies are prohibited from operating non-utility businesses. Repeal would eliminate such barriers, allowing PGE to be acquired more easily by out-of-state utilities, multinational corporations and other businesses.

"It would be up for grabs for all kinds of entities that wanted to acquire it," said Lynn Hargis, an attorney at Public Citizen, a consumer group in Washington, D.C. "There would be no limitations on who could own a public utility." Repeal could be significant because Enron's goal is to get as much money from the PGE sale as possible. An increase in bidders could drive the price up -- if Congress acts before Enron makes a decision. "It would vastly expand the universe of potential buyers and push up the price," said Dan Meek, an attorney for the Utility Reform Project. "It's supply and demand."

If the holding company act is repealed, such moves would be unnecessary. And it could open the door to intertwining PGE's operations with other utilities. For example, Hargis said, if the act is repealed, a utility in California, where power is more expensive, could purchase PGE and reap the benefits of cheaper Northwest power at Oregon's expense.

Both of Oregon's senators sit on the Senate Energy and Natural Resources Committee. Sen. Ron Wyden, D-Ore., is "opposed to repealing PUHCA unless there are strong consumer protections to replace it," Wyden spokesman Andrew Blotky said.
Wyden introduced an amendment, included in the 2003 Senate version of the energy bill, which would have created a federal advocate for energy consumers. But Wyden did not think the final version of the 2003 energy bill, House Resolution 6, went far enough to protect consumers, Blotky said. Sen. Gordon Smith, R-Ore., thinks HR 6 had adequate protections, spokesman Chris Matthews said. "As part of comprehensive energy legislation and with the added consumer protections and market transparency regulations that were in HR 6, the senator does support the repeal of PUHCA," Matthews said. "But only with those two caveats."

Analysis and Commentary:  Kosseff for the first time discloses the positions of Oregon's two Senators regarding the repeal of PUHCA.  An excellent article.

2005 March 1   Letter to PUC Chair Lee Beyer on Taxes, by Bill Parish, Independent Investment Manager

March 1, 2005

Lee Beyer - Chairman
Oregon Public Utility Commission
PO Box 2148
Salem, OR 97308-2148

Re: Comment on the February 18, 2005 DOJ memorandum on recognizing a corporate parent’s tax liability in setting utility rates due to the commission by March 4, 2005.

Dear Mr. Beyer,

I appreciate being provided the opportunity to testify before the commission last week. Please do consider this letter to be my
official correspondence to the commission regarding your request for public comment on the DOJ memorandum regarding the treatment of utility taxes. I'll also note that readers may hear the audio file of my testimony regarding the related staff white paper by going to your website at and making the following selections: public meetings, listing of audio files,Workshop on White Paper on Utility Income Taxes - February 23, 2005.

As noted in my testimony, Enron's fraud was enabled by cash flow generated from permanent tax differences that allowed
Enron to pocket the taxes billed to ratepayers and leverage off this significant cash flow. Frankly, Oregon's previous public
utility commissioners are therefore directly responsible for the greatest part of Enron's national fraud because by approving
PGE's purchase they in turn handed Enron the cash flow to build and sustain its scheme.

Key to this scheme was using permanent tax differences including losses created by stock option deductions, losses you will
not see unless you demand full disclosure of their top level partnership. At Oregon Electric alone, three executives stand to earn more than $15 million in stock option gains over the next three years, thereby creating one such permant tax accounting
difference. Is it not astonishing that these options and related tax deductions fully vest in only 3 years when TPG indicates they
are thinking longer term? See reference archive on my website at for more
details on how these tax deductions were calculated.

It does also seem clear that your legal support regarding taxes is somewhat weak. For example, your DOJ legal advisor, in defending the current treatment, argued in the hearing that taxes were indeed paid, simply to Enron rather than a recognized taxing authority like the IRS, State of Oregon or Multnomah County. Although he later clarified that taxes were a "recognized cost," this was still a ridiculous statement. What PGE did was make an intercompany transfer payment to Enron for taxes based upon book income in which no recognition was made of temporary timing nor permanent differences between PGE's financial and tax books.

PGE's management often cites Warren Buffet's purchase of Mid-American as a model similar to TPG's model yet the cashflow generated from such tax deductions will be undisclosed in TPG's case since it receives no SEC oversight. Buffet's fund that
purchased Mid-American is instead a publicly traded and SEC regulated mutual fund that fully discloses its cashflow
statement. This difference between Buffet's SEC regulated investor utility and a private equity utility owned by TPG's will have dramatic tax consequences unknown to the commission because the often referred to "ring fence", and related permanent
differences, will occur behind a curtain for TPG.

It is particularly unfortunate that you are unable to rely on the observations of recognized tax experts like former Chair of the
Senate Finance Committee Bob Packwood. In my testimony I related his comment on my work with respect to one such
permanent difference and he specifically noted I had done a great public service in identifying this loophole. The loophole is
explained in the archive on my website at, search using keyword Packwood.

Although my views have seemed somewhat strident regarding these tax issues involving PGE, if you allow these tax treatments
to continue, you will clearly be opening pandoras box of legal actions, likely to include both civil and criminal actions against a
wide number of public and private figures surrounding this "deal." Denying this tax and cashflow driven acquiring of our local
utility will result in no harm and therefore eliminate the basis and standing for most legal actions. Actions that many critics of this deal are far to anxious to initiate. In any event, best of luck to you. This letter including various reference updates will be
posted on my website at

Bill Parish

2005 February 28  Utility commissioners ready to rule on Texas group's bid for PGE, by Gail Kinsey Hill, Oregonian.

After almost a year of review, the Oregon Public Utility Commission stands ready this week to issue a decision on Texas Pacific Group's plan to buy Portland General Electric. PGE's geographic spread and economic heft adds to the high-stakes nature of the deal. Enron-owned PGE is Oregon's largest utility, serving six Willamette-Valley counties and 40 percent of the state's population. Texas Pacific declined to comment for this article. Any decision can be appealed by the various parties that participated in the review.

Outright denial by the PUC would prompt the most hubbub as Portland city officials, some state legislators and a handful of other parties intent on a public purchase of PGE would begin vying for attention. "That's when the gun goes off for everyone else who wants to be in the race," Sten said. Enron hasn't said whether it would entertain other offers. The fallen energy giant's bankruptcy plan says that if the Texas Pacific deal falters, Enron will distribute newly issued shares of PGE stock to creditors.

Analysis and Commentary:  It is nothing short of astonishing that this proposal is being seriously considered by the commission.  This long process has resulted in a tremendous waste of taxpayer money and postponed the emergence of a better solution regarding the future of PGE.

2005 February 28  Brim-Edwards won't seek re-election to school board, by Steve Carter, Oregonian.

Portland School Board member Julia Brim-Edwards, who pushed for more district accountability to taxpayers, has decided not to run for re-election. Brim-Edwards, 43, said she has completed the agenda she set for herself when she ran for the board in 2001. She said her new job as deputy public affairs director for Nike did not influence her decision.

Brim-Edwards was communications director for former U.S. Sen. Bob Packwood, R-Ore., and senior adviser to former state House Speaker Bev Clarno, R-Bend. She is married to state Treasurer Randall Edwards and has three children in Portland's public schools.

Analysis and Commentary:  While at the Portland Public Schools Edwards played a key role in effectively handing control of the district over to Steve Goldschmidt which resulted in an unmitigated debacle, best personified by the ridiculous decision to permanently lay off custodians, even though dramatic wage and benefit concessions were made.

Julia Brim Edwards was also silent on PERS reform, as was her husband State Treasurer Randall Edwards, creating a divisive environment.  Both Edwards were similarly silent on the future of PGE, even though the State, and schools in particular, have sufferred greatly due to rising power costs.

With Nike public relations executive Maria Eitel scheduled to be on Texas Pacific's board and it now disclosed that Phil Knight is a major investor alongside Robert Bass, see February 23, 2005 note on Oregon Investment Council meeting, who has been the money behind TPG and even today has important joint ventures with TPG, it would be curious to know if Julia advised her husband to abstain on the February 23 vote to give $100 million of Oregon's public pension assets to the partnership in which Bass and Knight are the prime players at $250 and $200 million respectively, that being Oakhill Capital Partners.

One might also ask how long will it take for Julia Brim Edwards to sully the fine and hard won reputation Phil Knight has as an outstanding contributor to our community?

2005 February 27  Low pay, high costs for service put off prospective lawmakers, by Dave Hogan, Oregonian

Oregon legislators are paid $1,283 a month -- about the same as working 40-hour weeks at minimum wage. Lawmakers say to avoid having a Legislature dominated by wealthy or retired people, Oregon should raise their pay, as in other Western states, but not enough to make them full-time legislators.

Oregon's 90-seat Legislature is dominated by people who are retired, independently wealthy or have a spouse who provides their household's primary income. The average age is over 50. Few legislators are in their 40s, and only a handful are younger than 40. Tim Knopp, 39, a Bend Republican, left the House last month after serving since 1999, mostly because he wanted to spend more time with his wife and three young children. But he said the pay is a particularly big obstacle for younger legislative candidates.

Boosting legislative pay would have another benefit, Bates said. "I think if you had more people in the building who were working for a living, trying to make the house payment or car payment or put kids through college, we'd be more in touch with the public," Bates said.

Analysis and Commentary:  Legislators pay should be raised due to numerous dysfunctions that are now occurring. Most interesting to some are the million dollar PERS paychecks handed out to legislators like Lee Beyer when they leave the legislature to accept an appointment to a commission, in his case the Oregon Public Utility Commission.

By gaining this political appointment Beyer stepped up from an annual salary of roughly $15,000 to more than $100,000 and need only stay at the commission 3 years to retire based upon the salary of $100,000.  He can therefore increase his monthly retirement payment 6.7 times.  This conservatively assumes an annual PERS retirement of 65 percent of pay or $65,000, thus requiring a $1.1 million pool of funds generating a return of 6 percent anually.  Meanwhile, other state employees, in particular younger teachers, are being forced to take dramatic cuts to their PERS retirement.

2005 February 26  True up utility taxes, lead editorial, Oregonian

Enron's stewardship of Portland General Electric was such a disaster that it's hard to identify a single outrage that rises above the others. But the parent company's handling of PGE's federal and state income taxes is a pretty good candidate. You'll recall that, under Enron, the accountants at PGE regularly noted the amounts set aside for taxes in their financial statements. But Enron was able to consolidate its corporate taxes and balance profitable businesses such as PGE against unprofitable enterprises. Thus, even though PGE's ratepayers were charged for taxes, Enron didn't necessarily pay them. The practice has sent an estimated $720 million from ratepayer pockets to Enron's bottom line since 1997.

Utility regulators in Oregon and most other states treat companies such as PGE as if they were stand-alone entities. But as the Enron experience underlined, that's a false picture of reality. Regulators should be able to consider the impact of consolidated tax returns when they calculate a utility's actual rate of return, then apply that knowledge to the rates they allow utilities to charge consumers.

Whatever the PUC says, legislators must tackle the problem. Some sort of after-the-fact adjustment to reconcile consumer rates and utility taxes seems like the most promising approach. In any case, one thing is clear: Ratepayers should not be charged for taxes that the owners of a utility don't pay.

Analysis and Commentary:  An excellent editorial by the Oregonian that finally supports only allowing PGE to bill for taxes that are actually remitted to a taxing authority.  Considering intercompany transfer payments to Enron or TPG to be taxes paid is simply ridiculous.

2005 February 24  Regulators examine tax effect on rates, by Gail Kinsey Hill

The topic drew the attention of politicians and the public in 2003 when information surfaced that state and federal taxes paid by Portland General Electric to its parent company, Enron, never made it to the government. Enron was taking the checks and whittling the tax obligation to zero by offsetting gains from money-makers such as PGE with losses from less successful subsidiaries.

Consumer groups that testified Wednesday offered a range of solutions, from the use of more detailed tax estimates to annual reconciliation between taxes collected from ratepayers and taxes paid by utility parent companies. The PUC expects to complete an assessment of its policies and present recommendations to the House and Senate revenue committees within two weeks. "I'm not sure what those recommendations might be," said PUC Chairman Lee Beyer.

Despite the logic, huge discrepancies have developed between the amounts charged in rates and the taxes actually paid. Since 1997, PGE, for example, has charged ratepayers more than $720 million for federal and state income taxes. PGE, in turn, has transferred most of those payments to Enron, which has paid little, if any, taxes to the Oregon Department of Revenue or to the Internal Revenue Service, according to documents submitted to the PUC.

Dan Meek, an attorney for the Utility Reform Project, is a longtime critic of the PUC's rate-making policies regarding taxes. He said the solution is simple: reconcile the taxes charged in rates with the actual taxes paid. Start, he said, by refunding PGE ratepayers $720 million. "It's unfair to charge a cost that doesn't exist," Meek said.

The Department of Justice memo concluded that the PUC had the authority to consider a parent company's tax expenses in calculating a utility's cost of service -- if there was a rational basis for doing so. Benefits of consolidated tax savings could be passed on to ratepayers, for example, if the expenses that generated the savings were linked to the utility, Assistant Attorney General Jason Jones wrote in the memo.

Bill Parish, a Portland-based investment manager, said regulators must have access to a parent company's tax calculations before they can accurately determine amounts to include in utility rates. "Whether you like it or not, it's all in the details when it comes to taxes," he said.

Jenks, of the Citizens' Utility Board, said it wasn't necessary to institute true-ups or wholesale changes to current policies. Instead, he called on regulators to more carefully assess tax intricacies when setting rates. Take more variables into account, he said, such as interest deductions on the debt held by the parent company.

Melinda Davison, an attorney with Industrial Customers of Northwest Utilities, suggested regulators set up a deferred account and annually reconcile the amounts collected for income taxes with actual taxes paid by the parent. Or, Davis said, regulators could set rates based on a three-year average of taxes paid by the utility or its parent.

Analysis and Commentary:  An excellent article yet Hill neglected to discuss the difference between temporary timing differences and permanent differences.  It is indeed the permanent differences that enabled the fraud at Enron, one TPG expects to continue.  See note on February 28, 2005, letter to Lee Beyer from Bill Parish, for more details.

2005 February 24  Governor challenges Nike contracts

Nike's endorsement contracts with two University of Connecticut basketball coaches have prompted Connecticut Gov. M. Jodi Rell to call for reviewing whether the state should draw up new standards restricting public officials from using their office for personal gain.

Analysis and Commentary:  This is an interesting situation that, at a minimum, should warrant adequate disclosure.  With Phil Knight's partnership with Robert Bass drawing upon public pension assets, see Oregon Investment Council meeting notes on February 23, 2005 in this archive in which their partnership received $100 million, and Bass being the power creating TPG and TPG's proposed buyout of PGE, some might argue that if Nike and Knight benefit from such relationships, more disclosure should be made.  Especially given that Nike executive Maria Eitel is slated to be on TPG's board.

2005 February 24  If knife is out, cut OHSU loose, by Steve Duin, Oregonian

Despite the various anachronisms in its title, OHSU is a business, a big business, a $1.2 billion business. Its primary mission isn't to train doctors or serve the indigent poor. The corporation aspires, instead, to be the region's primary economic engine.

We shouldn't begrudge them their success. We should celebrate it. But we don't need to keep a straight face when OHSU briefly masquerades as an altruistic, long-suffering care provider during its biennial campaign for state funding. "OHSU became a public corporation in 1995. That means we don't get to review their budget," said state Sen. Vicki Walker, D-Eugene. "They pay an astronomical amount to their president. When you add salaries and benefits, it's well over $600,000. They spend their money any way they want, and the Legislature has nothing to say about that. We cut them loose, but they're still here with their hand out."

So it goes. OHSU, at least, is doing fine. State funding, and the bill that liberated OHSU from state control, have done their job. And now that we're getting by without OHSU's charity, I think OHSU can get by without $53 million in state funding.

Analysis and Commentary:  OHSU is clearly suffering from a lack of focus, a situation that has bred significant dissatisfaction among the 11,000 rank and file, a story still not yet covered by any of our major news outlets.  Instead, we are getting pr spin that everything is fine.

2005 February 23 TPG Founding Firm, Bass Partners, Receives More Funding from the Oregon Investment Council at Monthly Meeting, Selected Commentary, Bill Parish

Purpose: Staff would like the OIC to consider approving a committment to Oak Hill Capital Partners II, L.P. in the amount of $100 million.
Background:  Oak Hill Capital Partners is being formed by Oak Hill Capital Management.  A total of $500 million will be invested by those associated with Oak Hill, including $250 million from Robert Bass and $200 million from Phil Knight.
Recommendation:  Staff and PCG recommend that the OIC authorize $100 million committment to Oak Hill Capital Partners.

Analysis and Commentary:  This regular monthly meeting resulted in Oak Hill Capital receiving $100 million of Oregon Public pension assets to manage. The partnership's two primary investors are Robert Bass and Nike's Phil Knight at $250 and $200 million respectively.  TPG's founders David Bonderman and Jim Coulter both came from working for Bass and today they have significant joint ventures with Bass.  A few interesting facts are summarized as follows.

1)  Bass has been the power behind TPG  and today has significant joint ventures with TPG.
2)  TPG's biggest investor is Oregon PERS at approximately $1 billion and its biggest investment is slated to be PGE.
3)  Nike founder Phil Knight has a significant co-investment relationship with Bass at $250 million.  It is not clear if Knight actually owns a percent of Oak Hill or is simply a significant investor alongside Bass. What is clear is that this same fund just received $100 million of Oregon PERS assets.
4)  Nike executive Maria Eitel is slated to be on TPG's PGE board.
5)  Nike has been silent on the future of PGE.

2005 February 22 In my opinion, Op-Ed by former PGE President Richard Reiten, Oregonian

If the PUC approves its purchase of PGE, Texas Pacific, working with a strong local board, is likely to execute its plan well, ultimately selling or taking PGE public again. But if the PUC decides against the purchase or makes the conditions too cumbersome, we need to chart the next-best alternative.

The city of Portland has made its intentions clear. It wants to organize a public purchase, forming a municipal utility with PGE's $3.4 billion in assets. The pros and cons of this outcome are not clear even with extensive media coverage. Certainly it would send all parties through another lengthy process at the PUC, along with complex discussions among jurisdictions served beyond Portland's borders.

Further, the oft-stated municipal financing benefits are largely illusory. With the current low interest rates there is no material financial advantage that a municipally owned utility gains over an efficient, investor-owned firm other than federal tax avoidance. A review of the performance of other regional municipals bears this out. Richard G. Reiten is chairman and former chief executive of Northwest Natural and former president of Portland General Electric.

Analysis and Commentary:  While CEO of NW Natural Gas Reiten groomed Mark Dodson to become CEO.  Dodson is a former Ater Wynne law partner and close associate of Neil Goldschmidt.  Interestingly, when NW Natural mounted its own bid for PGE, led by Dodson, Texas Pacific was slated to be a key player in the financing package.   Clearly, Reiten is unable to provide an objective opinion and is unfortunate that he was provided this opportunity with no counterpoint piece.

2005 February 20  Unmasking that pension consultant, by Gretchen Morgenson, NY Times

It's something of a mystery why the huge and presumably powerful public pension funds in this country have been so loath to investigate whether they have been hurt by their consultants' conflicted loyalties. After all, the biases in these organizations are of enough concern to the Securities and Exchange Commission that it has conducted an industrywide investigation of pension consultants and may recommend enforcement actions against some of them.

Well, last week, the ice finally began to crack on this important issue. The board of the Public School Teachers' Pension and Retirement Fund of Chicago is reviewing a proposal to conduct a comprehensive conflict-of-interest audit of its investment consultant, Mercer Inc., a unit of Marsh & McLennan. The fund has $10.3 billion in assets and has been a Mercer client since 1990. It may seem like a baby step, but remember that this is the don't-rock-the-boat pension world. Among these often meek managers, it is literally a shot across the bow.

If the Chicago teachers' fund goes ahead with the audit - it will decide next month - it may very well encourage other pension funds to conduct similar investigations. It's about time. Some $5 trillion sits in pension funds nationwide. Their beneficiaries are teachers, firefighters, bus drivers and other public employees, as well as workers at private companies that still offer traditional pensions for retirement.

Edward A.H. Siedle, president of Benchmark Financial Services in Ocean Ridge, Fla., and a former lawyer for the S.E.C., investigates money management abuses on behalf of pension fund clients. If the Chicago teachers' fund decides to audit Mercer, Mr. Siedle will conduct the inquiry; he will not charge for his services.

"Our investigations reveal that investment consultant pay-to-play schemes involving collusion with money managers have cost funds amounts ranging from 10 to 15 percent of assets," Mr. Siedle said. Ms. Poe said that Mr. Siedle was a frequent critic of Mercer and was involved in litigation against another Marsh unit. "While we welcome any objective independent review of our work," she said, "we question whether such an audit by this person can by its very nature be objective." See complete story at

Analysis and Commentary: Morgenson is an outstanding reporter yet this story is long overdue.  Here in Oreogn the Texas Pacific Group has not dislcosed its business relationships with the various consultants to the Oregon Investment Council. The OIC manages the nations 8th largest public pension fund and Texas Pacific's is its largest private equity investor. To date State Treasurer Randall Edwards has initiated no such review, nor required that such disclosures be made by all vendors to the Oregon Investment Council.

Instead Edwards is paying a Eugene law professor $1 to conduct a "best practices" review, narrow in scope like the review he requested Attorney General Hardy Myers to conduct surrounding Neil and Diana Goldschmidt and $300 million TPG received just prior to the PGE deal being announced in which Diana sat on the council approving the investment and Neil was slated to be Chairman. Scan this archive with Search word   Diana  to see additional background.

2005 February 20  Debt sows doubt with PGE deal, by Mike Rogoway, Oregonian

All utilities have debts to pay, but few carry a load as heavy as Portland General Electric would if Texas Pacific Group succeeds in its takeover bid. Texas Pacific wants to buy Portland General Electric from Enron for more than $2.3 billion, borrowing heavily to cover the bulk of the purchase price. Coupled with loans already on PGE's books, the deal would create a utility financed with $1.8 billion in debt -- three times more than the equity investors are putting into the deal.

A December survey of 37 publicly traded electric utilities by the investment research firm Value Line found none that use such a high level of borrowing. On average, Value Line reported, utilities' capital structures are split almost evenly between debt and investor equity.

Utilities have historically been considered low-risk investments, but an unforeseen crisis could eat into cash flows from PGE. If the Portland utility doesn't generate enough cash to pay debts created by the sale, opponents fear, PGE's new owners might seek regulatory approval to push up rates. Absent that, the utility could cut back service and reduce long-term investments to make its debt payments.

"There's just a lot of pressure to keep the rates as high as possible to make as much money as possible to service the debt," said Melinda Davison, an attorney for Industrial Customers of Northwest Utilities, a trade group that opposes the PGE sale. The deal Texas Pacific proposes is called a leveraged buyout. It's a common way to acquire troubled companies in many industries but is practically unheard of in the utility business.

"The money has to come from somewhere. We know where it comes from. It comes from customers," said Julie Brandis, lobbyist for Associated Oregon Industries, which opposes Texas Pacific's acquisition. See complete story at

Analysis and Commentary:  The following comment was provided via email to Rogoway:   "Although it was a great story and I can appreciate your perspective, i'd still have to strongly disagree on the approach for the following reason: debt to equity and leverage ratios are best considered as a reflection of the underlying financials or balance sheet of the entity, especially a regulated utility, not the purchase price.  TPG may give you a nice pr spin, as do other investment firms in such deals, yet debt to equity and leverage ratios are a function of an actual balance sheet.  Any basic accounting text will confirm that. By the way, I was once a certified public accountant and auditor responsible for calculating and reviewing such ratios. This was in the late 1980's at Arthur Anderson, the best firm at the time that no longer exists due to exactly such interpretations made in the mid to late 1990's.

It is not that I am trying to be harsh Mike and again it was an excellent story overall yet it is exactly this type of creative financial communication not adequately evaluated by major media outlets that spawned Enron.  Again,  TPG is considering cash on PGE's balance sheet as part of the purchase price, certainly not an "average" transaction with respect to a regulated utility. In summary, this is nothing but a highly leveraged buyout and a spectacular financial fraud. A fraud the public utility commission will be resonsible for if the deal is approved."

2005 February 19  PERS draws a bigger bite of spending, by James Meyer, Oregonian

Despite cuts in benefits and recent market gains, public pension costs continue to soar for schools and other governments in Oregon. The Public Employees Retirement System board on Friday approved new employer rates for 875 governments in Oregon. Rates will climb an average of almost 5 percentage points, beginning July 1, with a total cost of about $300 million.

"It's an expense you really don't have any control over," he said. Most school districts pay the same rate, which will go from 11.11 percent to 16.97 percent of payroll. For David Douglas, that's a jump from $4.6 million to $6.9 million. "Funding is not going to go up that much, so it forces you to make budget cuts to make room for additional costs," Wilton said.

Analysis and Commentary: On February 20, 2005 the Salem Statesman Journal published the 5 year investment results for PERS, noting the total PERS fund grew at an annual rate of 4.5 percent. For comparision purposes, an investment in cash would have yielded a return of 3.1 percent.  Longer term bonds would have paid a much higher yield. Clearly, not enough attention has been paid to this investment performance and its impact on the PERS system.

Instead, public employees have been scapegoated and the PERS asset allocation choices used as a political playground to a large extent due to the public employees inability to see this and the damaging impact of certain investments to the local economy, of which TPG's proposed buyout of PGE is a shining example.

2005 February 19  Proposal to Make PGE a "Mutual Utility," by James Hansen, Independent Investor

We believe that Oregonians want an enduring local utility dedicated to conservation and respectful of our culture that generates and delivers safe, reliable power at stable rates. Everyone benefits from the permanence and stability of a locally-owned utility: local ownership and customer control mean transparency and strong ethical governance; they mean safety and service will be given priority, because everyone is focusing on the core business function and a long-term vision instead of looking for short-term gain.

We are a group of more than a dozen local business leaders, utility executives and consultants—and all current or former PGE customers. We believe there's a way to assure local control and management of PGE. The idea is to create a new type of company: a unique combination of the best features of power co-ops and investor-owned utilities. We call it Oregon Mutual Utility.  See website at for more details.

Analysis and Commentary: Hansen's proposal is interesting yet would result in an entity clearly dominated by a few large industrial users.  This and other structural issues will need to be addressed for it to compete seriously with the city's proposal for a municipal utility with private management.

2005 February 18  Phillips pulls no punches, by Todd Murphy, Portland Tribune

On Feb. 9, Phillips announced that she was terminating Goldschmidt “effective immediately” — in spite of a contract Goldschmidt was able to negotiate with district leaders four years ago that seemed to allow him to be terminated only for “moral turpitude,” “gross neglect of duty” or with the district giving him a buyout of his contract in excess of $300,000.

Phillips’ announcement said Goldschmidt’s legal recourse to fight the immediate termination was “binding arbitration, pursuant to his contract, should he choose to pursue that route.” Goldschmidt has not commented since his firing, and attempts to reach him this week were unsuccessful.

“I’ve never had so many teachers, parents, principals, business leaders, stop me on the street, stop me in stores, send me e-mails … jumping up and down,” Guyer said of the days following Phillips’ announcement terminating Goldschmidt and two of his staff members. “There are very few people who are not applauding Vicki’s decision there. I think many people regarded HR as sort of the poison of the organization.”   Some suggest the move likely was the single most important step Phillips could have taken to improve the district’s relationship with the teachers union. That relationship was so antagonistic that teachers voted to strike against the district two years ago before city and county leaders went around Goldschmidt and other district leaders to negotiate a contract settlement. See complete story online at

Analysis and Commentary: Few organizations have been more damaged by higher energy prices than schools.  And with Neil Goldschmidt's brother Steve effectively running the Portland Public Schools with its $500 million annual budget, and all the related political power, it is not surprising that the district has to date been completely silent on the future of PGE.  Steve was brought to the district by Neil Goldschmidt's wife Diana after Neil worked to make her acting superindendent.

It will be interesting to see, now that Steve Goldschmidt has been fired, if the new superintendent steps up and makes a statement on PGE.  With former PGE executive Fred Miller's wife Karla Wenzel chair of the school board prior to Julia Brim Edwards being chair, Julia being State Treasurer Randall Edwards wife, the chances for any discussion of PGE or "balanced" PERS reform was simply impossible.  Remarkably, Edwards has still not stated a position on PGE.

The big untold story of the Portland Public schools is that it has been used as a political playground by three powerful couples; Fred Miller and Karla Wenzel, Neil and Diana Goldschmidt and Julia and Randall Edwards.  At one point it was so bad that Fred Miller was Chair of the "Real Estate Trust," an entity created to deal with surplus property, while his wife Karla Wenzel was chair of the school board determining which property would be declared as surplus.  The basic idea was to identify various soccer fields and other assets as surplus and, rather than work hard to sell these hard fought green spaces to the city, instead build condos on the fields.  Another proposed board member for PGE, Tom Walsh, may have indeed been on the board of this real estate trust.

2005 February 18  No one likes a Holllywood ending, by Jeanie Senior, Portland Tribune

Whatever the outcome of the buyout battle now raging over Wilsonville-based video rental chain Hollywood Entertainment Corp., one fact already is clear: Oregon is about to lose another corporate headquarters. Former Willamette Industries Inc. CEO Duane McDougall was at the helm of the Portland-based wood products company when it was swallowed by Federal Way, Wash.-based Weyerhaeuser Co. in 2002 after a lengthy and bitter takeover fight. He has been watching the Hollywood drama unfold.

“You can imagine my feelings about something like that,” he said. “I think it’s tough for the city and the region to be losing a corporate headquarters because it’s a substantial number of people who make significant contributions in the community, besides just paying lots of taxes.”  He added, “You count up all the income taxes, TriMet taxes, contributions to charities — its something that’s not easily replaced.”

At least two other companies, Louisiana-Pacific Corp. and Crown Pacific Partners LLC, have departed from Portland in the last year. “The trend is the wrong way,” McDougall said. “You can read into that what you want, but it’s not good.” There is not enough appreciation for the presence of a corporate headquarters here, he said. “People tend to look at a corporation as some big monolith, but it’s made up of people who live in the community. If they don’t have jobs, they go somewhere else, and it’s usually a long time before you can replace those kinds of jobs.”

Portland investment manager Bill Parish called the Hollywood Video situation “the same old sad story, in which Portland is going to lose a really important headquarters and the quality of jobs that go along with it.” “Locally based businesses should be cherished,” he said. “Here’s the governor going to China and California to try to bring in new businesses, and not enough is being done to protect existing businesses.” There’s another bonus to having a corporate headquarters, he said. “Companies like that groom executives who go out and start their own businesses.” And when they leave, “it’s another loss in the pool of executives.”

Analysis and Commentary: Duane McDougall is of course scheduled to be on the new PGE board and, in my opinion, is the only choice, in terms of competence, that makes any sense among the various board members.

I first spoke with Duane when trying to block Weyerhaeuser's hostile takeover of Willamette Industries.  At the time Weyerhaueuser was using accounting fraud, specifically manipulating its pension to inflate earnings, and I tried to get the SEC to act.  The problem was that too many larger scandals wer in process.

Nevertheless, a much clearer opportunity to block the Willamette takeover occurred.  The mistake Duane and Bill Swindells, former Chairman of Willamette, made was to not understand the significance of Institutional Shareholder Services (ISS), the proxy firm that cast almost 30 percent of the votes on the proposal on behalf of institutional shareholders to add board members, a tactic by Weyerhauser that sealed Willamett's fate.

While sitting at the annual meeting at the Portland Art Museum I pondered whether or not to stand up and declare it an invalid election before almost 1,000 people, specifically requesting that Swindells contact the SEC and verify my claim regarding ISS not fully disclosing its ownership structure.  I even had the number and would have offerred my cell phone.  In the end I chose silence because Swindells never called me directly prior to the meeting and I also thought he had the situation under control.

The nature of ISS problem is that it was required to disclose its ownership to the SEC and it had not done this since it had been acquired by the investment banking firm Warburg Pincus, a firm with significant conflicts of interest with the bond underwritiers who would finance the buyout of Willamette.  There vote should not have been counted.

Such mergers fall within the SEC's proxy guildelines, as clearly articulated by Harvey Pitt in a subsequent battle over the HP/Compaq merger, in which he required the filing was made just prior to the key merger vote.

It is somewhat ironic that this article on Hollywood has both Duane and I on the same page, in terms of perspective, yet he has at the same time aligned himself with Texas Pacific, a firm that will clearly lead to the closure of PGE's headquarters in Portland when it is "flipped" to another utility.  My thought, poor choice Duane.

2005 February 18  Public Utility Commission Sets Public Meeting on Income Taxes and Utility Ratemaking

The Commission will hold a public meeting on Wednesday, February 23, to discuss 1) the white paper on income taxes and utility ratemaking issued by the staff on February 4, 2) comments on the paper filed by interested parties, and 3) a legal memorandum provided to the Commission by the Oregon DOJ on recognizing a corporate parent’s tax liability in setting utility rates. The meeting will begin at 9 am in the Main Hearing Room in the PUC Building. Links to the staff white paper, party comments, and DOJ memorandum are provided below at

Excerpts from the staff white paper include the following:
Accounting for Public Utilities, Matthew Bender & Company, Inc., Publication 016, Release 21, October 2004
Section 7.08[3]:

“It is not uncommon for a regulated utility to have subsidiary operations that produce tax losses which, on a consolidated tax return, offset taxable income from utility operations. . .The only approach that is consistent with standard ratemaking principles
that prohibit cross-subsidization between utility and non-utility activities is to put the regulated operations on a ‘stand-alone’ basis and to assign the full tax burden to the taxable gain source and a tax benefit to the tax loss source. The basic theory is that the regulated costs should not be affected by the results from nonregulated operations.” See complete 17 page report at

Excerpts from Attorney General Hardy Myers office opinion on utility taxes dated 2/18/05 include the following:
For the reasons set forth below, I conclude that, within the parameters outlined, the Commission has the discretion to change its policy of calculating tax expenses. Specifically, I conclude that the Commission has the discretion to choose a policy of calculating tax expenses so long as its policy is rational, including taking into account the benefits and burdens of its policy, and meets minimum constitutional requirements. Taking into account the “benefits and burdens” of its policy means that the benefits of consolidated tax savings are given to ratepayers (by reducing the utility’s tax allowance) if the customers bore the burden of paying the deductible expenses that generated the savings. If the Commission matches the benefits and burdens in some rational manner, I conclude that the Commission’s choice would meet legal requirements.

In Federal Power Commission v. Hope Natural Gas Pipeline, 320 US 591 (1944), the Supreme Court recognized that it is the Commission’s role to set rates that provide for adequate revenue to pay the reasonable expenses and reasonable capital costs of a utility and that courts review whether the end result, as opposed to a review of each expense or cost, is fair. In 2001,
the Oregon Legislature put the Hope standard, which was already being applied in Oregon, into state statute when it amended ORS 756.040. Subsection (1) of that statute, in relevant part, provides: “The Commission shall balance the interests of the utility investor and the consumer in establishing fair and reasonable rates. Rates are fair and reasonable for purposes of this subsection if the rates provide adequate revenue both for the operating expenses of the public utility or telecommunications utility and for capital costs of the utility, with a return to the equity holder that is: (a) Commensurate with the return on investments in other enterprises having corresponding risks; and (b) Sufficient to ensure confidence in the financial integrity of the utility, allowing the utility to maintain its credit and attract capital.”

I conclude that the cases applying the actual taxes paid doctrine are flawed and, therefore, unpersuasive for one overriding, fundamental reason – in estimating the taxes of the regulated utilities the cases do not adequately consider the benefits and burdens of the consolidated group, or alternatively stated, the courts do not apply any symmetry in estimating tax expenses.
During the 1980s, the Pennsylvania courts issued several decisions that discuss and apply the actual taxes paid doctrine.5 Although the cases are difficult to understand because they are poorly reasoned, the approach of the Pennsylvania courts can be summarized as: all tax savings arising out of participation in a consolidated return must be recognized in ratemaking; otherwise, the courts would be condoning the inclusion of fictitious expenses in the rates charged to the ratepayers. Initially, this may seem logical and persuasive. However, a deeper analysis clearly demonstrates that Pennsylvania’s view, while simplistically pleasing, is unpersuasive and incorrect. The Pennsylvania cases concluded that where a utility realizes tax savings because of its participation in a consolidated return, those savings must be passed on to consumers by adjusting the utility’s allowance for tax expense. See Barasch v. Pa. Pub. Util. Comm., 548 A.2d 1310 (Pa. Commw. 1988).

The flaw with the Pennsylvania approach is not that it follows the actual taxes paid doctrine but that it patently fails to consider aligning the benefits and burdens of the consolidated tax structure. While I have concluded that this Commission could adopt an actual taxes paid doctrine to calculate tax expenses, it must do so in a rational, symmetrical way. This is why the Pennsylvania cases are incorrect – they do not even attempt to align the benefits and burdens of the tax treatment.6 In fact, the Pennsylvania approach does not look at all the consolidated companies in the parent’s corporate family. It looks only at those who lost money in recent years. It ignores those that were profitable, except for the purpose of calculating the utility’s share of tax savings from the losing companies.

The actual taxes paid cases do not consider City of Charlottesville, Virginia v. FERC, 249 U.S. App. D.C. 236; 774 F.2d 1205 (1985) (City of Charlottesville), which was issued by the United States Court of Appeals for the District of Columbia in 1985. 11 The decision, which is authored by Judge Scalia12, discusses the benefits and burdens test and, while not binding
authority, is persuasive and consistent with Oregon law and constitutional requirements. Therefore, I conclude that if the Commission wishes to change its policy on calculation of taxes, it would be prudent to follow the benefits/burdens test.
The benefits and burdens test can be simply stated as: the benefits of consolidated tax savings are given to ratepayers (by reducing the utilities tax allowance) if the customers bore the burden of paying the deductible expenses that generated the savings. See City of Charlottesville 774 F.2d at 1208.

Under current tax law, private companies are free to file consolidated taxes and, as a result, receive benefits as part of a consolidated group. If the Commission were to adopt a policy that passed along consolidated tax savings to ratepayers, it should explain why it is appropriate to disadvantage utilities and their nonregulated affiliates as compared to private consolidated groups. One possibility may be that the Commission can point to the regulated utility as the entity that gives rise to a benefit to the consolidated group; therefore, the ratepayers should be the ones that get the benefits. On the other hand, the Commission may consider that a policy that passes along consolidated savings to the ratepayers places the utility and its affiliates at a competitive disadvantage in the marketplace. For example, consolidated groups with regulated utilities
would not be able to take full advantage of the Code’s benefits, which are intended to encourage investment by providing tax benefits that make investors willing to risk more money than they otherwise would. As a result, such a policy may create disadvantages for consolidated groups with utilities and restrict their competitiveness in the marketplace. The Commission may also consider whether removing the Code’s tax benefits for regulated utilities would also diminish the attractiveness of investment in the utility company.

To take another practical example, consider the situation with PGE and Enron. PGE’s rates contained approximately $90 million in estimated federal and state income taxes. Enron, because of substantial losses in other businesses entirely unrelated to PGE, paid no taxes. However, in this case it was Enron’s other business risks that created the tax savings. PGE ratepayers did not assume any of the burdens of Enron’s other business endeavors, such as a higher cost of capital. Therefore, one could conclude that because PGE’s ratepayers did not take on any of the burdens that created the tax savings they should not get the windfall of benefits. On the other hand, if PGE suffered losses that lowered the tax liability of the consolidated group you could conclude that the ratepayers should receive the benefit of those lower taxes. If the ratepayers are taking the risk of the parent, ratepayers should also get the benefit of those burdens. However, if the ratepayers are not taking any risk of the parent, they should not get the benefit of tax savings resulting from the risk the parent, not the utility, incurred. The preceding examples are only intended to illustrate some of the considerations that the Commission may use when analyzing the symmetry of its tax policy. Ultimately, the Commission should consider and detail a rational explanation that considers the benefits and
burdens of its decision.

Conclusion by Myers Office: "The Commission currently has discretion to choose a policy of calculating tax expenses so long as the policy is rational, i.e., meets the benefits and burdens test, and meets minimum constitutional requirements." See complete opinion at

Analysis and Commentary on white paper and attorney general's interpretation: Clearly, the PUC is long on economists and MBA's and short on CPA's with auditing experience that understand accounting theory.  The arguments against not allowing utilities to charge for taxes that will never be paid is laughable, both from a legal and an accounting standpoint.

Now let's turn to someone who is an absolute expert on taxation, former Chair of the Senate finance committee Bob Packwood. The following is an email response from Senator Packwood on June 23, 2004 in response to my concern that TPG could eliminate all taxes, permanently, by purchasing companies with large operating losses for pennies on the dollar and rolling up its investments, like PGE, into a top level partnership.  Here are Packwood's exact comments:

"After your phone call I checked with John Colvin, who in 1986 was the Chief Tax Counsel for the Senate Finance Committee.  He confirmed what you said about profitable companies buying losing companies, consolidating their returns, and paying no taxes.  He agreed with you that we had limited the percent they could take each year, but he couldn’t remember the exact percent.  He was aware we had done nothing to prevent the reverse abuse.

After talking with John I called Roger Mentz, who was the Assistant Treasury Secretary for Tax Policy in 1986.  He explained exactly how the AOL-Time-Warner situation could happen.  He said it was not a big problem in 1986 because your losses were usually outstanding stock options and stock options were not a big thing in 1986.  He said in a nutshell that this is how it works:

A company gives you a stock option at $100.  Five years later you purchase it and sell the stock for $1,000.  You have $900 of income taxed at regular (not capital gains) rates.  The company has a $900 deduction.  You have enough stock options outstanding that are exercised it is very easy for a company to be, on paper, unprofitable.  The unprofitable company – probably using more of its stock – then buys the profitable company, consolidates the return, and pays no taxes.

 I have no idea what the Texas Pacific – Portland General Electric tax arrangements are so I can’t comment on that.  A don’t know if one of them is profitable and the other isn’t, whether they are both profitable, or whether they are both losing money.

Thanks for bringing this to my attention.  You’re providing a great public service."

In summary, the point is that the PUC's entire discussion of taxes has not addressed the reality of this staggering loophole and given that it will not have access to TPG's top level books, Oregonians are being positioned to be fleeced by the incompetence of the PUC, an entity that is supposed to represent ratepayers. See related article explaining this loophole by Steve Duin in this archive on June 22, 2004 titled "Digging deeper into the Texas Pacific Deal by Steve Duin, Oregonian"

2005 February 18  Email from Bill Parish to PUC Chair Lee Beyer titled "PGE Decision Grooming NW Natural Gas to be Sold"

bcc: interested parties including local and national media

Dear Mr. Beyer,

It now appears that you and your fellow commissioners are on the cusp of creating the equivalent of an Oregon full employment act for federal prosecutors as you are expected to announce approval of the TPG proposal to purchase PGE with conditions on Tuesday, coincidentally one day prior to the Oregon Investment Council's monthly meeting, presided by former Pacific Power executive Gerard Drummond.  Oregon's public pension employees are of course TPG's largest investor due to a brilliant divide and conquor strategy that pits these public employees against Oregon's businesses, whose very success and need for lower utility rates will fund these public employees retirement via future tax revenues.

Please allow me to explain a few points that are of extraordinary interest to a few top notch national investigative reporters who you can be certain will be looking behind those drapes you are quoted in the media as saying "no one is smoking." Whatever on earth that means?
1)  The Oregon Public Utility Commission is being used as a vehicle for the sale of all three major Oregon utilities, of which PGE is the second and NW Natural will soon be the third if you approve the TPG sale.  As you know, the big winner in the sale of Pacific Power was Mr. Goldschmidt's consulting firm. This is not the commissions role. Your role is to protect ratepayers and that, as mandated by PUHCA, is local ownership centric.  You will all, along with various other elected officials and their staff, discover this in spades subsequent to your decision if these reporters are so emboldened by your approval of the TPG deal.

2)  Mr. Goldschmidt and Mr. Imeson screened your appointment to being Chair of the PUC in late 2003 in addition to screening the additions of Ray Baum and John Savage to the commission.  Imeson now represents TPG before your commission.  To date no subpeonas have been issued to you or your staff for correspondence with their firm or intermediaries. It is also noteworthy that Mr. Imeson was a public official as a member of the OHSU board at the time and falls squarely within the state ethical rules as such. OHSU President Peter Kohler was chosen to replace Mr. Goldschmidt due to his sex scandal while Imeson might have even still been on the OHSU board.

3)  TPG was the key backer of NW Natural's attempt to acquire PGE a few years ago and by default would have eventually been positioned to own both utilities, thereby removing two headquarters of paramount importance to the region. It must be great to be in Texas and look at a map knowing full well what a bunch of trusting patsies are up here in Oregon.  Also noteworthy is the long collaboration between NW Natural's CEO Mark Dodson and Mr. Goldschmidt and his firm.

4)  My own personal "opinion" is that NW Natural's executives are already positioning for a sale of the company and this will accelerate if you approve the TPG transaction.  Running a top utility that pays a 3.5 percent dividend and grows steadily just doesn't seem to be of interest to "deal makers" like Mr. Dodson. Again this is my "opinion."  Note that Mr. Goldschmidt's former partner John Carter and his close associate Scott Gibson, who also both serve on the OHSU board with Mr. Kohler and previously with Imeson, are both on NW Natural's board.  Neither of them was subpeaned by Hardy Myers in his investigation, nor was Gerry Grinstein.  Of course most surprising to me is that David Bonderman was here in Portland in May 2003 making a presentation to the OIC, specifically referring to utilities, and no correspondence for this period was reviewed by Mr. Myers office.  Thinking the Oregon AG investigation will provide a measure of protection is simply, well, ridiculous.

Summary:  Frankly, I am just a casual observer of these things and tend to express strong opinions. Ignoring me is easy yet prior to ignoring the shark like school of agressive national media figures, which i frankly don't appreciate much, swirling around this decision, if you are going to be thinking about new drapes, be sure to stop by Kmart and look for Martha Stewart's brand, known for its high quality and low price.

Bill Parish

Analysis and Commentary:  To follow

2005 February 18  Wyden attacks Bush's plan for BPA rate changes, by Jeff Kosseff, Oregonian

Sen. Ron Wyden threatened to block President Bush's nominee for deputy energy secretary in an effort to pressure the administration to drop proposed changes to the Bonneville Power Administration. "Unless the administration drops their proposal, I will be forced to come back to this floor and have a public hold placed on the Sell nomination," Wyden said. The Senate must approve presidential nominations. Any senator can place a hold on a nomination, and at least 60 senators must vote to remove the hold. Senators are not required to publicly announce holds, but Wyden has made it a policy to do so.

Analysis and Commentary: Curious since Wyden has been absolutely silent on the future of PGE.  In addition, his office has done nothing to lobby the SEC to deny the PUHCA exemption to TPG.  Of course our other Senator Gordon Smith has similarly done nothing.

2005 February 17  Sorenson Details Action Plan to Stop TPG Takeover, Including Letter to SEC Chair Bill Donaldson, Press Release

Lane County Commissioner Pete Sorenson offers his solution-based action plan to stop the Texas Pacific Group takeover of PGE Thursday, February 17 at a media conference in Portland at 10:15 am at the US Bank Room in the Central Library, 801
SW 10th Avenue. Former Congressman Jim Weaver (D-Oregon) joins him.

"The threats to northwest utility ratepayers that are inherent in the proposed leveraged buyout by Texas Pacific Group should not be allowed to happen," said Sorenson, who is running for Governor. "The changes in rate charges foreshadowed
by this approval is yet another assault on the working families of Oregon." "Someone's asleep at the switch, and this deal is happening in the dark," stated Sorenson. "It needs to be brought out into the light. Sorenson will detail these actions at his Feb/17th media conference:

1) He releases a letter sent to the Securities and Exchange Commission, which is required to enforce PUHCA and to consider the wisdom of allowing the TPG-PGE deal. Sorenson asks the SEC to turn down this deal.
2) He urges the legislature to accelerate hearings in the Senate and House. There are important bills that are worthwhile starting points and deserve examination. An example includes: Senate Bill 408 sponsored by Sens. Vicki Walker and Rick Metsger, authorizing public utilities to charge state or federal taxes only when the taxes are actually paid to state or federal government. This bill does not, however, deal with the $710M federal and state tax money that has already been collected and not paid. In the last 7 years PGE paid only $10 to Oregon. The Legislature should also immediately create a regional entity to acquire PGE.
3) Sorenson calls on Governor Kulongoski to show leadership and to reject the PGE sale. The Governor should also condemn the PGE intention to collect taxes they don’t intend to pay. "The Governor should bring this deal into the public spotlight, instead of spending valuable public time focused on his campaign fundraising," Sorenson said. “Our governor is the first in recent Oregon history to fundraise during a legislative session. Only the Governor and Senate Republicans are fundraising
during the current session.”
Pete Sorenson is a former State Senator (D-Eugene) from 1993-97, and currently a third term County Commissioner in Lane County. He is a Democratic candidate for Governor of Oregon.

Text of Letter to SEC Chair Donaldson:

February 17, 2005

William H. Donaldson
Chairman, U.S. Securities and Exchange Commission
450 Fifth Street N.W.
Washington, DC 20549

Dear Mr. Donaldson,

The Oregon Public Utility Commission will soon issue its decision on whether or not the Texas Pacific Group will be able to purchase Portland General Electric from the bankrupt Enron Corporation. If approved by the Oregon PUC, the next step for Texas Pacific will be to request an exemption from Public Utility Company Holding Act (PUCHA).

The purpose of this letter is to request that the U.S. Securities and Exchange Commission not grant a PUHCA exemption. This request is supported by the following reasons:

1) Allowing this exemption will remove Oregon's largest electric utility from all SEC oversight. The previous exemption to Warren Buffet's fund to purchase MidAmerican Energy Holdings, still allowed for public disclosure as this fund is publicly traded and therefore, does receive some level of SEC oversight. Texas Pacific is not a publicly traded corporation and has limited SEC oversight.

2) Texas Pacific now receives more than half of it’s funding from public pensions and these public pensions are currently unregulated by the SEC. For example, the Oregon Public Retirement System is now TPG’s largest investor.

3) PUCHA has a specific provision that requires one to look beyond the form of the transaction to the underlying substance, specifically the ownership structure, to determine if local control exists. Although Texas Pacific has set up an Oregon
based shell, negative consent rights are so extensive that the local board will have no real operating authority.

4) I am attaching documents that further amplify reasons to reject this request.

The SEC is doing an extraordinary job during difficult times. Thank you for your efforts. Please do quickly and definitively deny TPG's request for an exemption so that other alternatives for a regulated electric utility might occur.

Very truly yours,
Pete Sorenson

Analysis and Commentary:  See compete text of Sorenson's comments at  Sorenson is a Democratic candidate for Governor running against Ted Kulongoski, the sitting Governor and also a Democrat. I have never spoken with Sorenson yet it is refreshing to see someone downstate with the courage to speak out on this issue.

2005 February 16  White paper or white wash? by Dan Meek, Utility Reform Project

The "White Paper" (February 2005) apparently seeks to whitewash the indefensible--the fact that the Oregon Public Utility Commission (OPUC) has allowed one utility, Portland General Electric Co. (PGE), since 1997 to charge ratepayers in Oregon over $720 million for "income taxes" that were never paid by anyone to any level of government. And that is just one of the regulated utilities in Oregon. The others may be engaged in this practice as well. The whitewash is accompanied by a legal smokescreen, which proves transparent.

What is weakest, and often absurd, is not the accounting explanations but the proffered legal theories, which are flatly unsupportable. According to the OPUC's stated legal analysis, at least 7 states are already violating utility constitutional rights by taking into account the known fact that the parent corporations of regulated utilities generate tax deductions that reduce the the amount of income tax actually paid on the income of the utility. Curiously, no court has ever so stated.

 Of particular note is the repeated claim that various alternatives cannot be implemented, because the OPUC cannot obtain utility tax payment information from the Oregon Department of Revenue (ODOR). This is completely irrelevant. The OPUC can obtain that information (as well as federal and local tax payment information) directly from the utility, as the Utility Reform Project (URP) is now obtaining in the UCB 13 docket at the OPUC. Footnote We have also there documented that the OPUC and its staff has never even asked PGE for information on the amount of federal, state, and local income taxes PGE has paid since 1997. Never even asked.

The Commission can require any regulated utility to provide such information directly to the OPUC. It has nothing to do with ODOR. As we pointed out to the Commission some 2 years ago in our Petition to Open Investigation (which the Commission summarily denied):

The OPUC's White Paper contends the OPUC is helpless to set utility rates in a way that fairly treats the actual cost of income taxes. Contrary to its assertions, new legislation is not required for any of the alternatives 1-4. All that is required is using the OPUC's existing regulatory authority. The White Paper offers a number of absurd claims, some of which are refuted in the comments provided by CUB yesterday. We will not repeat any of CUB's comments but merely note that forcing ratepayers to provide an interest-free loan to the utility, in the form of prepaying income taxes that the utility in fact does not pay, is not a "benefit" to ratepayers, as the White Paper claims. Instead, it is a forced ratepayer investment in the utility in the same manner as the practice of construction work in progress (CWIP), outlawed in Oregon by Ballot Measure 9 of 1978 (ORS 757.355).

Conveniently, none of the 5 alternatives offered by the White Paper include the crucial component of any solution--requiring the utilities to give back to ratepayers the amounts they have charged for the phony taxes they have never paid.

Analysis and Commentary:  An excellent analysis by Meek yet he did not address the loophole identified the the following article and its dramatic signifiance to the tax question.  The article can be seen in this archive at  2004 June 22 Digging deeper into the Texas Pacific Deal by Steve Duin, Oregonian.

2005 February 16  PGE fate riding on conditions, by Gail Kinsey Hill, Oregonian

The conditions that Texas Pacific might be willing to accept to gain control of Oregon's largest utility could mean the difference between the deal's success or failure. Each of the three primary participants in the PUC hearings -- the PUC staff, Texas Pacific and customer groups -- has submitted pages of proposed conditions. They have agreed on only a handful.

"You've got to allow the commission to go up chain of command to Texas Pacific because they're the real decision-makers," said Bob Jenks, CUB's executive director. "I don't care about Burger King and whether they serve chicken sandwiches," Jenks said, referring to one of Texas Pacific's many consumer-oriented investments. "But I do care about PGE and whether they (Texas Pacific) plan to invest in transmission lines or power plants." Finally, Jenks wants the PUC to exert controls over Texas Pacific's eventual sale of PGE. Specifically, he says, the city of Portland or another public entity interested in buying the utility should be given the first chance to submit an offer.

Analysis and Commentary: Is TPG really prepared to walk away from a $1 billion profit simply for fear of additional disclosures?  If so, what are they hiding?

2005 February 16  SAIF president gives report to Governor, by Edward Walsh, Oregonian

The interim president of Saif Corp. said Tuesday that the state-owned workers' compensation insurance company is a "well-run company" but suffers from a number of operational and management shortcomings that she is moving to correct.

Last November, voters defeated a ballot measure that would have dismantled Saif. Both the ballot measure and Oregonians for Sound Economic Policy were largely bankrolled by Saif's largest competitor for workers' compensation insurance business in Oregon, Liberty Northwest Insurance Co.

Sen. Vicki Walker, D-Eugene, the leading Saif critic in the Legislature, praised Rocklin for her work on the report but said she disagreed with one conclusion that it was appropriate for the agency to hire an outside lobbying firm. "I can't understand why a partisan lobbyist would meet their business needs," Walker said.

Analysis and Commentary:  TRocklin has done an outstanding job of fixing SAIF and could be an ideal candidate for PGE's board is a regional corporate governance structure is adopted.

2005 February 16  The Sneaker Offensive, by Nigel Jaquiss, Willamette Week

Inhabitants of rural Washington County are raising hell about Mayor Rob Drake's plan to absorb their neighborhoods into a bigger, better Beaverton. Drake has pledged not to annex the Nike campus, which is located in unincorporated Washington County. But the sneaker giant isn't taking any chances—and has launched an aggressive counterattack.

Ironically, two of the key commanders in Nike's battle to squelch annexation are elected officials who have been strong advocates for schools, which count on property taxes for funding.  The first is Julia Brim-Edwards, a member and past chairwoman of the Portland School Board. Nike hired her last year as a lobbyist. Last week, she warned the Beaverton City Council that its approach to annexation "raised issues related to trust and the long-term business climate in the region." Just in case the Beav didn't get the message, Nike asked state Sen. Charlie Ringo (D-Beaverton) to carry its water in the Legislature.

Ringo introduced a bill that would exempt from annexation any Washington County property owned by any company with at least 5,000 employees, $12 billion in annual revenue and 35 years of Oregon operation. Only one company fills the bill, of course.

Knight served up some food for thought, saying that if the company's headquarters were annexed, it might have to relocate 100 designers to Tokyo and move a call center to Canada. "Don't make us choose between our shareholders and our state," he told the crowd.  The Washington County assessor's office estimates that annexation could cost Nike an additional $900,000 annually in taxes, an increase of about 17 percent. Last year, the company posted revenue of $12.3 billion and profits of just under $1 billion.

Chuck Sheketoff of the Oregon Center for Public Policy says the Legislature has already bent so far backward for Nike that lawmakers are practically supine. In the past two legislative sessions, Sheketoff notes, lawmakers gave Nike and other companies with big operations in Oregon a massive break by juggling the formula that determines their state income taxes.

Analysis and Commentary:  An outsider might think that Julia Brim Edwards is providing Nike's Phil Knight poor advice and setting him up for a public relations problem with public employees. For example, why doesn't Nike negotiate annexation with a contractual cap on taxes and fees for 20 years?  It might seem somewhat ironic to public employees hat Nike and Knight are battling annexation when such a moves tax revenues would go mostly to teachers salaries and PERS, at the same time Phil Knight's investment partnership just benefited from an Oregon PERS investment to the tune of $100 million.

2005 February 16  PERS Tracker, Salem Statesman Journal

Every Monday, the Statesman Journal presents the latest facts about Oregon Public Employees Retirement System and related information.  Annualized past 5 year return for the total PERS fund per the Statesman Journal, is 4.5% while a comparable cash based investment yielded 3.1 percent over the same time period.

Analysis and Commentary:  This five year summary as of January 31, 2005 raises some interesting questions.

2005 February 15  Public power for greater Portland area Memo, by Ken Anderson, Howrey, Simon, Arnold and White Law Firm

There is a better way, tried and true across this country - conversion to a publicly-owned regional generation and distribution system for this vital contemporary commodity.  Public power systems are proven. No new legal or financial or service ground need be broken.  Models abound.  Successes predominate.  Public power systems today provide electricity to nearly 20 percent of the United States population. The complete text of this memo is not available on line but can be accessed by contacting Ken Anderson at  Anderson has more than 25 years of experience working with utilities and includes time spent at the Securities and Exchange Commission.

Analysis and Commentary: Howrey Simon Arnold is a global firm with 600 attorneys and is ranked by American Lawyer as a top tier law firm, #8 in the country.  They have even represented the Texas Pacific Group in a major transaction, summarized on its website as follows:  "Texas Pacific Group’s sale of its majority shareholding in Continental Airlines, Inc., to the Northwest Airlines Corporation. The Department of Justice brought a civil enforcement action, which remains pending but did not prohibit Texas Pacific Group from consummating the stock deal." Clearly, the Texas Pacific Group will not be, well, tickled by Howrey Simon's straight up comments regarding the clear benefits of public power. This position does however speak to the underlying credibility of the firm.  The Howrey website is at

2005 February 14  SEC's top accountant plans on not pleasing everyone, by Diya Gullapalli, Wall St. Journal

On a train ride here from New Jersey, Donald Nicolaisen overheard some lawyers and accountants discuss pressuring the Securities and Exchange Commission into relaxing disclosure on a deal they were working on. "They wanted to strong-arm the SEC," Mr. Nicolaisen recalls. "I extended my hand to them and said, 'Let me introduce myself, since you might be meeting with me.' " Mr. Nicolaisen is the SEC's chief accountant. He is an unassuming and even-tempered bureaucrat, but he also is technically savvy and unlikely to cave into lobbying tactics, as the businessmen on the train and mortgage giant Fannie Mae have learned.

Long considered one of Washington's most powerful lobbying forces, Fannie Mae was stunned two months ago when Mr. Nicolaisen declared its accounting fundamentally flawed. At one point in the SEC discussions, Fannie's then-Chairman Franklin D. Raines had asked how far off the company's accounting was for certain financial derivatives. Mr. Nicolaisen held up a sheet of paper and said that, if it represented the four corners of the rule, "you were not even on the page," according to one participant.

Weekly, he dispatches a lengthy e-mail updating his staff on events. "I'd like to make a few more comments about being a team," one read recently. "It means trusting, respecting and caring for one another. One of the most rewarding aspects of my job is to see this occur every day in our office."  "Don is very reassuring in his own quietly authoritative way," says Bob Burns, legal counsel who has worked in the Office of the Chief Accountant for 25 years.  See complete article at www.

Analysis and Commentary: Nicolaisen seems balanced and competent.  Clearly, smart enough to see that a PUHCA exemption for TPG makes no sense.

2005 February 14  Bush plan rewrites BPA mission, by Jeff Kosseff, Oregonian

The Northwest congressional delegation is banding together across party lines to fight President Bush's attempt to force the Bonneville Power Administration to charge market-based rates. Northwest members from conservative and liberal sides of Congress alike vowed last week to do everything they can to kill the proposal. Most have experience with past attempts to change the BPA's rates or privatize the agency. "It seems to be on about a three- or four-year rotation," said Rep. Greg Walden, R-Ore.

Analysis and Commentary: Again, where are all these politicians hiding when it comes to PGE, a $2.3 billion regional utility?

2005 February 11  Bush Plan may lift power bills, by Jeff Kosseff, Oregonian

Northwest consumers would pay an average of $100 a year more for electricity by 2011 under President Bush's plan to require the Bonneville Power Administration to charge market rates, according to estimates in a document from Bush's budget office.

Portland-based BPA, part of the Energy Department, sells power from federal dams and a nuclear plant to Northwest utilities, providing nearly half of the region's electricity. The BPA charges about $31 a megawatt hour. Market wholesale prices range from $40 to $50. "Cost-based power is embedded in the history of our state," Cantwell said Thursday as she announced an online petition to protest Bush's proposal. The petition is available at

"What they want to do is artificially jack up the amount of money we pay to BPA over and above the costs incurred by BPA to get some illusory budget deficit offset," Rep. Peter DeFazio, D-Ore., said of Bush's plan. "This is stupid, and they have to change the law to do it."

Analysis and Commentary: Perhaps a better proposal by Bush would be to gradually phase in a borrowing rate, for future debt only, closer to market rates.  This approach looks like a back door attempt to repeal PUHCA in which municipal and other public power entities would pay higher rates, making the only practical means for future rate relief a consolidation strategy predicated upon eliminiating jobs.  A consolidation that would likely lead to large utilitys eliminating public power entiites and in the end substantially higher power rates.

2005 February 11  Texas Pacific counting on tax kickback, by Todd Murphy, Portland Tribune

As part of its proposal to buy Portland General Electric, Texas Pacific Group is counting on an unusual fringe benefit that Enron counted on before it — and, in fact, one that any utility in Oregon can count on. The benefit: PGE gets to charge ratepayers for state and federal taxes that the Texas Pacific holding company owning PGE would never pay. That money would instead go into the holding company’s, and Texas Pacific’s, own pockets.

For the bankrupt Enron Corp., which currently owns PGE, the strange and perfectly legal benefit meant extracting more than $400 million from PGE ratepayers between 1997 and 2001 for state and federal taxes that Enron never paid. For Texas Pacific, the loophole would mean about $15 million a year for at least the first several years that Texas Pacific’s holding company might own PGE.

The Oregon Public Utility Commission — like public utility commissions in most states — uses a “stand-alone” approach to estimating a utility’s income taxes. Taxes are included among the costs that the PUC considers in setting rates. The rates allow the utility to recover the costs along with a defined profit. Through the stand-alone approach, the PUC calculates a utility’s taxes — and thus the rates it can charge — based on the revenues and operating costs of the utility itself.

But utilities are often owned by parent holding companies, many of which own other companies. And the holding companies often file consolidated tax returns in which they figure their taxes owed based on the profits, expenses and losses of all their companies taken together.

Oregon legislators are discussing possible changes in PUC policies or state law. “I think it does need to change,” said Sen. Rick Metsger, a Democrat from Welches and chairman of the Senate’s Business and Economic Development Committee.  In the meantime, opponents of Texas Pacific’s purchase say Texas Pacific and Oregon Electric should agree to a PUC condition that PGE’s rates would be based on an estimate of the taxes that Texas Pacific and Oregon Electric actually will pay.  Texas Pacific has said it would not agree to such a condition.

Analysis and Commentary: I testified at the Senate hearing chaired by Rick Metsger and specifically requested they contact former Chair of the Senate Finance Committee Bob Packwood to learn about the impact of a relevant loophole.  See story by Steve Duin in this archive for more specifics  2004 June 22 Digging deeper into the Texas Pacific Deal by Steve Duin, Oregonianon.

2005 February 11  A PGE primer, by Todd Murphy, Portland Tribune

As the proposed purchase has become increasingly controversial, proponents of the varied alternatives say they want to be ready in case the PUC rejects the Texas Pacific deal, or places conditions on the sale that Texas Pacific won’t accept.  Some of the alternatives are more viable than others.  All of them may be moot in a few weeks.  But here they are, and an analysis of their chances in any post-TPG world. See complete story online at

Analysis and Commentary:  This story does a good job of laying out alternatives to TPG.

2005 February 11  Public interest poses huge conundrum, by Todd Murphy, Portland Tribune

All that the three members of the Oregon Public Utility Commission have to do in deciding whether Texas Pacific Group should be able to buy Portland General Electric is determine whether the deal provides “net benefits” to PGE’s customers. And determine whether the deal is “in the public interest.”  There’s no more legal guidance than that. And Texas Pacific’s advocates and critics have been arguing about those six words for the last 15 months.

All six words come from state laws approved by the Legislature in 1985 to guide the PUC in dealing with possible mergers involving public utilities. “In the public interest” comes verbatim from the law. “Net benefits” comes from a PUC interpretation of the law.  Together, they give the commission a wide berth in making the decision — and allow plenty of room for competing interpretations.

Analysis and Commentary:  The key thing here is that the PUC can interpret this however they wish, thereby raising the issue regarding who they are truly representing.

2005 February 10 City touts financial advantages of PGE buy, by Gail Kinsey Hill, Oregonian

City of Portland officials say the cost advantages of a municipal purchase of Portland General Electric are irrefutable. Just do the math. Lower financing costs and no federal tax payments quickly bring annual utility savings to almost $100 million, enough to cut the rates of PGE's 755,000 customers by 10 percent. In contrast, a pending proposal from Texas Pacific Group, a private investment firm, guarantees rate cuts -- through credits on monthly bills -- of an estimated 0.6 percent.

"There are absolutely unique inherent advantages" if the city buys the utility instead of Texas Pacific, said Ken Rust, the city's chief financial officer. Currently, a typical PGE residential customer pays $82.47 a month for electricity, the highest bill among the Northwest's 10 largest utilities.

The city laid out these fundamental advantages, assuming Portland would match Texas Pacific's purchase price of $2.35 billion, which includes $1.1 billion of existing PGE debt: The city would issue municipal revenue bonds of at least $2.35 billion to cover acquisition costs. It would pay off the debt with revenue from ratepayers. Most of the debt would carry an interest rate of about 6.25 percent, more than a percentage point less than the costs of private capital, the city estimates. The city would reap other financing advantage because it does not have to pay a return to investors. The city estimates total savings at roughly $40 million annually.

PGE customers pay an extra $60 million in rates each year to cover the utility's federal taxes. A municipal utility wouldn't have to pay those taxes, so the amount would be eliminated from PGE's balance sheet and customers' bills. These two factors yield more than $100 million in savings, Rust said. Based on retail revenues of $1 billion annually, those savings would produce a cost advantage of 10 percent.

Beyond the cost, Texas Pacific questions whether the city can complete a deal. Under the state constitution, the city would have to buy the utility's assets instead of the stock being sold by Enron. Confidential documents obtained earlier this year by The Oregonian show that the city thought it could avoid the legal roadblock by setting up a nonprofit to buy the stock, then sell the assets to the city. "We're trying to thread a small needle," said Rust, referring to the hybrid stock-asset sale and an ownership alliance in which the city would hold the purse strings, and six counties would share operational powers. "It's a unique structure."

In direct response to Texas Pacific's critique, Rust said, "They can reach any conclusion they want. We come to a different conclusion." Rust also predicted even lower costs in the years after a city purchase, because the debt could be recapitalized using tax-exempt bonds with even lower interest rates than the acquisition debt.

Analysis and Commentary:  A good story by Hill, especially given the quotes form the city's highly respected Chief Financial Officer, Ken Rust.

2005 February 9  PGE's Windfall, Monopoly made millions while regulators snoozed, by Nigel Jaquiss, Willamette Week

In a legislative hearing last month, Oregon Public Utility Commission Chairman Lee Beyer assured state senators that his agency is fully capable of holding Texas Pacific Group accountable, should the Fort Worth-based firm purchase Portland General Electric. A document recently obtained by WW suggests otherwise.

One of the PUC's functions is setting electric rates. Periodically, it reviews industry conditions and sets rates at a level that allows utilities a reasonable profit. Over the past decade, the PUC allowed PGE to earn returns of between 10.5 percent and 12.5 percent annually. But the confidential document prepared by Texas Pacific when it was determining whether to purchase PGE shows that during a nine-year period ending in 2000, PGE earned nearly a quarter of a billion dollars more than the "maximum" return the PUC allowed.

In an earlier interview with WW, the PUC's Beyer scoffed at the notion a utility could slash costs and pocket the savings, as Texas Pacific's own documents suggest it will do. "In theory they can, but if you think that this commission would let them do that, you're smoking the drapes," Beyer said. Brian Conway, the PUC staffer overseeing the commission's consideration of Texas Pacific's bid for PGE, says he cannot comment on the confidential document because doing so would violate a "protective order."

Analysis and Commentary:  Once again the Willamette Week scoops the Oregonian on a major story.  It will be interesting to see if the Oregonian adequately covers this.

2005 February 9  Document suggests utility earned more than allowed profit in 90s, by William McCall, Associated Press

A confidential document leaked to a Portland weekly newspaper suggests that Enron subsidiary Portland General Electric earned far more than the maximum profit set by state regulators in the 1990's.

The analysis by Texas Pacific Group, obtained by Willamette Week, showed that PGE earned nearly a quarter billion dollars more than its maximum rate of return allowed by the Oregon Public Utility Commission for the nine years from 1992 to 2000.  Texas Pacific, along with PGE and the commission, countered that the rate is close to the allowed rate if a longer period is used for comparison.

Lee Beyer, PUC chairman, has said in earlier interviews that the state has tightened its scrutiny of PGE following the Enron bankruptcy.  Last month, Beyer assured state senators at a legislative hearing the PUC will be just as tough on Texas Pacific.  "We didn't fall off a turnip truck," Beyer said in aninterview.  "They knew the Oregon commission wouldn't let them run roughshod."

Dan Meek, a Portland attorney and critic of the Tecas Pacific buyout plan, said the Texas Pacific estimte of PGE earnings was probably closer to the actual profits.  When you're a company doing an analysis to decide whether to buy another company, you're likely to be far more careful about it," Meek said.

Analysis and Commentary:  Some might argue that Mr. Beyer may indeed have not fallen off the turnip truck he quotes yet the question might be, what was he doing on it in the first place?

2005 February 9  Another grab for Northwest power, lead editorial, Oregonian

Bush is seeking to require the BPA and the three other power marketing administrations in the nation to gradually bring their electricity rates closer to market averages. As it stands, BPA's wholesale rates are about $31 a megawatt hour. Wholesale prices now range from $40 to $50 a megawatt hour on the open market. For each dollar-per-megawatt hour increase, the Northwest would pay an additional $80 million a year, according to the Public Power Council, an association that represents consumer-owned electric utilities.

That means the Bush administration is proposing a change that conceivably could cost Northwest ratepayers more than $1 billion a year in higher electricity costs. The president could hardly come up with a policy to inflict more damage to our struggling economy. The proposal makes virtually no sense in economic or budget terms. It would damage job growth and economic activity across the region. And it would do virtually nothing to help balance the federal government's budget. What's really going on here is that Northeast and Midwest members of Congress, envious of low-cost Northwest power, together with ideologues opposed to the concept of federal power-marketing agencies, are trying again to move the BPA toward privatization.

Analysis and Commentary:  A strong editorial by the Oregonian although they could have also highlighted that although many other countries are moving from a public power model to private power model, these situations are non comparable due to rampant public corruption in many of these countries.  As Nigel Jaquiss noted in a city club address, it is a fact that public power has been successful throughout the nation and results in power rates on average 10 percent less than the private model.

2005 February 7  Some scenarios for PGE, by Don Frisbee, Op-Ed submission, Oregonian

A city could run the day-to-day operations of an electric utility.  Success would depend on a good working relationship among the city's political leaders, the overall leadership abilities of the mayor and the individual and combined learning capacities for undertaking such a new endeavor.

Analysis and Commentary:  Frisbee's former employer Pacific Power is now owned by Scottish Power and perhaps he is now starting to see the importance of more local control, especially a public model with private management. .

2005 February 6 The Case against Texas Pacific taking over local utility, by Michael Rose, Salem Statesman Journal

Analysis and Commentary: An excellent article available in the Statesman Journal archive at

2005 February 6  Few watchdogs trouble state's sacred cows, by Steve Duin, Oregonian

In my ongoing campaign to inject Oregon with a healthy transfusion of Eliot Spitzer, the latest telltale numbers are 850 and 211. The 850 represents the $850 million settlement that Spitzer, New York's intimidating attorney general, just pounded out of insurance industry giant Marsh & McLennan. That 211 is the number on the Senate Bill that may finally give Hardy Myers, Oregon's more placid AG, jurisdiction over violations of Oregon securities law. Why is Myers looking to wrestle that power away from the Department of Consumer and Business Services?

"Quite frankly," Myers says, "Eliot's example is part of the answer. He's demonstrated that an attorney general equipped with that power can do good things in the public interest." Amen, brother. Can I hear a hallelujah? The transfusion may be taking, though Myers remains years behind the most powerful and productive attorney general in the land.

"Eliot lends speed and violence to this process that you wouldn't believe," David Brown, who runs the Investment Protection Bureau for Spitzer, recently told New York magazine. "Eliot has smart people thinking, in a predatory way, 'Where can we do good?' " And Spitzer, everyone agrees, makes no apologies for that predatory instinct, which is essential in dealing with the shameless elements in corporate America. As one attorney told the magazine, "Spitzer's office assigns people a white hat or a black hat early on. You do not want to be assigned a black hat. They prosecute the black hats."

From all appearances, Myers confronts too many similar opportunists with hat in hand. His office has had admirable success against the pharmaceutical industry, securing significant settlements thanks in large part to the efforts of investigator David Hart. But all too often, Myers, like the Legislature, seems detached from the watchdog role. The Oregon Public Utility Commission decision that would allow Texas Pacific to perpetuate Enron's scam of pocketing taxes it collects from ratepayers is based, Myers admits, on "our honest analysis of the correct legal answer."

Myers' spokesman Kevin Neely, not surprisingly, argues otherwise: "The difference between Eliot Spitzer and Hardy Myers is that Eliot Spitzer wants to be governor." I tend to believe the politics play out a little differently: Spitzer has an outrageously liberal take on the power of his office and Myers a conservative approach to interpreting the law. Let's hear it for that liberal bias.

Analysis and Commentary: When asked a few weeks ago by one Oregonian reporter what looks interesting going forward I suggested doing a story on Elliott Spitzer's upcoming speech in San Diego.  See February 3, 2005 reference in this summary for a recap.  Although the paper chose not to cover the speech it is great to see Steve Duin continuing to do the heavy lifting for the Oregonian with respect to future of Portland General Electric, highlighting what Spitzer might do.

Kevin Neely's quote arguing that the difference between Hardy Myers and Elliott Spitzer is simply political is astonishing, especially given the recent review his office did of Diana Goldschmidt's participation on the OIC.  A review that did not review phone records during the time Bonderman was here in Portland in May 2003 for a presentation before the OIC in addition to numerous other shortcomings, see January 21, 2005 reference in this summary for a recap of this "investigation."

2005 February 6  OHSU bets on profits in lofty expansion, by Ted Sickinger, Oregonian

Rising from a vacant industrial tract on Portland's South Waterfront is one of the keys to the physical and financial transformation of Oregon Health & Science University.

By fall 2006, if all goes according to plan, sick people with generous medical insurance will be parking in a convenient garage and walking through OHSU's new front door into a sleek, 16-story tower housing doctor's offices, research labs, a gymnasium, a four-lane lap pool, cardio and weight-training areas, and a day spa.

Those who need more care will be whisked by tram to a new hospital wing on Pill Hill for cutting-edge treatments developed by scientists housed in a new research building. The profits these patients generate will be an engine of OHSU's growth and will subsidize the care of the uninsured, routine maintenance and equipment investments, and eventually construction of a medical school campus on the Willamette.

Such is the vision of President Peter Kohler, who has presided over OHSU's transformation from a medical backwater to a behemoth with 11,500 employees, a $1.2 billion annual budget and an array of clinics, hospitals and research centers during the past two decades.

"As head of the finance and audit committees, I would never let OHSU get out over its skis," said Scott Gibson, an area venture capitalist and member of OHSU's board of directors. "The assumptions we're making for how we raise our revenues are very reasonable."

OHSU's financial pressures are similar to those at academic health centers across the nation, and debt rating agencies such as Standard & Poor's say OHSU should be able to comfortably pay its debt.

The dream of building a top 20 medical school in Portland involves a host of similar uncertainties, many of which will not be fully tested for years, long after Kohler, 66, retires.

Assumption No. 1. OHSU will expand its hospital and increase its profitability when competition is increasing, the state is cutting subsidies for charity care and federal budget deficits are pressuring Medicare reimbursements. "In the end, OHSU can assume one thing: Nothing will remain the same," Rutledge said.

Assumption No. 2. The university will generate a significant increase in research grants when budget increases at the National Institutes of Health are declining, and it will do more research without losing more money.

Susan Amara, a member of the National Academies of Science and superstar faculty member who left OHSU in 2003, isn't so sanguine. "A flashy building is great, but if you don't fill it with people who can generate ideas and grants, it's a false economy," said Amara, now chairwoman of neurobiology at the University of Pittsburgh, a top 10 school by NIH grant awards.

As a researcher, Amara said, she thought OHSU's chronic budget problems, coupled with the focus on new buildings rather than existing programs, were sapping the institution's vitality and faculty's morale. "I wanted to be at a place where we could bring things to the next level, at a place that was financially solvent," she said of the University of Pittsburgh, whose $1.4 billion endowment is nearly five times the size of OHSU's.

Jim Walker, former executive vice president and finance officer at OHSU, said universities typically subsidize 15 percent to 20 percent of research costs, about what he estimated at OHSU before leaving in 2002. The most tightly managed programs at the best schools probably still provide an operating subsidy of 10 percent, he said. OHSU, meanwhile, says its operating subsidy is closer to 8 percent.

Assumption No. 3.  With new leadership, OHSU's foundation will regain momentum in raising money for the university's two new buildings, a new medical campus and a larger endowment.

Jonathan Ulsh, president of the foundation, departed in August. The foundation also saw turnover in important positions under Ulsh. Because fund raising is a relationship-based business, it may take time to regain momentum even after vacant positions are filled. Gibson, the board member, said the foundation is close to hiring a more seasoned leader, which should help reinvigorate fund raising and match donors' passions with OHSU priorities.

OHSU is already talking about its next big fund-raising drive, this one an academically focused push to help build a medical school campus on land donated by the Schnitzer family. Kohler says he also hopes OHSU's can build its $300 million endowment to the point it can provide stronger ongoing support of operations. What would that take? A billion? "Yes," Kohler muses. With a billion, OHSU would "reach the sweet spot."

Analysis and Commentary: An excellent article by Sickinger yet once again he does not interview any of the lower level workers from OHSU but instead sticks to management's representations and a few current and former department heads. There is also no mention of Kohler's role at PGE, in particular the fact that his stock options will fully vest in 3 years, and that he stands to earn more than $6 million over this three year period.

Imagine the irony that Peter Kohler is supervising the fleecing of the community to the tune of $1 billion with respect to PGE and at the same time notes with a "billion, OHSU would reach the sweet spot."  Perhaps OHSU should buy PGE and then at least the $billion would stay in the region?  Clearly, OHSU has significant problems that were previously not disclosed and it is time for it to seriously consider a leadership change to get back on track, the track being the provision of health care and research services.

2005 February 4 Enron energy scams predate West's 2000-01 crisis, by Gene Johnson, Oregonian

The Snohomish County (Wash.) PUD uncovers records that show Enron was falsifying information to drive up power prices in 1998.  Enron was falsifying transmission schedules to inflate prices, Snohomish County Public Utility District officials said Thursday as they unveiled new evidence at a news conference. Enron operated its West Coast energy-trading desk from offices in downtown Portland. The corporation plunged into bankruptcy in December 2001. Enron still owns Portland General Electric but is trying to sell the utility to buyout firm Texas Pacific Group under a bankruptcy reorganization plan.

By keeping power transmission imbalanced, Enron increased the price of electricity and thus its own profit.

One newly transcribed conversation reveals that Enron and a 50-megawatt plant in Las Vegas, LV Cogen, conspired to take the plant off-line on Jan. 17, 2001 -- the same day rolling blackouts hit an estimated 1 million customers in California. Taking the plant off-line was in direct violation of an order by U.S. Energy Secretary Bill Richardson requiring generators to send their energy to California.

In the conversation late on Jan. 16 that year, an Enron worker identified as Bill told a plant worker identified as Rich not to take notes because "this is going to be a word-of-mouth kind of thing."  Bill: "Ah, we want you guys to get a little creative." Rich: "OK." Bill: "And come up with a reason to go down." Rich: "OK." Bill: "Anything you want to do over there? Any . . . "Rich: "Ah . . ." Bill: "Cleaning, anything like that?" Rich: "Yeah, yeah. There's some stuff we could be doing." The plant went off-line, compounding California's crisis.

Analysis and Commentary: If problems like this can occur with a publicly traded and SEC regulated company like Enron, one can only imagine what might occur with no SEC oversight if TPG is successful in purchasing PGE.

2005 February 4 Law firm quick to hustle PGE case, by Jim Redden, Portland Tribune

The Ater Wynne law firm began pursuing the Texas Pacific Group as a client mere hours after it stopped representing the city of Portland in its efforts to buy PGE. One of the firm’s lawyers met with representatives of the Texas-based investment company and Oregon Electric Utility Co. — the company Texas Pacific formed to buy PGE from Enron Corp. — the very next day.

Sten said the city paid Ater Wynne about $150,000 for its work. Ater Wynne’s work for the city ended Nov. 18, 2003, the day that Texas Pacific held a news conference to announce that it was trying to buy PGE through Oregon Electric. Ater said his secretary called him at home that morning to say local TV news stations were reporting the purchase plan would be announced a short time later at a news conference.

According to Ater, that was when he first learned that Neil Goldschmidt would be heading up Oregon Electric’s board of directors. Goldschmidt’s role in the purchase posed a dilemma for Ater Wynne. Goldschmidt was a longtime client of the firm and also rented space from it in the downtown KOIN Tower for his consulting firm, Goldschmidt Imeson Carter. Goldschmidt quit the firm last year amid revelations that he sexually abused a 14-year-old girl during the 1970s when he was mayor of Portland.

Saxton made overture. Ater attended Texas Pacific’s Nov. 18 news conference and then called Tim Grewe, the city’s chief administrative officer, after it ended, the letter said. Ater explained the situation to Grewe, who suggested that he attend a previously scheduled meeting with other city officials on the purchase that day.

Still later that day, Saxton contacted Goldschmidt and Texas Pacific partner Kelvin Davis. According to the letter, Saxton told the two men “the firm no longer represented the city and would potentially be available for future engagements.” The next day, Saxton met with Goldschmidt, Davis and Texas Pacific partner David Bonderman. At that meeting, Saxton “stated the firm’s willingness to consider future engagements,” the letter said.

According to Tellam’s letter, “later that day, Mr. Goldschmidt asked Mr. Saxton for information regarding the firm’s capabilities for handling Oregon Electric’s application before the PUC.” The day after that, Goldschmidt asked Saxton to provide the résumés of two Ater Wynne partners — Lisa Rackner and Kirk Gibson — suggested as lead lawyers if the firm were to be retained to represent Oregon Electric.

Oregon Electric retained Ater Wynne approximately two months later. According to Tellam’s letter, eight firm lawyers who worked for the city on the PGE purchase also have worked for Oregon Electric: Alice Cuprill-Comas, Brenda Meltebeke, Colin Savoy, Gregg Johnson, Inara Scott, Jim Barrett, David Connell and Nathan Karman. They have researched issues ranging from past mergers to bankruptcy laws to tax credits, Tellam said.

Complaint not from city. The city did not initiate the bar investigation. Instead, it began after a complaint was filed against Ater Wynne in February 2004 by Lloyd Weisensee, a retired Portland attorney who learned about the situation through news accounts.  “I don’t see how Ater Wynne could possibly represent Texas Pacific when they have all the inside information on what the city’s views and ideas are. It just doesn’t seem possible to me, from what I understand about the bar’s conflict of interest rules,” Weisensee said.

Analysis and Commentary: It is also noteworthy that Ron Saxton has been Neil and Diana Goldschmidt's personal attorney.

2005 February 4 Local firms mum on PGE deal, by Kristina Brenneman, Portland Tribune

Major manufacturers not taking sides on Texas Pacific proposal. Of a dozen businesses contacted by the Portland Tribune, only four agreed to talk about the PGE sale. “We continue to watch it,” said Steve Zika, chief executive officer of the timber products company Hampton Associates, who remains neutral on the issue.

“The long-term, stable supply of power is important to us.” One reason business leaders aren’t talking is because “they’re tired of it,” said Ken Canon, Industrial Customers’ executive director. “What more can you say? They’ve lived with it well over a year. We’ve made our statement. We’ve asked the PUC to deny it. Now we wait for its decision.”

Four years of dramatic PGE rate increases — ranging from 45 percent last year to 53 percent in 2002 — have cost companies millions, and in the case of Blue Heron Paper Co., led to big staff layoffs. The region’s reputation for low-cost energy also has suffered, reducing a major advantage in recruiting businesses, city and state leaders said.

Analysis and Commentary:  Steve Zika is a top quality executive leader yet given that he also got his training at Arthur Anderson, a firm that no longer exists in large part due to Enron, he should know better than most that the TPG solution is simply not acceptable.  Hampton Associates is printing money hand over fist right now and, even if politically uncomfortable, it's about time they step up and support an alternative to Texas Pacific, even if that means helping craft a privately manageed municipal utility.

As far as lobbyist Ken Canon complaining that his users are tired of this long running controversy, that should be a rallying cry for his group to be more focused and successful in its efforts regarding an alternative.  For companies like Intel it is more than just about cost but also reliability.  Intel makes significant investments in redundant systems, some of which may indeed not be needed if confidence were higher in the reliability of PGE's transmission system.

2005 February 3  Elliott Spitzer Keynote Speech at TD Waterhouse Investment Conference, including specific response to question from Bill Parish regarding the future of Portland General Electric, Manchester Hotel, San Diego

Analysis and Commentary: See photo and commentary here: Bill Thanking Elliott Spitzer for his comments related to Portland General Electric

On February 3, 2005 Elliott Spitzer gave a keynote speech on corporate governance issues to roughly 1,000 institutional investment advisors at the annual TD Waterhouse Institutional Investment Conference in San Diego, California at the Manchester Hotel.  Even his harshest critics, and there were many, came around to understand the importance of his work.

Spitzer focused upon what he called free market "preemption's" that were undermining the integrity of the market.  These include an increasing lack of needed disclosure and transparency.

Regarding the Texas Pacific Group's proposed purchase of Portland General Electric he joked that "some people believe private equity firms are taking over the world."  He then added that he was most concerned with the overall lack of investment in needed generation and transmission infrastructure in addition to such private equity firms purchasing regulated utilities and thereby eliminating necessary SEC disclosure.

Spitzer is clearly focused, competitive and highly efficient in his efforts.  When younger he was apparently a rather competitive tennis player in high school and optimistic on his prospects until he played the top seed at a rival high school, that person having been John McEnroe.  Although McEnroe is a great player, it is now that I have appreciated him for the first time.

Let's be thankful Mr. Spitzer became who he is and fully support his important non-partisan work.

2005 February 1 Washington County not behind PGE talk, by Henry Stern, Oregonian

"The county should take a rather reserved role and not go full-bore until the PUC makes a decision," Washington County Commissioner John Leeper said. "There is wariness of the city of Portland, to use a trite phrase, of being an 800-pound gorilla and quite possibly imposing their will," he said.

Brian, who has long worked with Sten on the details of a regional public purchase, says the legislative alternative is better than a city-led purchase that promises the eventual transfer of PGE ownership from Portland to a regional body. "I don't think Portland recognized the degree of discomfort that folks around the state feel toward the city, " Brian said.

Sten says the city proposal has a far greater likelihood of winning support than relying on a Legislature with little recent history of coming together quickly on contentious issues. "My eye is on the ball," Sten said. "Our intent is to be collaborative and regional. And we have worked very hard at it."

Sten emphasizes that Portland's plan, which promises 10 percent rate reductions from lower interest rates for municipalities and no federal income tax, answers skeptics' concerns about who would run the utility. While the city would make the purchase with revenue bonds, the utility's advisory board would be regional. A private operator would be hired to manage operations. And plans call for a regional partnership to acquire the utility from the city.

"It is a reasonable set of concerns, which is why we proposed a specific model that addresses each of them," Sten said. "I don't think Portland should run the utility. The idea is to build a team that represents the region."

Analysis and Commentary: Not discussed by the reporter is the fact that TPG was coy in requiring that most documents regarding its proposal not be made public.  TPG also attempted a divide an conquor strategy with respect to the various local governments. This lack of disclosure made it difficult for many regional governments to fully evaluate its proposal in relation to the city's.

2005 February 1 PGE's long-term success is would-be buyer's goal, by Kelvin Davis, Op-Ed Portland Tribune

While our investment in PE may last up to 12 years, our record here in Oregon will follow us as long as we are in business.  Kelvin Davis has been with Texas Pacific Group for five years. He lives in Los Angeles.

Analysis and Commentary: One has to marvel at the comprehensive level of misrepresentation displayed by Mr. Davis.  The obvious question might be, why do the top executives stock options fully vest in 3 years if you are thinking long term with respect to PGE's future.  A second question might be regarding his level of utility service in Los Angeles he receives as a resident there, a top performing municipal utility unaffected by the brownouts that ravaged the rest of California.  Of course TPG's efforts are blocking the creation of similar municipal utility here in Portland, Oregon.

2005 February 1  Portland allies to profit on PGE, by Jeff Manning, Oregonian

Texas Pacific's profit projections for the PGE deal suggest Kohler could realize $6 million over time, including investment gains and other compensation. Four other director candidates -- Gerald Grinstein, Tom Walsh, Duane McDougall and Bob Miller -- would receive compensation packages of salary, stock and investment options that could earn each of them $4.7 million or more over time.  Texas Pacific has said its initial investment could grow in value by 2 or 2.5 times.

Bryan Conway, who is managing the case for the commission, said directors' pay has not been an issue in the regulatory proceeding because compensation expense is charged to shareholders, not ratepayers. Conway explained that the compensation details were furnished by Texas Pacific in response to a series of questions from PUC staff. Those answers were not put on the Internet, he said.

"We understand that you have various pre-existing professional commitments and that this will not be a full-time engagement," Kohler's agreement with Texas Pacific states. Other investor-owned utilities in the Northwest pay a roughly similar mix of cash and stock.  In all, Goldschmidt could have earned about $8.4 million.

Analysis and Commentary:  Although a fine article by Manning, this story does indeed deserve a follow up given that several key facts were watered down given the inevitable controversial nature of the article. To Manning's credit he has done the heavy lifting by doing the first story and educating other reporters for more focused follow-up.

Unfortunately, the Oregonian continues to misrepresent TPG's PGE as an "investor owned utility," comparing it to NYSE regulated and publicly traded Avista for compensation purposes.  There is a dramatic difference between a real investor owned utility regulated by the SEC and a group of speculators running a utility with no SEC oversight.  This is key concern among several Salem legislators that is not yet fully understood. Under TPG, PGE will be a "privately owned" utility, not a publicly traded investor owned utility with NYSE and SEC oversight, including disclosure of options, compensation, etc. Interviewing a few employees at OHSU to see how they feel about this situation, Mr. Kohler's day time job, might also have been good.  They are very upset and even draw a direct correlation, whether right or wrong, between the Governor's slashing funding for OHSU and Kohler's role with PGE.

I had also personally hoped to see a table highlighting for the first time the true ownership structure in which Kohler and others would only own .1 percent of the economic interest in PGE, .2 percent after the option, and have 95 percent of the voting control, 98 percent after the option.  Relating this to the compensation would have been most helpful, in my opinion.

It is also somewhat ironical that the lead story on the front page of the Oregonian, complete with a large photo, was representative Dan Doyle and his financial transgressions while a situation of much larger significance was tucked away bottom left on the front page. With the eye generally moving left to right and top to bottom, placement could have been greatly improved by Manning's editors and layout people.

Regarding financial facts, the article was excellent yet also seemed to significantly underestimate the potential gains to Kohler and others.  The most important key fact left out of the article, one specifically requested to be included by myself, is that the options to Goldschmidt were to completely vest in "3" years, raising the obvious question, why such a short-term incentive for management when publicly TPG is talking longer-term?  Perhaps TPG's plan was to flip PGE in three short years? Would that really surprise anyone?

The article also used a multiplier of 1.5 to recognize the high end for potential gains when TPG's own document refers to a maximum gain of 2 to 2.5 times.  This can make a dramatic difference with options and this error should be corrected in a follow-up piece. For example, if Peter Kohler is able to invest $3.6 million, his potential maximum gain at 2.5 times would be $9 million on the stock alone, prior to considering director's fees and expense reimbursements.

Although the article quotes Carrie Wheeler as stating these executives are taking a big risk, it does not disclose if TPG is the lendor for Kohler, who has said he will receive a loan for the equity, and others, a common practice in which top executives receive loans from the company so that they do not have to actually contribute any cash. These very same loans are often forgiven if things don't work out. Regarding Kohler, TPG's own documents also indicate that "this will not be a full-time engagement."  As often noted, this is good money for a part-time job.

Overall, a great first article by Manning regarding a complex set of financial and ownership circumstances. Rather startling that Bryan Conway of the PUC told him they decided to not post the compensation agreements, even though public, on the website.  If you believe in management incentives aligned with stakeholders, as TPG boasts it does, that 3 year vesting schedule says about all the PUC commissioners need to know on whether or not to flatly reject this deal. See my related analysis provided to all three local papers on January 29, 2005 and related link below.

2005 January 29  Detailed Analysis of TPG's Ownership Structure and Compensation Strategy, Bill Parish, Parish & Company

This analysis clearly indicates that TPG will control 99.9 percent of the economic interest in PGE while at the same time claiming it will provide its shell Oregon based entity Oregon Electric at least 95 percent of the voting control, 98 percent after exercising an option for additional equity. The total economic interest of the local shell will be .1 percent or .2 percent once the option is exercised. The analysis also clearly indicates that Neil Goldschmidt and his lobbying firm stood to earn at least $10 million over the next 3 years. Remarkably, his options complete vest over a three year period. See link for complete three page analysis at: 20050130pgeowneranalysis.html

2005 January 28 Federal energy policy changes may play role in PGE's future, by Jeff Kosseff, Oregonian

Congressional action this year could ease the way for companies with utilities outside Oregon to acquire PGE from Texas PacificWhen the Oregon Public Utility Commission decides whether to approve Texas Pacific Group's proposed acquisition of Portland General Electric, it could determine the next owner of Oregon's largest utility.

In documents filed with the Oregon Public Utility Commission as part of the regulatory review, Texas Pacific originally said its most desirable exit strategy would be to sell PGE to another utility company after holding it for a period of years. More recently, the investment firm has said it's more likely to sell PGE through an initial public offering of stock.

"Repeal (of PUHCA) would make it so much more likely that it would be acquired by another utility," said Lynn Hargis, an attorney at Public Citizen, a consumer group, and former assistant general counsel at the Federal Energy Regulatory Commission.  "My guess is they're betting on it to be repealed, and then they'll have a much wider audience to sell it to and therefore can earn a lot more money."

Act limits holdings. The Public Utility Holding Company Act requires the federal government to financially regulate utilities with operations in more than one state, and it prohibits those companies from operating non-utility businesses.

Hoping for its own exemption from the act, Texas Pacific created Oregon Electric Utility Co., which would be PGE's holding company. Peter Kohler, president of Oregon Health & Science University, would be chairman, and the board would include other local directors.

But some critics say the board would be powerless under a repeal of the act. "Oregon Electric is going to be like a former monarchy in a European country with a nice ceremonial rule but no practical influence at all," said Bill Parish, a Portland investment adviser who has been following the Texas Pacific proposal.

Parish said a repeal of the act increases the importance of the SEC's oversight of publicly-traded utilities. But private equity investors, such as Texas Pacific, aren't overseen by the SEC.

The bill's final version passed in the House but stalled in the Senate. Sen. Pete Domenici, R-N.M., chairman of the Senate Energy Committee, plans to reintroduce an energy bill including repeal of the act, said his spokeswoman, Marnie Funk.

The decision will likely hinge on a complex web of politics tied to the energy overhaul proposal. Tierney said any changes to the holding act would be unlikely to move forward as separate legislation outside of a broader energy bill. "The real question is, 'Will a comprehensive energy bill pass?' " said Alan Richardson, president of the American Public Power Association. "I don't know about that."

Analysis and Commentary:  To follow

2005 January 28 Where's the power?, by Todd Murphy, Portland Tribune

Texas Pacific’s structure for owning PGE is what the utility industry calls a PUHCA pretzel. It’s a complicated legal alignment where a holding company creates a subsidiary to buy a utility, which in turn allows the holding company to remain in compliance with the 70-year-old federal Public Utility Holding Company Act. But past the legalistic facade of the PUHCA pretzel, critics of the Texas Pacific deal say, local board members will have no real power to do anything of consequence on behalf of PGE.

Critics point to both the testimonies of Kohler and Walsh as evidence of how little the local board members matter in — and how little they even know about — Texas Pacific’s current and future plans for PGE.  “I just don’t know what the hell he was thinking,” Eisdorfer said of Walsh. “How can you go into this process … the fundamental issue is what happens to PGE when these guys are through with it. It’s his contention that an IPO is the best thing — but he doesn’t know he can’t stop (a sale.) And he doesn’t know what they’re thinking. That’s just stunning to me.” Walsh did not return a call seeking comment.

In a way, PGE has come full circle — from more than 70 years ago. Seven decades ago, PGE’s predecessor, Portland Electric Power Co., played a small and accidental part in the creation of the Public Utility Holding Company Act. Throughout the late 1920s, a holding company controlled by Thomas Edison’s former private secretary, Sam Insull, was gobbling up utilities across the country, trying to compete with a holding company controlled by J. Pierpont Morgan that was doing the same thing. It was then that Insull quietly gained control of Portland Electric Power Co. But Morgan’s and Insull’s companies were in essence giant pyramid schemes of holding companies on top of holding companies owning utilities, with owners of the holding companies having little equity in any of it. It’s a larger version of what critics are accusing Texas Pacific of today.

“Because of the pyramiding at each stage … Sam Insull was controlling the largest personal fortune in the history of the world … with literally no equity at all,” said Robert McCullough, a Portland energy consultant. After the stock market crashed in 1929 and the nation’s banks began calling in loans, “the whole thing collapsed like the proverbial house of cards,” said Lynn Hargis, an energy law expert with the Washington, D.C., nonprofit group Public Citizen.

The Portland Electric Power Co. declared bankruptcy in 1934, and Morgan purchased the company out of bankruptcy. But in 1935, the country’s new president, Franklin Delano Roosevelt, persuaded Congress to pass PUCAH to encourage localized ownership of utilities and discourage large national holding companies from gobbling them up.  “PUCAH was designed, by the way, explicitly to rule out this type of behavior,” McCullough said of the proposed Texas Pacific deal. “And rightly so. “The goal of the law is pretty close to the same public policy arguments we’d make,” McCullough said. “When you have critical infrastructure, you damn well want to make sure the pilot sits in the airplane. You do not want a remote-control pilot.”

Texas Pacific has another hoop to jump through: SEC.  Most of the focus on the Texas Pacific Group’s proposed purchase of PGE has been on the Oregon Public Utilities Commission, which needs to approve the deal before it can happen. But Texas Pacific also needs the federal Securities and Exchange Commission to approve the structure of the deal. And there, Texas Pacific has hit a snag. In an unusual move, SEC staff members told Texas Pacific officials in August that they would not issue what they’ve issued in similar deals recently — a “no-action” letter that in essence indicates that the SEC considers a deal to fall outside the provisions of the Public Utility Holding Company Act.

The SEC staff indicated that Texas Pacific would need to get approval for its deal from the full SEC. Such action would require hearings at which opponents could argue against the deal. TPG officials have said in Oregon Public Utilities Commission testimony that they are confident the deal will get approval from the SEC. But they also have indicated that Texas Pacific needs that approval for the PGE deal to happen.

Analysis and Commentary:  To follow

2005 January 26 Lawmakers grill PGE figures, by Brent Hunsberger, Oregonian

Democrats in a Senate hearing question the chief executive and the potential board chairman about Texas Pacific's intentions. The hearing was the second held by the committee to examine changes in the way the state might review utility mergers in the future.

Associated Oregon Industries and two other groups representing citizens and industrial customers emphasized in their testimony that the deal is like no other before the Oregon Public Utility Commission -- that of a private investment firm buying a utility. The Citizens' Utility Board, a consumer advocacy group, warned that state laws were never designed to oversee a private investment firm as a utility owner. Bob Jenks, the board's director, said the state lacks authority to force Texas Pacific to make long-term investments in power plants and power lines. "We think there's greater incentives for cost cutting and greater incentives to not make the investments because the owner's not going to be around for that return on investment," Jenks said.

Sen. Ryan Deckert, D-Beaverton, said he has found PGE's explanations for the documents unsatisfying and has become "more receptive than ever" to public ownership of PGE. Portland Mayor Tom Potter said last week the city, which previously had expressed interest in acquiring PGE, is poised to bid on the utility if Texas Pacific's bid fails to win regulatory approval. "I haven't heard an explanation that meets the acid test," Deckert said.

Metsger also seized on PGE's past nonpayment of state income taxes. The controversy erupted several years ago when information surfaced that Enron was paying little or no taxes because it was offsetting gains at some subsidiaries, such as PGE, with losses at other ventures. PGE continued to collect taxes from ratepayers, however. Enron, riddled by financial scandal, collapsed into bankruptcy in December 2001.

Metsger called the nonpayment a "net public fleecing" and demanded to know how ratepayers would benefit under Texas Pacific's ownership. Kohler pledged that under Texas Pacific's proposed structure, PGE would return taxes collected from ratepayers to state coffers. But the question remains how much is fair, he said.

Analysis and Commentary: To follow

2005 January 26 Past losses add to PERS costs, by Dave Hogan, Oregonian

The tab for Oregon's pension program will grow despite an overhaul of the system in 2003, creating new budget pressures.
Despite widespread cost-cutting changes in 2003, the amount Oregon's school districts and state and local governments pay for pensions will increase in July, the Public Employees Retirement System said Tuesday.

Much of the increase is the result of PERS continuing to pay for stock market losses on the investment of pension funds before 2003. The additional pension costs are expected to total about $300 million a year.

Analysis and Commentary: To follow

2005 January 25 Time for due dilligence, editorial, Oregonian

The deal for Enron to sell PGE to a Texas investment firm is in the hands of the Oregon Public Utility Commission. The PUC is expected to decide soon whether to approve the transaction, in which bankrupt Enron would sell PGE to the Texas Pacific Group. The question before the commission, of course, has nothing to do with the city of Portland. The PUC must decide whether the sale would result in a net public benefit.

It's important to note that the city's current proposal is for an asset-only sale, too. The Enron-TPG transaction, however, is an equity purchase. The price TPG offered, $2.35 billion, reflects both the value of the assets and the costs of PGE's liabilities. It also reflects the difficult-to-evaluate impact of other, less-concrete potential liabilities such as the pending lawsuits against PGE or additional fallout from any PGE role in the 2001 Western power-price scandal.

It's difficult to see how an asset-only sale would appeal to Enron's creditors or a bankruptcy court, whose main interest is to convert whatever they can to cash and get out of Enron altogether. From their perspective, a deal that still leaves them holding the bag for liabilities would seem like a non-starter, or far more costly than the city's estimates contemplate.

Ultimately, Portland may get a chance to pursue its dream of more than doubling the city's current debt and buying PGE. Before they get too far down that road, though, city councilors ought to satisfy themselves and their constituents that the city's due diligence on PGE justifies going ahead. Its assumptions have been criticized, even among the TPG deal's opponents, as flawed and unrealistic, and its projections are optimistic, to put it mildly.

Analysis and Commentary: To follow

2005 January 25 Two new suitors cozy up to PGE by Kristina Brenneman, Portland Tribune

If Texas Pacific bid is nixed, private coalition, legislators ready to jump in. State regulators have a few weeks before making a decision on the proposed sale of Portland General Electric to Texas Pacific Group, but that hasn’t stopped two new suitors from stepping forward.

One is a private coalition of Portland investors. The other is a group of state Democratic legislators who are exploring establishing a state power authority to buy the utility. And on Monday, Mayor Tom Potter threw his support behind the city’s longtime quest to own PGE. Potter joined other members of the Portland City Council and elected officials from other local governments in announcing details of the financial plan and management structure for a city-owned utility.

The new private coalition — under the guise of Oregon Mutual Utility Development LLC — is made up of more than a dozen Portland utility executives and business leaders. Coalition members are meeting to discuss new forms of utility ownership, as well as raise money for a possible PGE purchase. The members are “developing a concept for mutual ownership similar to the ownership structure of mutual insurance companies,” said Jim Hansen, a Lake Oswego entrepreneur and former legislative candidate who founded the group last summer. He said the group, which is getting help from former Republican gubernatorial candidate Kevin Mannix, is prepared to announce its plan if the Oregon Public Utility Commission denies Texas Pacific’s application.

Senate Democrats last week revived the possibility of activating a provision in the Oregon Constitution that provides for a state power authority. As yet, no legislation has been proposed that would set into motion a state purchase of PGE, said Senate Majority Leader Kate Brown, D-Portland. But the issue is expected to be raised during a Senate Business and Economic Development Committee hearing today.

State leaders have the authority to issue billions in revenue bonds backed by utility customer rates that could be used to buy a utility, Beyer said. He said the structure is no different than any other public authority, such as the Port of Portland, and would be run by gubernatorial appointees. “Maybe there’d be a bidding war between the city and state,” Beyer joked.

Analysis and Commentary: To follow

2005 January 25 City puts out word on utility: We still want it, by Jim Redden and Don Hamilton, Portland Tribune

Mayor Tom Potter and elected officials from around the region unveiled their plan Monday for how Portland would acquire, pay for and operate Portland General Electric. “I enthusiastically support the purchase of PGE by a regional partnership,” Potter said. “I believe it will protect Oregon jobs and create them as well.”

Joining Potter at a news conference were officials from Metro, Multnomah County and the cities of Lake Oswego, Milwaukie, Oregon City, Gresham and Woodburn. The show of support also targeted another audience: the Oregon Public Utility Commission, which will decide in the weeks ahead the fate of Texas Pacific Group’s $2.35 billion offer to buy PGE. Potter said he wanted the PUC to know there was a viable alternative to the Texas Pacific-backed deal before making its decision.  “All of the alternatives start with the PUC’s rejection of the TPG deal,” Potter said.

According to Potter and the others, a regional partnership of the six counties and 51 cities currently being served by PGE would be created to buy the utility from PGE. The city of Portland would make the actual purchase to speed the process along. A regional entity later would be created to buy PGE from Portland if the partners agree that makes better management sense, Potter said.

The public effort to buy PGE has been led for more than a year by Sten. Although Sten said the city’s exact offer is confidential, he said it would not be any less than the $2.35 billion offer currently being considered by the PUC.  Leonard said city ownership would mean more stability.  “Ratepayers deserve more than being rolled every few years for profits,” he said. “We need stability. We need ethics.”

Under the plan, the city would buy the utility with revenue bonds that would be repaid by utility payments. If the purchase was approved by the PUC, the city would retain PGE’s existing employees and contract with a professional management firm to run the utility on a day-to-day basis. The city has received 23 offers from private companies interested in running PGE.

Analysis and Commentary: To follow

2005 January 25 Region votes to mess with Texas Pacific, by Steve Duin, Oregonian

Mayor Tom Potter and the city of Portland unveiled a new regional lineup Monday to deliver a familiar message about the perils of Texas Pacific, a message designed for three power players who never graced the room: Lee Beyer, Ray Baum and John Savage, the missing links at Oregon's Public Utilities Commission.

Those commissioners are expected to rule on Texas Pacific's proposed buyout by mid-February. Joining Potter and city Commissioners Randy Leonard and Erik Sten -- long the lead dog in the local uprising against Texas Pacific -- were a dozen mayors, city councilors, county commissioners and business leaders from across the metro area.

And David Bragdon, the head of Metro, argued that a regional partnership counters the anti-Portland sentiments in the crowd. Bragdon called rural anguish about the city setting rates "awfully ironic. You'd rather have people in Texas doing it?"

Analysis and Commentary: To follow

2005 January 25 Potter cites support for PGE purchase, by Gail Kinsey Hill, Oregonian

Portland Mayor Tom Potter on Monday officially threw his weight behind a city plan to buy Portland General Electric from Enron, claiming broad backing from residents, politicians and businesspeople throughout the utility's six-county territory.

"If regulators reject the proposed transaction, the city will act "immediately" to put in a bid of its own, Potter said. PUC Chairman Lee Beyer has said a decision probably will come in mid-February.

Potter, in office less than a month, has the strong support of Sten and Leonard, both of whom have been pushing for a public purchase for more than a year. Newly elected commissioner Sam Adams, who attended Monday's announcement, says he supports a city purchase, and Commissioner Dan Saltzman says the idea is worth exploring.

Leonard is the only city official who supports the more extreme action of condemnation, which would use Portland's powers of eminent domain to take over PGE. "We haven't ruled it out," Potter said of condemnation, "but it's not something we're focusing on right now."

The business community has sharply criticized condemnation, arguing that such action would send an anti-business message to a state still recovering from a three-year recession. Nevertheless, business support for public ownership has gained ground in recent months as details of the Texas Pacific deal have become known, said John Russell, president of Russell Development Co. "This is not an issue that can be characterized as public versus private or socialism versus capitalism," Russell said.

Russell said he objects to the Texas Pacific deal because the buyout firm intends to make a huge profit on the utility by holding it for a brief time, then selling for as much as $1 billion more than the purchase price. Russell called the city's plan "compelling," but he said he would withhold complete endorsement until all the details had been worked out.

Analysis and Commentary: To follow

2005 January 25 Texas Pacific goes where others fear to spend, (published August 25, 2002), Riva Atlas and Edward Wong, New York Times

Like most other buyout firms, Texas Pacific tries to keep its inner workings private: its partners rarely grant interviews and its Web site is perpetually under construction. Mr. Bonderman, Mr. Coulter and William Price, the third founding partner, declined to be interviewed for this article.

Mr. Bonderman made his reputation in the 1980's as the chief investment officer for Robert Bass, the Texas oilman. Mr. Bonderman enriched Mr. Bass a second time by making early bets in industries like cable television and taking stakes in troubled companies like American Savings & Loan, which had been seized by the government. Over nearly a decade, Mr. Bonderman's picks earned an average annual return of 63 percent for Mr. Bass.

In 1993, Mr. Bonderman struck out on his own with Mr. Coulter, a former Lehman Brothers banker who had also worked for Mr. Bass. They teamed up later that year with Mr. Price, a veteran of GE Capital Capital and Bain & Company, a consulting firm, to form Texas Pacific.

Analysis and Commentary: To follow

2005 January 25 State Senate Hearing on Future of PGE, Senatre Subcommittee on Business and Economic Development Chaired by Senator Metzger.

The three hour audio file for this hearing can be accessed at  Once here select 2005 session, archives of 2005 committee sessions, then select business and economic development and finally the session on January 25, 2005.  City of Portland Commissioner Erik Sten's testimony can be heard at the 2 hour 32 minute mark and Bill Parish provides 3 minutes of public tesimony, drawing on the Charles Keating analogy, at 2 hours and 46 minutes.

Analysis and Commentary: To follow

2005 January 23  Schwarzenegger Aims at State Pension System, by John Broder, New York Times

Gov. Arnold Schwarzenegger, echoing language used by those who claim Social Security is headed for a crisis, contends that California can no longer afford a generous traditional pension plan for state employees and teachers and should force all new workers into a 401(k)-style plan of private accounts.

California's $300 billion pension system for its public employees is the largest state system in the nation and as early as this summer, Californians will be asked to vote on the proposed changes. The change that Mr. Schwarzenegger has endorsed is supported by a number of Republican state lawmakers and is driven by the same ideology behind the effort to transform Social Security. The outcome of the vote in California, pension experts and political analysts say, will not only have an impact on the state pension system, but will also provide an important marker of public opinion on proposed changes to Social Security.

The impetus for Mr. Schwarzenegger's plan comes from some of the same antitax advocates, free-market enthusiasts and Wall Street interests pushing President Bush's Social Security initiative. Grover Norquist, the president of Americans for Tax Reform, a Washington lobbying and research group, has endorsed the plan. The Howard Jarvis Taxpayers Association, in California, is sponsoring a similar measure. The Jarvis group plans to put its proposal on a statewide ballot if the State Legislature does not act on the governor's plan.

The proposal would affect the California Public Employees Retirement System, known as Calpers, which handles the accounts of 1.4 million state and municipal workers and retirees. It has $178 billion in assets and is one of the largest pools of investment capital in the world. The proposal would also cover the California State Teachers' Retirement System, with 750,000 members and $116 billion in assets.

Although Mr. Schwarzenegger described the plans as a looming train wreck, even advocates of privatization in his own administration say the system is currently sound. The plans, taken together, are nearly 90 percent funded, a level that most experts consider quite healthy. "We're not warning of imminent collapse," said Tom Campbell, an economist and former member of Congress who is the state's new budget director. "There is a potential danger for the state to have a defined benefit system, and to the extent we can move away from it, as many private employers in America have done, we should do that."

The danger, as Mr. Campbell and others describe it, is found in the vagaries of the stock market and the tendency of the State Legislature to award generous new retirement benefits in flush times. Unlike Social Security benefits, which can be changed by act of Congress, benefits granted to recipients of public pensions, at least in California, are virtually untouchable.

Opponents of the plan, who include almost all Democrats in the Legislature, state employee unions and the trustees of the pension plans themselves, say that the plans have been well managed and provide a critical source of income security to workers who sacrifice pay in their working years to toil in the public sector. Richard C. Ferlauto, director of pension investment policy for the American Federation of State, County and Municipal Employees, said that Mr. Schwarzenegger and others were manufacturing a crisis to justify sweeping changes to the retirement systems that millions of workers rely on and to throttle the influence the workers wield through their pension plan investments.

Analysis and Commentary: To follow

2005 January 25  PGE decision a tall order, by Gail Kinsey Hill, Oregonian

Members of the Oregon Public Utility Commission have all but sequestered themselves at agency headquarters in Salem to decide whether the proposed change in ownership would serve the public interest and provide a "net benefit" to ratepayers. After all the page-turning and analyzing, they will take one of three actions: Deny the proposal as presented by Texas Pacific, approve the offer, or craft a qualified denial that defines conditions that Texas Pacific would have to meet to secure approval.

"This is an unusual one," said PUC Chairman Lee Beyer, who expects to issue a decision in mid-February. In a recent interview, he ruled out the possibility of full approval of Texas Pacific's application, saying he expected "either denial or conditioned approval."

Analysis and Commentary: To follow

2005 January 22  If deal fails, city will bid on PGE, by Gail Kinsey Hill, Oregonian

Portland Mayor Tom Potter on Friday said the city is prepared to immediately put in a bid to buy Portland General Electric should a pending offer from buyout firm Texas Pacific fail to win the approval of state regulators. Potter stopped short of endorsing the more extreme measure of condemnation, which would exercise the city's powers of eminent domain, to wrest control of the utility from Texas Pacific should the transaction succeed. "I intend to take every action I can as mayor to make a public acquisition of PGE happen."

Influential business groups including Associated Oregon Industries and Industrial Customers of Northwest Utilities have sharply criticized the Texas Pacific deal and urged state regulators to reject the buyout. But the degree to which anger over the Texas Pacific transaction would translate into full-fledged support for a public purchase is unclear.

"We've been so absorbed by the PGE application, we haven't looked at the city effort," said Julie Brandies, a lobbyist for Associated Oregon Industries, the state's largest business lobby. However, Ken Canon, executive director of Industrial Customers of Northwest Utilities, which represents large electricity users, said he's ready to take a close look at a public purchase.

Analysis and Commentary: To follow

2005 January 21  Portland plans power play if TPG bid fails, by Wendy Culverwell, Portland Business Journal

We will immediately be in contact with the creditors and seek to negotiate a deal with them. We would be prepared to offer the same price that Texas Pacific has," Sten said.  He also expects to duplicate the agreement to manage Enron-related liabilities, as already negotiated in the Texas Pacific deal.  All they've done is negotiate a deal with Enron to split the liability.  The idea that they're the only one that can do that is laughable, Sten said.  He stressed that the city is not interested in runniong the power company or turning it into a department within the city structure.  We don't want to run it, he said.

Analysis and Commentary: To follow

2005 January 21  Investigation Report by Criminal Justice Division of the Oregon Dept of Justice regarding Diana Goldschmidt's involvement in the OIC decision to authorize investing $300 million in TPG. Conducted by Dave Rubey, Kerry Taylor and Steven Briggs

Attorney General Hardy Myers today released the results of a criminal investigation into Diana Goldschmidt’s October 29, 2003 participation in the Oregon Investment Council’s decision to authorize investment of up to $300 million from the Oregon Public Employees Retirement Fund in Texas Pacific Group’s (TPG) plan to purchase Portland General Electric (PGE). Oregon Department of Justice Investigators found no evidence that at the time of the Investment Council vote on October 29, 2003, either Diana Goldschmidt or her husband, former Oregon Governor Neil Goldschmidt, knew of the future involvement of former Governor Goldschmidt in the proposed purchase of PGE by TPG.

In May 2003 David Bonderman (Bonderman), the managing partner of TPG, and other TPG personnel made a presentation at an OIC meeting relating to the general state of the private equity market. This presentation included a discussion of public utilities and power companies as an investment trend. PGE was not discussed. At this presentation TPG did not refer to what
later became TPG Fund IV, and TPG did not mention a potential buyout of PGE. Diana Goldschmidt was in attendance.

Shortly after this presentation Bonderman contacted Fewel and said that TPG was taking a hard look at a utility “right in your own backyard.” In his interview Fewel stated this was not surprising because he was aware that two other investment firms were considering a purchase of PGE. Fewel also stated that investment firms such as TPG may consider several hundred
investments in a year before settling on one or two. Fewel said that he told only one person of this conversation with Bonderman: Schmitz, his supervisor.

In an interview on October 13, 2004 Schmitz stated that he remembered this conversation with Fewel. He said it was his impression from Fewel that TPG’s interest in PGE was preliminary, and that there were many hurdles yet to overcome, including the bankruptcy of PGE’s parent company Enron. Schmitz said that it was his understanding from Fewel that TPG
wanted to keep this information confidential. This is “normal” since an inadvertent release of such information could affect negotiations. After further contact between Fewel and TPG in August 2003 about TPG’s interest in PGE, Schmitz informed his superiors of TPG’s interest in PGE. Schmitz told DOJ he has a personal policy of keeping his chain of command informed.
Schmitz made his report to Haglund, State Treasurer Randall Edwards (Treasurer Edwards), and Drummond. In the course of our investigation we obtained a copy of the following e-mail from Schmitz to Treasurer Edwards and Haglund dated August 25, 2003:

Jay [Fewel] received a call from TPG about a co-investment opportunity today on an investment in PGE. I hope to bounce it off Jerry Drummond to get his reaction. But, on the surface, this may be a very good way to slide into an area that I think we should explore. This is VERY hush-hush. I have just violated the spirit of a pledge Jay [Fewel] made to TPG to keep this between himself, Jerry and myself.

In separate interviews Haglund, Treasurer Edwards and Drummond each stated that he or she never told Diana Goldschmidt or anyone else about TPG’s interest in taking over PGE. When asked why other members of the OIC were not informed about TPG’s interest in PGE, Schmitz said this was a judgment call by his chain of command.

Davis stated that a large number of people knew about TPG’s interest in purchasing PGE because they were involved in doing “due diligence” research for TPG about the purchase. However, these persons were all bound to secrecy by confidentiality agreements with TPG and other potential investors including NW Natural and Madison Dearborne Partners, Inc. Davis stated that during the summer of 2003 TPG developed a list of prospective board members for the holding company designed to operate PGE. This holding company was named Oregon Electric Utility Company (Oregon Electric). Davis said that he did not contact any of these people because of confidentiality concerns and the uncertain negotiations with Enron.

Through our investigation we obtained a copy of this list of prospective Oregon Electric board members while reviewing TPG records in TPG’s San Francisco corporate offices. The list was an attachment to a September 4, 2003 e-mail from Stephanie Portillo, on behalf of Davis, to Gerald Grinstein (Grinstein) with copies to Bonderman and Carrie Wheeler (Wheeler), a TPG
employee. The attachment listed Neil Goldschmidt as one of six potential General Partners. Neil Goldschmidt was not listed among seven named potential members of the Board of Directors of Oregon Electric.

Davis said that he first learned that Diana Goldschmidt was a member of the OIC during the breakfast meeting with Neil Goldschmidt. Davis said that he met her briefly as she walked through the hotel. During subsequent conversations Davis and Neil Goldschmidt agreed that if Neil Goldschmidt committed to serve on the Oregon Electric Board of Directors, Diana
Goldschmidt would have to abstain from any OIC business involving TPG.

Bidwell stated that he had not known about TPG’s interest in PGE when he voted at the October 29, 2003 OIC meeting. Bidwell confirmed that after the OIC meeting he and his wife accompanied Neil Goldschmidt and Diana Goldschmidt on a weekend trip to San Francisco. See complete report at

Analysis and Commentary:  The report highlights that phone records were reviewed only for the three month period from August 1 thru November 1, 2003, not the period when Bonderman made his presentation before the OIC in May 2003.  In addition, access to business phone records for David Bonderman, Kelvin Davis and Carrie Wheeler for the period reviewed, the three key players for TPG, was denied by Southwest Bell, no search warrant was requested.  Although many parties were interviewed they did not include key players such as Ron Saxton, Jay Waldron and Jim Coulter, TPG's head of operations based in San Francisco.  Also not interviewed were Paul Phillips and Mark Hass, both of whom provided initial communications strategy work for TPG. Furthur, email key word text searches did not include PGE or Portland General Electric.  Overall, the investigation seemed earnest yet too narrowly defined.

2005 January 19  Enron's Tax Holiday, by Nigel Jaquiss, Willamette Week

The Reform Project previously documented that PGE collected more than $700 million from Oregon ratepayers to pay state and federal income taxes since being acquired by Enron in 1997. Enron kept virtually all of that money. New documents PGE recently turned over to Dan Meek, the Reform Project's attorney, show Enron also stiffed Multnomah County.

Power companies are allowed to pass their tax bills on to ratepayers. (In this case, PGE's tax to the county is 1.45 percent of net income.) Many residential ratepayers probably never noticed they were paying a tax on their electric bill, as the average monthly cost is less than a buck a month. But those charges add up. Between 1997 and 2004, PGE charged county ratepayers $6.7 million—using a separate line item on monthly bills that specified a charge for county taxes. The documents Meek obtained show Enron paid less than $4,000 of that money to the county.

"Since PGE must have known that Enron was not paying the Multnomah County tax, PGE should have stopped collecting it in 1997," Meek says. "And should have repaid with interest all such charges that did not go to Multnomah County." City Commissioner Randy Leonard, who until recently oversaw the city bureau that collects business income taxes for both the city and Multnomah County, was unaware that local taxes were going into Enron's pocket. "That's outrageous," Leonard says. "I can think of no justification beyond some illegal intent on Enron's part for them not to pay the taxes they owe."

Analysis and Commentary:  To follow

2005 January 19  Trash the PGE Deal, by Mark Zusman, Willamette Week

It's astonishing that this stinker has even gotten this far. It has had a bad smell from the day it was first proposed. And in the intervening 14 months, the aroma has only gotten fouler. Despite this, a group of Texas speculators, with no experience running a power company, are one vote away from buying Oregon's largest utility.

Despite the transparency of TPG's motives, the proposed acquisition has a good chance of approval, due to a Public Utility Commission that, at best, is confused and, at worst, has lost sight of its obligations to Oregon ratepayers. And Gov. Ted Kulongoski? He has stayed in the shadows, preferring not to soil his hands with the most important economic-development decision any state agency will make during his tenure. This is not the time to analyze the governor's conduct. It is, however, the proper place to recognize just how bad this deal is, a fact underscored by this newspaper's release of Texas Pacific's confidential documents on Jan. 5 (see "The PGE Papers").

Readers of WW (and The New York Times, picking up on the story's national implications) know now that Texas Pacific privately thinks it can fire hundreds of employees, sell the company in five years to another utility and make more than a billion dollars in profit. Publicly, Texas Pacific was making different claims—including its insistence that profits would be so marginal that the firm could not offer significant rate reductions.

Analysis and Commentary:  To follow

2005 January 16  Sometimes Less Can Equal More, by David Cay Johnston, New York Times

The Texas Pacific Group says that if it succeeds in buying Portland General Electric, the Oregon utility, it will cut the fees paid to the company's directors. But five new directors will make more than their predecessors. How? They will be paid twice.

Dr. Peter O. Kohler will be paid $75,000 as chairman, down from the $100,000 his predecessor got. Other directors will get $45,000, not $75,000. But Texas Pacific, David Bonderman's $13 billion investment fund, will control the utility through a holding company called Oregon Electric - and it will pay the directors, too.

Dr. Kohler, president of Oregon Health and Science University, will get $50,000 as chairman of the holding company, and more for attending meetings. He told the Oregon Public Utility Commission he would pocket about $145,000 in cash and $15,000 in stock each year. (A spokesman said he'd donate his fees to charity after repaying $500,000 he would borrow to invest in Oregon Electric.)  By comparison, the highest-paid outside director at nearby Nike, which is eight times as big and competes in hotly contested apparel markets worldwide, received $59,500 last year.

Analysis and Commentary:  Johnston provides but one more small example regarding how Texas Pacific can boldly go where few have gone with respect to honesty and integrity in their public statements.  The truth is that Kohler will make millions on his stock options alone and, even if the profits were donated, he would still receive millions in valuable tax deductions.

One can only imagine what lurks in Texas Pacific's financial statements given that they have no SEC oversight and are self evaluating the value of the various companies in its portfolio for its investors, the largest investor of which is the Oregon Public Employee Pension System. This is exactly what Charles Keating did and he brought down a great industry.  Let's hope Bonderman does not do the same thing with public pensions, now a vital part of the market and representing 8 of the nations 10 largest investment funds.

Johnston is a good reporter and should be smelling another Pulitzer Prize if his editors allow him to research and profile Texas Pacific's efforts to purchase PGE rather than feed off press releases.  My first suggestion would be to survey the nations 200 largest public pensions and determine how much they have invested in Texas Pacific and thereby calcualte what percent of its $13 billion indeed comes directly from public pensions. A second step might be to reconstruct its cash flow statement and determine if companies like PGE and IASIS, a hospital chain based in Nashville, are a desperate attempt to gain cash flow due to excessive accounting creativity with its other investments and a need to pay dividends to investors.

2005 January 16  TPG Ventures, An affiliate of the Texas Pacific Group, Describes Its Business, see website at

TPG Ventures was founded in 2001 with $500M of capital and a team of experts to catalyze the creation of new businesses. Our investment focus is on early stage and acceleration round opportunities in information technology and biotechnology — with an emerging practice in consumer companies. By partnering with TPG Ventures, portfolio companies gain direct access to a broad network of contacts through our Corporate Network and our Venture Capital Network. In addition, entrepreneurs can leverage the deep domain knowledge and relevant operating experience of our Team. TPG Ventures is also an affiliate of the Texas Pacific Group, a private equity investment firm and the initial sponsor of our firm.

Analysis and Commentary:  In but one small example of a TPG related company, TPG ventures website notes that two of its five managing directors are physicians, M.D.'s, and a key focus of TPG ventures is biotechnology. This is interesting given that TPG itself also purchased IASIS Healthcare, a Nashville based hospital chain, for $1.4 billion in June of 2004. This is a link to the press release announcing the deal's completion.

It is rather surprising that TPG has not disclosed a complete list of its holdings and related companies prior to the Oregon Public Utility Commission making its ruling.  This goes right to the heart of whether or not the PUC commissioners are competent and independent. Obvious questions regarding one such affiliate, TPG Ventures,  include whether or not any of OHSU's board members are invested in these affiliate biotechnology companies, either directly or indirectly.  One might also wonder what kind of profit potential TPG saw in a hospital chain.  Of course the primary source of revenue for such hospitals is government tax dollars for medicare and other such health programs.  That is good cash flow, especially if TPG has been using creative accounting to show earnings that don't necessarily translate into a profit distribution to investors in other areas.

Imagine how many of TPG's related companies will be able to feed off a captive entity like PGE?  This is exactly why the Public Utility Holding Company Act was put in place early last century after Samuel Insull devised what some would consider a related scheme.

2005 January 16  SEC: Hedge Fund Rule Doesn't Signal Wholesale Regulation, by Marietta Cauchi, Dow Jones Newswire

"This is not a first step down toward a slippery slope of hedge fund regulation - it will impose no more than what clients expect of advisers in managing their money," said Roye, speaking about the regulations at a seminar organized by the Managed Funds Association in New York City. The rule, adopted in October, requires all hedge fund advisers with assets in excess of $25 million and more than 14 individual investors to register with the SEC under the Investment Advisers Act of 1940 by Feb. 1, 2006.

Initial registration requires the adviser to complete an electronic form giving basic information, such as name and address, which will be publicly accessible, said Roye. The second part of the registration process involves more comprehensive information that advisers currently won't need to file but must maintain and make available to the SEC if requested, Roye said. However the SEC plans that this further information, which includes details about the hedge fund advisers' personnel and their experience, will also become available in an electronic form to the public.

Roye highlighted the task force set up by SEC Chairman William Donaldson as a step to improve supervision and surveillance in the investment industry as a whole. "Expect to see more proposals from the SEC aimed at enabling it to do a better job of oversight by identifying and targeting problem areas," Roye said.

Analysis and Commentary:  This rule is of dramatic significance to Texas Pacific because currently they disclose nothing about their firm, even though a primary source of its funding is public pensions.  SEC Chair Donaldson is doing an excellent and courageous effort to create this necessary disclosure and TPG, not unlike Ken Lay and Enron, is fighting to stay behind the curtain. Anyone opposing TPG's acquisition of PGE should write a letter directly to SEC Chair Donaldson in support of requiring hedge and private equity funds like TPG's to register with the commission.

It is also important for Oregonians in general and Lee Beyer in particualr to recognize that we, in large part, created the Enron scandal as a result of allowing PGE to be acquired and providing hard assets and cash flow on which Enron could base their spectacular fraud.  If the PGE sale to Enron had been rejected by the PUC the scale of Enron's implosion would have been dramatically reduced.

2005 January 15  Commission's ties to bank scrutinized, by Ryan Frank, Oregonian

Civic leaders stung the city's influential development arm Friday with a report calling for stronger oversight, broader public involvement and an investigation into the agency's ties with a private community bank. The report's release comes just days after Mayor Tom Potter and Commissioner Sam Adams took office promising greater accountability and civic involvement. Potter didn't wait long to respond to the report Friday. The mayor issued a statement saying the city attorney would investigate the commission's relationship with the Portland Family of Funds. The agency helped create the private bank that uses federal tax credits to attract investment in commission-backed projects.

While the theme of encouraging greater public participation, better cooperation between the city and the development agency and stronger council oversight carried through the report, the committee reserved its most direct language for the controversial Portland Family of Funds.

The private bank has federal authority to leverage investment from tax credits to spur development in low-income communities. The bank also has taken about $1 million in loans from the development commission, said Kenneth Asher, the bank's general manager.

The City Club report said the bank invested money it had received in loans from the agency into private companies. That relationship, the report said, seems to violate the spirit of the Oregon Constitution. The Constitution prohibits cities from raising money or lending credit to private companies. But Mazziotti and Asher disputed the point Friday. "That particular item is not factually correct," Mazziotti said. Instead, Asher said, the loans were used for bank staff and operating equipment.

The commission's lawyer, Chip Lazenby, has approved its ties with the Portland Family of Funds, said Richmond, the agency spokeswoman. The City Club report also raised concerns about the private bank's lack of public oversight. While the development commission's files are generally open for public inspection, the Portland Family of Funds' files aren't.

The City Club committee reported reluctance from the development agency to share documents related to the community bank. "What if (Portland Family of Funds) wants to give favoritism to people?" Meyer asked of the community bank. "We don't know that. We can't judge that."

Analysis and Commentary:  The Portland Development Commission has done many great things for the City yet for some reason is completely silent on the PGE situation.  TPG's primary financial backer is Geneva based Credit Suisse, the same Credit Suisse that was awarded a contract to manage the $100 million Oregon venture fund mandated by the Oregon legislature.  Former OIC member Diana Goldschmdit did abstain on the venture fund vote yet provided no reason at the time.

Credit Suisse also structured some of Enron's most egregious partnerships and many opponents of TPG's PGE purchase now want to know if they are also a key issuer of the tax credits generated by the Portland Family of Funds.  These are of course a windfall for investment firms in terms of commissions and fees while at the same time could indeed have negative financial consequences for the City. Although the City's top financial and operational personnel are fully aware of the mechanics of the Portland Family of funds, it has taken Tom Potter's leadership to create an environment where this area can be more closely reviewed.

2005 January 14 Emails trace consultant's ties to Kulongoski, by Dave Hogan and Jeff Mapes, Oregonian

In February 2003, Imeson arranged for the governor to meet with top executives of ScottishPower and its subsidiary PacifiCorp, which owns Pacific Power and was one of Imeson's clients. Imeson, a former PacifiCorp vice president, also e-mailed a briefing paper suggesting comments for Kulongoski to make about issues such as the state Public Utility Commission, which regulates Pacific Power and other utilities.

"Their issues: 1. PUC is always an issue for a regulated public utility," Imeson wrote in the three-page memo. "Ted, your comments at the (Oregon Business Council) meeting, where you essentially said that you have to balance consumer interests with the need for an environment where utilities will make needed infrastructure investments is exactly the right message here."
But Imeson also was discussing the PUC in another vein. Two weeks later, Imeson provided two names to the governor's then-chief of staff, Peter Bragdon, as possible appointees to the PUC. "I would like Tom to check into these," Bragdon wrote to the governor's appointments secretary, after Imeson offered to call the two potential appointees. "I will tell him."

Today, Imeson notes the governor did not select his two PUC candidates, whose names were blacked out on documents provided to The Oregonian. He also noted that he wasn't involved in proposing the two people that Kulongoski eventually appointed: Ray Baum and John Savage.

On Public Utilities Commission May 5, 2003: Nancy Goss-Duran, Kulongoski's executive appointments director, to Imeson, re: PUC candidates: "Classic error -- never give an elected official the originals of anything to 'review briefly.' I understand you now have the PUC applications that the Governor wanted more information on. . . . I sure could use those returned. Can you make copies and get those back to me????" Aug. 1, 2003: Also on that date, Bragdon forwards to Imeson a note he received from a potential appointee to the PUC.

Analysis and Commentary:  Although current PUC Chair Beyer was not appointed by Governor Kulongoski, he was made chair by the Governor in September of 2003 and clearly Tom Imeson provided feedback on this choice. Beyer has still not disclosed whether he knew about the TPG deal prior to being made Chair of the commission.

2005 January 14  Texas Pacific rips watchdogs, by Kristina Brenneman, Portland Tribune

Texas Pacific Group partner Kelvin Davis says Oregon’s consumer groups — whose mission is to protect utility customers — are acting in their own self-interest when they try to hinder the company’s proposed $2.35 billion purchase of PGE. If the sale is turned down by the Oregon Public Utility Commission, he said, “there is no $43 million rate credit. Customers will lose hundreds of thousands of dollars in rate relief.

 “Who is representing whose interest here?” he continued. “I question if customers’ interest is being represented fairly” by the Citizens Utility Board of Oregon and Industrial Customers of NW Utilities. Davis made the comment Wednesday, a day after the Portland Building Owners and Managers Association filed a motion to reopen regulators’ briefings on the sale.

Meanwhile, as Texas Pacific tries to field criticism about how it would take care of PGE, the leaked papers show that the investment group already has pinpointed 13 potential buyers. Among them, two former PGE suitors: the NW Natural gas utility and Pacific Power’s parent company. The two companies’ strengths — and potential interest — in acquiring PGE are outlined amid the 700 pages of confidential documents that Texas Pacific was compelled to release earlier this week after Willamette Week revealed millions of dollars in potential staff and capital cutbacks. NW Natural, whose bid for PGE was abandoned when PGE’s parent company, Enron Corp., went spectacularly bankrupt in December 2003, was highlighted for its “previous strong intentions to buy PGE.”

Analysis and Commentary:  Once again Kelvin Davis has attempted, and failed, to orchestrate a classic divide and conquor strategy. It is almost funny how Davis would purport to defend ratepayers while his firm pilfers $1 billion from the utility.

2005 January 14  The Texas Pacific Deal: Two Views, by Ken Lewis and Sid Lezak, retired President of Lasco Shipping and US Attorney for Oregon for more than 20 years, respectively.

We obviously disagree with The Oregonian's continued enthusiastic editorial support for the sale, first set forth within 24 hours of its announcement (by its then local figurehead, Neil Goldschmidt) in November 2003, without knowing any of its important details, which are only now coming to light. We believe that none of the benefits The Oregonian claimed for Oregon ratepayers will actually be realized by this transaction.

Texas Pacific has insisted for the past year that its "due-diligence" documents submitted to the Oregon Public Utility Commission for the PGE deal be kept secret. Now that some have been released, we know that many objections voiced about the proposed sale are valid. We know that the local board of directors that Texas Pacific has named is merely an advisory group whose opinions can be vetoed at will.

We also know the documents reflect the opinion that Texas Pacific would likely get a higher price by reselling PGE to another utility (which could mean the loss of an Oregon headquarters) rather than by taking the company public through a stock offering. Texas Pacific is now professing to prefer the stock offering, but they cautioned that they are under no obligation. The documents also show that Texas Pacific expects to make between $800 million and $1.2 billion in profits on the deal. We all want what is best for Oregonians. Having now reviewed the documents, The Oregonian should reconsider its editorial position supporting the sale.

Analysis and Commentary:  Lewis and Lezak present a compelling case for the Oregonian to relook its editorial stand supporting the purchase and thereby restore some of its lost credibility.

2005 January 14  Texas Pacific is PGE's best chance for success, by Peter Kohler and Maria Eitel, Oregonian

We are all independent of PGE and Texas Pacific, the primary investor in Oregon Electric Utility Co. We have had a chance to work closely with them. We have full confidence in their competence and integrity.

PGE is a regulated utility, which means the PUC determines the amount of annual return on equity that is included in rates. The PUC will allow only a rate of return that it determines to be fair and reasonable. If Texas Pacific sells its investment, any profits will come from the buyer, not from customers.

This is not much different than if you buy stock in a utility and sell it years later when the value of the utility goes up. The dividends you would get are generally the result of the return on equity allowed by the commission; the additional profit you hope to make would come from the buyer of the stock, not the customers.

As individuals committed to Oregon and the Northwest, we agreed to join the PGE board with the belief that this proposal will make Oregon a better place to work and live. Today, we hold that belief as firmly as ever. Peter Kohler is president of Oregon Health & Science University. Maria Eitel is head of the Nike Foundation. Both are prospective board members of PGE, and they write on behalf of nine prospective PGE board members, who include Kirby Dyess, Gerald Grinstein, Jerry Jackson, Duane McDougall, Robert Miller, M. Lee Pelton and Tom Walsh.

Analysis and Commentary:  Peter Kohler's comments are completely inconsistent and nothing but pr spin.  Oregon Electric's board members now all seemed destined for the Oregon Hall of Shame.  My advice to Tom Walsh would be to start thinking defense, afterall he was a defensive guard and captain of the football team at Stanford in the early 1960's.  This whole mess is on a path of self destruction if approved by the PUC.

2005 January 12  Generating Spin, by Nigel Jaquiss, Willamette Week

The buyout firm Texas Pacific Group has been scrambling since WW released confidential documents last week. The internal documents contradicted the firm's public version of its plans for Portland General Electric, which it is seeking to buy (see "The PGE Papers," WW, Jan 5. 2005). Specifically, the confidential documents talk about big layoffs, cuts in maintenance spending and the sale of the utility in five years to another utility for a profit that could easily exceed $1 billion.

Texas Pacific responded by releasing some of the confidential documents to The Oregonian. And since Texas Pacific couldn't really deny that there are significant discrepancies between its private analysis and public pronouncements, it chose a different tack--maintaining that the private analysis shouldn't be taken too seriously.

In truth, however, the confidential documents represent the work of a small army of experts that Texas Pacific hired or already employed. According to the documents themselves, those who helped the firm analyze PGE included four law firms and three individual lawyers with specific expertise, two consulting firms, the accounting firm Deloitte & Touche and the investment bank Credit Suisse First Boston, in addition to three Texas Pacific partners and numerous number crunchers. And those experts had more of a bird's-eye view than "an external vantage point." According to the documents--which describe the proposed acquisition of PGE as "Project Tahoe"--Texas Pacific's team "undertook extensive peer benchmarking, management interviews and physical plant reviews." While Texas Pacific has subsequently tried to distance itself from such numbers, it's clear they are based on hard data, not guesses.

Even Texas Pacific partner Kelvin Davis, who since last week has been downplaying the significance of the confidential documents, had earlier this year implied how seriously his firm took its due diligence. In July, Davis came to Oregon and told interested parties that Texas Pacific had spent "more than seven million dollars" assembling what he termed a "massive amount of information" about a "host of operational, financial and legal questions surrounding Portland General."

Mark Gardiner, one of the five members of the OIC, which oversees the investment of more than $56 billion in public funds, was puzzled by Texas Pacific's downplaying of the documents. "They've said this [the documents] isn't a plan. Are they really entering into an investment of this size without a plan? If so, how do they know it is an investment worth making?"

Analysis and Commentary:  Jaquiss highlights the reality that "due dilligence" is just that, not optimistic assumptions but careful complete analysis. For TPG to pay $7 million for this work and those parties invovled to be liable for their work, arguing that it is not relevant makes no sense.

2005 January 12  The Electric Marionettes, by Nigel Jaquiss, Willamette Week

Last week, when KGW-TV wanted to interview the local board members Texas Pacific Group has hired to oversee Portland General Electric, none would appear on camera. Rather than hire retired utility executives or industry experts, Texas Pacific selected a panel whose head is an endocrinologist (Kohler) and whose only member other than PGE chief Peggy Fowler with electric-utility experience (lawyer Jerry Jackson) lives in Louisiana.

That's because the real reason the local board exists, as the confidential documents make clear, is to comply with federal regulations. Because of abuses in the 1930s, financial speculators such as Texas Pacific cannot own utilities directly. In order to buy PGE, Texas Pacific had to establish a local company to hold the utility. The Texans gave Oregon Electric's board nominal voting authority over PGE's operations--but no real control.

As spelled out in Texas Pacific's public and private reports, Walsh, Kohler and the rest cannot do much more than order a pizza without permission from Texas. Asked during an October PUC hearing whether the board could stop Texas Pacific from selling PGE, Walsh told state regulators, "I think the answer is yes." The next witness, Texas Pacific partner Richard Schifter, said Walsh was wrong. "His testimony would require correction," Schifter testified. "We can do it without their approval."

In fact, according to Texas Pacific documents, the company can even remove board members. And if, as utility experts anticipate, Congress relaxes rules on utility ownership, Texas Pacific would no longer have any need to pretend the local board had any control. In October, Kohler, the board chairman, acknowledged that the local panel would cease to have any relevance if that repeal happens.

In their testimony before the PUC, both Walsh and Kohler admitted they had not read the Texas Pacific documents that provided the rationale for buying--and later selling--PGE, which may help explain why neither they nor other Oregon Electric board members would speak to KGW last week or answer questions for this story. "That's what's so distressing about this local board," says the Citizens' Utility Board's Eisdorfer. "They don't even understand how little authority they have."

Analysis and Commentary:  Both Peter Kohler and Tom Walsh admitting that they had not read the key documents that provide TPG the rationale for buying PGE is telling, especially when they also boast that their board will be strong and independent..

2005 January 12  Suitor signals new PGE priorities, by Gail Hill and Jeff Manning, Oregonian

Texas Pacific Group now says that if it succeeds in buying Portland General Electric, it likely will eventually sell the utility to investors in an initial public offering, even though the option could reduce the firm's profit by as much as $400 million.

Many customer groups prefer that PGE become a publicly traded, locally based company. Nevertheless, they remain highly suspicious of Texas Pacific's latest claims, viewing the firm's professed interest in an IPO as an attempt to portray its deal as kinder and gentler than it truly is. When it comes time to exit the investment, critics say, Texas Pacific will go for the most lucrative deal. "They will do whatever makes them the most money," said Portland City Commissioner Erik Sten, who has called on the Oregon Public Utility Commission to reject the transaction.  If the Texas Pacific transaction falters, Sten said, the city is prepared to make a bid to buy PGE. He contends city ownership could save ratepayers $100 million a year.

Davis cautioned, however, that either type of sale could occur. "The same two alternatives exist," he said. Although the most likely option has "swayed to an IPO," Davis said, that's still "speculation."

Analysis and Commentary:  There seems to be no limit to the lack of honesty and integrity displayed by Texas Pacific, there latest policy shift occurring only after the Willamette Week released their confidential plans for PGE. One need only view Mr. Davis comments before the Portland City Council, available on line in the video archive at, to marvel at the depth of their dishonesty.  Testimony made by Peter Kohler, Tom Walsh and Jay Waldron is also available for viewing.

2005 January 12  Nortel Unveils New Accounting Flubs, by Mark Heinzl, Wall Street Journal

Nortel Networks corp. unveiled details of additional accounting errors involving bilions of dollars and said that a dozen executives will return millions of dollars of bonuses as the telecom-equipment maker attempts to put a major financial scandal behind it.

Analysis and Commentary:  If leading companies such as Lucent and Nortel can become involved in accounting scandals, imagine the potential for a company like Texas Pacific that operates in complete secrecy even thought its primary source of funding is public pensions.

2005 January 11  Secrecy Stripped From Oregon Utility Sale  by David Cay Johnston, New York Times

The Texas Pacific Group, after fighting to keep secret 700 pages of documents about its proposed purchase of Portland General Electric, reversed course yesterday and said it would make the documents public. The decision came after an alternative newspaper, Willamette Week, obtained most of the documents for an article published last week.

The Oregon case has significance beyond Portland. It illustrates what consumer and industry lawyers in California, Texas and Washington said yesterday was a growing use of secrecy in utility cases to the detriment of ratepayers. It raises questions about moves in Congress to repeal a 1934 law that protects customers. And it illustrates the growing interest in electric utilities by leveraged buyout firms like Texas Pacific and Kohlberg Kravis Roberts & Company in New York.

Congress may vote soon on repealing the 1934 law, the Public Utility Holding Company Act, a move that opponents say would open the door to short-term speculators and distant owners with little interest in the long-term reliability of electric service. Texas Pacific has said that unless the Securities and Exchange Commission exempts it from that law, it will not complete the deal.

The 1934 law was adopted after one of the biggest business scandals of the Depression, the 1932 collapse of the Insull Trusts, a network of heavily indebted utilities that included Portland General Electric, which is now owned by Enron.

Dan Meek, the lawyer for the Utility Reform Project, a Portland consumer group, said that the Oregon Public Utility Commission grants secrecy orders on request, which he considers improper. "It amounts to a government-sponsored dog and pony show for the utility and its allies to make their own case, unchallenged," Mr. Meek said, adding that even after opponents make important discoveries in closed-door proceedings "the public is not allowed to hear about it." Bob Valdez, a commission spokesman, confirmed that requests for confidentiality had increased in recent years, an issue the commission will study this year.

Erik Sten, a Portland commissioner who wants the city to buy the Portland G.E.'s assets, said Texas Pacific's release of the documents threw doubt on the legitimacy of the secrecy order. Documents cannot be both "meaningful and in need of secrecy and at the same time not important, which is what Texas Pacific is now saying," Mr. Sten said. "Either the protective order was given too freely or Texas Pacific is now misrepresenting its due diligence to the public."  Texas Pacific said yesterday that the documents, which it has testified were developed for $7 million, were analytical and should not be considered as policy or plans.

Mr. Sten called for reform of the laws allowing secrecy in utility cases. "The idea that the public should grant a monopoly to a speculative firm without access to the business plans is unreasonable," he said. "Public bodies can only exercise judgment on behalf of the public when they have heard the public's opinion - and that opinion has been manipulated through false public statements."

Analysis and Commentary:  An excellent story by Johnston.  Clearly, reliable and stable power rates are a key ingredient to the economic and cultural vitality of our nation.  This article highlighting the inappropriate shielding of information from the public regarding the takeover of a natural monopoly like PGE is something one would expect to find in a communist state rather than a beacon of democracy rooted in a strong free market system like the U.S.  Perhaps there is an irony that TPG's CEO David Bonderman did indeed obtain an undergraduate degree in Russian studies at the University of Washington during the height of the cold war.

2005 January 11  Legal eagle eyes PGE deal, by Kristina Brenneman, Portland Tribune

After leaked confidential documents disclosed last week that the Texas Pacific Group plans massive cuts after its purchase of Portland General Electric, the investment firm apparently has singled out Ann Fisher as the person responsible for the leak. Texas Pacific attorney Lisa Rackner sent an e-mail to Fisher, the attorney for the Portland Building Owners and Managers Association, warning her that if the source of the disclosure is determined, Oregon Electric Co., the holding firm set up by Texas Pacific to attempt to buy PGE, “will pursue all available legal remedies, including requesting a formal investigation by the Oregon State Bar Association.”

As BOMA’s attorney, the 56-year-old Fisher has publicly taken the Oregon Public Utility Commission to task several times in the past month. First, for rushing ahead with its PGE review without waiting for results of a state investigation into Texas Pacific’s questionable investment in state pension funds. Then, during hearings on the PGE sale, she challenged Public Utility Commissioner Ray Baum — a former law school classmate — over whether Texas Pacific’s power trumped that of state regulators. And, notably, Fisher filed a legal motion with the PUC just a week ago demanding that the PUC release the confidential documents — outlining staff and capital spending cuts at PGE — that had been leaked to a Willamette Week reporter. The PUC will consider the motion today.

Cuts are made confidential:  Fisher believes the Texas Pacific papers, which detail proposed 50 percent cuts in power generation spending and a 26 percent reduction of PGE staff, should not have been secret in the first place. Nor was it a surprise to Fisher, who has a background in bankruptcy and finance law, that Texas Pacific would expect a 38.4 percent return on PGE. She calculated that the return broke down to 10 percent from the utility’s earnings, 10 percent from unpaid state and federal taxes, and the rest from tax write-offs. At Willamette, she found she “loved the law, much like I do electricity.” Fisher started at Lane Powell Spears Lubersky, before moving on to PGE in 1989 and Schwabe Williamson & Wyatt in 1994. She launched her own firm, AF Legal & Consulting Services, in 1996, and despite the workload has yet to hire an assistant.

Building owners make move: Because of her boldness, Assistant U.S. Attorney Allen Garten said Fisher has had a legal career “that doesn’t quite match her skill. I don’t think she’s achieved the success I think she’s earned.” Maybe now, said Garten, who has known Fisher since 1990, it’s her time to shine. Complete story available for viewing at

Analysis and Commentary:  Brenneman does a splendid job of profiling one of the most important figures in the debate surrounding the future of PGE.  This appears to be the Portland Tribune's core strength, that being excellent profiles of local people involved in major stories.  Fisher is clearly doing a splendid job representing the Portland Building Owners and Managers Association.

2005 January 11  Private email from Bill Parish to Lee Beyer, Chair of the Oregon Public Utility Commission.  Beyer is one of three commissioners whose vote will determine if TPG is allowed to acquire PGE.

Email Title:  Lee Beyer, Martha Stewart, Andy Weiderhorn and PGE: Some advice

To:  Lee Beyer at
cc:  John Savage, Ray Baum and Kathryn Logan
bcc: other interested parties, including local and national media

Dear Lee,

After reading your comments in the media I thought you might appreciate a brief story regarding my meeting with Andrew Weiderhorn in the Spring of 1998.  Andy is now residing in the Sheridan State Prison as a result of some "pension issues."  We were in a toastmasters group together for years and my sense was that he needed some specific financial modeling unique to banks called A&L managment in early 1998 to avoid a liquidity crisis. I have never had a personal or business relationship with him yet would see him regularly at the Mac Club and around town.

Andy was very interested but naively said, Bill, I spent $250,000 on accounting fees last year, don't you think it's covered?  He later had his CFO call me but that guy was just too plain arrogant for me to spend the time.  Of course this is why auditors and controllers need to be tough, that is their role.  Regardless of how people feel about Andy, his handlers betrayed him, and this percipitated a $200 million pension scandal along with his latest residence.

My point is this, the only way you will be able to avoid a dramatic legal debacle for a variety of parties involved with this PGE mess is to flatly and definitively reject the deal. Do you really think, as Martha Stewart did at the time, that the parties involved in this "arranged deal" will be able to simply say, I didn't understand the significance?  It must also now be obvious that Kevin Mannix will be raising a toast in grand fashion if you approve this deal for TPG as it will solidify his chances to be governor.  Nothing against Mannix yet if he's govenor he should earn that role rather than be given the role by your decision.

Clearly, your vote will immediately become a proxy on the upcoming Governor's race.  Vote for TPG and you condemm the person who appointed you Chair of the PUC Commission to the political dust bin and betray both industrial users, including intel, and consumer ratepayers alike.  Even more disturbing and sad of course will be the inevitable legal cases brought against various parties involved by increasingly agressive opponents to this deal, cases that become irrelevant if the deal is flatly rejected.  Thinking that these cases will not be advanced if you approve the deal is rather impractical.

Please don't waste your time criticizing my opinions as extreme, just read the papers, and look how mobilized these groups have become. You might instead consider me a brief visitor to your island with a thoughtful "heads up" and be thankful I am not the Governor because if I were I'd have you removed from your role as a PUC commissioner immediately, thereby gaining immense public trust.  Nothing against you personally Lee buy let's be realistic and get you out of that Trojan Horse that has a blanket titled Kevin Mannix for Governor on its back.

2005 January 11  Focus on public interest, not net benefit, by Steve Duin, Oregonian

On the one hand, you have the Texas Pacific finger puppets: Tom Walsh, Tom Imeson, Peter Kohler and, if only in our memories, Neil Goldschmidt. They are handsome men, handsomely paid, all lip-synching the lyrics. Don't sweat the details. Don't bother to read the legal briefs (they haven't). You can trust Texas Pacific, they insist, because you trust us to look out for you.  On the other hand, raised in thoughtful protest, you have Ann Fisher.

In the battle over the future of Portland General Electric, no one has brought a sharper mind -- or emerged as a sharper thorn in TPG's side -- than Fisher, a lawyer representing the Building Owners and Managers Association. She, too, is receiving a paycheck for her work, but the utility's long-suffering ratepayers are getting a free ride.

Texas Pacific is assuming little or no risk. There are few conditions to protect the public or to guarantee the real decision makers are subject to PUC jurisdiction. And that commission is asking the wrong questions in evaluating the merits of TPG's bid. "I argued public interest," Fisher says. "Everyone else argued 'net benefit' and 'do no harm.' What the commission wants to say is we don't have to consider public interest; we want to consider this formula we've devised for net benefit. I think they're wrong." "Net benefit" worked in the old world of utility mergers but is an outdated and almost irrelevant guideline when we're dealing with investors/speculators who have no sustained interest in running a utility that has a dramatic effect on the cost of doing business in Oregon.

Fisher is many things. She worked for PGE from 1988 to 1993 and still cares deeply about the company and the people employed there. She is skeptical that the PUC. "I expect the commission to approve" the deal, Fisher said. "I expect (Chairman) Lee Beyer to get his back up and say, 'We're not going to get pushed around by the press, and our conditions are good enough.' I just don't think they are. And I like to buy insurance." In two weeks, we'll know what the PUC is willing to buy . . . and whether it chooses to stand with Tom Walsh and Tom Imeson or with Ann Fisher and the rest of the ratepayers.

Analysis and Commentary:  Steve Duin once again carries the credibility flag for the Oregonian that on this very same day still printed an editorial in favor of the TPG purchase.

2005 January 11  No secret now ,  Lead editorial in the Oregonian

The Texas Pacific Group's disclosure of the "secret" documents it filed with Oregon regulators should help dispel the idea that the company is saying different things in public and private as it tries to buy Portland General Electric. The commission must decide the only proposition on its docket -- whether TPG's proposal to buy the Portland-based utility would result in a net public benefit. As we've said here before, we think the evidence shows that the deal would meet that test, especially if the commission attaches some conditions to its approval.

The TPG "secret" documents try to inform the commissioners on that point. They are the company's due diligence -- consultants' reports and financial modeling designed to show TPG's investors what they could expect if the transaction ever goes through. They are not "plans," as described in some reports last week after someone leaked the then-confidential documents to Willamette Week newspaper. In 2002, the venture-capital firm bet that PGE was undervalued because of liabilities stemming from its ownership by Enron.

But it's crucial to the integrity of the regulatory process that they decide based on the evidence before them, regardless of the political pressure -- whether it comes from the governor or a document-leaker with an ax to grind.

Analysis and Commentary:  As a loyal Oregonian reader I am continually amazed at how the editorial board is able to ignore everyone and everything in its position.  Even today the New York Times, that again is the New York Times, wrote a major story indicating the significance of the disclosure of these documents.  This Oregonian editorial also contains key factual errors, for example, noting that Texas Pacific is a venture capital firm.  They are not a venture capital firm, a firm that specializes in start-up companies, but rather a leveraged buyout firm, which is very different and rather a firm that guts companies, piles on debt and spins off the shell in a public offerring.  Another error is its explanation of the nature of due dilligence. The editorial concludes by criticizing a "document leaker with an ax to grind" when in reality many loyal Oregonian readers are concluding it is indeed the Oregonian editorial board that has an ax to grind. They see this "leaker" as having done a major public service.  Many still sincerely believe this board is controlled by Neil Goldschmidt and that is disappointing.

2005 January 9  PGE suitor's intentions: big profits by Jeff Manning and Gail Hill, Oregonian

Texas Pacific Group on Saturday released the material it had submitted in secret to Oregon regulators and it made explicit what has long been understood: The company expects to earn a handsome profit from its purchase of Portland General Electric.

Those early consultants' reports said the best, most profitable way to dispose of PGE would be a sale to another energy company. The consultants listed Scottish Power, owner of PacifiCorp; Northwest Natural; Avista of Spokane; and Puget Energy in Bellevue, Wash., as possible PGE buyers.  Complete story available for purchase at

Analysis and Commentary: Manning does a fine job of bringing out important details although it is not clear if TPG scrubbed its documents before providing them to Manning or whether they are indeed complete.  Manning notes that the first firm listed as a potential buyer when TPG spins off PGE is Scottish Power, which if done would give the firm a complete monopoly in Oregon.  This is interesting since the law firm representing Enron's unsecured creditors who will have a major voice in whether to accept a city proposal if TPG's proposal is rejected, is Milbank, the same Milbank that represented Scottish Power in its $7.3 billion acquisition of Pacific Power in 1999.  The Oregon Investment Council Chair Gerard Drummond is also a former top executive at Pacific Power and it was this council's providing $300 million to TPG just before the deal was announced that has created a major controversy.

2005 January 7  Suitor's Files Cause Stir on Oregon Utility, by David Cay Johnston, NY Times

As regulated monopolies, electric utilities are generally allowed to earn about a 10 percent rate of return on their investment in the business. But the Texas Pacific Group, David Bonderman's $13 billion investment fund, expected to make a profit of as much as 38.4 percent a year by acquiring Portland General Electric from the Enron Corporation, documents disclosed by a newspaper in Oregon show.

The documents obtained by the newspaper, Willamette Week, showed that Texas Pacific had developed a plan to increase profits through a 50 percent reduction in spending on the utility's biggest power plant, a 26 percent reduction in customer service ranks and an 8.3 percent cut in annual capital spending to maintain the grid.

Evaluating the validity of their concerns has been impossible, however, because the Oregon Public Utility Commission has sealed most of the records related to the deal at the behest of Texas Pacific. The commission also excised all testimony on the major issues, except for a few lines approved for public release by Texas Pacific.

The contrast between Texas Pacific's public statements and the documents it kept secret drew a rebuke from Oregon's governor, Theodore R. Kulongoski. "Oregonians are entitled to candor and truthfulness about the proposed acquisition," the governor said in a statement. In its testimony and documents given to the commission, Texas Pacific is "saying one thing, and outside of the regulatory process, it appears they are giving another message" to Portland G. E. customers, he added.

The documents were obtained by Nigel Jaquiss, who was a Wall Street oil trader before joining Willamette Week as a reporter. His articles on the deal have prompted at least three official investigations. Erik Sten, a city commissioner who wants the city to acquire the utility's assets, said the utility commission should release the documents. He said if the documents were not important, as Texas Pacific said in its statement, there was no reason to keep them confidential. And if they are significant, the public should see them to get an idea of how Texas Pacific would run the utility. Texas Pacific, in a statement, said that it had "no specific plans regarding the operation" of Portland G. E., and that there were "no plans for cost-cutting or staffing reductions." Mr. Sten, the city commissioner, said that statement raised a new question: "Just what is Texas Pacific's plan?"

Analysis and Commentary:  Johnston wrote an excellent story and rightfully attributed the fine work of Willamette Week's Nigel Jaquiss.  It is encouraging to see reporters like Johnstone analyze the news rather than spoon feed press releases, as has unfortunately become the practice of some local publications.  Case in point is the Oregonian on Saturday indicating that Texas Pacific was planning on earning 20 percent while Johnston rightfully indicated returns indeed could be as high as 38 percent.

2005 January 6  Political fallout batters PGE plan, by Jeff Manning and Gail Hill, Oregonian

Oregon political leaders expressed growing unease Wednesday with Texas Pacific Group after the disclosure of documents detailing the buyout firm's plans for Portland General Electric appeared to contradict public statements of the deal's proponents. "I am concerned by media accounts alleging that Texas Pacific Group is delivering two different messages about its proposal to acquire PGE," Gov. Ted Kulongoski said. "In testimony and written documents before the Public Utility Commission they are saying one thing, and outside of the regulatory process, it appears they are giving another message to PGE customers," he said.

"If true, it's pretty disgusting," Portland Mayor Tom Potter said. "I intend to protect the ratepayers of Portland, and it sounds like they need protecting." Potter, who entered office Saturday, said he intends to meet with a variety of other city officials who have led the city's effort to buy PGE, a move long advocated by City Commissioner Erik Sten. "This definitely moves me closer to Erik's camp," Potter said.

Texas Pacific has been the subject of increasing suspicion since its ill-fated decision to hire Neil Goldschmidt, a former governor, as its initial local frontman. Now Kulongoski, who appointed two of the three PUC commissioners, has expressed reservations about Texas Pacific's credibility, which could give commissioners political cover to reject the acquisition.

The political fallout extended to the Oregon Investment Council, a crucial customer for Texas Pacific. Richard Solomon, a Portland CPA and a newly installed member of the council, said if the Willamette Week article is accurate, then Texas Pacific's marketing campaign championing the deal is misleading. "If that proves to be the case, I think the Oregon Investment Council should re-evaluate continuing to do business with TPG," Solomon said.

The investment council members' concerns are no small matter for Texas Pacific. Oregon has provided nearly $1 billion to various Texas Pacific funds over the years, making it Texas Pacific's largest single investor. Solomon said the long relationship between the investment council and Texas Pacific has been frayed by controversy surrounding Diana Goldschmidt, a former council member and Neil Goldschmidt's wife. Kulongoski ousted Diana Goldschmidt from the investment council Sept. 29, citing lingering suspicion over the relationship between Texas Pacific and Neil Goldschmidt.

The council voted to allow a $300 million investment in a private equity fund managed by Texas Pacific shortly before the Fort Worth-based buyout firm contacted Neil Goldschmidt about participating in the effort to acquire PGE, a position that could have brought him significant financial gains if the deal succeeded. Neil Goldschmidt resigned from the position in May after admitting he sexually abused a 14-year-old girl while serving as Portland's mayor in the 1970s.

Texas Pacific's Davis declined to discuss details quoted in news reports, maintaining that the documents remained confidential. He emphasized, however, that there were no discrepancies between the contents of the documents and Texas Pacific's public statements. "Our information is completely truthful," he said. "In no way have we misled anyone."

Oregon Health & Science University President Peter Kohler, who stepped forward to replace Goldschmidt as PGE's board chairman, said any change in operations would be reviewed by directors. "People don't give the board enough credit," he said. "We're a strong group and we serve an important function."

PUC Chairman Lee Beyer said he did not see discrepancies between the contents of the confidential documents and the public testimony of PGE. The commission is expected to issue a decision within the next couple of months.

Analysis and Commentary:  With even the Governor expressing concern over TPG's truthfulness, it appears that PUC Chair Beyer still doesn't get it.

2005 January 6  Opponents say leaked documents confirm Enron deal flaws, by William McCall, Associated Press

The leak of documents suggesting that Texas Pacific Group simply wants to make a quick profit on the purchase of Enron ubsidiary Portland General Electric will not have any effect on the sale decision for the last remaining Enron asset, the state's chief utility regulator says.

Lee Beyer, chairman of the Oregon Public Utility Commission, said Wednesday the regulatory agency asked for the analysis and it will be part of the final decision on the sale. He dismissed criticism that the commission should have made the confidential
documents public.  "We went into this with eyes wide open," Beyer said. "It's not like there hasn't been a pretty full and open discussion about this issue. If anybody thinks we're being fooled, you'd have to be sort of like the three blind mice."

Beyer told The Associated Press the documents amount to "mere speculation" about possible outcomes of the sale, and he emphasized the commission has not made a decision -- despite a recommendation from its own staff to reject the deal. "It's a lot of financial modeling," he said.

"Virtually our entire case is arguing this form of ownership, which lasts for a very short period of time, which creates incentives to cut costs and not to make investments, and to get out with a bunch of money, is detrimental to the ratepayer," Eisdorfer said.

Erik Sten, the Portland city commissioner who has led a city effort to buy PGE and turn it into a municipal utility, said he had not seen the "Project Tahoe" documents but that city staff had read them. "It's been clear all along that the Texas Pacific is in it for the short term," Sten told AP. "This whole proposal is based on false promises and scare tactics," Sten said. "It's been an insult to the intelligence of Oregonians from day one and it shows how deep their lack of regard for Oregon's interests and common sense is."

Analysis and Commentary: Given Mr. Beyer's comments and the fact that he serves at the pleasure of the Governor, he should clearly be removed.  Although already a commission member when elected, Governor Kulongoski did make Beyer Chair of the commission, a powerful position, in a decision that was screened by Neil Goldschmidt's partner Tom Imeson. Imeson was of course representing TPG at the time.

2005 January 5  The PGE Papers, The Secret Documents Texas Pacific Doesn't Want Oregonians To See, by Nigel Jaquiss, Willamette Week

For more than a year, the Texans who want to buy Portland General Electric have said, "Trust us." This is no slash-and-burn corporate takeover, they've insisted. Sure, they plan to profit, but not at the expense of customers. Yes, there could be some belt-tightening, they've admitted, but no specific jobs have been targeted. And, of course, they'll sell the utility at some point, but that's a long way off, and when they do, they support the idea of keeping local control. Rather than provide details of how they'll do all this, however, Texas Pacific Group and its Oregon representatives have insisted that their specific plans be kept secret.

After protracted legal wrangling, Texas Pacific agreed to hand over the documents--which describe what it has called "Project Tahoe"--only if state regulators agreed to keep the documents out of the public eye. The PUC promised it would give copies of the Tahoe documents only to "intervenors," parties who have standing in the approval process.

To get their hands on the documents, the intervenors had to pledge not to share them with anyone. Their copies of the Tahoe report were printed on watermarked paper to discourage reproduction and placed in envelopes sealed with the warning that sharing the contents with people other than "qualified persons" is prohibited. Last month, WW obtained a copy of those documents.

It's clear why Texas Pacific wanted to keep them under wraps. Crucial elements in the nearly 400 pages of the Project Tahoe papers directly contradict statements that the firm and its representatives have made before the PUC, which will decide later this month whether to approve Texas Pacific's bid.

For example, the Tahoe documents show that Texas Pacific plans wholesale layoffs and dramatic cuts in maintenance. The firm plans to sell the utility in five years for a huge profit. The records also show that Texas Pacific's exit strategy makes it highly unlikely PGE will continue as a locally headquartered, stand-alone utility.

Fisher argued that because of those contradictions, the documents should be made public. "The truthfulness, the hidden or undisclosed intentions, and future plans for the utility are all part of the public interest," she wrote. "The public has a right to know."

Here's what Texas Pacific does not want PGE customers to find out:

PGE IS POORLY MANAGED. Three months ago, Tom Walsh sat in a Public Utility Commission hearing room in Salem answering questions about the proposed sale of PGE. In his testimony Walsh described PGE as "extraordinarily well-run." That assessment contradicts the findings in the Project Tahoe documents. Was Walsh intentionally misleading the public? He says he believes he and Texas Pacific share the same view of the "heroic" job PGE management has done. "Texas Pacific does not have a different view from mine," Walsh told WW earlier this week--though he admits he has not read the Tahoe documents.

TEXAS PACIFIC PLANS BIG CUTS. In a deposition taken last July, Texas Pacific's Davis said this about his firm's plans for the utility: "We do not have, nor have we represented that we have, specific plans to improve the financial performance of PGE." Ten months prior to making that statement however, Davis had helped complete the final draft of the Project Tahoe reports, which include remarkably detailed plans for cost savings. The report shows that Texas Pacific expects to slash PGE's operations and maintenance budget (see chart, page 22), which will pump up the utility's earnings. The documents also suggest that more efficient operations could result in "a reduction of officers and high-level managers" (which may not bode well for PGE chief executive Peggy Fowler and her team) and that PGE could save money by slashing information-technology and human-resources spending by as much as $10 million annually. Of perhaps greater interest to people who receive a PGE bill each month, Texas Pacific believes that its largest savings would come where ratepayers will feel it most--in customer service.
Charts and figures in the Tahoe documents show that Texas Pacific has targeted as many as 120 of the company's 467 customer-service staff for layoff. "Greatest potential for cost reduction appears to be in customer service," states the caption for one chart. In addition, Texas Pacific anticipates cutting overhead--mostly in the form of employees--at the company's largest power plant, a gas-fired facility in Columbia County, by 50 percent. It also plans to shave $15 million off PGE's $180 million annual budget for routine capital expenditures on plants and equipment.

TEXAS PACIFIC WILL SCORE BIG. In November 2003, when Texas Pacific announced its intention to purchase PGE, Texas Pacific founder David Bonderman acknowledged that a utility might seem an unusual investment for his firm.  A far more likely outcome, according to four dozen scenarios assembled by Texas Pacific's number-crunchers, is that the firm will make somewhere between $800 million and $1.2 billion profit in just five years. If things go according to plan, the projections show, Texas Pacific will generate annual returns of between 20 and 30 percent. Part of that return will come from cost-cutting and other efficiencies; the rest of it will come from the profit generated by buying PGE cheap and selling it at a price more in line with other recent utility takeovers. "Returns of 30 percent for a regulated monopoly that supplies electricity to schools, churches, governments and other nonprofits is unconscionable," says Portland financial advisor Bill Parish, who has tracked Texas Pacific's activities in Oregon closely.

PGE WILL BE SOLD AGAIN SOON. In pitching the virtues of their ownership of PGE to Oregonians, Texas Pacific and its representatives have focused on what they claim will be a return to local control and stability for the 115-year-old utility. Yet all of the four dozen exit scenarios presented in the Tahoe reports assume Texas Pacific will sell the utility in five years. "That's a very short holding period," says Parish. "Texas Pacific will focus on short-term cost-cutting and budget moves which will have negative long-term consequences for ratepayers." "I think it's the best long-term both option and assurance that would bring PGE back to what it historically was, which is a locally controlled, investor-owned utility," Walsh told the PUC in October. The scenario Walsh describes is completely different, however, from the information in the Tahoe papers--which Walsh had access to for more than six months prior to his testimony. Those documents explicitly state that selling PGE to another utility is far and away the most likely and preferable outcome. "Intuitively, we strongly believe...we will sell the company to a strategic buyer," stated an Aug. 31, 2003, Project Tahoe memo. The Tahoe documents even list 13 "potential strategic acquirors" that might buy PGE. All are large utilities.

Brian Conway, the PUC staffer overseeing the regulatory decision, says the differences critics cite between Texas Pacific's private plans and its public statements are "a matter of interpretation." "It may be no coincidence that all of the intervenors who represent customers strongly oppose Texas Pacific's deal--although they are prohibited by the confidentiality agreements from citing the Project Tahoe reports in their arguments.  Complete story available for viewing at

Analysis and Commentary: A superb article by Nigel Jaquiss. Jaquiss not only provided significant new information yet he also credited the fine work of the Statesman Journal reporter Steve Law. Other potential sources of valuable information should take note that Jaquiss can clearly be trusted to do the important stories with respect to the future of PGE.  In the area of investigative reporting, the Oregonian continues to be scooped by the Willamette Week, Portland's free alternative weekly newspaper.

Perhaps most interesting to me is that Neil Goldschmidt's partner Tom Imeson was a public official well into 2004 as a board member of OHSU and therefore should be subject to the state ethical guidelines. According to a recent Salem Statesman Journal article quoted in the Willamette Week, "Imeson also advised Gov. Ted Kulongowki on the selection of Public Utility Commissioners in 2003."  These are the very same commissioners he now arguing TPG's case before.  This whole situation is becoming so ridiculous that an outsider might agree you "simply could not make this stuff up."  For Imeson and everyone else involved with TPG, any decision short of an outright rejection of TPG's proposal by the PUC could lead to numerous additional problems.

2004 January 5  Documents hint at plans for PGE, by Jeff Manning, Oregonian

In preparing to buy Portland General Electric, Texas Pacific Group reportedly has outlined scenarios under which it would flip the investment in five years, dramatically reduce the utility's work force and produce a hefty profit for investors. The Texas-based investment group's projections are included in confidential documents filed with the Oregon Public Utility Commission and obtained by Willamette Week, according to a joint report from the weekly newspaper and KGW-TV, which aired Tuesday night. According to the report aired on KGW, the secret documents show that Texas Pacific would resell PGE in five years and realize as much as a $1 billion profit.

Just last month, the Business Owners and Managers Association, an intervenor in the proceedings, asked the PUC to release some of the confidential, or protected, material. "Applicants themselves have put at issue the need for the removal of the protective order," attorney Ann Fisher wrote in the BOMA motion. "They have placed advertisements and made public statements, including statements made during oral arguments that are inconsistent with material contained in the protected material."

Lee Beyer, chairman of the three-member PUC said Tuesday that he had not seen the Willamette Week story, but that all documents in the case, confidential and public, are available to commissioners and other parties to the review.  "The important thing is that this is not new information," Beyer said. "It's part of the public record, even though it's shielded. "Their release or the nonrelease doesn't impact our decision or impact our timeline."

Analysis and Commentary:  Manning does a good job of summarizing the Willamette Week story, in particular the motion made by Ann Fisher to have the protective order lifted on TPG's documents provided to the PUC.  It continues to amaze me how openly TPG can lie to the Portland City Council and public, as if the truth were irrelevant.

2005 January 3, Email from Bill Parish to Attorney General Hardy Myers and Assistant Attorney General Kevin Neely Regarding TPG's Proposed Purchase of PGE

To:  Attorney General Hardy Myers and staff
Cc:  PUC Commissioners and legal counsel
Cc:  Governor's chief of staff and legal counsel
Bcc: City officials, media, cub, intel and other interested parties

Dear Hardy,

The Salem Statesman Journal recently published a series of articles that clearly indicate Tom Imeson participated in the selection of two public utility commissioners in August 2003 and the decision to make Lee Beyer Chair of the Commission in September of the same year.  Given that Mr. Imeson is representing TPG in its efforts to have this very same commission approve TPG's proposal to acquire PGE, coupled with the fact that his partner's wife and his partner's best friend, Diana Goldschmidt and Gerry Bidwell respectively, voted to provide $300 million in public pension funds to TPG just prior to announcing that Mr. Imeson's partner Neil Goldschmidt would be chair of the new PGE, it is now the public's general expectation that your investigation will be expanded to the PUC commission itself to determine if these appointments were not "conflicted" when made.  Since these commissioners serve at the governor's pleasure they can be removed "at will" with no required justification.

As you also know, our State Treasurer Randall Edwards is also conducting an investigation of himself and other OIC council members and has agreed to pay a practicing mergers and acquisitions attorney, Texas Pacific's ballgame, and part-time law professor, Ted McAniff,  $1 plus expenses to conduct an investigation of the OIC.  For a $50 billion pension fund vitally important to 300,000 participants this is well, could we say, a dangerously "low bar" Mr. Edwards is setting.  Frankly, the public is now looking for your leadership.

The PUC staff has outlined 37 conditions, that agreed to by TPG, would cause the staff to support this plan.  Please note that since TPG is clearly planning to pilfer somewhere between $1-$1.5 billion from PGE, these conditions are a political ruse.  This effort to steal our local utility, which is vital to the region's economic future, should be flatly rejected by the PUC Commissioners, regardless of the staff conditions. Please visit the following link and read the summary of key news stories, recently updated for the period 11/1/04-12/31/04.  This includes a simple detailed description, from an accounting standpoint, how TPG will most likely pocket this amount.  It also indicates why the PUC imposed maximum return and staff recommended conditions are irrelevant. Here is a link:

Please do also feel free to contact me if you need any additional information.  It's about time to end this charade so that Texas Pacific can move on to more appropriate investments and the region can also craft a better solution for PGE. Of course Peter Kohler will also benefit from an increasing focus on the many issues confronting OHSU, including a severe funding shortage. Many would consider this most reasonable for a public official and PERS participant receiving a salary of $600K per year along with a home and other lavish perks.

David Bonderman, Kelvin Davis, Tom Walsh and Peter Kohler, along with their legal advisors, are all copied on this note, as is Catherine Fisher from the SEC.  This note will be posted to my website tomorrow and therefore do let me know if anything said seems inappropriate or unreasonable. For that matter, other readers are also encouraged to let me know if anything said seems inappropriate. Thanks so much. Best regards.

Bill Parish

Analysis and Commentary:  Various comments have been received regarding this email, including the following requested correction from State Treasurer Randall Edwards Chief of Staff.

"The Attorney General is conducting an investigation of the circumstances surrounding a specific OIC vote, at the Treasurer's request. The arrangement with Prof. McAniff is entirely separate and is not, in fact, an investigation at all. Prof. McAniff is conducting a general "best practices review." As outlined in the statement of work, he shall review the laws, administrative rules, policies, guidelines and practices under which public investment boards such as the Oregon Investment Council should operate with respect to possible conflicts of interest involving board members and staff of such boards in order to determine those policies that are considered to be best practices.  Best practice policies are those that comport with the general view of the standard to which such public investment boards might reasonably aspire. In the course of his review, he will compare the OIC's current conflict of interest and other relevant policies with best practice policies and, if differences exist, may suggest changes. As you can see, Prof. McAniff's work is not an investigation nor directly related to any specific actions of the OIC. I expect that you will amend your statements accordingly. Thank you for your courtesies. Kate Richardson."

Anyone following the Oregon Investment Council would be genuinely surprised by this perspective. In terms of best practices, Mr. Edwards might begin by suggesting that the monthly minutes note that former council member Gerry Bidwell resigned in July with no explanation and Diana Goldschmit was later removed by the Governor.  Remarkably, months later, there is no mention in the minutes of either event.  In addition, one of the 5 council seats is indeed still vacant after one vacancy was filled by Dick Solomon who has been doing Chair Gerard Drummond's tax returns for 20 years and is a close personal friend.

Edwards might also add basic biographical information on the council members beyond their names and the term they serve, perhaps looking to his very own college savings board for an example.  He might also respect public meeting laws and not publicly state meetings are cancelled and then have clandestine private phone conference meetings instead.  Adequately summarizing public comments would also seem to be a reasonable best practice.

In any event, it does seem clear that immediate aggressive action by Attorney General Hardy Myers is necessary to determine if any PUC commissioners should be removed prior to the key vote on whether or not to approve Texas Pacific's proposed purchase of PGE.  Of course the Governor could still remove chair Beyer for incompetence yet he remains silent, even as Beyer makes such statements as the following in a January 5, 2005 Oregonian story by Jeff Manning (summary in this archive) in response to the Willamete Week story Titled PGE's Secret Papers.  Beyer noted, "It's part of the public record, even though it's shielded. Their release or the nonrelease doesn't impact our decision or impact our timeline."

2004 December 29  Is Bigger Better for Buyout Funds?  by Henny Sender, Wall Street Jounral

In 2004, Carlyle Group returned about $5 billion to those who put money in its funds, while Kohlberg Kravis Roberts & Co. returned about $6 billion to its investors. These funds have been able to reclaim much of their equity in recent months by putting more debt on the companies they control and then giving themselves and their investors big dividends.

Consider PanAmSat. In the spring, KKR announced it was buying the satellite company and sold stakes of 27% each to Carlyle and Providence Equity Partners in a $4.4 billion deal that closed in August. The acquisition was funded in part with the proceeds of a $1 billion note offering and a $2.9 billion loan package, according to data from Standard & Poor's. In September, the three took 45% of their equity investment off the table by paying themselves -- and their investors -- a $250 million dividend after the PanAmSat holding company issued more notes. Three months later, on Dec. 20, PanAmSat filed to raise as much as $1.12 billion in an initial public offering of stock. A quarter of the proceeds of the planned offer will go to pay out more dividends.  Complete story available for purchase at

Analysis and Commentary:  Even today, one year after TPG announced its intention to purchase PGE, although there has been extensive "financial analysis" of the transaction, there has been no genuine analysis from a pure accounting standpoint, the perspective from which TPG operates.  While the PUC ponders whether or not TPG should be able to earn 10.5 percent on its investment, the partners of TPG laugh at the unthinkable incompetence of the commission.

They laugh because returns to TPG are about cash flow, that's it, not some commission limited return based upon convoluted economic assumptions.  Let's also not forget that Enron's CEO Ken Lay was a PHD economist and it was an accountant, Sharon Watkins, who blew the whistle. For every dollar of additional debt TPG can pile on PGE, as summarized in this WSJ article, TPG can pocket pure net profit of the same amount.  For example, if they add $500 million in debt, that $500 million goes right to its investors as pure profit.  That's the game, you get public pension money to finance buyouts and then fleece the firms in terms of expense reductions that will "juice up" profits on a short-term basis but compromise the organizations long term outlook.  You then pile on debt to furthur expand your returns.  Clearly, the Oregon Public Utility Commissioners should each enroll in an accounting 101 class at their local community college so that this sherade can be addressed.

This strategy by TPG may be perfectly acceptable from a market standpoint for an organization like Burger King that produces a discretionary food item, yet applying it to a natural monopoly like PGE that serves businesses, schools, churches and government offices alike  is foolish and runs directly counter to our free market system predicated upon fundamental infrastructure being available to allow competition to flourish.  Having received his undergraduate degree in Russian studies, no one knows that better than TPG's own chairman David Bonderman.

2004 December 28  Goldschmidt, Kulongoski met often about clients, by Jim Redden, Portland Tribune.

Salem newspaper reports 24 meetings in a 16-month period. Former Oregon Gov. Neil Goldschmidt and members of his former consulting firm repeatedly lobbied current Gov. Ted Kulongoski on behalf of its private clients — including the Texas Pacific Group, the venture capital firm trying to acquire PGE — according to a recent series of stories in the Salem Statesman Journal newspaper.
   The six part series is based on a review of Kulongoski’s appointment calendar and an examination of 1,500 pages of communications between the governor’s office and Goldschmidt Imeson Carter dating from Kulongoski’s January 2003 inauguration to May 2004, when Goldschmidt left the firm and withdrew from public life after admitting he had sex with a 14-year-old girl when he was mayor of Portland in the 1970s.
   The series was written by reporters Steve Law and Tracy Loew. In the series, the reporters reveal:
   • Kulongoski met with Goldschmidt and/or firm partner Tom Imeson two dozen times during the 16-month period. That’s more than the governor met with anyone else except top legislative leaders and his staff, including Attorney General Hardy Myers, state Treasurer Randall Edwards and Secretary of State Bill Bradbury.
   • After Imeson coordinated Kulongoski’s transition team in 2002, he and Goldschmidt continued submitting names and feedback about potential executive appointments, including candidates for the Public Employees Retirement Board, the state Board of Higher Education, the Oregon Health & Science University board, the Oregon Board of Forestry, the Port of Portland Commission, the Northwest Power and Conservation Council and the state Public Utility Commission.
   • After Texas Pacific recruited Goldschmidt to head up its effort to buy PGE, he arranged a dinner between Kulongoski and the firm’s partners the night the deal was publicly announced.
   In an interview with the Statesman Journal, Kulongoski denied doing anything wrong. He said that he initiated most of the contacts with the firm because he valued Goldschmidt’s advice, and that he always knew when they were lobbying on behalf of a client.
   In an editorial Sunday, the Statesman Journal called on state legislators, regulators and managers to re-examine any transaction or decision that involved Goldschmidt or his firm. “These latest revelations about influence peddling should have taxpayers banging down the governor’s door — demanding to know what’s really going on in state government and insisting that the 2005 Legislature add teeth to the state’s ethics law,” the paper wrote.  Complete story available on-line at

Analysis and Commentary:  The Portland Tribune is the first local paper to fully recognize the significance of Steve Law's article in the Statesman Journal.  It is these types of contacts outlined by Law that reveal the depth and breathe of Goldschmidt and Imeson's influence on Governor Kulongoski.

Given the ongoing controversy over Goldschmidt and Imeson's influence, perhaps now is a good time for the Oregonian, Willamette Week and Portland Tribune , our three major papers, to also publicly reveal how many meetings their editorial boards, in particular the Oregonian, have granted TPG and all the various entities supporting its proposal.  To my knowledge, very little access has been provided to those opposing the deal.  At one point, based upon there access to the Oregonian's editorial board,  it almost seemed as if the PUC Commissioners and everyone else involved with TPG were part of a coordinated strategy to push the deal through.

2004 December 21 Public Utility Commission (PUC) and PGE Deal, by Gail Kinsey Hill, Oregonian

The commission, which is appointed by the governor and oversees the state's investor-owned utilities, must decide whether to approve Texas Pacific Group's proposed $2.35 billion purchase of Portland General Electric.

Beyer, 56, a compact, affable man who loses himself in spy novels when he finds a quiet moment at home, is the veteran of the commission, with a little more than three years of service. He says his time in the Legislature prepared him for this type of decision.

Baum is a seventh-generation Eastern Oregonian, born and raised in La Grande. His dad was a lawyer, and he's a trial lawyer who has tried in excess of 100 cases. "I bring two decades of real-life experience, from the courtroom to politics," he said. "That allows me the ability to cut through the chaff and see the real issues of the case."

The Texas Pacific proposal has taken up most of Baum's time, but when he has a free weekend, he heads for the hills near La Grande to hunt chukar with his brother and his hunting dog, a sleek red vizsla named Donovan (after U.S. Olympic soccer star Landon Donovan).

AOI, the state's largest business lobby, generally has stayed away from utility issues. But because energy costs have become such a critical component of business expenses, it has made PGE a priority. "Electricity is a critical and key driver of the economy," Brandis said.

Commissioners wouldn't discuss the extraordinary nature of the case or the controversies involved. They will say only that they are continuing to weigh the evidence and sort through the issues. They have begun meeting among themselves to craft an order, with the legal aid of an administrative law judge.  Complete story available for purchase at

Analysis and Commentary: Kinsey wrote a good general profile of the commisisoners yet did not inquire if they knew about the TPG deal before being appointed to the commission in late 2003, or in Beyer's case being made Chair of the commission.  The December 19 article in this archive by Steve Law of the Statesman Journal clearly indicates that Texas Pacific's consultant Tom Imeson, Neil Goldschmidt's partner,  played a key role in selecting the commissioners.  Also not highlighted was the fact that John Savage was a top administrator for Neil Goldschmidt when he was Governor, clearly a relevant fact due to the Attorney General's ongoing investigation of the Goldschmidt's role surrounding TPG and the Oregon Investment Council.

Chair Lee Beyer spent years in the legislature and has since received a million dollar PERS check by stepping up his salary from $15K as a legislator to $100K as a commissioner.  Three years in his new role will allow him to retire based upon a salary of $100K or an annual pension of $60K more than he would otherwise.  It would indeed take a million dollar portfolio earning 6 percent to fund his pension.

Ray Baum seems to take pride in his experience being a trial attorney, claiming he brings experience from the courtroom to politics.  An onlooker might also note a considerable increase in the amount of acrimony in the legislature at the same time and question whether those trial attorney skills are really the right mix for the legislature.  Regardless, Baum clearly doesn't have the skills to sit on the PUC board. Overall the board, to many observers, seems to have been stacked by Imeson/Goldschmidt prior to the announcement of the TPG deal.

Attorney General Hardy Myers has yet to address this possibility regarding his separate review of TPG, PGE and the Oregon Investment Council.  Meanwhile, State Treasurer Randall Edwards has launched his own investigation, hand picking a Eugene Law professor and lawyer, see November 22, 2004 reference in this archive, who specializes in Texas Pacific's arena, mergers and acquisitions.  Edwards furthur notes that this practicing lawyer Ted McAniff will be paid only $1 plus expenses.

Attorney General Hardy Myers might note that this is hardly an arms length review by Mr. Edwards of the very same council Edwards sits on. Clearly, if the commissioners approve the TPG deal, the risk of significant legal actions against all parties involved is great and the only way to prevent such legal actions is to reject the proposed TPG acquisition.

2004 December 19 Power Circle by Steve Law, Salem Statesman Journal

Correspondence reveals how influence-brokering in Oregon government benefits clients. Former Gov. Neil Goldschmidt's consulting firm enjoyed unrivaled access to Gov. Ted Kulongoski's administration, using it to get favors and influence appointments to state posts, until a sex scandal halted Goldschmidt's career.

Goldschmidt and business partner Tom Imeson had more private meetings with the governor than anyone besides Kulongoski's staff and top legislative leaders, according to the governor's appointments calendar. That's more than he met with the secretary of state, the attorney general, the state school superintendent or any business or labor lobbyist.

The Goldschmidt-Imeson-Carter consulting firm and the governor's staff also exchanged an average of 100 pages of e-mails and other written communications monthly.  The e-mails show that Goldschmidt and Imeson often blurred the line between public servant and private lobbyist, mixing political advice to Kulongoski's staff with requests for private meetings and other favors for more than a dozen clients.

This special relationship is revealed in a Statesman Journal examination of the governor's appointments calendar and 1,500 pages of communications to and from Goldschmidt's firm, in a period from Kulongoski's January 2003 inauguration until May 2004. That's when revelations of Goldschmidt's sexual relations with a 14-year-old girl three decades ago forced his withdrawal from public life.

Pacific University political scientist James Moore, who read a summary of the key e-mails, said they illustrate how Goldschmidt's firm helped set direction for the Kulongoski administration. "While that is legal, it is certainly ethically troubling," Moore said.

Documents revealing:  After Imeson directed Kulongoski's transition team -- a volunteer group that helped choose personnel and frame policies for the new governor -- he continued submitting names and feedback about potential Kulongoski staff members and executive appointments. With input from Goldschmidt, Imeson recruited or gave feedback about candidates for the Public Employees Retirement Board, State Board of Higher Education, Oregon Health and Science University Board, Board of Forestry, Port of Portland Commission, Northwest Power and Conservation Council and Public Utility Commission.

Goldschmidt long has been one of Oregon's top power brokers. After stints as Portland mayor, Oregon governor and President Carter's transportation secretary, he became a go-to lobbyist for corporations seeking influence with government policy-makers, particularly fellow Democrats. Kulongoski has called Goldschmidt a political mentor. That stems from 1987, when then-Gov. Goldschmidt rejuvenated Kulongoski's sagging political career -- after two statewide election defeats -- by naming him state insurance commissioner. Goldschmidt declined an interview for this story.

Shadow appointments:  Aside from screening personnel for Kulongoski's administration, the transition team forged the governor's early pro-business initiatives and charted the direction of state pension reforms, Imeson said.

Imeson is well-suited to the task, said Patricia McCaig, chief of staff to former Gov. Barbara Roberts.  "He really does have, because he's been in both worlds, an extraordinary ability to tap and understand what it takes to be an appointee," she said. Imeson has served on the Land Conservation and Development Commission, Oregon Health & Science University Board, State Board of Higher Education and Port of Portland Commission.

After Goldschmidt was recruited to be the front man for Texas Pacific Group's buyout of Portland General Electric in fall 2003, he secured a dinner meeting between Kulongoski and Texas Pacific partners the night the deal was publicly announced. Goldschmidt's firm arranged high-level meetings with executives from Bechtel and ScottishPower, owner of Portland-based utility PacifiCorp, during the governor's second month on the job.

Seeking favors: Imeson's role extended to prepping Kulongoski for a meeting with ScottishPower. He prepared talking points for the governor, noting that the company was concerned about a proposed public takeover of PGE via a Peoples Utility District. Imeson, a former PacifiCorp executive, suggested that Kulongoski comment on the need to "balance consumer interests with the need for an environment where utilities will make needed infrastructure investments." If the PUD proposal got passed by voters, Imeson noted, PacifiCorp "would have to question why they're headquartered in Portland under such circumstances."

State Sen. Vicki Walker, D-Eugene, who read a summary of key e-mails, said they showed many conflicts of interest. "I understand that Imeson was on the transition team," Walker said, "but it appears that the advice turned into influence-peddling to a significant degree. "You're getting closer to what I've suspected for some time, that Neil Goldschmidt and Goldschmidt-Imeson-Carter profited from state government, Walker said.

Sex scandal breaks: Goldschmidt's involvement in the Kulongoski administration abruptly ended after the sex scandal broke May 6. He initially blamed a heart ailment for his unexpected resignations from the state higher education board and the PGE buyout deal. He then admitted to having an "affair" with a teenager, just as the Willamette Week newspaper prepared to publish a thorough investigation of his sexual relationship.

Goldschmidt's long sexual connection with a 14-year-old amounted to statutory rape, but he could not be criminally charged because the statute of limitations had run out. The young woman led a troubled life after the relationship ended and has blamed her emotional trauma on Goldschmidt.

Analysis and Commentary: Steve Law has written an extraordinary story, a beacon of quality journalism, especially given the Statesman Journal's limited reporting resources compared to the Oregonian.  Neil Goldschmidt's partner Tom Imeson was advising the Governor on the selection of the Public Utility commissioners while going on to represent TPG in the most important decision the commission will consider, whether or not to approve TPG's effort to buy PGE.

Clearly both State Treasurer Randall Edwards and Attorney General Hardy Myers investigations should focus on this correspondence.  One small criticism of Law's article is that he did not clarify that TPG is still one of Tom Imeson's clients as of December 29, 2004.

2004 December 19   Oregonian Editorial says "Approve the sale of PGE to TPG."

Texas Pacific has made an offer for PGE that, with significant conditions, clearly provides a net public benefit. It should be approved by the Public Utility Commission next month.

Texas Pacific will take PGE out of the Enron bankruptcy and provide nearly $100 million in new legal protections from Enron-related liabilities. The company has formed a local board of directors led by Dr. Peter Kohler, president of Oregon Health & Science University. The people Texas Pacific has placed on the local board are leaders in Oregon business and public life, not figureheads or puppets.

There are real risks and uncertainties in this highly leveraged purchase of Oregon's largest utility, which has 755,000 individual and business customers in Portland and throughout the northern Willamette Valley. The commission's approval should come with many of the 38 conditions set out by its staff.

It is vital to protect ratepayers from new costs linked to the Texas firm's debt, and to require the company to make the long-range investments in PGE it has promised. It is also necessary to require that the parent company to notify the state if and when it overrides the decisions of the local board overseeing PGE.

Analysis and Commentary:  Even though substantially all constituent groups, including industrial, commercial and consumer users are strongly opposed to this sale and have proven that the local board will be powerless and irrelevant with the upcoming repeal of PUCHA, the Oregonian editorial board still supports the sale to TPG.  One might say the good news is that the Oregonian's editorial board is independent yet the bad news could be one more scandal for the Oregonian if such a position discredits the credibility of its fine news staff.

 In 2003 the Oregonian ran a story regarding TPG and PGE afterwhich Neil Goldschmidt said to me upon passing each other, "so I see you were in the Oregonian this morning." I replied, "you too."  Goldschmidt then added, "mine was an accident but I think yours was by design."  The story pertained to the Oregon Investment Council, which his wife was Vice-chair of at the time, giving TPG $300 million just prior to it being announced they would buy PGE and make Neil Chairman. Clearly, Mr. Goldschmidt believed that he could dictate content to the Oregonian.

2004 December 17  PGE might go public down the road by Krisinta Brenneman, Portland Tribune

As Portland General Electric’s fate hangs in the air, some utility analysts have a solution: Take the company public.  Rather than wait for Texas Pacific to do that, some analysts say PGE’s 43 million outstanding shares should be spun off to creditors now by its bankrupt parent, Enron Corp. Creditors would have the option of keeping their shares, which would be traded publicly on the stock exchange, or selling them.
   “They would be operated by NASDAQ rules and have more disclosure and not be run by a monolithic investment firm as the sole shareholder,” said Jim Bellessa, a utility analyst for D.A. Davidson & Co.
   Then PGE would be a stand-alone utility “like it used to be,” said Jerry Leone, manager of the Portland-based Public Power Council, but speaking for herself. “That’s what I’ve been saying for years. Selling it off to some other holding company or financial outfit would bring as much angst to the region.”
   But Bill Parish, a local investor, said it’s not in PGE’s interest to go public now. An IPO, he said, “is only a way for insiders to gain control of PGE and fleece it.”
   The PGE sale is subject to approval by the Oregon Public Utility Commission, which heard final arguments on the controversial Texas Pacific purchase Dec. 14. The three commissioners have 60 days to make a decision to accept or amend the firm’s application, or reject it.
   Commissioners are taking a hard-nosed stance with Texas Pacific, particularly in the wake of Enron’s long and tortuous bankruptcy. Critics have wondered whether Texas Pacific will skip out on state taxes — as Enron did — and if the investment firm is more interested in a quick profit than in reasonable rates for customers. The city of Portland still is waiting in the wings for the deal to fall through, and to again be considered as a buyer.  See complete story at

Analysis and Commentary: Utility analysts are generally conflicted because they represent the investment firms, directly or often indirectly, who would profit from issuing the necessary stocks and bonds.

It is also curious that Commissioner Baum and OIC Chair Gerard Drummond (see October 27, 2004 OIC Minutes in this archive) would both publicly tout the idea that "isn't a willing sellor a good thing."  They argued, why not let TPG buy PGE so that TPG, as a willing sellor, could then later sell it to the City.  Of course this is ridiculous and would allow TPG to fleece the utility.

2004  December 17  Opposition to deal increases by Kristina Brenneman, Portland Tribune

A cadre of state and local leaders has joined in the opposition to Texas Pacific Group’s proposed purchase of Portland General Electric, saying, “TPG’s interests do not align with the citizens and business owners we represent.” Seventeen leaders signed a statement of opposition, released by Commissioner Erik Sten’s office Thursday, including Secretary of State Bill Bradbury, Portland Mayor Vera Katz and state representatives Diane Rosenbaum, Jackie Dingfelder and Chip Shields, all Democrats representing Portland. Also signing the statement were mayors from Woodburn, Lake Oswego and Oregon City.

Texas Pacific’s proposal “as it stands now does not offer enough public benefits,” said Commissioner-elect Sam Adams, who signed the statement along with Commissioner Randy Leonard. “The rate reductions are not significant enough. What they are willing to do is not generous enough. That’s why I signed it.”

It is difficult to find a major business group that is not opposed to the $2.4 billion sale of PGE to Texas Pacific, whose holding company, Oregon Electric Utility, will oversee its operations. During final testimony to the Oregon Public Utility Commission on Tuesday, the Portland Building Owners and Managers, Associated Oregon Industries and Industrial Customers of Northwest Utilities opposed the Texas Pacific purchase. See complete story at

Analysis and Commentary: Noticably absent from the list are Goveror Kulongoski, State Treasurer Randall Edwards who voted to give TPG $300 million just before the deal was announced, and Metro President David Bragdon, Metro being one of the regions biggest energy users.

2004 December 16  Oregon Investment Council Monthly Meeting.  $1.3 billion in Public Pension funds provided to two investment firms, $925 million to Franklin and $400 million to KKR.

Analysis and Commentary: This was a most interesting meeting that included a presentation from legendary George Roberts, the R in KKR, to manage a $400 million Europe based fund.  In a private discussion with me Roberts also provided a few key comments regarding KKR's desire to purchase a large Arizona utility that are germance to the situation in Oregon in which TPG is attempting to acquire PGE.  I noted to Roberts that I opposed both purchases yet saw their proposal on much stronger financial footing that what is almost a laughable TPG proposal.  While TPG wants to extract $240 million off PGE's balance sheet and consider it part of the purchase price, KKR is proposing an equity infusion and less debt overall to the Arizona utility commission.  Click here to see unofficial minutes prepared by Bill Parish, including the comments regarding PGE
December 16, 2004 Oregon Investment Council Meeting Minutes

2004 December 15  Private email from Bill Parish to Theresa McHugh, Governor Kulongoski's Chief of Staff

to:  theresa mchugh - governor's chief of staff
      mardilyn saathoff - governor's legal counsel
bcc: interested parties

Dear Governor Kulongoski,

Yesterday I attended the PUC hearing on the future of PGE and was absolutely shocked at the level of incompetence displayed by two commissioners, your appointed Chairman Lee Beyer and secondly Ray Baum.  This also made me understand why the public is so thoroughly disgusted with the Oregon legislature. Clearly there has to be a limit to politically motivated appointments and more emphasis on competence regarding the task at hand.

Baum even has the audacity to note that PUC imposed limitations on PGE worked to protect it from Enron.  He had to be reminded by one intervenor that commercial rates increased 50 percent in addition to numerous other major problems including businesses leaving the area.  Perhaps Mr. Baum should call the Los Angeles utility and learn that, even in the heart of the Enron crisis, the city's rates stayed relatively stable in comparison. Commissioner Lee Beyer could not even understand the significance of TPG, a short term investor eager to pump up short term results, putting in place long term contracts that could compromise PGE's long term solvency, a point raised by Dan Meek.  The Associated Oregon Industries offerred particulary compelling testimony.

It's no secret that a lot of deal making occurred to secure Neil Goldschmidt's appointment to the higher ed board in early 2003 and I hope part of that deal making did not include these appointments to the PUC. In any event, the PUC laws clearly state in 756.014 under the commission powers and duties section that each commissioner serves at the pleasure of the Governor.  Perhaps it is ironic that you removed Diana Goldschmidt from the OIC when she was clearly competent in that role, her problem was conflicts of interest.  If all major groups are opposed to this deal and provide detailed reasons why, and an incompetent commissioner refuses to respect both the industrial and consumer perspectives and is unable to understand basic business fundamentals, even though you don't need a reason to remove them, in the public's eye this will be grounds enough.

May I therefore respectfully request that you identify new candidates for these PUC posts in the event a commissioner votes in favor of the TPG proposal afterwhich there employment at the PUC could be immediately terminated.  This may not save PGE from being fleeced by TPG and its carcass spun off in an IPO only to go bankrupt again, a condition not uncommon for such private equity firms, but at least such debacles will be avoided in the future.

These PUC commission positions pay $100K per year and also enjoy full PERS benefits.  Many would argue that appointing a legislator vested in PERS and allowing that person to work only three years at the PUC salary of $100K, compared to the legislator salary of less than $15K, and enjoy a permanent retirement based upon the higher salary is grossly unfair.  One need only look at the 300 Portland Public School custodians who lost their jobs due to rising PERS costs that squeezed them out of the budget for a clear such example.  The same situation is occurring at OHSU.

Perhaps now is also an excellent time to make a public statement regarding your position with respect to TPG's proposal.  Clearly your future opponents are now silent because many of them are strongly behind this TPG deal, including Ron Saxton, but the minute this deal is finalized they will begin a tough campaign to block you from a second term.  The time to act is now, in my opinion.  This may not be your style or within your comfort zone but frankly if you won't help yourself who will?  The alternative is clearly the political dust bin as Oregonians simply will not tolerate being chumps again for an out of state speculator anxious to steal PGE, a reality they will be reminded of each and every month as they write a check for their utility bill.

Bill Parish

Analysis and Commentary:  The only genuine hope the governor has to get the Goldschmidt scandal to subside is for the TPG proposal to be rejected.  If the Governor isn't playing hardball with the PUC commissioners, most observors could conclude that his political career is finished.

2004 December 15 PUC hears opposition to PGE buyout by Gail Kinsey Hill, Oregonian

Customer groups on Tuesday tore into an acquisition proposal that would put the state's largest utility in the hands of buyout firm Texas Pacific Group, warning regulators the deal carries too much financial risk and too little public benefit. "If this is in the public interest, then why is the public so against it?" asked Mary Ann Hutton, a lawyer for Associated Oregon Industries, a business lobbying group. Hutton's comments, along with a litany of criticisms from other business, consumer and public interest groups, came during the second and final day of oral arguments before the Oregon Public Utility Commission in Salem.

Commissioner Ray Baum, who joined the commission along with Savage in September 2003, questioned whether critics' jitters might have more to do with the residual sting of the bankrupt Enron than the true intentions of Texas Pacific.

The PUC staff has listed 38 conditions under which the deal probably would meet regulatory approval. Without the conditions, the staff has recommended that the commission reject the transaction. Commissioners are not bound to honor the staff recommendation.

Analysis and Commentary:  Kinsey Hill provides a good recap of the intensity and broad based nature of the opposition to the TPG takeover.

2004 December 15  Who Knew by Nigel Jaquiss, Willamette Week

What would you do if you learned that the most influential person in the state had committed statutory rape?  The revelation that for three years Goldschmidt had sex with the daughter of a neighbor and former employee, beginning when the victim was 14, shocked the state.

Nearly as stunning as Goldschmidt's crime was that he'd kept it quiet for three decades, even while a member of President Jimmy Carter's Cabinet, a senior executive at Nike, the governor of Oregon and, finally, the state's consummate power broker for the past 14 years.  It turns out, however, that Goldschmidt's secret wasn't so secret after all.  During the past seven months, WW has established that dozens of Oregonians--many of whom today work at the highest levels of business, government and the media--knew something about Goldschmidt's secret.

Nobody from Goldschmidt's mayoral tenure (1972-1979), when the sexual abuse occurred, has admitted he or she knew about it at the time, though it's difficult to believe that for three years a big-city mayor regularly snuck away to the Hilton, to a downtown apartment and to the teenage girl's home without anyone noticing.

According to court records and interviews, Goldschmidt began having sex with Susan when she was 14, in 1975, and stopped not long before he left Portland in 1979 to work for Carter, a fellow Democrat.  Soon afterward, his victim's life began a spiral into deep dysfunction that would include a dozen arrests, a brutal rape in Seattle, and a stretch in federal prison. Susan, now 43, was not always such a tragic figure. A straight-A student and class president in elementary school who had enrolled at Portland's elite St. Mary's Academy, Susan eventually dropped out of high school in her sophomore year. Although friends say she remained intelligent and beautiful, she struggled throughout her 20s with substance abuse.

For more than 15 years, the media, including this newspaper, has danced around the conduct of Sheriff Bernie Giusto, who was an Oregon state trooper and Goldschmidt's bodyguard and driver from 1987 to 1989, the first two years he was governor. Giusto was always more ambitious than the average cop. A graduate of Willamette University with a degree in political science, he won the first of three terms on the Gresham City Council in 1989 while serving as Goldschmidt's bodyguard. Around that time, according to numerous Goldschmidt staffers and state officials, Giusto also began an affair with the governor's then-wife, Margie Goldschmidt. While Giusto's dalliance with the wife of the man he was protecting is the stuff of soap operas, the greater significance is that Giusto knew about Goldschmidt and "Susan."

Last month, Giusto appeared before the Senate Rules Committee for a confirmation hearing on his reappointment to the board of TriMet, the regional transportation authority. Under questioning from state Sen. Vicki Walker (D-Eugene), Giusto acknowledged that he had learned the story about Goldschmidt and the young girl but did not say exactly when or how. Giusto didn't report the information to his superiors, he testified, because he believed the statute of limitations had expired. (Law-enforcement officials say he was correct.)

No story about "who knew" would be complete without a discussion of the role of The Oregonian—the Northwest's largest daily newspaper and the state's most powerful shaper of public opinion.

Local readers and media critics at publications including The Washington Post and the Columbia Journalism Review have hammered The Oregonian since May about its handling of the Goldschmidt story.They said the paper was too soft on Goldschmidt, allowing him to call what legally constituted statutory rape "an affair" while overstating its own role in uncovering the secret.

But it is The Oregonian's conduct before the story was broken that deserves more scrutiny. WW has learned that the paper's first solid information about Goldschmidt's secret came 18 years ago, in 1986. At that time, Jack Ohman, the paper's nationally syndicated editorial cartoonist, heard a tip from a friend. Ohman took the information to his boss, then-editorial page editor Robert Landauer, who still writes a twice-weekly column for the paper. (At daily papers, the newsgathering and editorial-page staffs work independently.)  In an interview last week, Landauer recalled that after speaking to Ohman, he interviewed Ohman's source, whom he would not identify, and found him to be credible.

Landauer says he immediately called a meeting with then-Editor William Hilliard and Managing Editor Peter Thompson, both since retired. "I said, ‘Here's what's been told to me,' Landauer recalls. "'I'm looking at these allegations. They are serious and ought to be pursued in some manner, but this story requires more than the editorial department can do.'" Today, both Hilliard say and Thompson say they have no memory of the meeting. In any case, the paper never printed a word relating to Ohman's tip. Landauer says his conscience is clear. "I turned it over to news," he says. "I have no second thoughts about my behavior. Ohman did not respond to phone calls or questions presented in writing.

In The Oregonian's own postmortem of its coverage of the Goldschmidt story, there has been no mention of the Ohman-Landauer episode. In May of this year, the paper's public editor, Michael Arrieta-Walden, wrote that back in December 2003, the daily got what he characterized as "a tip from an anonymous source" about Goldschmidt but failed to follow up. That's not quite accurate. WW has learned that the "anonymous tip" was actually a comprehensive account of Goldschmidt's crime from a knowledgeable insider.

On Nov. 13, 2003, Gov. Kulongoski appointed Goldschmidt to the State Board of Higher Education. A couple of weeks after the appointment, former Goldschmidt speechwriter Fred Leonhardt contacted Jeff Mapes, The Oregonian's senior political writer, whom he'd known for years. Over lunch, Leonhardt says, he gave Mapes the victim's name, a chronology and the names of others who could confirm the story. (Leonhardt told WW he had promised himself that if Goldschmidt ever sought office again, or was appointed to a position of public responsibility, he would go to the media.) Mapes, who declined to comment for this story, reportedly told his editors about Leonhardt's bombshell. But there's no evidence that anybody in The Oregonian's 430-person newsroom pursued the story until the first week of May, when word leaked that WW was about to expose Goldschmidt.  See complete story at

Analysis and Commentary:  Once again the Willamette Week has landed a direct hit to its arch competitor, the Oregonian. It is unfortunate that what I would argue is the West Coast's best daily paper, the Oregonian, continues to be tarnished by this scandal.

2004 December 14  When a Utility Saves Money, Who Benefits by David Cay Johnstone, NY Times

When the sale of a utility is proposed, big customerss typically seek concessions, like rate reductions.  But in this case, nearly all the economic powers in Portland are asking that the deal be rejected, even if that means that the city of Portland could wind up owning the utility.  Leading industrial, commercial and real estate interests in the city argued at the hearing that Texas Pacific would be an absentee owner that would charge too much and make too much profit, and that it would not have an interest in making long-term investments to ensure reliable electricity.

Texas Pacific specializes in buying troubled companies like Continental Airlines, J. Crew and Burger King that have tax losses.  By buying a profitable company, and indeed one in which the taxes are included in the company's revenue stream, Tecas Pacific can offset those losses and keep some share of the tax money.  Portland General Electric (PGE) collects $1.2 billion a year form its customers, of which $92 million is used to cover federal and state income taxes.  Since 1997, when Enron bought the utility, none of that money has made its way to government treasuries.  Retaining the taxes roughly doubles the profit an owner can earn from PGE.

The industrial and commercial customers pay 40 percent of those taxes, or about $36 million a year.  Intel, the area's largest employer, pays almost $4 million a year in taxes that are reflected in its PGE bill.  Lisa Rachner, a lawyer for Texas Pacific told the commission that it could only examine the tax issue in a special proceeding covering all investor-owned utilities in the state.

Analysis and Commentary: In a July 22, 2004 column by Steve Duin, see summary in this archive, based upon original Parish & Company research, a significant tax loophole story was disclosed that could have a dramatic impact on TPG's acquisition of PGE.  Even today, months later, David Cay Johnstone, the business reporter covering tax issues for the NY Times, still refuses to cover the story.

Former Senator Packwood noted in an email that I had done an "outstanding public service in identifying this situation" after confirming it with top treasury officials.  He added that "for someone who appreciates first rate academic research, your work was simply sensational."  The story involves a massive tax loophole that was closed in the late 1980's, led by then former Senate Finance Chair Packwood. The loophole allowed profitable companies to go out and buy companies who had large tax losses they could not use and then fully offset these losses against their income.  For example, one could buy an almost defunct company for $1 million and perhaps get $50 million of tax losses.  Closure of this loophole was led by Senator Packwood and resulted in such deductions being limited to a certain percent each year based upon a formula.

In July of 2004, while responding to my study in a converstion at the Multnomah Athletic Club in Portland, Packwood confirmed that the Senate Finance Committee never considered the possiblity of the company with the losses buying the profitable company, thus excaping the loophole's closure.  I did try to get the NY Times to do a story on this situation during the time of the AOL/Time Warner merger, a merger that might not otherwise have happened.  Sadly today many people still don't know that this was the primary driver in AOL purchasing Time Warner rather than the reverse.  At the time AOL had almost $16 billion in tax deductions they could not use resulting from stock option gains.

If the Times had done the story both companies would clearly have been better off today yet of course the investment banking firms who purchase significant advertising space from the Times might not have been pleased.  There is an irony given all the stories the NY Times does about problems in corporate america yet at the same time it refused to cover major stories that could prevent many of those very same problems.

Furthur complicating my efforts to get this loophole discussed was the plagiarism scandal that resulted in top executives at the NY Times resigning, including its executive editor Howard Raines.  The NY Times had developed a habit of using others work without attribution, often giving it to be recycled by large investment houses like Bear Stearns, and an overall arrogance perhaps best summarized in a remark Johnstone made to me when I expressed frustration with their unwillingness to cover this story,  "no one questions the integrity of the NY Times," he said.  This was of course before the scandal.

David Cay Johnstone and I had significant discussions before Enron's collpase in which I explained how the cash flow statement worked and its ability to help one recreate a corporate tax return and unlock many questionable accounting practices.  This included concluding that the Microsoft Corporation paid almost no federal income tax in 1999 even though they made $15 billion.  He said the story was simply too big and that I should talk to Gretchen Morgenson, a lead reporter at the Times, even though she might refer me to him since its a tax story and he is the "tax expert."

After regularly getting emails and phone calls from analysts and other journalists around the country asking me why i did not make an issue with others using my work I decided to challenge two reporters at the Times, David Cay Johnstone and Gretchen Morgenson, after being given a copy of an interview Johnstone did on NPR and seeing Morgenson on the nightly business report with a prominent NY Times logo behind her.  Morgenson never responded because she knew how much reporters at the times had used my work without attribution, including key stories that made a significant contribution to her getting a Pulitzer Prize.  Johnstone, on the other hand, threated legal action and requested that I apologize to him and copy his editor, Glenn Kramon.  He went on to publish a best selling book and tour the nation discussing corporate tax loopholes.

Johnstone specifically said that the analysis I provided him was regarding the Microsoft Corporation and that he wrote about Enron and therefore it was not plagiarism.  My claim was that I provided the tool and whether he applied it to Enron or another firm the appropriate thing would be to provide attribution.  I added that Ken Lay at the zenith of Enron's power, when asked how one should view Enron, would regularly reply as "the Microsoft of the energy field."  Clearly, what Lay meant was that they would use financial engineering, as Microsoft had, to leverage growth in its stock price.  Key to this was issuing non-qualified stock options which provide a tax deduction yet did not require being recognized as an expense. Rather than get in a legal struggle with Johstone and Kramon at the Times I chose to note that we simply had interpreted the information differently.

The sad aspect to me is that corporate america relies on a strong business media to keep excesses in check and the NY Times has become a de-facto sales rep for large mergers only to follow up with tabloid like stories chronicling the very same abuses they enabled by shoddy coverage up front.  And one need only look at the coverage of Portland General Electric, Enron's only real credible operating subsidiary.  Other examples include the NY Times refusal to fully report the impact of Institutional Shareholder Services (ISS) on other mergers, the proxy company that can often vote as much as one-third of all shares outstanding in such situations,  including the hostile takeover of Portland based Willamette Industries by Weyerhaueser.  In this case investment banking firms issued $5 billion in bonds to finance the hostile takeover, creating a fee bonanza for key NY Times advertisors.  Another prominent example was the merger of Hewlett Packard and Compaq which resulted in significant job losses in Oregon.

My apologies for this lengthy diversion yet it is most relevant.  Ask yourself, why is it that Bob Packwood, the former Chair of the Senate Finance Committee and SEC Chairman Bil Donaldson, a tried and true conservative Republican appointed by President Bush, can see the dramatic significance of this loophole and the need for a dialogue on closing it yet the NY Times still won't do the story.

I did send a letter to the NY Times public editor, a position created after the scandal, asking for some thoughts and the ability to write an 800 word piece on this topic, which would thereby end my concern over the NY Times using material without attribution but never got a response until I left a phone message.  The public editor followed up with an email to me suggesting communicating via email.  The question becomes, how do I send an email to the NY Times public editor if my emails, as stated by Johnstone at the City Club meeting with two onlookers listening, will be redirected?  What does redirected mean?  They certainly could not be spam since they are no more than 1-2 per month.

2004 December 14  Panelists grill Texas Pacific on PGE deal by Gail Kinsey Hill, Oregonian.

Months of maneuvering culminate in Oregon regulators' tough questions on the utility takeover.  The Oregon Public Utility Commission on Monday grilled Texas Pacific Group on the investment firm's proposed purchase of Portland General Electric, searching for details on everything from rate credits to debt loads.

The three commissioners, who will decide by early next year whether to approve the transaction, gave little hint about how they might rule. They did, however, acknowledge the challenge they face as they prepare to pass judgment on one of the most controversial utility mergers in the state's history.

Texas Pacific, one of the country's largest private-equity investment firms, is trying to buy PGE from Enron for $2.35 billion. The PUC's decision not only will determine who will control the state's largest supplier of electricity, but it also could influence the rates paid by consumers throughout much of the Willamette Valley and set a precedent for utility purchases by non-energy companies.  The PUC's decision also is complicated by the stigma of Enron, whose collapse wrote one of the most controversial chapters in U.S. business history.

Commissioners also questioned Oregon Electric about what might happen to PGE if the deal doesn't go through. Under Enron's reorganization plan, which became effective last month, PGE stock would be distributed to Enron creditors in a spinoff of the utility. Oregon Electric emphasized the downside of the spinoff, which it argued is fraught with uncertainty about who ultimately would own the utility.

Utility Commissioner Ray Baum wondered aloud whether that option might not quickly free PGE from Enron while avoiding the risks involved in the Texas Pacific deal. Baum, a former state legislator and attorney from La Grande, also argued the fine points of the state law governing utility mergers. He questioned whether the buyout firm might be taking a too narrow view of the statute, thus suggesting limits on the commission's decision making.

Analysis and Commentary:  Kinsey Hill provided a good recap of the meeting, again highlighting that this whole drams boils down to a vote by the three PUC commissioners, each of whom was screened by Neil Goldschmit's partner Tom Imeson.  Even today, on December 29, 2004, Tom Imeson still counts TPG as one of his most important clients.

2004 December 14  OHSU chief pledges he'll donate PGE earnings by Ted Sickinger, Oregonian

Peter Kohler says his role in the contentious takeover proposed by the Texas Pacific Group would help the school, charities.  Peter Kohler, president of Oregon Health & Science University, says he will give away to charity all investment profits, stipends, meeting fees and stock option proceeds he earns from serving as the local frontman for the Texas Pacific Group's controversial proposal to buy Portland General Electric.

His most recent statements come amid what university officials acknowledge are ongoing concerns among business people and donors about how Kohler's involvement in the deal could harm OHSU.  Those concerns have continued to surface in business and donor circles. And employees in recent weeks urged him to make his charitable intentions public.

In an e-mail to Kohler dated Oct. 29, Susan Tolle, head of OHSU's Center for Ethics in Health Care, told Kohler, "I wanted to let you know that I have again been questioned regarding your relationship with PGE in a group setting this week."

The occasion was an Oct. 27 reception honoring Maribeth Collins, who heads the board of Collins Cos., a lumber-products company headquartered in Portland. She is also president of the Collins Foundation, a philanthropic concern that is on OHSU's president's list, meaning that OHSU asks the foundation only for grants that promote top institutional priorities, as defined by Kohler and other senior administrators.

"With Collins family members gathered around" at the reception, Tolle wrote in the e-mail, Wade Mosby, senior vice president of Collins Cos., expressed concerns about Kohler's relationship with PGE. It's not clear whether the charitable donations, which can be deducted from taxes, will allay community concerns.

Contacted Friday, Mosby of Collins Cos. agreed Kohler was doing the right thing with his PGE pay. But he said he was still worried that Kohler's prospective utility role could harm OHSU.

"OHSU is too important to this city to get embroiled in any kind of negativity. I'd rather see him take a more neutral stance," said Mosby, stressing that he was offering his opinion, and not that of the Collins family. "This buyout is like the presidential election: There are a lot of sharply divided opinions out there, and he loses some of his political capital even if he wins with PGE."

Analysis and Commentary: See December 9, 2004 private email from Bill Parish to Peter Kohler in this archive given that his comments here are basically a response to the email.

Peter Kohler is the highest paid public official in the State of Oregon.  He makes $600K per year and recvies a free house and lavish perks.  Basic math also indicates Kohler will receive the highest PERS pension in Oregon history, in excess of $400K per year. Pledging to donate his income and investment gains from TPG to charity is noble yet these valuable tax deductions will still provide him an enormous tax deduction against his record PERS retirement income.

As president of OHSU, Kohler oversees 12,000 employees representing the largest regional participant in Oregon's public pension system.  Oregon PERS is also Texas Pacific Group's largest investor, having invested $1 billion with the buyout firm.  What this means is that Mr. Kohler, by being chair of PGE, is leveraging growth in his personal portfolio via these highly valued tax deductions, on the backs of his fellow PERS participant employees at OHSU.

2004 December 12  A holiday treat: Our PDQ PUC TPG Q&A by Steve Duin, Oregonian

Maybe that's part of the problem. Those endless acronyms. They clutter the page. They fog the mirror. A private equity group (TPG) is trying to buy our largest utility (PGE) from a bankrupt public nuisance (Enron). Federal law (PUHAC) requires the buyers to set up a shell company (OEUC). Oregon law requires approval by the state's regulatory agency (OPUC). That approval process is winding down. Oral arguments are set for Monday.

Let's cut to the chase. Who or what is Texas Pacific (TPG)? A smart, arrogant group of investors with a history of buying distressed companies, giving them an extreme makeover and selling them for big bucks. Is PGE a distressed company? No. Enron savaged its workers' pensions, but the utility is quite healthy.

What's necessary for Oregon Public Utility Commission approval? Proof that the sale results in a net benefit for the ratepayers. Enron and Texas Pacific have challenged the idea that such a net benefit is required.

What is Texas Pacific offering? A better resume than Enron. Short-term stability. And a rate cut, spread over a five-year period, of $43 million.  Which amounts to . . .? 0.6 percent. Even that isn't guaranteed.

Who's opposing Texas Pacific before the PUC? Many of the major business groups in the state: Associated Oregon Industries, which claims 20,000 member companies, including PGE and Pacific Power. The Industrial Customers of Northwest Utilities, which represents, among others, Intel, the state's largest private employer. The Building Owners and Managers Association. And, of course, the Citizens' Utility Board and the city of Portland.

What's their beef? The measly rate reduction. The lack of long-term stability. Texas Pacific's attitude. As Mary Ann Hutton said in AOI's brief to the commission, "While the applicants are in the courtship phase of a relationship with the Commission, Staff and customers, they dispute the Commission's regulatory authority to protect the public interest, withhold information, eschew public disclosure, and leave critical questions unanswered. What does this portend for the future if this application is granted?"

That regulatory authority, by the way, is a particularly thorny issue. Why? Because the PUC only has that authority over the shell company, Oregon Electric, not Texas Pacific. And TPG maintains veto power over everything the Oregon Electric board does.

Wait a minute. You mean those local stalwarts on the board, Peter Kohler and Tom Walsh, have little or no ability to protect Oregon's interests? That's right. Which may explain why Kohler, the Oregon Health & Science University president, told the commission he hasn't read the legal filings in this case, instead giving them to OHSU's lawyer. Walsh conceded that TPG could sell its equity interest in Oregon Electric without the approval of its board or the PGE board.

Where does the city of Portland fit into all of this? Whatever you think of the city's interest in buying the utility, it's not an issue before the PUC.

Is it true Texas Pacific can replicate the old Enron tax scam, collecting federal taxes from ratepayers that it never passes on to the feds? Yes. The commission has already checked off on that.

How does that bode for the PUC's final decision? Not well. Several interveners think the PUC is overmatched. Others think this deal has been wired from the start. Our best hope may be that the commission approves the purchase with conditions and safeguards that protect the ratepayers or force TPG to walk.

Analysis and Commentary: Duin provides an excellent recap, one that his papers own editorial board could study more thoroughly.

2004 December 12  PGE fate up to interpretation by Gail Kinsey Hill, Oregonian

The Public Utility Commission, nearing a decision on Texas Pacific's proposal, must select a way to test benefits to customers.  PGE's current situation is about to change, no matter the outcome of Texas Pacific's $2.35 billion proposal. Enron, emerging from a long and complicated reorganization, will either sell PGE -- to Texas Pacific or someone else -- or spin it off to creditors under a stock distribution plan. In short, there is no dependable status quo against which to compare the Texas Pacific deal.

"The commission is 100 percent independent," said Bryan Conway, the PUC staffer who is leading the state review. "They look at everybody's recommendations, the pros and the cons, and they make up their own mind."

Should regulators use PGE's performance at this moment in time as the standard against which to measure the pros and cons? Or should they use the stock distribution plan outlined in Enron's reorganization plan? Or, should commissioners consider possible ownership by the city of Portland, which has said it's interested in buying the utility. "No one can judge all the scenarios," Conway said. "That's where things get difficult. There are too many potentials out there."

Ken Canon, executive director of Industrial Customers of Northwest Utilities, an influential business trade group, argues that Texas Pacific has vastly underplayed the financial risks, in part by ignoring comparative measures. "They have no baseline," he said of Texas Pacific's preferred means of analysis. "That's like doing the review in a vacuum."  He says regulators should compare the proposal to the current state of PGE's finances and operations. This "status quo," he says, gives the commission a specific, dependable measure while avoiding the pitfalls of speculation. Canon, who praises PGE for a strong balance sheet and a well-run electricity network, opposes the Texas Pacific proposal, which he believes involves too much debt and too little rate relief.

Like Canon, Bob Jenks, executive director of the consumer watchdog group, the Citizens' Utility Board, has hardened his opposition to the proposed transaction as the negotiations have unfolded over several months. Jenks doesn't rule out the spinoff option, which is included in Enron's reorganization plan. But, while Texas Pacific emphasizes the risks attached to Enron's fallback plan, Jenks underscores its benefits.

"There's uncertainty either way," Jenks said. "But the options out of the bankruptcy court actually come closer to getting us to the end state we want." That "end state," he said, is a "locally headquartered, publicly traded independent PGE."

PUC Chairman Beyer downplays the notion that the friction over ownership alternatives complicates his task.  "It just makes it different," he said. "Each case is unique."  The regulatory statute, created by the state Legislature in the 1970s, attempted to address the concerns of Oregon utilities, which feared a trend of the times: hostile takeovers, he said. "This isn't what the statute envisioned," Beyer noted of the Texas Pacific proposal. "But we'll try to make sense of the law we have." "Our job is the same," he added. "We decide what's protective of ratepayers."

All three commissioners --Beyer, John Savage and Ray Baum -- are relatively new to their posts. This is their first acquisition proposal. "We're looking forward to our chance to get in the game," Beyer said.

Analysis and Commentary:  Hill wrote a fine story with the last paragraph perhaps being the most telling.  It highlights that all 3 commissioners on the Public Utility Commmission (PUC) are new to their posts and that this is their first acquisition, with Beyer referring to this as their "chance to get in the game."  This game Beyer refers to could indeed be more exciting than he realizes if the TPG deal is approved given that Neil Goldschmidt's partner Tom Imeson screened Beyer and the other commissioners for the Governor.

2004 December 11  Variations on Power to the People by David Cay Johnston,  New York Times

In the long-running Enron bankruptcy tale, one of the more intriguing sideshows involves the fate of Portland General Electric, Oregon's largest utility and the only energy-producing asset Enron actually owned. The electric utility has become the object of a tug of war in which many in the city's business elite have aligned themselves with their natural adversaries, consumer groups, to fight a proposed sale to the Texas Pacific Group. The deal is so disliked by the economic powers here that some prefer that the city government buy Portland G.E.

The Oregon Public Utility Commission is scheduled to hear final arguments on the Texas Pacific plan on Dec. 13. The panel has 60 days to decide whether to accept or reject the application, or add conditions. Mr. Blicksilver, a Texas Pacific Group public relations advisor, could identify only two business supporters of the purchase. One is a small newspaper, The Business Journal of Portland. The other is The Oregonian, a Newhouse newspaper that published an editorial favoring the deal.

The industrial users are especially worried that Texas Pacific will not invest the necessary funds to upgrade Portland G.E.'s transmission facilities, and that service will become unreliable. Reliability is an especially crucial issue for Intel, the computer chip maker that is the area's largest employer and pays Portland G.E. $51 million annually for electricity.  "The more our members hear about this deal from Texas Pacific, the less they like it," said Ken Canon, executive director of the industrial users group. Mr. Canon adds that some of his biggest members would favor city ownership of the utility - an unusual position for business leaders to adopt - if that is what it takes to stop Texas Pacific.

Because Portland G.E. is a legal monopoly, the rates it charges, and how much profit it can earn, are regulated. The commission has said the profit target should be 10.5 percent of equity, but public documents suggest Texas Pacific may be able to earn more than 20 percent.

According to Ann L. Fisher, the lawyer for the Building Owners and Managers Association and a former Portland G.E. lawyer, Texas Pacific could make as much as a 50 percent return on its investment. Texas Pacific representatives dismissed talk of a 50 percent return as absurd, but would not reveal what they expected to earn, saying this was a private matter between the investment firm and its investors.

The Public Utility Commission, at the request of Texas Pacific, has required lawyers for the opposing groups to sign confidentiality agreements before looking at financial documents that, in most utility rate proceedings, would be public record. Among them are documents explaining what rate of return the parent company expects the utility to achieve.

The Texas Pacific deal has renewed interest in the lessons to be learned from Portland G.E.'s involvement in what were two of the biggest corporate bankruptcies of their time: the 1932 collapse of the Insull Trusts and the 2001 failure of Enron. The Insull scandal, like that at Enron, involved convoluted financial manipulations that wiped out electric utility investors and prompted demands to prosecute the top executive, Sam Insull, who had been Thomas Edison's secretary.

In response to the Insull Trust scandal, Congress enacted the Public Utility Holding Company Act, which requires extensive financial disclosures by electric utilities and was intended to align the interests of utility company owners with their customers by making ownership local.

Texas Pacific is seeking to avoid that law by creating a holding company whose only significant asset will be Portland G.E. The new holding company would be required to make financial disclosures and comply with other state and federal laws. Oregon's utility regulators, however, would not have the authority to inspect the books of Texas Pacific itself.

In legal arguments, Texas Pacific's opponents describe the structure as one intended to comply with the law in name only.

The federal and state income taxes that utility customers pay as part of their electric rates are calculated as if Portland G.E. was a stand-alone company. Since Enron acquired Portland G.E. in 1997, Ms. Fisher said, "customers paid $667 million to cover Portland G.E.'s taxes, and that money never made its way to the government." She said the proper term to describe this is "stealing our money."

Analysis and Commentary: A fine article by Johnstone.

2004 December 9  Private Email from Bill Parish to Peter Kohler, President of OHSU and Designated Chairman of PGE by Texas Pacific.  bcc various interested parties including the public utility commissioners, governor's chief of staff and legal council, media and significant donors to OHSU

hello peter.  i saw an old friend this week who had you over for dinner recently.  he thinks very highly of you and has also always had great confidence in my judgement. he asked me numerous questions about pge and ohsu in an effort to defend your actions and when it was all said and done shook his head and said, well bill, you've got a point.

my point is that if the puc commissioners approve this tpg deal, two or whom were appointed in august 2003 long after numerous parties knew about tpg's intentions, you will clearly tarnish ohsu's fine reputation.  in patrick o'neil's excellent article about future cuts in state funding for ohsu you aptly were quoted as saying "I thought the Governor appreciated what we were doing."  perhaps so yet the governor and his staff certainly can't appreciate being condemmed to a political dust bin by whomever runs against him if this deal goes through.  this is the kind of stuff that is fun for political advertising consultants.

if i might also offer some sound financial advice furthur demonstrating why being president of ohsu should be considered a full-time public position, brace yourself for the repeal of the estate tax, now strongly supported by both senator ron wyden and gordon smith and perhaps some of those same high tech executives you now have on the ohsu board.  such a repeal will significantly impact charitable giving to ohsu.  as if the cuts to key programs like nursing were not significant already. many including bill gates sr, warren buffet and myself support an expanded exemption rather than an outright repeal.  has your board chair staked out a position on the estate tax?

in any event, as oregon's highest paid public official standing to collect the largest pers retirement in the state's history, the notion of padding that with a multi-million windfall in large part financed by your fellow pers participants is simply over the top.  please don't hesitate to give me a call sometime if you would like to discuss this furthur.  what follows are the first four paragraphs of o'neill's fine story.  best of luck to you, the governor and the puc commissioners if this deal is approved. the governor's chief of staff is copied on this note.  i have mostly stepped aside in this debate on pge's future yet if you and the governor would like to meet I would be glad to take the time to get together.


Analysis and Commentary:  Kohler publicly responded in a December 14 article in the Oregonian by Ted Sickinger, see excerpts in this archive.

2004 December 8  Budget plan has OHSU reeling by Patrick O'Neill, Oregonian

Administrators at OHSU said they were shocked last Wednesday when the governor's proposed budget was made public. A proposed cut of nearly 40 percent in state support for Oregon Health & Science University could eliminate a wide range of medical and educational programs and bring further tuition increases to OHSU's medical school -- already one of the priciest in the nation. "I had thought the governor appreciated what we were doing," said Dr. Peter Kohler, OHSU president.  Kohler said Kulongoski has agreed to meet with him to discuss the budget.  OHSU became a public corporation in 1995 but receives state support.

Keith Thomson, Chair of OHSU's Board of Directors, said that while OHSU has a $1 billion annual budget, the "vast majority" of that money is restricted for specific uses--construction and research, for example -- and can't be shuffled to other programs.  "State dollars support esssential public programs that cannot otherwise support themselves," Thomson said.  With a nearly 40 percent reduction in state funding, he said, "there is no way to sustain these programs.  Kohler said the cuts "will hit our programs hard, translating into fewer patients receiving care, fewer students being educated, and fewer employees on the job."

Analysis and Commentary: See my response in email to Kohler dated December 9, 2004.

2004 November 23  Firms power up PGE debate by Kristina Brenneman, Portland Tribune

The region’s biggest electricity users now are joining in the chorus of dissent over the pending sale of Portland General Electric. Executives from Intel Corp., Siltronic Corp., The Greenbrier Cos. and LSI Logic Corp. are among those calling for other options for PGE besides a sale to the Texas Pacific Group — ranging from spinning off its stock to another private sale.

“The offer is simply unacceptable,” said Intel spokesman Bill MacKenzie, reflecting the industrywide complaints about Texas Pacific’s $2.4 billion offer. “We’d like to see increased interest in other options that could relate to PGE. We are not advocating any particular proposal; we’re interested in looking at all options.” Should the Texas Pacific-PGE deal not go through, MacKenzie said it could either spin off PGE stock to creditors or establish a public utility district.

Neil Nelson, chief executive of Siltronic USA, which spends $7 million a year for power at its Northwest Portland plant, said it, too, is looking for cheaper options. Nelson is one of several executives who recently met with city of Portland officials to hear more about its continued interest in buying PGE. Commissioner Erik Sten, Mayor-elect Tom Potter and others aim to amass enough private business support to spark a renewed bid for the utility.  See complete story at

Analysis and Commentary:  When Intel, one of the State's largest employers and perhaps the world's most important technology firm speaks out strongly against the TPG deal, the governor should take note.  At this point the Governor's silence has become almost deafening.

2004 November 22   Veteran lawyer reviews state investment council's conflict-of-interest policies by Gail Kinsey Hill, Oregonian

Edward "Ted" McAniff, a visiting professor at University of Oregon School of Law, and a law partner with deep experience in banking and securiteis law, has agreed to evaluate the Oregon Investment Council's conflict-of-interest politices.

McAniff, semiretired from the O'Melveny & Myers law firm in Los Angeles, began his review earlier this month, after signing a contract with the Oregon Treasury, the agency that oversees the investment council.  He is expected to complete the evaluation by June 30.

The review was prompted by controversies that erupted after council vice chairwoman Diana Goldschmidt voted along with fellow council members to allow a $300 million investment in a private equity fund managed by Texas Pacific Group.  Less than a day after the vote on Oct. 29, 2003, Texas Pacific asked Neil Goldschmidt, Diana Goldschmidt's husband and former Oregon governor, to participate in a potentially lucrative partnership that would own Portland General Electric, Oregon's largest utility.

A firestorm of questions about whether Diana Goldschmidt or other council members knew about Neil Goldschmidt's association with Texas Pacific before the vote prompted an investigation by the Oregon attorney general and a decision by Gov. Ted Kulongoski to remove Diana Goldschmidt from the council.

Attorney General Hardy Myers began the investigation on Sept. 29.  He has declined to discuss details whiel the inquiry is on going.  "The department is making every effort to complete the investigation by January," said Kevin Neely, a spokesman for the Oregon Department of Justice.

This will help provide assurances that the policies in place are good and sound," said Kate Richardson, Treasury's chief of staff.  The contract sets compensation at $1 and caps expenses at $20,000.  McAniff declined repeated requests for an interview.  Richardson said the rock-bottom fee was McAniff's idea.  "It really was a sense of civic duty," Richardson said.

Each spring since 1998 McAniff has taught at UO's law school. Classes include financial transactions, mergers and acquisitions and corporate finance.  He has a vacation home in Central Oregon.  Texas Pacific's purchase proposal is under review by the Oregon Public Utility Commission, which must approve the transaction before it can become final.

Analysis and Commentary:  One has to note the audacity of our sitting State Treasurer Randall Edwards hand picking an attorney who specializes in mergers and acquisitions, Texas Pacific's ball game, to evaluate Edwards and other members of the Oregon Investment Council's relationships with TPG for the grand fee of $1.  Given that this is a $50 billion pension fund, it seems downright silly to not conduct a strong "arms length" review.  The risk of impairing the PERS systems credibility from a non-arms length review makes no sense.  One also has to wonder if federal regulators may weigh in.

2004 November 19  Texas Pacific Group to Acquire Celerity, Company Press Release, Yahoo Finance

MILPITAS, Calif.--(BUSINESS WIRE)--Nov. 18, 2004--Celerity Group, Inc. announced today that Texas Pacific Group ("TPG") has agreed to acquire Celerity under an asset purchase agreement. Terms were not disclosed. Revenues for the current year are approximately $330 million. Upon the transaction closing, Celerity intends to withdraw its current S-1 registration statement with the Securities and Exchange Commission.  Celerity is a leader in the design and production of high-performance gas and chemical delivery process modules that are integral to the equipment used in manufacturing semiconductors, flat panel displays, and related products. For additional information, please visit

Analysis and Commentary: This might be a good example regarding what a sweet deal having 755,000 captive electricity customers could be in terms of piling on TPG's related companies products and services.

2004 November 16 Who's afraid of the big, bad rate decrease? by Steve Duin, Oregonian

In the ongoing battle over Portland General Electric, Kelvin Davis of Texas Pacific is campaigning in Yamhill County.  Portland City Commissioner Erik Sten is locking up support in Washington County.  And a familiar and impassioned activist is stirring in Salem.  You're right.  That description would definitely eliminate the governor.

While Davis romances Yamhill, Sten is trying to sell the city's business model--public ownership, private management--to PGE's major industrial customers, who've seen their rates increase 50 percent since 2001.  "What I'm working on," he says, "is to show them our proposal is more sensible than it's been portrayed."

Sten must be having some degree of success at Intel, which had a $51 million electric bill last year and would love a $5 million rate reduction.  On Oct. 15, Sten adn Ray Guenther, the general manager of corporate services at Intel, made a written request for a 30-minute meeting with Gov. Ted Kulongowki.  They wanted to discuss "Texas Pacific Group and an alternative model for ownership of PGE" and promised to bring along "one or two other CEO;s of industrial electrical users."

How did the Guv respond?  He didn't...for three weeks.  Then his staff informed Sten that Kulongowki would have no time in the next six weeks to meet with a representative of the largest private employer in the state.

"I requested a meeting with some key stakeholderss.  They declined," Sten says.  "My goal isn't to pick a fight with the governor's office, but there hasn't been any help forthcoming from Salem.  I really don't know where the governor is.  I'm not sure we need the governor."  That last sentence, I believe, would serve nicely as the new state motto.

Not everyone in Salem is sleeping.  State Sen. Vicki Walker, D-Eugene, remains an insomniac.  Walker has drafted a bill that directs the PUC to set rates based on actual taxes paid rather than a fictional tax liability.  "This is a real scam on Oregonians," Walker says.  "If it's not Texas Pacific, it's the next buyer."  Sten hastens to add, "The simple fact that you still can't guarantee your taxes will go to the government should tell the whole story on the Texas Pacific deal."

But whatever success Sten has had making that case with Intel and other major industrial customers, he still has work to do in selling the region on the city's dilligence.  "What I'm hearing from my membership as they look at PGE's rates," Canon says, "is we're not afraid of public ownership/private managment if it can be done right."

Analysis and Commentary: Duin offers a blisterning critique of the Governor, in particular for declining to meeet with Intel over its $50 million utility bill, the state's most important employer.  Intel strongly opposes the TPG buyout.  At the same time Duin also applauds the efforts of State Senator Vicki Walker.

2004 November 6  Doctors question long-term effect of OHSU's tuition, enrollment strategy by Patrick O'Neill, Oregonian

The dean of Oregon's only medical school will go before the state's largest physicians organization today to explain the school's high tuition and low percentage of in-state students.

Dr. Walderman said OHSU's in-state tuition fee of $24.,626 for the 2004--4 school year was the highest of 18 state-supported medical schools west of the Mississippi River. But OHSU's out-of-state tuition, at $34,962, was lower than five of the 18 states, making teh state's medical school attractive to non-Oregon students.  By contrast, the University of Washington charges $12,848 in-state adn $29,788 out-of state tuition for its medical students.

Analysis and Commentary:  With issues such as these at OHSU, it's president Peter Kohler has no time for a side job as Chairman of PGE.

2004 November 2  Texas Pacific opposes PUC delay by Gail Kinsey Hill, Oregonian

A building owners group asks to put acquisition of PGE on hold until the Oregon Investment Council's role is investigated. Texas Pacific Group on Monday objected to a motion to postpone the Oregon Public Utility Commission's review of the proposed acquisition of Portland General Electric, calling the request an "untimely back-door attempt to delay these proceedings."  "We think the pace at which the regulatory approvals are going is fine," said Owen Blicksilver, a spokesman for Texas Pacific.

Ann Fisher, an attorney for the Portland Building Owners and Managers Association, asked on Oct. 25 that the PUC delay its review until the state attorney general completes an investigation into the Oregon Investment Council. The investigation, initiated Sept. 29, involves council members' votes that cleared the way for a $300 million investment in a Texas Pacific investment
fund that would be tapped to buy PGE from bankrupt Enron.

"It's time to decide the merits of the application and bring this proceeding to a conclusion," PGE attorney Jay Dudley said in a Monday filing. The PUC's review began in March. Commissioners are expected to issue a final ruling early next year. Fisher stood by her claims. If the commission doesn't suspend the review, then it should condition the proposed acquisition on findings by the attorney general that clear Texas Pacific and Oregon Electric of any wrongdoing, she said. "We need to either suspend the proceedings or hold Texas Pacific accountable for what's going on," Fisher said Monday.

Analysis and Commentary:  Ann Fisher, attorney for commercial utility users, has provided compelling reasons why the TPG deal should be rejected.

2004 October 27  Who Knew? by Nigel Jaquiss, Willamette Week

Until last week, the conventional wisdom had been that only a select group of people knew of Texas Pacific Group's plans to purchase Portland General Electric prior to public announcement of the deal on Nov. 18, 2003. Who knew matters because of the questions surrounding Neil and Diana Goldschmidt's roles in the takeover, which is currently the subject of an investigation by the Oregon Attorney General.

Former Gov. Goldschmidt has said Texas Pacific asked him on Oct. 29, 2003, to be chairman of the company it formed to purchase PGE. That request came only hours after his wife--one of five Oregon Investment Council members--voted to invest $300 million of public employees' pension money in Texas Pacific. If the Goldschmidts knew about TPG's interest prior to Diana's vote, she could be in trouble for investing public money in a deal that could benefit her husband.

But WW has learned that a far larger group of people knew about Texas Pacific's plans--and knew about them much earlier. In fact, Texas Pacific hired a local lobbying firm and a current legislator back in August 2003 to help it develop a public-relations plan for its purchase of PGE. The issue of who knew what and when they knew it resurfaced last week. Testifying during a City Council discussion about the city's stance on PGE, Jay Waldron, a lawyer who represents TPG, said he could not recall when that representation began.

But WW has obtained an Aug. 4, 2003, email that TPG official sent to Waldron and two of his colleagues at Schwabe Williamson & Wyatt showing that they were working on the deal at least that early. (The email was produced during the current Public Utility Commission consideration of TPG's bid.)

Later that month, WW has learned, Waldron brought in Wilsonville-based Pac/West Communications to assist TPG with public-relations strategy. Several Pac/West employees, including former state senator Paul Phillips and his subordinates Scott Bolton, Eric Endicott and Pam Wilson, worked on the project. "I was brought in by attorneys to give process advice and figure out how to make the announcement," Phillips told WW.

State Rep. Mark Hass (D-Beaverton), a former reporter who now runs a communications business, also worked on the project beginning in August. "I was brought in for media strategy and to do some writing," says Hass.

While there's no evidence any of the people TPG hired talked with Goldschmidt or his wife, it's clear that the "secret" was shared by many more than has been previously represented.  "It turns out that a lot of people knew what was going on," says Portland City Commissioner Erik Sten, a critic of TPG's bid. "I find it very hard to believe that the Goldschmidts didn't."

Analysis and Commentary:  Nigel Jaquiss of the Willamette Week has clearly done the best job of defining the key players in TPG's bid to purchase PGE and the similarities to Enron continue to be striking as TPG enlisted the services of a prominent Republican attorney, Jay Waldron, in addition to a leading Democratic State Representative, Mark Hass.  It is pretty easy to understand why Hass has been silent on TPG's effort to purchase PGE, most likely not realizing the TPG was doing nothing more than trying to make an executive comp bonanza out of PGE. 

With the Public Utility Commissioners close to making their decision on the TPG bid, perhaps now is also an excellent time to ask the three commissioners, two of whom were appointed the same month Waldron and Hass were hired, and the third commissioner made Chairman in September of 2003, when they first heard of TPG's interest in PGE.  Did Phillips, Hass, Tom Imeson or any of the other numerous parties discuss this bid with them prior to the appointments?

2004 October 27  Oregon Investment Council Monthly Meeting Summary

Analysis and Commentary:  The Oregon Investment Council was called to order at 9:15 by Chair Gerard Drummond. This monthy meeting occurred at the Willamette Country Club in Canby, Oregon and was classified as a workshop/retreat rather than a normal business meeting.  As a result, the minutes for the previous month were neither discussed nor approved and it was explicitly stated by both Chair Drummond and Chief Investment Officer Ron Schmitz that no public comment would be allowed.  A tape of the meeting was made and is available by contacting the Treasurer's office.

The agenda listed 10 topics, the last of which was "Other Topics the OIC may choose to discuss."  No mention was made in the agenda, and no details provided in writing, regarding the cancellation of the upcoming November meeting in addition to the decision to reduce the monthly meetings in 2005 from 12 to 8, even though the proposed meeting schedule for 2005 in the written packet listed 12 meeting dates.  Click here to see October 27, 2004 Oregon Investment Council Minutes in addition to a summary of a conversation between OIC Chair Drummond and Bill Parish regarding the future of Portland General Electric.

2004 October 20 PDX City Council votes to oppose PGE sale by Jim Parker, KGW News

“TPG’s offer is not good enough. The people of Oregon deserve reasonable rates and a stable electric utility,” said Mayor Vera Katz.

"Well the good news is we don't need their approval," said Kelvin Davis, the chief partner for Texas Pacific, prior to the Portland council vote. He said TPG would continue to work with state regulators in the hopes of gaining approval and emphasized that his investment group has a history of buying companies and improving them.  "Whether you look at Continental Airlines which we invested in for many years or J-Crew, the popular retailer, or Petco," he explained.

Analysis and Commentary:  I attended this City Council meeting. A few highlights included Schwabe attorney Jay Waldron testifying that he represented both Oregon Electric and TPG yet refusing to publicly disclose exactly when he began representing each firm upon being questioned by the Council.  Perhaps Mr. Waldron is concerned about a subpoena regarding the unfolding scandal regarding Neil Goldschmit's involvement with TPG.  Waldron cited client confidentiality. Another supporter of TPG, who claimed he represented various small businesses, refused to disclose who the top funders were in his not for profit organization upon being questioned by Mayor Katz.  When the City shows me its financial statement, I'll show them who backs us he noted.  Apparently this TPG ally doesn't realize that the City publishes its financial statements and operates under a significant public financial microscope.

TPG partner Kelvin Davis highlighting TPG's success with airlines, fashion and pet supplies speaks to their total lack of preperation with respect to managing PGE, a regulated utility.  It also raises the obvious question, is TPG desperate for PGE's significant cash flow in order to pay off investors who are demanding distributions resulting from other investments that are cash poor yet rich on accounting gimmicks?  It is not known how much creative accounting TPG does yet it is clear that they receive no oversight from the SEC and that they also self evaluate their investments for purposes of communicating returns to major investors, most of whom are public pensions.  The similarity between this practice and how Charles Keating operated, made infamous in the Savings and Loan scandal, is striking. Keating later served 5 years hard time in a real prision and still causes most people over 60 to bristle at the sound of his name.  Whether or not Kelvin Davis and David Bonderman are Keating proteges remains to be seen yet the lack of oversight combined with there preying on the public pension system is concerning.

2004 October 20  For ratepayers, PUC must tread carefully in PGE deal, In My Opinion by Ann Fisher, Oregonian

Think the Oregon Public Utility Commission will protect your interests in the proposed acquisition of Portland General Electric by the Texas Pacific Group?  Think again.

Unless the PUC forces Texas Pacific -- as a condition of the approval of the sale -- to accept PUC regulatory authority and to give value to Oregon ratepayers, the PUC will be powerless to protect Oregon customers from actions taken by Texas Pacific and powerless to enforce any conditions of a subsequent resale of the utility. The actual applicant seeking authority to purchase PGE is Oregon Electric Utility Co., a shell corporation indirectly owned by Texas Pacific. Nothing in utility regulations requires TPG, the de facto buyer, to directly operate the utility or to accept the jurisdiction of the PUC. It is this anomaly that explains the Texas group's interest in PGE. In other words, Texas Pacific can "flip" PGE to another set of owners outside of the PUC process.

What can be done? The PUC must require that Texas Pacific accept PUC authority as a condition of the sale and to give something substantial in exchange for the extraordinary value TPG will receive in the sale. That is the minimum required to protect the public interest. We cannot risk another set of Texas raiders leaving us in the dark. And if Texas Pacific threatens to take its marbles and go home? The PUC can reject the sale and allow distribution of PGE's stock to large and small investors who, like Oregonians, were burned by Enron.  PGE then would be a publicly traded, stand-alone company, fully subject to continuing regulatory oversight by the PUC.  Considering the alternative, maybe that wouldn't be so bad.

Analysis and Commentary:  It is surprising that leading reporters covering this story have not made this key point, that Texas Pacific will escape all PUC oversight if its proposal is approved.  Fisher does however simplify somewhat the impacts of a stock spin since many of the leading creditors are the same firms that structured Enron's deals, i.e. Credit Suisse.  A much stronger alternative would indeed be a Municipal Utility if it were privately managed and provided significant negative consent rights to the largest industrial users.

2004 October 17 The PGE deal:  To wire or unplug? by Gail Kinsey Hill, Oregonian

Since announcing the $2.35 billion purchase proposal last November, Texas Pacific has angered public officials, alienated consumer groups and sparked investigations into the Oregon Investment Council and a top Portland law firm.

"It's all bigger than life," said Len Bergstein, who heads political consulting firm Northwest Strategies in Portland. "You have historic battles over public power, you have corporate scandals playing out, you have personalities of soap opera quality."

Sten takes the issue of attitudes a step further. "They're arrogant," he said. "There's a condescending tone to their whole argument. They think that just because they have access to a whole ton of money, they shouldn't be questioned. . . . There's a complete lack of understanding of the culture of this state."  Sten said the city might try again to buy PGE if the Texas Pacific deal crumbles. Enron rebuffed earlier efforts by the city to buy the utility for $2.33 billion, according to documents obtained by The Oregonian.

Critics immediately zeroed in on Kohler, questioning whether the head of one of the region's largest employers had the time or the objectivity to lead the board of the state's largest utility.  Kohler, accustomed to respect, said he was "surprised by the vitriolic nature of the attacks."

Northwest Strategies' Bergstein, who often works with large corporate clients but is not involved in the Texas Pacific deal, cautioned that the surrounding noise is too loud to ignore. "They might think this is a business deal, with a business heartbeat and a rational business core," he said. "But when you have multiple crises erupting one on top of the other, it's almost impossible to deal with it in a rational way."

Analysis and Commentary:  Gail Hill wrote an excellent article yet a few important clarifications might include the following.  Len Bergstein is now a key advisor to the Jim Francesconi campaign for mayor and therefore is putting his stamp of approval on the TPG deal since Jim is publicly stating he will not support a City led plan.  Bergstein is clearly one of the most powerful and effective lobbyists in the State, representing Clear Channel and other major firms in addition to playing a key role in putting the measure to abolish SAIF on the ballot for Liberty Northwest. A second key clarification is the fact that Peter Kohler is a public employee and participant in the very same PERS system contributing to the funding of the TPG buyout.  Kohler will indeed receive the highest PERS pension in history given his salary is the highest for any pubic official in the history of Oregon, at $600K per year.  For Kohler to expect respect in a time in which he is cutting back on various programs such as nursing and simultaneously positioning himself for an executive comp bonanza is somewhat unrealistic. Perhaps he will immediately follow the money and resign from OHSU if the TPG deal is approved.

Another timely observation might be to determine whether Lee Beyer, John Savage or Ray Baum had any conversations with anyone regarding the possibility of TPG purchasing PGE prior to Beyer being made Chair of the three person commission in September of 2003.  Savage and Baum were appointed in August of the same year.  A casual observer might conclude that the commission was "stacked" prior to the deal being announced and it is quite remarkable that this panel will determine the future of PGE and still no journalist has clearly reported whether any of them knew of the TPG deal prior to the deal being announced.

2004 October 15 New TPG Board Suffers the Lingering Fragrance of Goldschmidt by Lisa Baker, Brainstorm NW Magazine

The feeling is promulgated by his any ties to business and government groups-ties that separate him by the thinnest of degrees from many seats of power in Oregon.  These ties are most obvious on the Oregon Investment Council.

Bill Parish, a Portland investment analyst and frequent critic of the Oregon Investment Council, says Goldschmidt could clear the air by simply providing a client list, something the firm has declined to do.  Diana Goldschmidt, he says, should explain why she abstained from the council vote involving Credit Suisse.  Even today, with all the controversy, Neil Goldschmidt hasn't disclosed his client list.  Is Credit Suisse a client?

He says Oregonians should be suspicious of the various links to Goldschmidt and his lobbying firm, now called Imeson Carter.  Even today, TPG is a client of Goldschmidt Imeson, Parish says.  They'll say Imeson and Carter, but it's still Goldschmidt's income stream.  He's getting paid.  They didn't give him a pink slip on his last day and walk him to the door.

While there are few on the proposed Oregon Electric Utility Board who lack association with Neil Goldschmidt, there are two local appointees further removed from the rest. Maria Eitel, Nike's Vice President for Corporate Responsibility and Duane McDougall, who was Chairman and President of Willamette Industries before Goldschmidt helped Weyerhaeuser take it over.

A City of Portland ownership is particularly risky. I don't see where the city runs anything very well, McDougall says. Eitel agrees.  She says she's known both Davis and TPG partner David Bonderman for nearly a decade and proclaimed their company a gold standard investment house whose reputation for building up broken down companies is well known.

Analysis and Commentary:  Lisa Baker does an excellent job of identifying numerous aspects to the TPG situation not covered elsewhere.  As she noted, McDougall and Eitel are clearly the best choices TPG made for Oregon Electric's board.  Chosing Peter Kohler to be Chairman, a public official and participant in the Oregon PERS system, does however speak volumes to their lack of common sense.

What none of these board members will acknowledge is that a city purchase would involve private management of the utility and a management team much more likely to perform well than this board composed of people with no utility experience hanging out for an executive comp bonanza provided by TPG.  Although Eitel is a terrific PR person, it is also somewhat startling to hear how she refers to TPG as a gold standard investment house.  That may be good PR yet anyone familar with there business practices would know otherwise.

Perhaps PGE will indeed be TPG's undoing due to the increased scrutiny of its business practices.  Andrew Weiderhorn, nor serving time in federal prison, was also a high flyer yet after departing from his loan collection business and purchasing a small bank the additional oversight led to his undoing. Purchasing companies like Bally Shoes out of bankruptcy and stripping them of value may be TPG's strength yet the transparency created by purchasing a regulated utility is something they should clearly avoid.  Complete story available at

2004 October 15 Peter Kohler Addresses City Club and Declines to Answer Question provided by Bill Parish

Today I provided Mr. Kohler a specific question prior to his talk, copying local journalists, with the hope that he would respond.  The question was as follows:

"You are oregon's highest paid public official at $600K per year, including a free house and generous expense accounts. Basic math also indicates you will receive the highest pers pension in state history given that pers does not now cap benefits based upon salary.

Remarkably, you are also planning to do a "side gig" as Chairman of the new PGE in which you stand to earn hundreds of thousands dollars each year.  My question is, if someone were able to demonstrate a striking similarilty between the business practices of David Bonderman of Texas Pacific and Charles Keating, the financier that took down the S&L industry, would you consider resigning from the PGE post."

Analysis and Commentary:  None

2004 October 13 Parish & Company Testifies Before City Council Regarding the Future of PGE.

This morning Bill Parish of Parish & Company briefly addressed the Portland City Council regarding the future of Portland General Electric. The purpose of the presentation was to discuss items noted in the reference on October 11, 2004, in this report, in addition to clarifying the importance of shining more light on the decision making process at the Oregon Public Utility Commission.  Key areas discussed included the similarity of Charles Keating and David Bonderman's business practices and a strategy for preventing a quick spin of stock to creditors when the TPG deal is withdrawn.  An updated alternative to the TPG proposal was also submitted today.

The Oregon Public Utility Commission will soon render its decision on the TPG transaction yet the Commission appears to be compromised.  Two of the three commissioners were appointed in August 2003 and the third, Lee Beyer, was made Chairman of the PUC in September 2003.  This is roughly the same time period which has generated so much controversy for other parties involved.

None of the commissioners have yet disclosed whether they knew about TPG's bid for PGE and the involvement of Goldschmidt, Carter Imeson at the time of the appointments in August or Beyer being made Chairman in September. This is particularly important given that Neil Goldschmidt's partner Tom Imeson was in charge of Governor Kulongowski's transition team and also had a key role in many high profile appointments.  Each commission member should now officially state whether or not they had any conversations with Imeson or other representatives of his firm regarding the future of PGE prior to the TPG deal being formally announced. Today Imeson still maintains TPG as a client.

Other board members, in particular Duane McDougall, the former President of Willamette Industries, and Tom Walsh should also now be questioned about when they first learned of Goldschmidt's and others involvement in this deal.

Regarding Keating, he was famous for showering cash on employees, cash pilfered from savings accounts via poorly disclosed and interlocked business dealings. Bonderman is most famous for spending $10 million in Las Vegas for his own birthday, featuring one set of music by the Rolling Stones, and creating executive comp bonanzas for participants in his deals, in this cash Peter Kohler, current President of OHSU.

Clearly, it's time for Bonderman to withdraw TPG's bid and avoid the inevitable scrutiny and legal actions that will develop involving various parties if the deal is approved by the Oregon PUC.  Aggressive action by the City of Portland, given other developments, would certainly contribute to such a withdrawal.

2004 October 11  Email to David Bonderman from Bill Parish titled "Charles Keating, David Bonderman, OR Public Pension, PGE and Glenn Kramon Story Request"

Bcc: Other interested parties including Gretchen Morgenson, David Cay Johnstone and Floyd Norris of the NY Times.  Morgenson has received a pulitzer for stories regarding accounting and compensation issues, Johnstone received one on tax matters and, it seems to me, the timing is right for Norris or another reporter at the times to receive one for a series on the public pension system.  In January of 2003 Parish and Company identified the public pension system as the most important "issue" in the financial markets over the next couple of years. The times reporters are all bcc'd, while their editor Glenn Kramon is cc'd on this note along with pulitzer prize chair Seymour Topping of Columbia University. Johnstone will be speaking here in Portland before the Portland City Club this fall. Norris is one of the nations leading business reporters and covered Arthur Anderson long before its demise.

Dear Mr. Bonderman,

You are obviously working on numerous big deals and have lost track of what is happening here in oregon. Barely a day goes by without a new controversy surrounding your efforts to acquire PGE. We read about the State Attorney General's Office investigating, the FBI investigating, etc.  It is simply unbelievable. Please do review this archive of key stories with analysis and commentary. Just yesterday Steve Duin of the Oregonian wrote a column on your colleague Mark Dodson, CEO of Northwest Natural Gas.  The smart decision is to withdraw the bid on pge for the following reasons:

1)  Charles Keating Analogy:  The S&L industry was a great industry and acted as a true economic catalyst.  Only today are we again seeing strong growth in local and regional banks.  Most people over 65 however still bristle over the name Keating since many lost their life's savings. My point is that the public pension system is now also vital to the nations economy, representing 8 of the largest 10 pension funds, and your bid for PGE is undermining its credibility. You may be doing a
great job overall yet credibility is important due to the inherent confidence required for the system to work. Of course the public pension system is also funded by taxpayers, not investors.

Keating was a key factor in upending the S&L industry and many are now seeing a parallel, ridiculous as this might sound to you, in the way you are handling this PGE takeover.  Think about it.  Your primary source of funds is the life savings of public employees, their pensions, and you offer almost no disclosure regarding your business activities.  This may be fine for most investments yet a regulated utility key to the regions economic security?  You are looking desperate for cash.

Keating did with the S&L's what some fear TPG may be doing with public pensions.  The good news is that by backing away from the PGE deal and focusing elsewhere you should be able to repair your image.  After all, according to the Oregonian, your firm is now being considered part of a criminal investigation associated with receiving $300 million in public funds just before making Neil Goldschmidt, someone you indicate no one at your firm had ever met prior to making him Chairman of the new PGE. For a history buff like yourself, why would you offer the Chairmanship of your most important business to someone you had never met?

In any event, it's a mess.  By the way, Kelvin Davis testifying before the City Council that the local board you set up would have substantial control seems unusual since Peter Kohler notes his role as Chairman won't take much time nor involve him in many key operational issues. A few of your other planned board members for the new PGE are also copied on this note, including Tom Walsh, Duane McDougall and proposed Chairman Peter Kohler.

2)  Concern over TPG's Cash Flow:  Many are asking, why is TPG so determined to purchase PGE.  Is it desperate for the cash flow to satisfy necessary investor distributions in other areas?  Cash flow is of course what ultimately caused Keating so much difficulty.  Your considering the $240 million in cash on PGE's balance sheet to be part of your bid further fuels these concerns.  Add to that the notion that you are "self determining" the value of the investments in your portfolios.  I suppose
that is understandable since many of your investments are not liquid nor publicly traded.

You might consider an independent audit to verify the "going concern" status of your cash flow.  My suggestion would be to hire a regional accounting firm, rather than one of the final four. Perhaps you have already provided such a certification to Oregon's Chief Investment Officer Ron Schmitz?  We are truly lucky to have Ron here in Oregon and many empathize with his being stuck in a tough political situation.

3)  Political Considerations:  The Oregon State GOP is running television ads trying to discredit the Governor, Secretary of State, AttorneGeneral and State Treasurer based upon this whole mess.  They are, like Neil Goldschmidt, all Democrats.  Regarding the national scene, your outspoken support of John Kerry for President strikes many as Charles Keating like, especially given that the current SEC Chairman Bill Donaldson is pushing for funds like yours to register with the SEC.  Of course this may not be a fair analogy, yet Keating did play both sides of the political spectrum well and ensnared prominent democrats like John Glenn and republicans including John McCain, both of whom became known as part of the Keating five.  To McCain's credit he later became a champion of financial reform and integrity, even leading a failed effort with respect to the expensing of stock options in the US Senate.

4)  Discrediting the Fine Image of the Gates Foundation (Bill Gates Sr. is bcc'd on this note):  The Gates foundation is doing a lot of fine work yet as the second biggest investor in your buyout plan for PGE, standing to own 10 percent of the utility, you may indeed draw them into a criminal investigation and require that its manager bill larson disclose what and when he knew about this whole situation.  He may have known nothing yet it's a small community up here in the NW.

5)  Preventing a quick spin of the stock to creditors concern:  The City is now completely aware of this potential and therefore any effort by Milbank to quickly spin the stock to creditors without accepting a bid from the city for the same amount you offerred would be a gross breach of its fiduciary responsibility to creditors.  Luc Depins of Milbank is copied on this note.

Summary:  TPG has basically become a lightening rod of controversy up here, what most call Enron part II, whether fair or not, and the sensible thing is to withdraw and minimize the damage. We both realize that history is littered with situations in which people like yourself greatly magnify problems due to a certain inflexible mindset. It seems hard to believe that you are really that desperate for PGE's cash on its balance sheet.

I sincerely hope you appreciate this heads up and my apologies for the direct nature of this note.  I would be glad to chat anytime. As you probably know, i believe that a municipal utility with private management and fixed income based public pension funding from existing pools of public pension assets, thereby eliminating the need for more public debt, i.e. revenue bonds, is the most sensible solution for pge, especially if coupled with negative consent rights over the city are provided to these debt holders in addition to the largest 10 industrial users. Craig Barrett, AndGrove, John Miner and Intel CFO Andy Bryant are copied on this note. Please do also read the news story summary and related analysis and commentary section.

2004 October 10 Mark Dodson seeks to clear the air by Steve Duin, Oregonian

Beginning in July 2002 -- and six times over the next year -- Mark Dodson, the chief exec of Northwest Natural Gas, and City Commissioner Erik Sten met over breakfast or the phone to discuss Portland General Electric. Dodson had already made (and withdrawn) his bid to buy PGE; Sten was contemplating the city's own. As they compared notes, the two danced around or bumped up against various confidentiality agreements that limited full disclosure, but Sten was always armed with two assumptions:

The first? "Mark knew more about the structure of PGE than anybody in town," Sten said. The second? Their mutual goal in these chats was good public policy, not looking to gain some private advantage in the quest for the utility. That's why Sten was surprised to learn recently that Dodson and Northwest Natural were involved in the bidding for PGE -- and involved with Texas Pacific -- as late as April 2003. "I didn't realize," Sten said, "he was still in the game. He gave me no sense of that. I didn't find out until this summer he'd been working with Texas Pacific."

On Friday, Dodson agreed to clear up a little of the confusion about his conversations with Sten and his lack of the same with Goldschmidt, one of his better friends. The same confidentiality agreement governed both relationships, he said. "When you're in the industry, you just don't make these kinds of disclosures," Dodson said. "The risks are too great."

Dodson said Sten came seeking information -- on Northwest Natural's $2.9 billion bid for PGE, which was scuttled by Enron's bankruptcy -- not advice. Sten had a confidentiality agreement with Enron; Dodson had one with TPG. The latter was inked in the fall of 2002 when Northwest Natural, armed with Texas Pacific financing, took a second look at buying PGE at auction. In April 2003, Northwest Natural finally decided not to make an offer and gave TPG permission to bid on its own. Dodson argues he wasn't a "player" in PGE's future while meeting with Sten: "I was not, in fact, in the game."

Analysis and Commentary:  Duin does an exceptional job of piecing together details surrouding NW Natural's relationship with TPG. In the article Dodson clearly indicates that he knew about TPG's bid to purchase PGE in April of 2003, when he gave TPG permission to pursue its own independent bid.  This was shortly before I met David Bonderman at the May 2003 meeting of the Oregon Investment Council, the meeting in which he spoke before the council regarding "deal flow in the power sector."  Clearly, Bonderman knew all about TPG's bid for PGE while he sat before the council.

Since Neil Goldschmidt's consulting partner John Carter has been on NW Natural's board since 2002, see link at follow
, it would also seem reasonable to surmise that Carter knew of TPG's bid at the same time. Such things are generally disclosed to board members. Also on NW Natural's board is Scott Gibson who was simultaneously serving on OHSU's board along with Neil Goldschmidt's other consulting partner Tom Imeson.  See OHSU link at  and Gibson profile, Imeson went off the board in mid 2004 and is no longer listed.

One would clearly expect Gibson to also have known about TPG's bid for PGE, since Gibson is on the boards of both NW Natural and OHSU,  yet neither he nor Carter have yet been interviewed by the media.  Current OHSU President Peter Kohler, Oregon's highest paid public official, has since accepted a "side job" as Chairman of PGE, a role in which he will earn hundreds of thousands annually.  Remarkably, Kohler has publicly stated that he sees no conflict regarding his dual roles, even though OHSU, the regions largest employer and participant in the public pension system, is now burdoned with numerous significant challenges. Since most of the money to finance the PGE buyout is coming from public pension dollars, including his fellow employees, many argue that he is effectively leveraging growth in his personal assets off of the pension contributions of his fellow public employees.  Of course these OHSU employees may also get a return on their investment but nothing like the executive comp bonanza Kohler is positioned to earn.

Given that Dodson, Gibson and Carter, as CEO and board members respectively of publicly traded Northwest Natural Gas are all regulated by SEC,  one has to wonder if any rules have been broken given the interaction between TPG, Northwest Natural and the Oregon Public Pension system whose largest private equity investment is TPG.

Disclosure: Although many of my investment management clients own Northwest Natural Gas stock due to its strong dividend and market position, I maintain somewhat concerned that Mark Dodson may not be ideally suited as its CEO.  Dodson came directly from the Ater Wynne law firm and many fear that, as Gerry Drummond did at Nerco, the Pacific Power subsidiary that incurred staggerring losses due to a failed merger and expansion strategy, Dodson is too focused on doing big merger deals and not focused enough nor equiped with the nuts and bolts operational skills to adequately manage Northwest Natural. He is currently enjoying the fruits of NW Natural's previous CEO's excellent work in the early 1990's.  Drummond was also an attorney that came to a large Oregon utility, Nerco, with limited operational experience and is now interestingly Chair of the Oregon Investment Council, the group managing Oregon's public pension assets.  Drummond and Treasurer Randall Edwards have both been reported to have known about TPG's intent to purchase PGE prior to voting in October to committ another $300 million in public pension assets to TPG.

Many observers of this whole situation are now wanting to know exactly when the three Public Utility Commissioners became aware of TPG's intent to purchase PGE.  Two of the three commissioners that will vote on the deal were appointed in August of 2003, long after various utility executives and state officials knew about the deal.  This could be important since Tom Imeson led the Governor's transition team and has had a strong hand in numerous such appointments.  Imeson's lobbying firm does of course now also acknowledge that TPG is one of its clients. According to news accounts, none of the three have yet been questioned nor received a supeana by investigators.

2004 October 6 Texas Pacific Plans not a secret by Jeff Manning, Oregonian

In August 2003, Texas Pacific Group searched for suitable heavyweights in the Portland business community to help lead the investment firm's planned purchase of Portland General Electric. For advice, Texas Pacific partner Kelvin Davis turned to one of the firm's chief contacts in Portland -- Mark Dodson, chief executive officer of Northwest Natural. What about Neil Goldschmidt? Davis asked Dodson.

The conversation, confirmed by two sources close to the PGE transaction, adds to evidence that TPG's play for PGE last year was not as closely held a secret as it was once thought to be. It also shows that Dodson, a close friend and longtime professional ally of Goldschmidt, knew not only about TPG's plans for PGE but also that the firm considered enlisting Goldschmidt to grease the deal.

The Oregon attorney general's office last week opened an investigation of Goldschmidt's connections to Texas Pacific. At issue is whether Goldschmidt or his wife, Diana, was secretly in league with Texas Pacific when she cast a vote Oct. 29, 2003, on the Oregon Investment Council to place $300 million in state employee pension money with Texas Pacific. The central issue facing investigators is whether Neil Goldschmidt knew of Texas Pacific's intentions before the vote.

By August 2003, about two months before the Investment Council's vote, Texas Pacific had told at least six Oregonians of its plans, all of whom knew either Goldschmidt or his wife. They include Dodson; Investment Council Chairman Gerard Drummond; state Treasurer Randall Edwards, who also sits on the council; and three treasury staff members. Except for Dodson, all were involved in the Oct. 29 vote. Yet Goldschmidt, the former governor turned powerful business consultant who counted electric utility PacifiCorp as one of his largest clients, was in the dark, according to his wife.

Diana Goldschmidt has repeatedly said she and her husband did not learn of Texas Pacific's interest in hiring him until after the Oct. 29 Investment Council vote. Texas Pacific declined to comment for this story. Last week, the investment fund said "no one at Texas Pacific Group had ever met or spoken with Neil Goldschmidt at any time prior to Mrs. Goldschmidt's vote on Oct. 29." Gov. Ted Kulongoski, citing the ethical questions that have arisen in the aftermath of the vote, last week removed Diana Goldschmidt from the Investment Council after she declined his request to resign.

Goldschmidt and Dodson go back decades. Dodson's wife, Ruth Ann, was a key Goldschmidt aide for years. Goldschmidt appointed Mark Dodson to the state's higher education board, and Dodson was a founding partner in the Ater Wynne law firm, which worked closely with Goldschmidt's consulting firm.

Dodson enjoyed a unique bird's-eye view of the PGE sweepstakes. His company, Northwest Natural, made its own run at purchasing its larger next-door neighbor in 2001 and 2002. It announced in October 2001 that it had reached a tentative deal to buy PGE from Enron. Texas Pacific first learned of the PGE opportunity through Northwest Natural. The company had agreed to help finance Northwest Natural's bid for PGE.

Northwest Natural, however, called off the purchase in May 2002 out of concern for PGE's legal liabilities. Sometime afterward -- it's unclear precisely when -- Texas Pacific informed Northwest Natural officials that it intended to make a run at PGE.  Texas Pacific's chief rival in the PGE bidding also turned to Dodson for advice. Erik Sten, the Portland city commissioner who advocated a city takeover of PGE, went to Dodson several times in 2002 and 2003 for guidance on how best to negotiate with Enron, PGE's bankrupt owner. But last November, Texas Pacific won out over the city and announced that it had reached a tentative deal to buy PGE for $1.25 billion in cash and $1.1 billion in assumed debt.

Texas Pacific's past association with Dodson and Northwest Natural have spurred speculation that he is angling for some kind of broader executive role with PGE or perhaps a consolidated PGE and Northwest Natural, if Texas Pacific's purchase is approved by state utility regulators.

Analysis and Commentary:  If Texas Pacific is telling the truth, they are saying that they were offerring the Chairmanship to what would be their most important investment, PGE,  to someone they had never met!  Now that's a halo effect.  Making this even more surprising is Kelvin Davis testimony before the Portland City Council and Oregon Public Utility Commission stating that Oregon Electric, a local shell organization set up by TPG to demonstrate local ownership, would be independent in its operation of PGE.  This does seem somewhat odd since even Neil Goldschmidt has stated he had no utility experience, as has his successor in the same role as Chairman, OHSU President Peter Kohler.

2004 October 3 High power rates in the Northwest bring hardships by Jeff Manning, Oregonian.

The double-whammy of recession and surging power costs have hammered residential and business ratepayers alike. Cash-strapped PGE customers are seeking public financial help and getting disconnected in larger numbers. Companies have laid off employees and postponed improvement projects. Unlike PGE, a state-sanctioned monopoly, the business customers point out they face tough competition. Simply charging more to make up for higher power rates often is simply not an option.

Increasing energy costs also have taken a toll on industrial and business customers, some of which use vast amounts of power and face global competition. West Linn Paper Co. last year laid off 50 employees and slashed pay 9 percent for everyone else, said Brad Mongrain, the company's controller.

Analysis and Commentary:  Manning does an excellent job of bringing the importance of reasonable power rates into perspective, both for industrial and consumer ratepayers.  Clearly, job losses resulting from squeezed budgets resulting from rising power rates have been significant.

2004 October 3 Utility rates on upward track by Gail Kinsey Hill and Jeff Manning, Oregonian

Texas Pacific Group has promised to cut utility rates by $15 million if it succeeds in buying Portland General Electric. State regulators say that's not enough -- they're demanding $75 million.

The deal-making might give PGE customers the idea that monthly bills finally could drop from the bruising levels of the past three years. If so, they should think again. Those bills are going up, not down. Even the rate credit outlined by regulators would cut a scant 75 cents from monthly charges and would last five years. What's more, PGE is planning a 1.5 percent rate increase for all customers Jan. 1, enough to wipe out the effect of the credits, and another jump of nearly 10 percent by 2007.

Among the factors driving up expenses: premium prices for natural gas, the fuel used to operate the utility's thermal plants; environmental requirements necessary for dam relicensing; and more costly contracts to buy hydropower over the long term.

"We're keenly focused on what's going on with natural gas," said Jim Piro, PGE's chief financial officer and treasurer, who pegs acceptable levels at about $3.50 per million Btu. "What drives power costs, primarily, is natural gas."

"Utilities are like generals -- always fighting the last war," said Ken Canon, executive director of Industrial Customers for Northwest Utilities, a trade association that represents manufacturers and other large industrial users of electricity. Canon calls PGE's decision to build Port Westward "questionable," given natural gas prices and a current surplus of electricity in the Northwest.

PGE officials say they carefully analyzed whether to build or buy power plants, or to seek long-term power contracts with independent producers. The Port Westward project, which will be built next to an existing PGE facility, was the cheapest, most efficient option, the utility concluded. Groundbreaking for it is set for Thursday.

Lee Beyer, the PUC chairman, repeatedly has said PGE's rates are too high. Though he acknowledged that Port Westward and rising energy costs make it harder to cut rates, he remains unconvinced that Port Westward is PGE's best option.

Although the commission approved PGE's resource plan, it did not specifically sanction Port Westward. When PGE submits a formal request to increase rates to recover construction costs and operate the plant, "they're going to have to demonstrate it's the least costly way to go," Beyer said.

"I'm still hopeful rates will come down," he added. "It may be Pollyanna-ish, but I'm not willing to give up." As for Texas Pacific and its acquisition proposal, Beyer stresses that the commission's objective is to protect PGE customers from unreasonable rates. "We're not in the business of guaranteeing profits for Texas Pacific," he said.

Analysis and Commentary:  Hill and Manning are the first to truly bring TPG's ridiculous proposal for rate cuts into perspective, the average consumer rate credit being less than 75 cents per month or roughly half the cost of a regular cup of coffee at Starbucks.  One would think that industrial users would be particularly unmoved by these credits yet there lobbying group seems to still be focusing on an overall dollar amount which serves to only disguise the lack of concessions.  Also noteworthy is the debate over whether the new Natural Gas plant makes sense given the current surplus of power in the Northwest.  Since TPG has significant partners who are heavy into natural gas production and distribution, it is interesting how little scrutiny this has obtained.  These partners could benefit greatly from excessive use of Natural Gas production facilities by PGE.

2004 October 2 Mayoral debate takes on tough tone by Henry Stern, Oregonian

Francesconi and Potter clashed over campaign finance, the fate of Portland General Electric, their leadership qualifications and who could fix City Hall relations with business. In the May primary, Potter got 42 percent of the vote in a 23-candidate field. Francesconi placed second with 34 percent and has sought to turn up the heat on Potter.

Potter, Portland's police chief from November 1990 through June 1993, said he was not a career politician and would not be beholden to anybody. Potter limited individual donations to $25 in the May primary and $100 for the Nov. 2 general election. Francesconi has not limited contributions and has raised about $1.2 million.

Potter responded that condemnation of PGE would be a last-resort option that must be preserved to protect ratepayers. Francesconi said that he has protected ratepayers by raising rate-relief questions directly about Texas Pacific's proposed purchase of PGE but that he opposes condemnation.

Analysis and Commentary:  See previous analysis under October 1, 2004 reference.

2004 October 1 City Club Mayoral Debate between Tom Potter and Jim Francesconi

Analysis and Commentary:  Today Tom Potter debated Jim Francesconi in the mayoral race in what has historically been one of the City of Portland's most important forums.  Tapes can be ordered at  The debate was moderated by Randy Gragg, a reporter from the Oregonian who provided a most unusual approach. Those interested might simply listen to the first 10 minutes, available at

Prior to the debate's beginning Gragg criticized both candidates in his introduction, setting a dark tone, and then went on to provide a warm introduction for Mr.Francisconi and trivialize how Mr. Potter's candidacy originated in his bathroom while sitting on the toilet.  Other irregularities included Mr. Potter losing a coin toss and going first in his opening remarks and again first in his closing remark.

Regarding PGE, in the debate Mr.Francesconi continues to compromise the City of Portland's negotiating position with TPG for his own personal political gain by stating he will not support condemnation of PGE under any  circumstances.  At the same time he is attempting to persuade the public that he has good business judgement and will look out after businesses and citizens. Although Francesconi is now on record as officially opposing the TPG deal, he was the strongest supporter of TPG on the City Council and immediately supported the deal without knowing any specifics, simply because it involved his long-time political ally Neil Goldschmidt.  Whether or not Francesconi had been briefed prior to other City Council members is not known.

Francesconi has clearly been and continues to be TPG's strongest ally on the council and even though now officially not in support of the deal, he has done nothing substantive to advocate an alternative, effectively positioning TPG to get the utility. Prior to the debate Francesconi said hello and put his hand on my shoulder. With a smile I stated "public power, it may be the difference Jim."  He replied, with a smile, you may be right and went on the use the phase "dont' support condemnation" several times in his remarks..

It seems especially unfortunate that Francesconi has been privileged to sit on the City Council for 8 years yet now  is sadly selling out the City of Portland's negotiating strength by using Mr. Potter's statement that he would consider condemnation as a last result while Francesconi will not consider it under any circumstances.  Repeating the words "don't support condemnation" seems to have become Francesconi's holy grail like plan to gain the mayor's seat.

Like Mr. Potter, I am also strongly opposed to condemnation, frankly it is not necessary, and this is what Francesconi should be stating because its threat is the most important bargaining tool the City has to negotiate a fair deal with TPG and prevent an Enron like plundering of this utility that serves 40 percent of all Oregonians.

It is disappointing for a guy with so much potential like Francesconi to go on and itemize how he will support the business community, a community that has seen utility rates climb 50 percent in perhaps the cruelest tax of all. Perhaps he, like many of Mr. Goldschmidt's closest allies over the years, simply needs to adopt a new more local business/citizen centric path, perhaps beginning with genuinely supporting campaign finance reform.   Francesconi's supporters on his website include Diana Goldschmidt, Fred Miller (previously the public face of Enron in Oregon as PGE's communications director) and co-chair Harry Demorest (previously managing partner of the Arthur Andersen office in which PGE was a key audit and consulting client during his tenure in the late 1980's.)

2004 October 1 Ousted official may not be the last by Jim Redden and Kristina Brenneman, Portland Tribune

Attorney General Hardy Myers said he won’t rule out the possibility that the investigation into Diana Goldschmidt’s actions before the state invested $300 million in pension funds could result in a wider probe of other public officials.

First, Myers said, they have to resolve the issue of whetherDiana Goldschmidt was aware that Texas Pacific “was inviting (her husband) Neil to participate in the PGE takeover.” If the facts indicate she did, Myers said any charges of misconduct or public investment fraud would be forwarded to the district attorney’s office and the ethics board. He said the investigation likely will take about three months to complete.

On Oct. 30, the day after the investment council’s decision to increase its investment in Texas Pacific’s Fund IV, partner Kelvin Davis met with Neil Goldschmidt to offer him a position on the company board that would oversee PGE. Texas Pacific announcedNov. 18 that it intended to buy PGE for $2.3 billion and created Oregon Electric to oversee it. The sale is under review by the Oregon Public Utility Commission.

Texas Pacific’s Blicksilver said no one from the company spoke to Neil Goldschmidt or his firm before the council vote. However, when asked if Oregon Electric board member Gerald Grinstein, who knew of the Texas Pacific-PGE deal since its 2002 start, spoke to Goldschmidt before Oct. 29, he said: “We don’t believe so. We don’t believe anyone had a conversation with Neil before then, to the best of our knowledge.” Grinstein, a longtime friend of Goldschmidt’s, did not return phone messages from the Tribune.

Analysis and Commentary:  It is surprising that State Attorney General Hardy Myers, a fellow Democrat of Neil Goldschmidt's, would use words such as "charges of misconduct and public investment fraud" given that no official charges have been made.

As CEO of Delta Airlines, an SEC regulated publicly held company, Gerry Grinstein should probably also publicly state whether or not he discussed TPG and PGE with Neil Goldschmidt. It is reported that Grinstein and David Bonderman are very close and it's hard to imagine that a student of history like Bonderman, BA in history and Russian from the University of Washington, would not officially speak with Goldschmidt before offerring this key role.

2004 September 30 Goldschmidt inquiry may expand by Jeff Manning, Oregonian

Investigators for Oregon Attorney General Hardy Myers will focus on possible public investment fraud and official misconduct in their review of circumstances surrounding a $300 million state pension investment that figured in Diana Goldschmidt's removal from the Oregon Investment Council.  A spokesman for Myers said that although Goldschmidt's role in authorizing the investment prompted the investigation, the focus could broaden to include others depending on what is discovered.

Goldschmidt was ousted from the five-member investment council Tuesday by Gov. Ted Kulongoski after she refused his request to resign. Criminal charges are possible if state investigators determine Goldschmidt lied when she claimed she didn't know of the financial ties between her husband, Neil Goldschmidt, and Texas Pacific Group at the time of the Oct. 29 vote.

The vote gave the go-ahead for investing $300 million with Texas Pacific. The next day, according to the Goldschmidts, Texas Pacific asked Neil Goldschmidt to lead an effort to acquire Portland General Electric from Enron for $2.35 billion and to be an investor in the potentially lucrative buyout.

Texas Pacific now finds itself linked to a criminal investigation, just as the high-flying investment firm is attempting to sell itself and the merits of its PGE purchase to state utility regulators.

The investigation has yet to become an issue in Texas Pacific's proceedings before the Oregon Public Utility Commission. PUC spokesman Bob Valdez said any party in the case, including customer groups critical of Texas Pacific's bid, could attempt to make it an issue. Neely said Texas Pacific officials could face questions from investigators about their dealings with the investment council and the Goldschmidts.  "This is about the conduct of public officials," said Neely. "It may well be that our investigators need to talk to the staff of TPG."

Texas Pacific issued a statement Wednesday saying it expected to be cleared of any wrongdoing "since no one at Texas Pacific Group had ever met or spoken with Neil Goldschmidt at any time prior to Mrs. Goldschmidt's (investment council) vote on Oct. 29, 2003. "Furthermore, no (Texas Pacific) personnel had ever spoken with Mrs. Goldschmidt about TPG's potential interest in PGE prior to her vote on this date," the statement said.

Analysis and Commentary:  With Texas Pacific finding itself now linked to a criminal investigation, they should be concerned about supeanas.  Clearly, Mark Dodson, John Carter, Scott Gibson and Gerry Grinstein, all regulated by the SEC as publicly traded executives or board members, will not misrepresent the facts. Nor will others supeaned including members of the Public Utility Commissioin, Oregon Investment Council members and staff and various members of the Governor's staff.

It is also odd that TPG issued a statement saying "no one at Texas Pacific Group has ever met or spoken with Neil Goldschmidt at any time prior to Mr. Goldschmidt's vote on Oct 29th."  What if Bonderman finds out that a staff member does indeed know Goldschmidt well.  Seems just plain dumb to make such a statement because it invites a supeana for all the TPG staff and effectively opens its firms records for scrutiny by the State Attorney General's office and other regulatory parties reviewing the situation, including the FBI.  Again, it seems ridiculous to offer the Chairmanship of your most important investment, especially if you are a student of history as Bonderman is.

2004 September 30 The truth is loose, so send out the dogs by Steve Duin, Oregonian

No one should be surprised that, seven months later, the Oregon State Bar has not yet decided whether to formally investigate an ethics complaint against the high-powered Portland law firm Ater Wynne. These cases are notoriously complex, said Kateri Walsh, the spokeswoman for the bar. For a better understanding of those complexities, she added, she would normally direct me to two ethics experts, Bradley Tellam and Peter Jarvis, but there's a small problem. Tellam and Jarvis are representing the two Ater Wynne attorneys, Jonathan Ater and Lisa Rackner, caught up in the ongoing melodrama involving the city of Portland, Texas Pacific Group and the future of Portland General Electric.

In November 2002, Ater Wynne contracted with the city to "provide legal advice and assistance to the City of Portland on the consideration and evaluation of the acquisition of Portland General Electric, whether through an auction occurring in the Enron bankruptcy or otherwise."  Ater Wynne and the city played well together for a year. According to the city, Jonathan Ater was intricately involved in the strategy sessions regarding the fate of PGE. According to Tellam, Ater's lawyer, Ater came up with a crucial plan to help break an impasse in stalled negotiations between the city and Enron.

On Nov. 18, however, Ater Wynne learned Enron would sell the utility to Oregon Electric, a holding company set up by Texas Pacific and headed by former Gov. Neil Goldschmidt. Goldschmidt had been an Ater Wynne client for 10 years and was a tenant in their KOIN Center office. Given that relationship, the firm decided it could no longer represent the city. "We had an impossible conflict," Ater said at the time. He informed city officials. They understood Ater Wynne was suddenly in a bind not of its own making.

What the city couldn't countenance, however, occurred when Ater Wynne promptly signed on to help steer Oregon Electric through the Oregon Public Utility Commission process. The city considered this an equally impossible conflict and was delighted when a complaint by local attorney Lloyd Weisensee sparked a preliminary bar inquiry in February.

In several written replies to the bar and the city, Tellam maintains no conflict exists. The firm's contract with the city, he argues, "was for the limited purpose of assisting the City in acquiring PGE. That acquisition is, however, off the table." What's more, Tellam adds, Ater Wynne is only guiding Texas Pacific through the PUC process and "is not engaged to oppose any position put forth by the City of Portland."

Nonsense, counters Linda Meng, a city attorney, and Commissioner Erik Sten. Ater Wynne's work with the city was not so limited, Meng argues, and the firm possesses the "confidences and secrets of the City" when it argues against the city's potential acquisition of PGE.  "Ater Wynne was the key strategist in the city's efforts to create a public utility," Sten added. "Whether or not a public utility is possible is at the heart of this debate. One of Texas Pacific's primary arguments before the PUC is that they're not only a good deal, they're the only deal. That's flat out not true, and Ater Wynne is helping them to make that argument."

Lawyers for the city and Ater Wynne have been lobbying the bar for seven months. Ethical standards are easy to articulate, Tellam said, "but the nuances can be difficult to grasp. Conflicts have a tendency to be very fact-specific, and the facts can change shades just like anything else."  But if the bar truly wants to get beyond the he-said-she-said nuances in this case, I know where its investigators might want to begin. A check of the case file reminds me that Rochelle Lessner, one of Ater Wynn's primary attorneys in its work with the city, walked away from the firm in the first five weeks of 2004 and joined Lane Powell.  Lessner refused any comment on this case. Somehow I don't think she'd be accorded that privilege if, at long last, she finally gets a call from the diligent truth-seekers at the Oregon State Bar.

Analysis and Commentary:  Perhaps former Ater Wynne partner Mark Dodson, now CEO of Northwest Natural, said it best when he noted that "In April 2003 Northwest Natural finally decided not to make an offer and gave TPG permission to bid on its own." (See October 10, 2004 article by Steve Duin)  My point is that these significant relationships between parties, even more so when law firms are involved, generally require permission to pursue a competing path.  Of course Ater Wynne did not get permission from the City for its own bid on the legal work for TPG, thereby blatantly violating the State Ethics for attorneys.  If the State Bar does not act to prohibit Ater Wynne from representing TPG, its credibility will be seriously compromised.

2004 September 30  Investment council back to work by Michael Rose, Statesman Journal

The Oregon Investment Council went about its business of reviewing investments and hiring money managers Wednesday without mentioning the absence of Diana Goldschmidt, who was booted from the council by Gov. Ted Kulongoski on Tuesday.

Eugene Democratic Sen. Vicki Walker, known as a persistent critic of SAIF Corp., has complained that the investment council needs new blood and better oversight. She pushed for Goldschmidt’s removal and also wants longtime council member Gerard Drummond to leave. Drummond, a retired corporate lawyer and former head of a Pacificorp subsidiary, which was sold in 1993, said that he has no intention of leaving the council before his term expires in May.

Analysis and Commentary:  Chair Drummond decided to not even mention Goldschmidt's absence which is simply bad form.  Not only is that insulting to Goldschmidt, who served on the council for years, yet it also invites questions regarding what other activities he has chosen not to discuss.  Clearly, it is time for Drummond to apply his talents elsewhere, especially given his refusal to disclose whether he is participanting in a Pacific Power pension plan.  Pacific Power's parent Scottish Power is the most ardent opponent of a municipal utility for PGE with private management due to fears over competition that they have not had for years, even though Pacific Powers service district does not overlap in any meaningful way with PGE at this point.

2004 September 30 A mess claims another casualty, Editorial by the Oregonian

F or the credibility of Oregon state government and its investment process, Diana Goldschmidt should no longer be on the Oregon Investment Council. Still, her painful firing this week by Gov. Ted Kulongoski demonstrates the deepening destruction in the mess spreading around her husband, former Gov. Neil Goldschmidt. So far, nobody has publicly produced any evidence, or serious charge, undermining Diana Goldschmidt's integrity or her contributions to the state, on the investment board or as interim Portland school superintendent.

Refusing to resign, telling the governor he would have to fire her, Diana Goldschmidt declared that a resignation would be an admission of wrongdoing. She blazed back at the governor, "I have served this state with honesty and integrity and will not resign. I do not lie and have not lied." And nobody has shown that she has.

But the governor's point remains. A public servant does not resign only out of guilt. It's also proper when the public service can no longer be performed. And in a position dependent on full public faith, Diana Goldschmidt could no longer serve.

Analysis and Commentary:  An excellent and practical position by the Oregonian editorial board.

2004 September 29  Governor offers measured response when scandals erupt by Steve Law, Statesman Journal

It was clear back in November that something was amiss in Texas Pacific Group’s PGE deal when ex-Gov. Neil Goldschmidt emerged as a co-investor shortly after his wife Diana Goldschmidt approved state money for the transaction. “It certainly strained some credibility that Goldschmidt and his wife never had a conversation,” Democratic political consultant Mark Wiener said.

Kulongoski’s action Tuesday certainly appeared decisive. Ordering Diana Goldschmidt to resign by midnight was a “get-out-of-Dodge message,” Wiener said. “That’s not the white-glove treatment.” It couldn’t have been an easy thing to do for the wife of someone Kulongoski once called his political mentor.

When Kulongoski slipped out of the public limelight after a bruising loss in the 1982 governor’s race, Goldschmidt helped revive his political fortunes in 1987 by naming him the state’s insurance commissioner. Working in tandem, the two later orchestrated Oregon’s landmark 1990 overhaul of its workers’ compensation insurance system after a series of meetings at Salem’s Mahonia Hall governor’s mansion. That was the pinnacle achievement of Goldschmidt’s term as governor.

When Kulongoski ran for governor a second time in 2002, he asked Goldschmidt to fashion ideas for retooling Oregon’s economic-development strategy. In November, Kulongoski turned to Goldschmidt again to lead a revamped State Board of Higher Education. Kulongoski hoped that Goldschmidt could build legislative support for greater higher-education funding and for a scholarship trust fund that failed to advance in the 2003 legislative session.

Goldschmidt abruptly resigned from the higher-education board in May after admitting to having sex with a 14-year-old girl in 1975, when he was 35 years old and serving as Portland mayor. Since then, Kulongoski has sought to distance himself from Goldschmidt, especially after The Oregonian newspaper published allegations that the governor had been informed earlier about Goldschmidt’s sexual abuse of the underage girl. Kulongoski denied the allegations.

Analysis and Commentary:  It does seem that Governor Kulongowski is finally recognizing the significance of the scandal surrounding his long-time mentor Neil Goldschmidt.

2004 September 29 Diana Goldschmidt loses post by Jeff Manning and Les Zaitz, Oregonian

The governor's ultimatum to Goldschmidt came as a surprise. She repeatedly has denied wrongdoing in the vote, maintaining that she had no prior knowledge of Texas Pacific's plans. Neil Goldschmidt has said he did not learn details about the company's plan to purchase PGE until a breakfast meeting the next day in San Francisco.

"I am concerned that this ongoing investigation of a sitting council member is a distraction and will become harmful to the council's fulfilling its duties," Kulongoski wrote in a letter sent Tuesday to Goldschmidt demanding that she resign by midnight or be "removed from your duties."

Goldschmidt faxed Kulongoski a blistering letter Tuesday night refusing to step down. "I have served this state with honesty and integrity and will not resign," the letter said. "I do not lie and have not lied. . . . Oregon is capable of so much more than this, Governor."

Texas Pacific officials declined comment about Tuesday's events. Oregon is the firm's single biggest investor, with $950 million placed in four Texas Pacific funds.

Analysis and Commentary:  None

2004 September 29 Governor asks Diana Goldschmidt to resign by Michael Rose, Salem Statesman Journal

Oregon Gov. Ted Kulongoski has demanded the resignation of Diana Goldschmidt, an Oregon Investment Council member and the wife of former Gov. Neil Goldschmidt.  Diana Goldschmidt, one of four governor appointees who oversees a $56 billion portfolio of public funds, was given the choice to resign or be fired in a letter Kulongoski issued Tuesday. Goldschmidt, who served on the council for six years, told the governor to fire her.

Allegations of conflicts of interest have swirled around Goldschmidt for almost a year. Critics of the investment council point to an Oct. 29 vote that provided $300 million in private equity to a fund managed by Texas Pacific Group, the buyout firm backing a proposed purchase of Portland General Electric.  Goldschmidt’s husband, Neil, later was brought into the buyout deal to serve as chairman of a reconstituted PGE board. He since has resigned from public life after admitting to having sex with an underage girl in the 1970s.

Democratic Sen. Vicki Walker said that complaints about the investment council might have culminated in the governor’s decision to fire Goldschmidt. Walker, one of the sources who led to the embarrassing disclosure about Neil Goldschmidt’s past, has called for the resignation of Diana Goldschmidt and Gerard Drummond, the longest-serving member on the council.
“We have one down and one to go,” Walker said. Goldschmidt’s vote to provide financing to Texas Pacific has created a cloud of suspicion around the investment council, Walker said. New blood is needed on the council to keep it from becoming a fiefdom prone to conflicts of interest, she said.

Bill Parish, an investment adviser and critic of the investment council, said that Goldschmidt was an effective on the investment council but that the appearance of conflict has damaged her credibility. "No matter how good a council member, her presence can’t be justified unless her husband provides more disclosure of his business activities,” Parish said.

Analysis and Commentary:  None

2004 September 27  Parish & Company Submits Initial Required Steps to Alternative Proposal for Portland General Electric to Governor and Other Interested Parties

To: Governor Ted Kulongowski
cc:  State Treasurer Randall Edwards
cc:  Pers Chief Investment Officer Ron Schmitz
cc:  City of Portland Commissioners
cc:  Securities and Exchange Commission
cc:  Other Interested Parties

Given that the structure of PGE will play a major role in the economic future of Oregon, and the absence of a clear alternative to the proposed buyout by the Texas Pacific Group, Parish & Company today submits the basic parameters for a practical alternative.

Step 1: Governor Kulongowski and State Treasurer Edwards together request that Oregon PERS Chief Investment Officer Ron Schmitz contact the City of Portland for purposes of discussing the future of Portland General Electric.  Schmitz is a competent investment professional. This would include examining the feasibility of orchestrating a municipal utility with private management and funding from a partnership of 4-6 public pensions led by Oregon PERS.  Funding received from public pensions would be exclusively debt and receive a rate of the 10 year Treasury plus one percent, thereby eliminating the competition between rate payers and shareholders for returns. It is important to note that public pensions now represent 8 of the nations 10 largest pension funds and that they are in search of quality fixed income opportunities with secure underlying assets or revenue streams as collateral.

Step 2: The City of Portland votes to authorize the formation of a partnership to become the primary equity holder of PGE stock.  Total equity is 1,000 shares valued at $1 each.  Bond holders, i.e. the public pensions, along with large industrial users, maintain by-law based negative consent rights over the City of Portland to ensure certain parameters are met.  These could include approving the management firm, legal counsel, outside audit and review services, all transactions regarding equity and debt, etc.

Step 3:  Both Governor Kulongowski and State Treasurer Edwards send a letter to the Public Utility Commission (PUC) requesting that it reject Texas Pacific's proposed purchase of Portland General Electric. This is especially important given that the Governor appointed two of the three PUC commissioners in August 2003, long after the State was aware of Texas Pacific's bid to purchase PGE.  Given the various legal actions surrounding Mr. Goldschmidt's activities, including an FBI investigation regarding SAIF,  his initial prominent role as Chairman of PGE, coupled with the ridiculous nature of TPG's proposal and facade that local executives will control it, this would seem most reasonable and is likely what the public is expecting..

Step 4:  State Senator Vicki Walker introduces legislation that prohibits companies purchasing Oregon based regulated electric utilities serving more than 10 percent of Oregonians subsequent to January 1, 2004 from including taxes in the rate structure unless those taxes are actually paid to state and federal authorities.  Each year PUC analysts would compare taxes per the financial books to the actual unconsolidated tax return of the utility and its local operating entity, for example Oregon Electric with respect to TPG, to determine these amounts.  Pocketing these taxes that will never be paid is a key part of Texas Pacific's plan, not unlike TPG considering $240 million in cash on PGE's balance sheet to be part of its purchase offer.

Scope of Service:  Parish & Company to work with both the City and PERS Chief Investment Officer Ron Schmitz to facilitate the purchase.  Public pension holders of PGE debt to pay Parish & Company a fee of 10 basis points per year for three years, if certain parameters are met. This is effectively a success fee rather than a transaction fee because again it is predicated upon reaching certain goals which could also include rate reductions for consumers and industrial users. The City of Portland could hire its own set of advisors in addition to drawing upon the work of Parish & Company yet the fee to Parish & Company would be paid directly from those being provided the investment opportunity, that is the public pensions holding PGE debt, not the City of Portland.
Reasons This Practical Approach Has not Been Adopted:

1)  Neil Goldschmidt polarized the discussion, resulting in only two alternatives, the first being a Public Utility District (PUD) and the second a proposed buyout from Texas Pacific.  The public has clearly rejected the PUD approach yet will support a municipal utility with adequate management safeguards and responsible financing.

2)  Governor Kulongowski trusted the future of PGE to Mr. Goldschmidt, not knowing that Goldschmidt's primary focus appeared to be a "fee buffet" for the investment industry.  Credit Suisse, the same firm that structured many of Enron's deals, will be able to issue $700 million in bonds and able to generate long-term commissions in excess of  $50 million, TPG, Oaktree and the Gates foundation gain exposure to large equity gains, executives including Peter Kohler get the possibility to earn millions on stock options,etc.  In addition, with Internet service now close to being offered over power lines, the Microsoft Corporation via the Gates foundation will have the inside track on high speed service for its MSN Internet access business.  It is simply remarkable that the City of Portland is poised to basically give away this extraordinary opportunity to provide competition to Comcast in the future.

3)  Parish & Company's approach will not result in new debt being issued by the City, thereby cutting out the investment banking firms, but rather draw upon large existing pools of public pension assets in search of a quality investment opportunity.  Although investment firms will claim that the City can issue PGE debt and it won't technically impact its credit rating nor be backed by the City, this would be grossly irresponsible because it will, especially given that the City already has a $1 billion unfunded liability to the police and fire pension fund.

In a September 7, 2004 NY Times story by John Broder titled "Sunny San Diego Finds Itself Being Viewed as a Kind of Enron by the Sea," the author highlights that San Diego also has a $1 billion unfunded public pension liability in addition to a large unfunded health care liability.  Sadly, by not fully recognizing the significance of these liabilities many government agencies are practicing Argentina Finance 101.  Is it not astonishing that, with respect to PGE, large existing pools of public pension investment capital are in need of quality fixed income investments and would be denied that opportunity if the City simply did a "bond deal" with an investment house, financing that would exceed $1 billion.  The City of Portland does indeed have outstanding operational and finance staff yet what they need is political support from the Council to pursue this most practical approach.

4)  Enron's unsecured creditors are represented by Milbank, the same law firm that counts Scottish Power, owner of Pacific Power, as one of its most important clients.  This is a key reason why the City's bid was blocked. Pacific Power is leading the fight against a municipal utility in Oregon because they can't afford the competition given that Scottish Power paid $7.3 billion for Pacific Power at 1999 stock market highs. Five years later the total market value of Scottish Power is only $13 billion, making Pacific Power the dominant entity.  Clearly, the bankruptcy judge would not have allowed Milbank to represent Enron's unsecured creditors if this conflict of interest were identified up front. Also noteworthy is that the current Chair of the Oregon Investment Council, Gerard Drummond, is a retired Pacific Power executive.  He has not revealed whether he is receiving a pension from Pacific Power yet if he is, he should have excused himself with respect to the discussions regarding TPG rather than being TPG's main contact on the council.

Summary:  Much good work has been done analyzing the future of PGE yet the steps noted here may indeed be the key steps that, together with existing background work put together by the City's finance and operational staff, will spell success for the State of Oregon regarding the future of PGE.

2004 September 26  OHSU foundation rallies back after market drop by Patrick O'Neill, Oregonian

Private fund raising for new medical and research projects at Oregon Health & Science University has lagged and threatens to slow plans to equip two cutting-edge patient care and biomedical buildings rising on Marquam Hill. Rcords show the OHSU Foundation, the fund-raising arm of the university, has raised $10 million in donations of the $50 million needed to equip the Patient Care Facility, which is scheduled to open in 2006. The foundation has raised less than $13 million of the $40 million needed to equip the nearby Biomedical Research Building, set to open next fall.

With so much at stake, pressure to raise millions from deep-pocket donors is intense. The drive hit more turbulence this month when Jonathan Ulsh resigned after heading the OHSU Foundation since 1999. The foundation has launched a nationwide search to find a fund-raising rainmaker, who would be the third foundation president in five years.

The Ophthalmology Department is a hugely successful fund-raiser, Robertson said. Of the 15 million-dollar-plus donations to OHSU during 2001-02, six went to the Casey Eye Institute. Part of the reason is the long-term personal contact the department heads have had with donors. "Ophthalmology has had only three (department heads) in 60 years," he says. "We have passed on personal contacts through the years." Numerous gifts that materialized during Robertson's tenure as chairman were the result of decades-long relationships between donors and his predecessors.

Jim Johnson, a former Intel executive who is now president of Tripwire Inc., a Portland software firm, says OHSU fund raising is "absolutely essential" to enable the university to lure researchers, develop companies and incubate ideas. "In order to get the people, you need the space," Johnson says. "It's hard to recruit great researchers if your options aren't competitive."

Analysis and Commentary:  Remarkably, OHSU President Peter Kohler, who is slated to soon have a side job as Chairman of the Board of PGE with significant pay and stock options, does not appear anywhere in this story. Clearly this article dramatizes the need for Kohler, as Oregon's highest paid public official along with lavish perks, to focus exclusively on the 11,500 employees at OHSU. As the article notes, the impact of three Foundation presidents in 5 years is significant  and many would argue be a srong incentive to gain Mr. Kohler's complete undivided attention.

One might also consider the reality that Mr. Kohler's dramatic conflict of interest will certainly impact the perspective of some major would be donors to OHSU.  To think otherwise is simply naive.

2004 September 24 Senator wants investment panel meetings taped, by Jeff Manning of the Oregonian.

Sen. Vicki Walker, D-Eugene, said Thursday she will propose legislation requiring the Oregon Investment Council to tape all meetings and record detailed minutes, as does the Oregon Legislature.  The five-member council has come under fire for its unscheduled vote Oct. 29 to place $300 million of public employee pension money with Texas Pacific Group.

The Fort Worth investment fund hired Neil Goldschmidt, husband of Diana Goldschmidt, an investment council member, to lead its local effort to buy Portland General Electric. The Texas Pacific matter was not on the council meeting agenda and was not taped. Controversy about the vote prompted Oregon Treasurer Randall Edwards to request the state attorney general's office to review the circumstances of the Oct. 29 meeting.  Neil Goldschmidt resigned from the PGE effort last spring after admitting that he had sex with a 14-year-old girl when he was mayor of Portland in the 1970s. See complete story at

Analysis and Commentary:  Although brief, Jeff Manning does a great service by calling attention to the fact that these meetings, which involve distributing billions of public pension funds to various asset managers, are not always taped.

2004 September 23 Texas Pacific takes heat over ethics, timing by Jeff Manning and Susan Goldsmith, Oregonian

Three current members and a nominee to the Oregon Investment Council say Texas Pacific Group is partly to blame for the ethical cloud hanging over the panel. Two said they would oppose further state investments with the firm, which is attempting to buy the state's biggest utility.

Treasury officials confirmed this week that the $300 million investment was not on the council's agenda that day and came up under an unusual emergency procedure. The motion to approve the item was made by Jerry Bidwell, a close friend of the Goldschmidts' who resigned his council seat this summer.

Oregon Gov. Ted Kulongoski and Treasurer Randall Edwards already have asked the Oregon attorney general's office to review the circumstances of last fall's vote. Edwards has also hired University of Oregon law professor Edward McAniff to review the council's ethical practices and procedures.

Texas Pacific declined to answer questions about the Oct. 29 meeting and the timing of its contacts with Neil Goldschmidt afterward. The partnership, based in Forth Worth, did offer a written statement claiming that it never told Diana Goldschmidt of its plans in advance of the vote.  "The insinuation that Neil Goldschmidt's appointment to chair Oregon Electric was in exchange for Diana Goldschmidt's vote on TPG's allocation to its new fund is both preposterous and insulting," the company wrote. "At no time was Diana Goldschmidt ever informed by TPG of its intent to invest in PGE."

The rare public criticism could be a significant problem for Texas Pacific. With its purchase of Portland General Electric already facing tough demands from state utility regulators, the company now finds its long-standing relationship with the Oregon Investment Council fraying.

Oregon is the single largest investor in TPG funds, placing nearly $950 million with the firm since 1994. Most of the money invested is from the $45 billion Oregon Public Employee Retirement Fund.

At least three staffers of the Oregon Treasury as well as Drummond and Treasurer Edwards, have said they learned by the summer of 2003 that Texas Pacific was exploring a deal to acquire PGE.  Both Gardiner and Diana Goldschmidt fault Treasury officials for keeping the council in the dark.  Yet during the meeting, Treasury staff informed the council that they needed a vote to waive the bylaws of a staff subcommittee that was poised to invest the $300 million with Texas Pacific.

The matter was not on the agenda and had not been publicly announced, creating a conflict with Oregon public meeting laws. Schmitz said he went to the attorney general's office the morning of the meeting and was told an emergency could be declared to waive normal notification rules.

Gardiner said he questioned during the meeting whether the vote was permissible because of the lack of public notice. Nevertheless, he went along with the rest of the council to approve the bylaw waiver, thus paving the way for the $300 million investment with Texas Pacific. The motion to go forward was made by Bidwell, who resigned from the council July 1 without explanation.

Given the likely controversy over the PGE bid, Gardiner argued that the investment council should have been given ample time to deliberate on the Texas Pacific investment.  "Instead, you had this rush to bring something in," Gardiner said. "It put the council in the position of 'Approve this now, or this deal is going away.' "

Diana Goldschmidt acknowledged Wednesday that it would have been best to immediately notify the Treasury of her husband's association with Texas Pacific link. "I wish I had thought of that but I didn't," she said. Sten said the Goldschmidts' explanations strain credulity. "Every time somebody looks into this, they find another problem with the story," he said.

Drummond, the investment council's chairman, said he believes the Oregon Treasury's long and mutually profitable relationship with Texas Pacific will survive.  "In retrospect, I wish to hell they hadn't hired Neil," Drummond said. "I wish they would have chosen to invest in someone else's back yard. But I don't think the attorney general's investigation will find anything that you haven't already printed in your paper."

Analysis and Commentary:  Manning and Susan Goldsmith do a good job of framing the comments of various parties involved yet the overall suggestion that the OIC was left in the dark by the Treasury staff is most unusual given that the article also states that two of the five council members, Gerard Drummond and State Treasurer Randall Edwards, knew about the potential TPG acquisition long before the vote to committ $300 million to TPG.

Apparently both Drummond and Edwards sat quiet rather than inform their fellow council members of TPG's interest in PGE?  In addition, the article did not highlight that TPG is still today a client of Goldschmidt/Imeson and therefore it is important to determine the financial ties Neil Goldschmidt maintains to his prior firm given his wife sits on the OIC. A little more analysis of the here and now might also be helpful, for example citing the Willamette Week story indicating the Goldschmidt's co-own a major downtown building with former fellow council member Gerry Bidwell.

2004 September 23 Regulators reject PGE bid, demand cut in rates by Gail Kinsey Hill, Oregonian

Oregon utility regulators on Wednesday rejected Texas Pacific Group's sweetened bid for Portland General Electric and said it would not approve the deal unless the investment firm agreed to cut utility rates by $75 million. "We arrived at the $75 million figure based on our 'big picture' assessment of the risks, harms and benefits of this transaction," said Bryan Conway, who is leading the Oregon Public Utility Commission staff's review of the transaction. Texas Pacific has until Nov. 11 to formally answer the rate-reduction demand, as well as other conditions. Company officials on Wednesday responded tersely to the rate figure, describing it as "extremely high."

Wednesday's report, the second set of recommendations issued by the PUC staff, defines the parameters for a critical round of negotiations between Texas Pacific, regulators, consumer advocacy groups and other intervenors. The staff acts only as an adviser to the three-member PUC, which must approve the deal before it can become final. The commission will hold hearings starting in November and is expected to issue a final decision by early next year.

The conditions released by the commission staff on Wednesday call for rate credits of $15 million annually beginning in 2005 and continuing through 2009.  Consumer advocacy groups participating in the negotiations are seeking even more in rate credits. Industrial Customers of Northwest Utilities, a trade association representing manufacturers and other large electricity users, has demanded $97 million. Given the degree of risk for PGE and its customers, "that's a more reasonable level," said Ken Canon, the association executive director. In the weeks ahead the parties will continue negotiations, or settlement conferences, which are not open to the public. Hearings are scheduled for Nov. 19 through Nov. 21, and oral arguments are set for Dec. 8.

"There's still a lot of work to get done to get to a global settlement," said the PUC's Conway. Texas Pacific's response to the latest set of conditions will prove critical to whether the deal lives or dies, he said. "They'll either stop making steps or start making some giant steps," he said.

Analysis and Commentary:  Both the PUC analyst Conway and the Oregonian reporter Hill could benefit by stating the financial facts using a "percent change."  Providing a $15 million rate cut each year beginning in year 2005 in not the same as "agreed to cut utility rates by $75 million" as stated in the first paragraph.  The key point is, what does $15 million per year amount to in terms of a percentage reduction, any other number is meaningless?  It is surprising that Ken Canon, who is supposed to represent industrial users,  has also not highlighted that distinction.  The concession is laughable and only serves to fuel concern that the PUC Commissioners are conflicted, industrial users are being sold a status quo political compromise and that overall this is nothing more than a ploy to appear as if a major concession has been made.

Remarkably, the same day this story appeared, another story appeared in the Portland Business Journal titled "PUC staff recommends approving PGE sale."  This story highlighted various staff recommendations, including that PGE be treated as a stand alone entity for determining the costs of utility service, including taxes, and setting rates.

2004 September 23 Interview of Dick Solomon by Bill Parish Regarding His Nomination to the Oregon Investment Council. Interview held at Dick Solomon's office in downtown Portland from 4:30-5:45 pm

Due to the considerably controversy regarding potential conflicts of interest on the Oregon Investment Council, the five person group that manages the States $50 billion public pension system, and at the urging of interested parties, I agreed to interview Dick Solomon with the specific objective of deciding whether or not to support his nomination.

Analysis and Commentary:  I have decided to support Dick Solomon's nomination for the Oregon Investment Council.  Although I strongly disagree with his supporting the choice of Oppenheimer for the College Savings Plan "my opinion" is that, as a member of the College Savings Board, he was not provided adequate information by State Treasurer Randall Edwards office to make the right decision, that being the choice of Vanguard.

While some may also argue that Solomon also does not have the proper background to sit on the council since he has never held an investment management position, he does bring a strong set of accounting skills now lacking on the council. These skills are increasingly important due to the prominence of accounting based corporate governance issues. Some of the topics covered in the interview included his relationships with existing council members, positions on key corporate governance issues including the accounting treatment for stock options, the debate over the future of PGE and disclosure issues regarding private equity and hedge funds and other SEC initiatives in general.

Although many of his fellow CPA's now earn significant fees, some would call kickbacks, from investment firms for setting up College Savings Plan accounts, Solomon does not earn such fees.  Although this may work for others, in my case, this would break the bond of trust between myself and clients, he notes.  "My goal is to provide clients unbiased advice."

Regarding stock options, Solomon notes that we are fooling outself if we think there is not a cost of issuing options.  I support the expensing of options, he added.  With respect to the debate over the future of PGE,  Solomon notes that it would not be his role as a council member to intitiate a dialogue with the City of Portland or another party.  My role should be focused upon managing the assets on behalf of PERS participants. He added that this is up to either State Treasurer Edwards or the Governor.  If either one of them requests that the council have Chief Investment Office Ron Schmitz explore some of the alternatives being debated, I would of course support that.

Solomon added that "my father, as an attorney in the 1930's and 1940's, drafted many of the original documents that established numerous Public Utility Districts (PUD's) in the Northwest.   I have nothing against public power, particularly since such entities often obtain a lower cost of financing resulting in lower rates, yet again as a council member this is up to the State Treasurer or Governor to direct, not a Council member like myself.

When asked about his thoughts on the four council positions being paid, without benefits, he declined to respond because he determined that would be self serving.  He did conceed however that following the recommendation of Parish & Company to make these paid positions, without benfits, at $50K - $75K per year would broaden the pool of candidates. Overall, Solomon should make a strong addition to the council due to his capacity to broaden the skill base.  Of course the Governor, in the event of another resignation, will need to add a pure investment management person of the caliber of Gerry Bidwell.

2004 September 22  The $300 million emergency by Nigel Jaquiss, Willamette Week

Last October, when the Oregon Investment Council's five members met for their normal monthly meeting, the agenda didn't mention an unusual item of business: a vote on whether to invest $300 million in a buyout company called Texas Pacific Group.
This was hardly a routine matter. First, the proposal busted a self-imposed $200 million cap on investments of taxpayer cash in buyout groups. Second and more importantly, at least two members--State Treasurer Randall Edwards and Chairman Gerard Drummond--knew that Texas Pacific was trying to purchase Portland General Electric.

Because the October meeting was held offsite rather than in the council boardroom, the meeting was not tape-recorded. There is no record of the discussion before the unanimous vote to give Texas Pacific $300 million. Just hours after the vote, according to a chronology published by The Oregonian, Texas Pacific tapped former Gov. Neil Goldschmidt to be chairman of the "new" PGE. Goldschmidt's wife, Diana, a member of the investment council, had agreed to fund Texas Pacific in the "emergency" vote.

Kate Cooper Richardson, Edwards' chief of staff, says the events surrounding the vote are a series of coincidences. Cooper says Texas Pacific wanted Oregon to commit to giving it money well before the end of 2003, causing the council's haste. Texas Pacific did not respond to a request for clarification on timing. But earlier this year Texas Pacific's law firm issued a statement saying the fund Oregon invested in did not "close" until late January.

Texas Pacific had other reasons to want a speedy vote. First, the City of Portland was anxious to acquire PGE by any means necessary, including seizing the company's assets. "Texas Pacific was in a hurry to announce their purchase before the city started condemnation proceedings," says investment advisor Bill Parish.

Then there was the intricate timing necessary to bring Goldschmidt, the state's premier political power broker, on board. It would have been awkward for Texas Pacific to have hired him before the investment council kicked in its cash, as Diana Goldschmidt and perhaps fellow council member Jerry Bidwell, a close friend of Goldschmidt's, might have had to declare conflicts of interest.

"It would appear that there was some collusion," says Portland City Commissioner Randy Leonard, an advocate for the city's acquisition of PGE. "Some of the events that occurred and how they are explained seem a little disingenuous to me."

Analysis and Commentary:  Jaquiss does an outstanding job of cobbling together key details.  In addition, he focused upon key facts up front, including the fact that both OIC Chair Gerard Drummond and State Treasurer Randall Edwards knew about the TPG deal to buy PGE prior to voting to give TPG another $300 million.  Quite astonishing given the public controversy regarding the future of PGE.  Perhaps this also explains why both are so reluctant to have the State's Chief Investment Officer Ron Schmitz talk to the City of Portland regarding the future of PGE.

This is particularly unfortunate since Schmitz is a top investment manager and could most likely orchestrate an ideal solution for PGE in which the State of Oregon would be a participant, perhaps contributing $200 million in debt financing along with five other public pensions for the buyout.  This would be a much lower risk investment in high quality fixed income than committing funds to a blind equity pool run by TPG that would thereby purchase PGE, create an executive compensation bonanza for principals involved, fleece the utility for a few years and then spin its shell out to the public in an IPO.

Parish and Company will present a plan for such an approach at the September 29, 2004 OIC meeting given the problems associated with the TPG plan. In preliminary discussions with a variety of business leaders and public officials, the response has been most positive.

2004 September 20  Statement from Diana Goldschmidt indicating she will not resign from the Oregon Investment Council. The following summary statement was received by Bill Parish from Diana Goldschmidt today based upon an email I sent her on September 7, 2004 suggesting various reasons why she should resign from the Oregon Investment Council.  It should be noted that I have always supported Diana as having made a solid contribution on the OIC yet sadly now see her resignation as essential in order to preserve the OIC's credibility before the public due to her husband's activities."My analysis and commentary follows.

Dear Mr. Parish:

To reiterate even more clearly, I have no intention of resigning from the OIC.  The reasons are as follows:
1.       My husband has no clients.
2.       My husband has neither represented nor had a business relationship with Credit Suisse.
3.       My husband has neither represented nor had a business relationship with Oaktree.
4.       My husband has neither represented nor had a business relationship with Pacific Corporate Group.
5.       Until the overture by Texas Pacific Group (TPG) last year, my husband has never represented any investment manager or private equity firm doing business with the Oregon Investment Council.
As to certain of my votes and abstentions while serving on the Oregon Investment Council, those reasons are:
1.       I did not know of TPG’s interest in purchasing PGE at the time of my October 29, 2003 vote.
2.       My husband did not know of TPG’s interest in purchasing PGE at the time of my October 29, 2004 vote.
3.       At the time of my TPG vote, neither my husband nor I knew of TPG’s intent, immediately after that vote, to ask him to serve as PGE’s Chair.
4.       My later abstention on the Credit Suisse vote was prompted by learning a few days before the vote that Credit Suisse might be providing Texas Pacific Group with the permanent financing on the PGE purchase.
5.       I voted for Oaktree earlier this year because I was not aware of their future decision to co-invest in 5 percent of TPG’s purchase of PGE.  (As you perhaps recall, Howard Marks of Oaktree testified at his last OIC appearance that his firm had not even considered the TPG investment at that early date.)
6.       I abstained from the more recent Oaktree vote this summer because I felt the proximity in time was too close to the prior TPG vote for the public to understand my complete separation from TPG.
7.       I will publicly state the reason if I ever believe another OIC abstention vote is required.
8.       Lastly, I personally have no conflicting client or business relationships with any firms doing business with the Oregon Investment Council.

Diana E. Goldschmidt

Analysis and Commentary:  In a very positive and long overdue development, Diana Goldschmidt has openly provided, for the first time, some disclosure regarding her husband's business activities and her rationale behind key abstentions of her votes as a member of the 5 person Oregon Investment Council managing the State's $56 billion in public pension assets. Although it is still not clear what level of financial ties her husband maintains with his former lobbying firm, it is clear that TPG is still a client and of course the OIC one of its largest investors.  It is also not clear whether or not other investment firms doing business with the State, in particular Oppenheimer, but not directly before the OIC, are clients.  This is important due to the interrelationships with respect to fee sharing involving most investment firms.

Other council members might benefit from Diana's example, in particular Chair Gerard Drummond, and also disclose whether they have any business relationships with firms doing business before the council, including its various consultants.  In the event Diana Goldschmidt submits a statement covering the topics she notes above, in addition to those identified in this analysis and commentary, Parish & Company, regardless of the controversy surrounding her husband's business activities, will support her continued role as a member of the Oregon Investment Council.  This would not be the first time that one's spouse damaged the other's reputation.

2004 September 17, 2004 Budget use of Pensions Sows Trouble in San Diego by Mary Williams Walsh, NY Times

San Diego is caught in a financial bind, facing the possibility of a bankruptcy filing, largely because of a $1.2 billion shortfall in its pension fund for municipal workers.  For years the city has spent money from illusionary pension fund earnings, according to the authors of a new report released yesterday.

Yet the practice, which authors called dangerous, is sanctioned by law in California and other places and is commonplace among cities that offer pensions to their workers.  The findings raise the possibility that other communities will face similar financial disasters.

These days San Diego is unable to issue bonds because of errors in its 2003 annual report, which is being redone.  In addition, the SEC and the Justice Department are investigating its financial management and legal disclosures.  Cities are not held to the same standards of disclosure that corporations are when they issue stocks and bonds.  The only relevant provisions of the federal securities laws are broad prohibitions of significant ommissions and misstatements.  Until now, the SEC has never brought an enforcement action over a city's pension disclosures, Mr. Maco said.

Analysis and Commentary:  Some are now calling San Diego Enron by the sea. Although the City of Portland has been more transparent in its disclosures, the reality remains that the City has an unfunded public pension liability to police and fire of more than $1 billion.  For this reason, it is important for the City to think more creatively in the event a purchase of PGE can be orchestrated.  Rather than simply issue more revenue bonds, the City could help orchestrate a partnership of 6 public pensions with large existing pools of assets in need of good fixed income alternatives.  Using this solution, no additional government debt would be issued.  Additional details will be provided in a specific proposal to the OIC at its September 29, 2004 meeting.

2004 September 15  Building Clout. A chummy real estate deal raises new questions about Goldschmidt's influence, by Nigel Jaquiss, Willamette Week

The Oregon Investment Council is responsible for investing more than $50 billion in public funds. But it's increasingly obvious that the five-member board runs more like a private club for ex-Gov. Neil Goldschmidt's cronies than a body entrusted with taxpayer dollars. Last October, the OIC voted to sink $300 million into the takeover firm Texas Pacific Group. Just hours after getting the state's money, Texas Pacific hired Goldschmidt, Oregon's premier political power-broker, to smooth its effort to purchase Portland General Electric, the utility that provides power to 750,000 Oregonians.

The sequence of events raised questions (see "Power Grab," WW, Nov. 19, 2003) about who knew what and when they knew it. Part of the intrigue stemmed from the fact that Goldschmidt's wife, Diana, and Jerry Bidwell, founder of the local stockbrokerage firm Bidwell & Company and the man Goldschmidt has called his best friend, cast two of the five votes. (OIC chairman Gerard Drummond, whom Goldschmidt himself appointed to the council in the '80s, cast a third.)

Now, WW has learned that Bidwell--who resigned abruptly from the OIC on July 1--and Goldschmidt were more than friends. They were business partners. In April 2002, the two purchased a downtown Portland office building together--a building that lies in the path of an ambitious development scheme Goldschmidt publicly championed. Their previously undisclosed business relationship comes to light as an outside investigation into the investment council's inner workings commences.

The FBI is currently probing Goldschmidt's relationship with the state-owned workers'-comp provider, SAIF. State Treasurer Randall Edwards has ordered an outside investigator to examine the OIC's operations, including the circumstances surrounding the October vote. Those inquiries might now include the Woodlark Building--and the question of just how chummy Bidwell and Goldschmidt were before Bidwell voted to give $300 million to Goldschmidt's bosses-to-be.

In April 2002, according to county property records, a company named Woodlark Partners LLC bought the Woodlark Building at 813 SW Alder St. for $4.24 million. Goldschmidt's name is the only one that appears on public records, but three people familiar with the transaction say Bidwell is his partner in the building.

The Woodlark Building is not just any old piece of real estate. At the same time Goldschmidt's group bought the nine-story building in downtown Portland's historic Midtown Blocks, he was actively promoting developer Tom Moyer's desire to connect the North and South Park Blocks into a park that would bisect the central city.

As a member of the OIC, Bidwell filled out the same form. But while Goldschmidt and his wife acknowledged Woodlark ownership on their statements, Bidwell did not.  See complete story at

Analysis and Commentary:  The author Nigel Jaquiss does an excellent job of highlighting what is clearly a significant conflict of interest regarding Gerry Bidwell and his relationship with Neil and Diana Goldschmidt. It does seem increasingly clear that the Governor needs to clean house at the Oregon Investment Council and with the next council meeting in two weeks on September 29, 2004, at a minimum, one would expect Diana Goldschmidt to resign.  Many might also argue that Dick Solomon should be removed from consideration due to his business and personal relationship with the existing chair Gerard Drummond.

What hasn't been clearly identified yet is what responsiblity David Bonderman and other principals at Texas Pacific might have if they knowingly participated in gaining public pension investment funds contrary to proper methods. Texas Pacific has not dislcosed if it has been questioned by the FBI.  Of course, any level of misappropriation of public pension assets is a serious issue, even if public pension funds do not technically fall within the ERISA guidelines.  This is furthur complicated by Texas Pacific having employed the Neil Goldschmidt's lobbying firm during the period in which it obtained hundreds of millions of Oregon's public pension assets to manage.

Perhaps most surprising to me about Goldschmidt and Bidwell's purchase of  the Woodlark building is that just after purchasing the property he became active in a campaign to unite the north and south park blocks which would require the building's removal.  Luckily, Mayor Katz has since stepped up and presented an alternative plan based upon a highly successful concept used in Portland's sister city in Italy, Bologna, that will not necessitate the demolition of these blocks.

2004 September 10 Federal prosecutor joins SAIF inquiry by Les Zaitz, Oregonian

Saif Corp. officials will soon turn over ducuments requested by the FBI and federal prosecutors as part of a criminal investigation sources say focuses, at least in part, on transactions involving ex-Gov. Neil Goldschmidt.

An FBI agent and federal prosecutor requested the material in a meeting with Saif officials two weeks ago.  The FBI earlier examined Saif-related records at the state ethics commission and former state Treasurer Jim Hill said an FBI agent recently questioned him about government corruption in Oregon.

This is the first notice that federal prosecutors have joined the state's criminal investigation of the state-owned workers' compensation insurer and signals that the probe is widening.  Separately, the Oregon State Police continues to investigate allegations that Saif officials illegally destroyed public documents.

Analysis and Commentary:  Many forget that the Oregon Investment Council supervises the management of the investment portfolio at SAIF, meaning that Mr. Goldschmidt working for SAIF was a direct conflict of interest given his wife sits on the OIC.  Of course that conflict is now gone since Goldschmidt resigned as a consultant to SAIF.

Of course the dramatic controversy regarding TPG and its effort to take over PGE with Neil Goldschmidt at the helm has served only to fuel concerns over a conflict of interest.  In his zeal to takeover PGE, David Bonderman and his partners are now igniting various legal and regulatory actions that would all disappear if they simply withdrew their bid.  Like Goldschmidt, Bonderman seems consumed by narcissism and total disregard for the parties involved and their credibility, including the Governor, State Treasurer, Peter Kohler and the three public utility commissions who will vote on the transaction.  Two of these commissioners were appointed in August of 2003, long after the state knew about the upcoming TPG deal, and neither has yet publicly disclosed whether they knew of the transaction's possibility or Goldschmidt's potential involvement before being appointed.  Some believe the puc commissioners were screened by Tom Imeson, Neil Goldschmidt's partner who has played a key role in other appointments, was head of Governor Kulongowski's transition team, sat on the board of OHSU where Peter Kohler is President up until this year and still maintains TPG as a client.

2004 September 2 The need for Neil hasn't disappeared, by Steve Duin, Oregonian

For some time now, I've wondered why Neil Goldschmidt is still hanging around town, rubbing up against John Kerry at El Gaucho, or -- at dinner parties in his honor -- apologizing to his many friends for embarrassing them. Then I figured it out: Why would the puppetmaster disappear when so many of the trusty puppets are still in place?

Ted Kulongoski, who admits Goldschmidt rescued his political career from the scrap heap, is still governor -- and still denying he was told numerous times, long before naming Neil to be chairman of the state board of higher ed, that Goldschmidt had sex with a 14-year-old girl while he was mayor of Portland. As much as Kulongoski wants this crucial character issue to vanish, it was noted in last week's New York Times' profile.

Diana Goldschmidt, Golden Boy's wife, is still parked on the Oregon Investment Council, despite casting at least one vote that benefited Texas Pacific after the equity fund hired her husband as the local front man for its proposed purchase of Portland General Electric. Mark Dodson -- one of Neil's best buddies -- is still at the helm of Northwest Natural, awaiting the verdict of the Texas Pacific-PGE deal. Northwest Natural made a $2.9 billion offer for PGE in 2001, subsequently formed a brief partnership with Texas Pacific, and would be a natural to buy the utility down the road once (or is that if?) Texas Pacific is successful at hoodwinking the Public Utilities Commission and squeezing millions in profits out of PGE and its ratepayers.
And Tom Imeson, Goldschmidt's longtime aide, is still minding the store at the lobbying firm. He has stepped down from the Oregon Health & Science University board -- on which Goldschmidt also served in recent years, with Dodson as board secretary -- but he's no longer needed.

With Neil's help, OHSU was converted into a public corporation in 1995, then granted exemptions to public-record laws on such matters as property acquisition. OHSU is now invested in the South Waterfront district on land donated by Schnitzer Investment Corp., a Goldschmidt-Imeson client. And OHSU President Peter Kohler has gallantly stepped forward to take Goldschmidt's place on the PGE board and maintain the charade that Texas Pacific's purchase is in the public interest.

Connections to Goldschmidt are everywhere. "Clearly, Neil has a lot of tentacles throughout this state," said state Treasurer Randall Edwards, "and it's a very small state." There's little reason to think those connections are broken. Neil a pariah? Along with Tom Walsh, Mike Thorne and Bill Scott, Gerry Frank was one of 40 friends of Neil's who recently turned up at a party for the man hosted by his ex-wife, Margie. "If I were writing this," Frank said, "I would take a broader look at leadership in our state, and how devoid we are of people with real vision and the ability to get things done. That elevated Neil to the position he had." Bingo! And all his sycophants and sidekicks didn't suddenly sprout a brain or a unique vision or Goldschmidt's ability to seal the deal. Why won't Neil disappear? Because the pathetic need for him still dominates the scene.

Associating with Goldschmidt isn't a crime -- his friends may actually believe the man, for the first time in his life, needs them -- but still profiting with him is infamy. "The only price Neil has paid is he got knocked off his pedestal," said state Sen. Vicki Walker, D-Eugene. "People in this state who are still well connected, who are supposedly the pillars of society, continue to do business with this man, continue to find all this acceptable."

Walker doesn't believe Kulongoski's denial; she was so annoyed by it she decided to "break my silence" and be identified as the key figure in bringing Goldschmidt's crime to light. That move elicited this from Peter Bragdon, Kulongoski's former aide: "She could have saved the state and the university system a world of hurt with one quiet question six, seven months ago." A quiet question, so the sleeping dogs could lie and the lying dogs could sleep. See complete story at

Analysis and Commentary:  Mr. Goldschmidt has put together a remarkable network to control the economic and political landscape in Oregon.  More surprising is that even today Governor Kulongowski has not called upon Goldschmidt to reveal his client list, in particular which investment firms he represents, given significant interactions with public entities, including his wife serving as one of five members on the Oregon Investment Council, the group managing the State's $56 billion in public pension assets.

2004 August 27 Investment board pick sees no conflict, by Jeff Manning, Oregonian

Richard Solomon, the Portland CPA nominated last week to sit on the Oregon Investment Council, has worked for years as personal tax accountant for Gerard Drummond, the influential chairman of the council. "I know Gerry Drummond," Solomon said. "I've advised him on his taxes for a long time. But I don't think any of the decisions I might make as a member of the council would be influenced by my friendship with him. "

Solomon's nomination comes at a time when the investment council is under intense scrutiny, largely because of its investments with Texas Pacific Group, the huge buyout fund that is in the process of purchasing Portland General Electric. The council voted last October to invest $300 million with Texas Pacific just days before the buyout fund announced the PGE deal.

"On paper, Mr. Solomon looks like a good candidate," said Oregon Sen. Vicki Walker (D-Eugene.) "He's been involved in some good issues. I had no idea Drummond was a friend of his."

Gov. Ted Kulongoski, who nominated Solomon to replace Gerald Bidwell on the council, did know of Solomon's relationship with Drummond. Kulongoski spokesperson Anna Richter Taylor said, "Solomon was the most qualified person" available. "Dick Solomon's resume speaks for itself," Taylor said. "He's served the state well on a number of boards already. There isn't a conflict of interest here." Walker has called on Kulongoski to "clean house" at the council. She has asked specifically for the resignations of Diana Goldschmidt and Drummond.

Solomon said he doesn't do accounting work for any other investment council member or for Neil Goldschmidt. His nomination will be considered by the Oregon Senate in mid-September.

Analysis and Commentary:  In yesterday's Oregonian I was quoted as commending Mr. Solomon for his work on the lottery commission and being hopeful that he could be a good addition to the council, although with reservations due to concerns over his role in supporting the selection of Oppenheimer for the State College Savings Plan.  A plan structured to enrich investment advisors at the expense of parents, in my opinion.

Today, I must however strongly object to Mr. Solomon being added to the council due to his and Drummond's failure to disclose their personal relationship when he was introduced at the OIC Meeting Wednesday August 25, 2004.  If the Governor's goal is to reform the council and restore public trust, he has taken a giant step backward and should immediately ask Solomon to withdraw his name from consideration.  Oregon is awash in outstanding candidates for this most important post and it's time for the Governor to look beyond the same tight circle he has been dominated by since he took office.  Many, including myself, have offerred to supervise a search to identify candidates for his consideration yet neither he nor his staff seem interested in such efforts.

2004 August 24  State starts ethics review, by Jim Redden, Portland Tribune.

State Sen. Vicki Walker, D-Eugene, is calling for Oregon Investment Council Chairman Gerard Drummond and member Diana Goldschmidt to step down while the group’s ethical practices are being studied. Walker made the request in a Saturday letter to Gov. Ted Kulongoski.  “While the state of Oregon appreciates their volunteer service, I believe it is time to look elsewhere for leadership,” Walker wrote.

Walker’s letter was sent one day after state Treasurer Randall Edwards told Kulongoski that he wanted to hire Edward McAnniff, a professor in residence at the University of Oregon law school, to review the council’s ethical practices.

Edwards also asked Attorney General Hardy Myers and the state Government Standards and Practices Commission to review whether Goldschmidt had a conflict of interest when she voted last October to invest $300 million in state funds in the Texas Pacific Group. Shortly after the vote, Texas Pacific officials asked Goldschmidt’s husband, former Gov. Neil Goldschmidt, to head up its effort to buy Portland General Electric from the bankrupt Enron Corp.

Diana Goldschmidt has said she knew nothing about the pending job offer before the vote. Neil Goldschmidt resigned from the PGE project and other groups after admitting last spring that he had had sex with a 14-year-old girl while he was mayor of Portland in the 1970s.  In her letter to Kulongoski, Walker says Drummond already has served on the council longer than allowed by its standard of ethics, which limits members to two full terms in any 12-year period. Drummond served two terms from 1989 to 1997. He was reappointed to the council in 2001. See complete story at

Analysis and Commentary:  Tribune reporter Jim Redden has identified a major story not yet covered in the Oregonian. Generally known for her leadership role in reforming the State Accident Insurance Fund (SAIF), Senator Walker is also now leading the effort to reform the Oregon Investment Council (OIC), the group responsible for managing the State's $56 billion public pension system.  Many are now hopeful that Senator Walker will now also weigh in on the future of Portland General Electric by bringing together the Governor and other political forces in the State Capital, including State Treasurer Randall Edwards, to discuss PGE's future with the City of Portland. Afterall, PGE does serve 40 percent of all residents and businesses in Oregon.

2004 August 22  Texas Pacific throws in its 12 cents' worth, by Steve Duin, Oregonian.

Twelve cents each month. That's Texas Pacific's idea of an appropriate rate reduction, a "credit" that won't take effect until 2007. That's Texas Pacific's commitment to the public benefit in its proposed purchase of a public utility. And in a deal in which the private equity group expects to makes tens of millions, that's Texas Pacific's estimate on what it will take to buy off the Oregon Public Utility Commission and public opinion.

Texas Pacific doesn't like showing its cards, at the table or anywhere else. As a private equity firm, it works in the dark. It deals in blind trusts. The Oregon Investment Council has plowed $950 million into Texas Pacific, making it the firm's largest investor, and it's not allowed to ask where the money goes. "These are investments we make without say or knowledge beforehand about what they are going to invest in," said Ron Schmitz, the director of investments for the Oregon State Treasury.  All Texas Pacific usually needs when it deals with Oregonians is its track record and an expected rate of return. That's enough for the Investment Council, which voted last October to waive its internal rules so it could throw another $300 million at the buyout firm.

But in the PGE deal, Texas Pacific needed something more to sway public opinion and the PUC, which is looking for ways the buyout can benefit ratepayers, not Texas Pacific's David Bonderman and his local yes-men. That's why hiring Goldschmidt was so crucial. And that's why it continues to defy credulity that Neil was, as almost everyone insists, such a late addition to the Texas Pacific team. Surely, you remember his quotes. Goldschmidt claimed he first heard about the deal on Oct. 29. He was so stunned, he said, "You could have knocked me over with a feather . . . It was like someone dropped a water balloon on my head."

Think about it. At the time, Goldschmidt said Bonderman and Texas Pacific had been negotiating with Enron to buy PGE for a year. No later than August 2003, the firm was offering a piece of the deal to the OIC. Although the OIC eventually passed, a subcommittee quickly voted to invest that extra $300 million in Texas Pacific, money the firm desperately needed to sweeten its offer to Enron.

All this hyperactivity and the firm waited until Oct. 30, a mere 18 days before going public with its buyout proposal, to add Goldschmidt to the team? A $2.35 billion deal is in the works, and Texas Pacific waits until the midnight hour to hire the slick, virtuous local hero, who will seduce the public and sweet-talk the PUC?

Back in November, Bonderman said, "This is going to be, for us, a low-return deal," claiming Texas Pacific would put up 90 to 95 percent of the equity in the $2.35 billion deal. Because Texas Pacific is assuming $1.1 billion of PGE debt, we're talking $1.25 billion in cash. Credit Suisse is putting up $707 million of that figure. Last fall, the OIC contributed $300 million to the two funds Texas Pacific is using for the buyout (Schmitz said he expects a return in the "mid- to upper-teens"). And doggone if Texas Pacific didn't negotiate to make $240 million in unused PGE dividends part of the purchase price.

Add the numbers. Do the math. And remember that 12 cents. When the smoke clears, 12 cents may be just about all the cash Texas Pacific has invested in this get-rich scheme. Complete story available for purchase at

Analysis and Commentary:  Imagine the audacity of Texas Pacific considering $240 million on PGE's balance sheet to be part of the equity it is contributing to the purchase, roughly half in fact?  Once again, Steve Duin breaks a major story and presents it in a clear form the public can grasp.

2004 August 21 Outsider to look at panel ethics. Questions about the Oregon Investment Council persist following a controversial vote by member Diana Goldschmidt, by Gail Kinsey Hill, Oregonian

Oregon's state treasurer told Gov. Ted Kulongoski on Friday that he will hire an outside attorney to evaluate the ethics practices of the Oregon Investment Council, overseers of a $56 billion portfolio of public funds. Treasurer Randall Edwards also said he is asking the Oregon attorney general and the state ethics commission to look into whether council member Diana Goldschmidt violated conflict-of-interest laws when she cast a controversial vote in October. Critics contend the vote served to potentially benefit her husband, former Gov. Neil Goldschmidt.

In a statement issued Friday night, Kulongoski acknowledged receipt of the letter. "I have previously discussed these matters with the treasurer and Chair Drummond and appreciate their response to my inquiries," he said. In a July interview with The Oregonian, Kulongoski said he was aware of public concerns about the council and was "interested in looking at how the board is functioning."

Bill Parish, an investment adviser and vocal critic of the council, commended Edwards' action and called it "long overdue. It will help preserve the integrity of the whole system," Parish said.

The core of the controversy involves an Oct. 29 vote by council members that allowed a subcommittee to commit $300 million to a private equity fund managed by Texas Pacific Group. Less than a month later, Texas Pacific publicly announced plans to buy Portland General Electric, using money from the fund containing the state's contribution. The announcement also disclosed that Neil Goldschmidt was to invest in the deal and serve as chairman of a reconstituted PGE board. Council members contend they didn't know at the time that Texas Pacific had reached an agreement with Enron, PGE's parent company, to buy the utility. And Diana Goldschmidt maintains she learned of Texas Pacific's interest in bringing her husband into the acquisition arrangement the afternoon of Oct. 29, after her vote was cast.

"A question of conflict arose again when it became known that the investment council in February approved investing $75 million in an Oak Tree Capital Management fund that also joined Texas Pacific's effort to buy PGE. Diana Goldschmidt, who participated in the unanimous vote, later said she was unaware of the connection between Oak Tree and Texas Pacific."

Neil Goldschmidt resigned from any involvement in the Texas Pacific deal in May, following disclosures that he repeatedly had sex with a 14-year-old girl in the 1970s when he was mayor of Portland.

Edwards said in the letter that he hoped to hire Edward McAniff, a law professor-in-residence at the University of Oregon Law School, to assist the council in what is known as a "best practices" review. McAniff "has already met once with treasury and OIC staff, and we will be moving forward with this evaluation immediately," Edwards said in his letter to the governor.

Drummond expressed confidence in the council's integrity and in Diana Goldschmidt's explanation of her voting record. "I have no reason to believe Diana did anything inappropriate," he said. "But it warrants investigation so we can prove it to the world. I understand how circumstances can lead a reasonable person to have suspicions."  Complete story available for purchase at

Analysis and Commentary:  Hill wrote an excellent story summarizing a structural credibility weakness at the OIC.  It is also encouraging that State Treasurer Randall Edwards is now finally weighing in on this situation.  His Republican opponent for State Treasurer, not mentioned in the article, has made reforming the OIC a key platform in his campaign.

I did meet with Governor's Kulongowski's office on July 21st and subsequently summarized the meeting for State Treasurer Edwards, suggesting that the governor clean house at the OIC and institute one critical reform, that is,  that he make these four positions on the OIC board paid positions.  My suggestion was $50,000 per year with no benefits.  Such a change would bring a larger pool of potential candidates and most importantly create more accountability.

Managing $50 billion in public pension assets is simply non comparable to other state boards, as noted in a major Oregonian newspaper editorial, and therefore this area should receive more attention. I also encouraged the Governor to act swiftly in order to quell the current controversy and restore credibility to the PERS system.  Sadly, it's the participants, including teachers and custodians, that suffer the most with respect to public opinion due to such problems at the OIC.

This recommendation to clean house at the OIC was made within the context of suggesting that the Governor implement a "triple play" if you are a baseball fan or "hat trick" if you are a soccer fan by fixing the state workman's compensation program SAIF, cleaning house at the Oregon Investment Council and entering into conversations with the City of Portland regarding the future of PGE, regardless of the outcome.  In summary, it is up to the Governor to reach out to Senator Walker because he will need her credibility before the public to accomplish these goals.

Key to success here would be convincing State Senator Vicki Walker to support such an effort and, with respect to SAIF, convincing her to appear in advertisements on behalf of SAIF in order to prevent it from being abolished in a November referendum  In conversations with Senator Walker it was also requested that she apply her credibility regarding SAIF to the OIC and PGE in order to work with the Governor to complete this "triple play."

With the next monthly OIC meeting scheduled for this Wednesday August 25th, here in Portland at PERS headquarters from 9-12:30, it should be expected that a new OIC member be nominated.  Although common sense would suggest someone with a strong financial background, perhaps a CPA, more important will be the process.  Has the Governor done an aggressive search and developed a pool of potential candidates or will he simply throw out a name without involving major parties involved, including major contributors such as the City of Portland and perhaps also independent observers like myself?

While many see Vice-Chair Diana Goldschmidt's participatioon on the board as the primary issue, my sense is that the much greater risk is the presence of Gerard Drummond as Chairman. One reason Drummond is controversial is because he was CEO of Nerco, at the time a major subsidiary of Pacific Power.  As a result of gross mismanagement and speculations in the coal market not unlike some of Enron's speculations, Nerco was eventually sold to a European firm to avoid bankruptcy.  Many beleive that these staggerring losses so weakened Pacific Power that it was forced to eventually sell out to Scottish Power in 1999.  Scottish Power purchased Pacific Power for $7.3 billion in 1999, at stock market highs, and was represented by the law firm Milbank, the same firm that today represents Enron's unsecured creditors.

Given that Scottish Power is leading the opposition to public power efforts in Oregon, including the City of Portland's bid for PGE, it would seem reasonable for Chair Drummond to disclose whether or not he participates in a Scottish Power retirement plan or has any other significant business connections with the firm or with the investment firms TPG, Oaktree and Credit Suisse involved with the buyout of PGE.

Perhaps the biggest concern; however, with Mr. Drummond is his long standing reputation for being hostile to the public process, including a history of discouraging comments from the public during the 15 minutes of each four hour OIC meeting dedicated to public comments. Generally, the entire length from all such comments does not exceed 5 minutes each month.

2004 August 10  SAIF leaders call Goldschmidt deal a "godfather type of racket", by Jim Redden, Portland Tribune

Contract likened to ‘protection money’ in discussion last fall. The SAIF Corp. officials compared Neil Goldschmidt to a mafia boss selling influence and protection to the highest bidder during a meeting at the agency’s Salem headquarters late last year. At the time, Goldschmidt was a consultant working on a $20,000-a-month contract for SAIF, the state workers’ compensation insurance agency. SAIF records show that the agency paid Goldschmidt’s firm — Goldschmidt Imeson Carter — more than $1.1 million between 1996 and 2003.  During the meeting, the officials discussed what Goldschmidt was doing for SAIF. Among other things, Tibbetts said Goldschmidt was able to meet with Gov. Ted Kulongoski.

During last week’s hearing, Stephen Bushong, the assistant state attorney general representing SAIF, said Cohen had secretly recorded the Nov. 21 meeting.  Bushong introduced both the tape and transcript into evidence last Friday in order to question Cohen about it. Cohen said Tibbetts gave him permission to tape the meeting.  Cohen on Friday repeated his charges that Keene and Tibbetts directed him to alter or destroy internal records to prevent DiLorenzo from receiving them. Keene denied the charges in a deposition entered into evidence. Tibbetts personally denied the charges Friday.  See complete story at

Analysis and Commentary:  Given that Neil Goldschmidt's wife sits on the Oregon Investment Council and is thereby responsible for the massive investment portfolio at SAIF, one would think that more disclosure and transparency would be a given.

2004 August 8  Another nice guy stands up for Texas Pacific by Steve Duin, Oregonian

 It's not about the money. That's what Peter Kohler said. To secure Kohler's services, Texas Pacific Group plans to pay him $125,000 annually to chair the boards of Oregon Electric Utility and Portland General Electric.

The president of Oregon Health & Science University will receive $30,000 in stock options if Texas Pacific's proposed purchase of the utility is approved. Kohler will have the opportunity to invest $500,000 in Oregon Electric, from which he expects a "moderate" return. He will also get a $5,000 check for each board committee he chairs and another $1,000 for each meeting he attends.

But it's not about the money. That's what Peter Kohler said. It's not about time off from his obligations at OHSU, which pay Kohler more than $600,000 each year, making him the state's highest-paid public official. His new board duties will only require "four half-days" a month, Kohler said Thursday, "less than that" if the Oregon Public Utility Commission approves the deal.

"The thing taking up the most time right now is the media," Kohler said. And the media is confused about what's at stake here, Kohler believes. It's not about conflicts of interest, as city Commissioner Randy Leonard suggests. In Kohler's morning job, Leonard argues, the OHSU president will be working to lower the cost of electricity on campus. In his afternoon job -- well, four afternoons each month -- the PGE board chairman will be working to maximize the utility's profits as part of his fiduciary responsibility to shareholders. "There's an obvious conflict of interest, it would seem to me," Leonard said.

Bill Parish, a Portland investment manager, describes another conflict in a letter asking Kohler to resign from the boards. In its $2.35 billion bid for PGE, Texas Pacific is using $1 billion in public pension funds from the Oregon Investment Council. "With 11,500 employees, OHSU is the largest regional provider of public pension funds," Parish writes. Thus, the pension contributions of his employees are allowing Kohler to benefit privately in his role as chairman of the PGE board.

Kohler dismisses these accusations. "I will not be involved in any rate discussions," he said, putting an end to the mystery of whether he has the power or inclination, as board chairman, to lobby for lower rates. To counter perceived conflicts of interest, Kohler said, he has "secured many opinions to the contrary" from legal counsel and the OHSU board. "You don't often find the president of an academic institution heading a utility board," Kohler said. "I understand there's a novelty to it that creates some tension. (But) I think everyone at OHSU is comfortable with this."  See complete story at

Analysis and Commentary:  Duin wrote an excellent piece explaining a few key aspects regarding Peter Kohler's proposed role as Chairman of PGE.  He did however possibly grossly underestimate the value Kohler's options at $30,000 since such options are generally highly leveraged and could easily bring Kohler millions in profits when PGE's shell is spun out in an IPO by Texas Pacific.

It is also rather surprising that Peter Kohler so openly misrepresented the opinions of his fellow employees at OHSU and thereby compromised his integrity.  His credibility was furthur impaired by claiming that Texas Pacific was not a corporate raider. The truth is that many employees are very disturbed by Kohler's dual role and want him to focus exclusively on OHSU, perhaps a reasonable request given his annual salary at OHSU of $600K.  These same employees considered the e-mail letter he broadcast to all OHSU employees explaining his role as patronizing.  Perhaps Kohler forgot that OHSU is full of bright, dedicated and informed research and health care professionals.

Also not mentioned is that in his role at PGE Kohler will be effectively pocketing the cash flow from taxes paid by ratepayers along with other TPG investors since these taxes will clearly never be paid due to a loophole highlighted in a June 22, 2004 Steve Duin column, see summary in this archive.  At the same time the State of Oregon is providing OHSU more than $50 million per year in financing, including of course a piece of Mr. Kohler's own salary.

As City of Portland commissioner Randy Leonard noted, there is an obvious conflict of interest between Kohler's morning job at OHSU and his afternoon job four days a month for TPG.  Commissioner Leonard of course also represents another major group of contributors to PERS itself, City of Portland employees, and he has distinguished himself as able to address tough situations for the benefit of the City.

It will be interesting to see if Pat Hearn of the State Government Standards and Practices Commission, the group in charge of such ethical conflicts, will step up and suggest that Mr. Kohler resign, rather than wait for an official complaint.  According to Mr. Hearn, as of Thursday August 5th, no complaint had been filed.  Any party interested in filing such a complaint with Hearn can do so by visiting the website at  See analysis and commentary for August 3, 2004 article by Kristina Brenneman titled "Big Bucks proposed for PGE Board" explaining specific reasons why Hearn should not wait for a formal complaint.

Duin's column does have one factual error; however, in that it is not clear exactly how much of the $1 billion Oregon PERS has given the Texas Pacific Group to invest will be actually invested in PGE.  This is because TPG operates "blind investment pools" with no SEC oversight and not only does not provide such information to individual investors yet it also self evaluates the returns on such investments.  These same returns are later communicated by the State Treasury to PERS participants.  See analysis and commentary in this archive for August 4, 2004 Wall St. Journal story regarding SEC Chairman Donaldson's support to require such investment pools to register for the first time, the story is titled "Kerry makes headway."

A good question for State Treasurer Randall Edwards and Chief Investment Officer Ron Schmitz given the current situation in which public funds are going to blind investment pools that in turn pocket the cash flow from taxes paid by ratepayers that will never reach the government is, do you support the efforts of SEC Chairman William Donaldson to require hedge and private equity funds to register with the commission? As Donaldson notes on the SEC's website, himself a conservative Republican and former investment banker,  "I don't get much push back from people who have nothing to hide."

2004 August 4  Kerry Makes Headway in Luring Corporate Support by Jackie Calmes, Wall Street Journal

Among the Kerry converts is David Bonderman, founder and managing partner of the Fort Worth, Texas, investment firm Texas Pacific Group, who supported Mr. Bush for president in 2000 and earlier for Texas governor.

In an interview from a chartered boat off Italy where he is vacationing, Mr. Bonderman said: "George is a really good guy personally. But his policies are really terrible. And he had an opportunity to bring the country together -- which was his MO in Texas. But for reasons only his psychiatrist would know, he's chosen to do just the opposite as president. He's turning out to be the worst president since Millard Fillmore -- and that's probably an insult to Millard Fillmore."

Analysis and Commentary: Bonderman's firm has received more than $1 billion of public pension funds from the State of Oregon and the buyout of PGE will represent its largest investment. What Bonderman does not note is that SEC Chairman William Donaldson, a loyal Republican and Bush appointee, has voted with two Democratic Commissioners to require hedge and private equity funds to register with the SEC for the first time.  This would seem most reasonable since these funds primary sources of funds are now public pensions and they currently self evaluate the market values of these blind investment pools for these same public pensions.

See link at on SEC website describing proposed rule on July 20, 2004, noting that two commissioners dissented and that Donaldson was in the 3-2 majority in favor of the proposed rule.  In his testimony before Congesss on July 18, 2004, text at, Donaldson noted ("I don't get much push back from people who are operating good funds," he said. "I don't get much push back from people who have nothing to hide.")

The registration of hedge funds would represent a dramatic reform for the financial markets, a reform that ironically no democratic president could possibly achieve. Donaldson, being a former investment banker and loyal Republican, does indeed have the credibility among his constituency to make this a reality, a reality Bonderman is clearly not comfortable about..

2004 August 3  Oregon pension fund eyed PGE deal by Gail Kinsey Hill, Oregonian

As recently as February, 2004, Texas Pacific Group and the Oregon Treasury were discussing a joint investment in Portland General Electric, a partnership that would have given the state partial ownership of the utility.  In late February, 2004, six months after Texas Pacific first asked whether the state was interested in putting an estimated $50 million into the deal, Treasury officials said no.

"Even though the investment has some favorable characteristics for OPERF, we have declined the offer given the restrictive nature of the decision timeline, the intense public scrutiny of the deal and the complexity of the regulatory process," Schmitz wrote in a March 2, 2004 e-mail.

Later, in July, 2004, the state Treasury quietly committed $75 million to a fund that seeks direct investments with general partners, such as Texas Pacific and Kohlberg Kravis Roberts & Co. By going through a fund manager -- in this case Harbourvest Partners of Boston -- the state chose a modified route to gain some of the benefits of co-investing while avoiding the constitutional prohibition on stock ownership. Schmitz called it a "baby step" into co-investing.

Texas Pacific founder David Bonderman first called the state investment division on Aug. 25, 2003 about a possible co-investment in PGE. "On the surface, this may be a very good way to slide into an area that I think we should explore," Schmitz wrote in an e-mail to state Treasurer Randall Edwards to notify him of Bonderman's request. Texas Pacific had notified Oregon's investment staff early in the summer 2003 that it was evaluating a purchase of PGE. But it didn't extend the co-investment offer until months later, when the possibility of an acquisition deal apparently began to jell.

Then, the request simmered for months. The state didn't hear from Texas Pacific again until the firm publicly announced on Nov. 18, 2003 that it had reached an agreement with Enron to buy PGE. Acquisition details named Credit Suisse First Boston as the provider of more than $700 million in debt financing but included no information about potential investment partners. Then, on Feb. 23, 2004 Texas Pacific partner Kelvin Davis held a conference call with investment division staffers Schmitz and Fewel, Treasurer Edwards and Oregon Investment Council Chairman Gerard Drummond, Schmitz said.

According to Schmitz and Fewel, Texas Pacific wanted two or three outside investors to contribute $100 million to the deal. The remainder of the $525 million in equity requirements outlined in the financing package would come from two Texas Pacific funds, TPG Partners III and TPG Partners IV.

Drummond, the only investment council member drawn into the discussions at the time, played down the breadth of the state's interest. "We really weren't equipped to do it directly," he said. "We didn't even look at any documents." Even before Texas Pacific's proposal, the Treasury was considering co-investment options. Although the Oregon Constitution prevents the state from investing directly in company stock, state law allows the state to forge contracts with equity advisers and managers, which, in turn, make the actual investments.

The Treasury's investment division lacks the staff and expertise to conduct the in-depth review, or due diligence, that co-investments require, Schmitz acknowledged. But, for more than a year, it has been putting together a proposal under which an outside adviser, Pacific Corporate Group of La Jolla, Calif., would shoulder the research responsibilities and serve as exclusive general partner.

The Oregon Investment Council in June rejected the proposal. Because Pacific Corporate is a consultant to the pension fund on other private equity investments, some members worried that conflicts of interest might arise. The Treasury also could have set up an entity such as a limited liability corporation to purchase stock on the state's behalf. But neither arrangement was in place, and time ran out. See complete story at

Analysis and Commentary: (Please note that I inserted the year to go along with various dates in this story in order to make the complicated timeline clearer.)  Although an excellent article, it does not distinguish between an opportunity to invest in PGE debt (fixed income), and an equity investment (stock).  My original proposal was that the State organize a partnership of 4-6 public pensions to invest in PGE bonds.  This was repeatedly communicated directly to the Oregon Investment Council at its monthly meetings.  Afterall, public pensions such as the OIC do have huge pools of assets that must be dedicated to high quality fixed income in order to meet asset allocation targets.

Readers are led to believe that the only option the state had was an equity investment along with TPG when they could easily have called the City of Portland and together orchestarted the buyout of PGE, making it a municipal utility with private management. The only looser here would be Goldschmidt/Imeson's client TPG, and Credit Suisse since it is slated to issue $700 million in bonds to finance the deal.  It is not known whether or not Credit Suisse is a client of Goldschmidt/Imeson since no journalist has posed the question, even though Diana Goldschmidt has curiously abstained regarding votes with respect to Credit Suisse at the Oregon Investment Council.

Public pensions would get a high quality fixed income investment, backed by the assets, the city could make a small capital investment through a partnership and large power users could be given negative consent rights in order to gain there support.  A privately managed municipal utility would result. The story also does not mention that Oaktree and the Gates foundation are the two minority investors, each of whom will own 10 percent of PGE nor that the State Treasurer's office has still never spoken to representatives from the City of Portland about the future of PGE.

The real story here is clear and that is one of intimidation and the fact that TPG is a client of Goldschmidt/Imeson and there lobbying was so effective that all state officials, including Governor Kulongowski and State Treasurer Edwards, have been silenced, even though they should be representing many state organizations, i.e. the City of Portland, who are the largest contributors to PERS itself.

Also not referenced in the article is the conflict of interest that would result in an "equity" investment by Oregon PERS if the taxes ratepayers are charged are never paid to the government.  Clearly, this is TPG's plan.  See June 22, 2004 column by Steve Duin in this archive titled "Digging Deeper into the Texas Pacific Deal" which explains this loophole.  Remarkably, there has been no follow-up by the business staff about this extraordinary situation, confirmed by former Senate Finance Committee Chair Bob Packwood in the same column.

Other areas not discussed are the specific conflicts of interest surrounding Peter Kohler acting as PGE's Chairman, the fact that Tom Imeson was on OHSU's board thru June of 2004 while maintaining TPG as a client and most importantly the reality that Texas Pacific is self evaluating its investment portfolios for purposes of communicating to Oregon PERS what the returns are.

In summary, although an excellent article, this situation is so big that it clearly requires at least two more reporters dedicated to it on a full time basis.  One such reporter who has indeed distinguished himself by doing complicated financial stories, including the demise of Wilshire Capital, is Jeff Manning.  My advice, dispatch Jeff Manning to bolster the breadth of coverage.

2004 August 3 Big bucks proposed for PGE board by Kristina Brenneman, Portland Tribune

 Texas Pacific Group is proposing to pay the five managing members of a 12-person board that would oversee Portland General Electric a total of a half-million dollars a year — more than other utilities in the region.

Former Willamette Industries Inc. Chief Executive Officer Duane McDougall, like his managing member colleagues, would earn $50,000 for serving on the Oregon Electric board and $30,000 for the PGE board. He would receive another $1,000 for each meeting attended. Most utilities average six to eight meetings a year.

The only one who would earn more is Oregon Health & Science University President Peter Kohler, who would earn $75,000 as chairman of the Oregon Utility board and $50,000 a year as chairman of the PGE board. Kohler also would earn $5,000 for each meeting he chaired.   The board members — who would individually invest between $500,000 and $750,000 in PGE’s holding company — also would get $15,000 in annual stock options.

“That’s significantly higher” pay (than other local utilities), said Randy Miller, a PGE Foundation member and former PGE board member. “But the risk is a lot higher, and corporate boards are having trouble recruiting right now.” A representative for NW Natural gas utility, which pays its directors far less than Oregon Electric would, says it has had no trouble attracting board members.  “Despite the increased expectation and the heightened scrutiny of boards and governance of corporations, we have not experienced any difficulty really in the past few years on getting quality board members,” said NW Natural spokesman Steve Sechrist.

Ken Canon, executive director of Industrial Customers of Northwest Utilities, said the stock options also concern him. "Obviously board members are looking out for the company and stockholders, and if you get stock options that clarifies that point even more,” he said. “What part of this would indicate to customers they are going to be looking out for their interests?”

Analysis and Commentary:  Given that Peter Kohler is a participant in the Oregon public pension system as President of OHSU, his role as Chairman of PGE is clearly an unacceptable conflict of interest given that the Oregon Public Pension System has invested more than $1 billion with the Texas Pacific Group.  Furthur complicating this is the fact that Tom Imeson is on the board of directors of OHSU while his lobbying firm maintains Texas Pacific, Mr. Kohler's new employer, as a client. Even today these key facts have not appeared in the press.

The following reference is from the OHSU website dated June 9, 2004 and printed today August 3, 2004. It appears in the "On-Going Board Member Section."  Imeson along with three others, including the managing partner from the Stoel Rives law firm, Henry Hewitt, are noted as on-going board members. Stoel Rives of course was one of Enron's attorneys and is also working to block public power efforts on behalf of other clients here in Oregon.  Perhaps most interesting is that Gerard Drummond, Chair of the Oregon Investment Council, the group investing PERS funds, is one of the key original partners of Stoel Rives.  While later CEO of the Pacific Power's failed coal mining subsidiary, Nerco, Drummond made many ill fated acquisitions and immediately terminated the existing legal staff and outsourced most legal work to Stoel Rives, thereby probably doing more than any other single person to make Stoel Rives the large prominent law firm it is today.

Although a strong diverse law firm, Stoel Rives has been involved in numerous major scandals and in some cases paid million dollar settlements regarding conflicts of interest.  One situation includes the Lewis and Clark controversy over former disgraced President Mooney.  See 9/10/03 story by Nigel Jaquiss in Willamette Week titled "Report slams Mooney, Stoel Rives. The question becomes, why has Stoel Rives managing partner Mr. Hewitt, an OHSU board member, not advised Mr. Kohler to resign and does Hewitt's representing the private utility industry now constitute a board level conflict at OHSU of his own.

Hewitt is indeed Chairman of Stoel Rives and did sign its annual report which can be viewed at  His bio at the website does not; however, reference that he is chairman.  Stoel Rives clients include Pacific Power, NW Natural, The Oregonian and the Port of Portland.

OHSU's website lists the following bio for Tom Imeson, as of 8/3/04: "Thomas Imeson, a principal with the consulting firm Goldschmidt Imeson Carter. Past president of the Oregon State Board of Higher Education, Imeson served as Oregon Gov. Neil Goldschmidt's chief of staff from 1987 to 1990. He was vice president of PacifiCorp for 10 years, and before that he worked for 16 years for Sen. Hatfield. In 1994 and 1995 Imeson ran Gov. John Kitzhaber's transition team and then served as the governor's interim chief of staff. Although his term on OHSU's board has officially expired, he will continue to serve until replaced by the governor and the Senate."

In any event, it does not seem clear if and when Mr. Imeson has left the board.  Also noteworthy is that OHSU has been a client of his lobbying firm Goldschmidt/Imeson.  A brief look at recent board minutes should; however, clearly indicate Imeson's role at OHSU.

OHSU President Peter Kohler is effectively using his public position for private gain, a clear violation of the Government Standards and Practices Act in Oregon.  For this reason, he should resign.  In addition, the stock options board members are being given could indeed be worth millions in the future, furthur demonstrating his role is less about public service and more about private gain.

The specific statutory requirement in Oregon regarding the Government and Standards Commission notes that an ethical violation by Kohler would occur only after a specific action is taken in his capacity as President of OHSU.  However, since OHSU is the largest regional contributor to PERS and rising PERS expenses are forcing significant cutbacks at OHSU, including closure of important programs and related job losses,  such actions have already occurred as Mr. Kohler is responsible for approving the monthly budget at OHSU.  Kohler is effectively eliminating jobs and related PERS expenses that would not otherwise be eliminated if the investment performance of the PERS private equity portfolio, most notably the investments in TPG, met expectations given the risk taken.

Generally, it is expected that such high risk partnerships earn at least a 5 percent better return than the overall stock market and TPG has not come close.  In addition, TPG values its own investment portfolios on its own, providing no disclosure to the SEC.  Since most of these investments are non-publically traded and not liquid, there is also concern over whether these investments are fairly valued.  This is especially important because these values result in an expected rate of return fpr PERS investments and greatly influence the PERS system.

Recently, the SEC did vote 3-2, with Chair Donaldson in the majority, to require hedge and private equity funds to register with the SEC for the first time.  Given that such funds are now receiving most of their investment capital from public pensions, such registration is perhaps long overdue.

2004 July 29 Turmoil Oregon doesn't need, lead editorial, Oregonian.
The investment council, buffeted by ripples from the Neil Goldschmidt scandal, requires the governor's attention. To many Oregonians -- maybe even most -- the Oregon Investment Council is about as familiar as the lowly State Weed Board. All comparisons stop there, though. The investment council is a powerhouse panel managing nearly $60 billion in public money, including $45 billion from the Oregon Public Employees Retirement Fund, one of the biggest pension funds in the nation.

That's why simmering questions involving some of the council's members are matters of serious concern. Most recently, there's the troubling manner in which the council's most market-savvy member, discount broker Jerry Bidwell, resigned this month. He did so with no notice and without explanation, amid continuing fallout from a sex-abuse admission by his close friend, former Gov. Neil Goldschmidt.

Sen. Vicki Walker, D-Eugene, who says she may call for a state ethics inquiry into Diana Goldschmidt's actions, also has raised concerns about its members' residency. Bidwell lived in Camas, Wash., during much of his tenure. And the council's chairman, Gerard Drummond, another close friend of the ex-governor, spends at least a third of the year living in Southern California.

The residency issue, though in need of the governor's attention, pales next to the matter of conflict. It's unsettling that two friends of Neil Goldschmidt, along with his wife, voted to direct money into funds linked to a $2.35 billion utility buyout deal that was all set to involve Neil Goldschmidt, before he bailed out in an explosive sex scandal.

The Oregon Investment Council's long record of success must not be allowed to falter. Public trust in its decisions must not be permitted to erode. Oregonians deserve an explanation from the hastily departing Jerry Bidwell and a clearing of the murk surrounding Diana Goldschmidt. Most of all, Gov. Ted Kulongoski needs to steady this ship, and soon.

Analyis and Commentary:  It is good to see the Oregonian providing some high profile exposure regarding this most important board yet unfortunately the paper did not mention the importance of making these paid position, perhaps $50K with no benefits, in order to attract a broader pool of quality candidates.  This was a key reform I recommended in a meeting at the Governor's office on July 22, 2004.

2004  July 25 State investment panel's turmoil breeds concern by Harry Esteve, Oregonian.

With billions of funds at stake, some may call for a review of the Oregon Investment Council amid ethics accusations and an unexplained resignation. The Oregon Investment Council, which manages a $58 billion portfolio of state funds, has hit perhaps the rockiest times since its inception in the 1960s.

Its most knowledgeable member, discount broker Jerry Bidwell, resigned earlier this month without explanation. Another member, Diana Goldschmidt, has come under a cloud of accusations related to her marriage to disgraced former Gov. Neil Goldschmidt. And the council's chairman, Gerard Drummond, has raised eyebrows because he spends at least a third of the year living out of state, in Southern California. The developments have caught the attention of Gov. Ted Kulongoski, who is responsible for council appointments.

"I've heard a number of comments about the council, particularly in the last two weeks," Kulongoski said in a recent interview. "I'm interested in looking at how the board is functioning." Separately, state Sen. Vicki Walker, D-Eugene, says she may call for a state ethics investigation of the council because of what she thinks are conflicts of interest by Diana Goldschmidt.

Four of the five voting council members are appointed by the governor. The fifth spot is for the elected state treasurer, Randall Edwards. A sixth, nonvoting position is held by the director of the Oregon Public Employees Retirement System, Paul Cleary.
Residency of members an issue. Kulongoski has yet to nominate someone for Bidwell's seat. Nor has he given any indication that he's considering a top-to-bottom shake-up of board members as he has done with other state commissions, such as the PERS board and the state land-use board. But he's taking a hard look at the council's current troubles.

One of the issues Kulongoski said he wants to tackle is where council members live. During much, if not all, of his tenure, Bidwell lived in Camas, Wash., raising questions about his qualifications to serve on the Oregon panel. Drummond, the council chairman, said he spends at least four months a year at his retirement home near Palm Desert, Calif.

Diana Goldschmidt recently sold her main Portland residence, fueling speculation she might leave the state and resign from the council. In a telephone interview with The Oregonian, Goldschmidt put those rumors to rest. "I am not moving, and I am not planning on resigning from the Oregon Investment Council," she said. "I'm living in Portland right now. If I move anywhere, it will be 25 miles down the road to Dundee."

Ties to Goldschmidt questioned. Walker's concerns go beyond members' addresses and are focused on the council's close ties to Neil Goldschmidt. Before Bidwell resigned, three of the five voting members of the council either were close friends of or married to Goldschmidt, Walker said, naming Bidwell, Drummond and Diana Goldschmidt.

"I think we need to clean house at OIC," said Walker, who late last year filed an ethics charge against Saif Corp., the state-owned workers' compensation insurance agency. Her complaint alleges that Saif underreported the amount it spent on lobbying, including more than $1 million that went to Neil Goldschmidt's firm over a six-year period beginning in 1998.

The case is under investigation, with a hearing scheduled next month. Once that case is cleared, Walker said, she may file a complaint against the investment council. Walker said she is bothered by recent council decisions to direct money into funds linked to Texas Pacific Group's effort to buy Portland General Electric for $2.35 billion.

Until recently, Neil Goldschmidt was on tap to serve as the chairman of the PGE board of directors if the sale to Texas Pacific went through. Goldschmidt also planned to invest about $830,000 in Oregon Electric Utility Co., the holding company created to execute the sale. The arrangement would have set up Goldschmidt and other partners for profits -- or losses -- when Texas Pacific sold PGE in a few years as buyout firms typically do.

Last year, the investment council authorized its fund managers to commit $300 million to one of two Texas Pacific investment funds that would provide most of the cash for the PGE buyout. Diana Goldschmidt voted for the investment. She said she didn't know at the time she voted that her husband would be involved, and only learned an hour and a half later as the couple prepared to leave for a trip to San Francisco. "On the way to the airport, Neil gets a phone call," in which he first heard general information about the PGE buyout, Diana Goldschmidt said. He later learned specifics about what his role would be.
Investment raises concern.

A question of conflict arose again earlier this year, when the investment council in February approved investing $75 million in an Oak Tree Capital Management fund that also joined Texas Pacific's effort to buy PGE. Diana Goldschmidt was part of the unanimous vote. Later, she said she did not know of the connection between Oak Tree and Texas Pacific.
Walker says she doesn't buy the claims of ignorance. Diana Goldschmidt "made what I believe to be an unethical vote to give that money to Texas Pacific Group," Walker said, about the initial $300 million investment. "That bears scrutiny."

"I agree, it looks horrible because the time frame was so close," Goldschmidt said. "I am an ethical person, and I resent her (Walker's) accusations," she said. "She can file whatever complaint with whatever agency she wishes. I have nothing to hide."
Neil Goldschmidt has since withdrawn from the PGE-Texas Pacific deal. He resigned all his public and private commitments after admitting in May that he had repeated sexual contacts with a 14-year-old girl while he was mayor of Portland in the 1970s.

Diana Goldschmidt said her main concern about the investment council is the loss of Bidwell, a former Portland resident who started a discount brokerage that he recently sold for $55 million to Ameritrade. "Jerry brought a whole new depth of knowledge and understanding to the council," she said. "It's a tremendously important position."

Drummond said he wants to make sure the council has enough members to ensure the required monthly meetings continue with a voting quorum. "We might be a bit short-handed until the governor makes an appointment," he said. He said the difficulty will be finding someone with a sophisticated understanding of large investments who isn't involved in the markets to a degree that it would create a conflict. "That's kind of hard to find in this state," he said.

Regardless, he said, Oregon's investments are safe. They have performed "superbly," and he expects they'll continue to do so. "You'd have to have an investment council that did not take the advice of consultants or staff and went off on a frolic of its own in order to get us in serious trouble," he said. "I don't see that happening."  See to order complete story.

Analysis and Commentary:

It is sad that Diana Goldschmidt seems to be putting the credibility of the PERS system at risk, a retirement system with 300,000 participants, by refusing to resign from the OIC.  Another fine public institution, SAIF, has already been so thoroughly discredited by her husband's business activities that a ballot measure calling for it to be abolished will be on the November ballot.  Imagine the tragedy if a similar fate fell upon PERS due to increasing public disgust with the conduct and conflicts of interest of current board members?  The only winners in such an investment scenario would be large investment firms as they able to prey on teachers, custodians and other public employees without the inherent protection of such a defined benefit system.

State Senator Vicky Walker seems very focused upon cleaning up the Oregon Investment Council and her efforts should be applauded.  Given that Walker's work regarding SAIF has even resulted in an FBI investigation into Mr. Goldschmidt's business activities, with his wife Diana sitting on the board responsible for SAIF's investments, that would in itself seem to be a compelling reason to resign.

Neil Goldschmidt has still not disclosed which investment firms his lobbying firm has represented.  It is known that TPG has been a client and speculation does now also include other firms given unexplained abstentions on key votes.

Another council member Mark Gardiner has also abstained from certain votes and has similarly has not disclosed which public entities he represents and the fees his investment consulting firm earns from various investment firms he collaborates with.  Gardiner was previously the Chief Financial Officer for the City of Portland and also a key player in the controversy regarding Portland Family Entertainment (PFE), the company that managed the renovation of PGE Park.

In meeting with the Governor's office on July 21st, I also called on the Governor to restore his credibility by cleaning house at the OIC and also contacting the City of Portland regarding the status of PGE.  Regarding the OIC, I specifically suggested that the positions be paid at an annual stipend of $50K with no benefits and no PERS and that Tom Imeson, Neil Goldschmidt's partner, not be allowed to screen candidates as he has done for many state appointments.

This would draw a much wider pool of candidates and also increase accountabililty.  The notion of having a $50 billion pension fund being managed by volunteers with significant conflicts of interest, some even now arguing a board that now looks more and more like the council members private investment bank, doesn't make sense.

2004 July 23  Files shed light on city's bid for PGE by Jeff Manning and Gail Kinsey Hill, Oregonian
Documents reveal how close Enron came to selling the utility to Portland officials -- and how apart the sides were in principle.
Portland city officials told Enron last year that they were willing to pay at least $2.33 billion for Portland General Electric, and the two sides came "within spitting distance" of agreeing on an acquisition price before talks cooled, according to confidential documents obtained by The Oregonian.

The city's offer, cloaked by secrecy agreements, until now has remained hidden. Last fall, Enron announced it would accept a similar price -- $2.35 billion -- from Texas Pacific Group, a private buyout firm.

The documents offer an inside view of the financial hurdles and the cultural differences that separated city leaders from Enron's executives just as Mayor Vera Katz and city commissioners have reaffirmed their interest in acquiring PGE and renewed claims that a city-owned utility could slash electricity rates by 10 percent.

Texas Pacific argues that the city's pledge to cut rates is an empty promise based on bogus financial assumptions. But in a development that could lend political momentum to the city's case, state regulatory staff on Wednesday recommended rejecting Texas Pacific's offer, primarily because it failed to guarantee rate cuts.

The documents also establish the pivotal role played by Ater Wynne, the Portland law firm hired by the city to pursue the PGE transaction last year. By late 2003, the firm switched sides to represent Texas Pacific, prompting a preliminary investigation by the Oregon State Bar into whether Ater Wynne violated state ethical rules.

It's clear from the documents that Enron felt the city's offer fell short on financial detail and failed to adequately insulate Enron from potential legal claims. But Erik Sten, the Portland commissioner who has led the city's effort to buy PGE, maintains that Enron executives never had any intention of selling PGE to the city regardless of its offer. "We needed a willing seller and Enron wasn't," he said.

Enron declined to comment for this story. In bankruptcy documents filed early this year, the company acknowledged numerous meetings with city officials, but emphasized that Portland "never provided debtors with a formal offer . . . and never provided a purchase agreement, whether a markup of Enron's form or otherwise."

On Feb. 26, 2003, the city submitted to Enron a term sheet, which outlined a proposed purchase, including price and conditions. The nonbinding document offered $2.1 billion for PGE -- $1 billion in cash, $1.1 billion in assumed debt.
The Oregon Constitution prohibits the city from purchasing company stock, a potentially serious obstacle to the deal. But the city, with advice from Ater Wynne, had found a way around the rule. A new, city-formed nonprofit corporation -- dubbed "Newco" for the purposes of negotiation -- would buy the stock then sell the assets of PGE to the city.

The documents show Enron was dissatisfied with the offer, however, including price. Enron wanted another $300 million.
There were other issues as well. Enron wanted any buyer to assume all PGE legal liabilities. Enron also claimed that at least $200 million in PGE's profits belonged to Enron creditors. That money had been building up because PGE had stopped paying dividends to Enron in mid-2001. The city's initial offer called for those retained earnings to remain with PGE.

"This is a really big problem for them," Tim Grewe, the city's chief administrative officer, said in an April 17 e-mail about the dividend issue. Enron officials "aren't taking the city seriously. Think we are arrogant. . . . Insecure about a public process."
City sweetens offer. At some point that spring -- the documents don't make clear when -- the city made two significant concessions. It upped its offer from $2.1 billion to $2.33 billion. And the city also accepted that the PGE retained earnings belonged to Enron, adding the prospect of more cash to the deal, according to three sources who were involved with the negotiations.

"Cooper said that he would love to do a deal with us," said Kathleen Gardipee, an assistant to Sten, in a May 19 e-mail to other city officials. "Cooper said he is willing to ship the team out to Oregon and they will stay there until we can get something hammered out." But optimism was tempered by a May 23 letter from Enron's Taylor, who seemed to play Enron's "bad cop" to Cooper's "good cop." The city's price was still too low, Taylor said. Just as significantly, Enron demanded insulation from all of PGE's legal liabilities, which included costs associated with the shuttered Trojan Nuclear Plant, Enron pension lawsuits and legal issues associated with fraudulent electricity trades.

Taylor also questioned the city's ability to finance the deal and took Sten to task for talking too freely to the media, which he said posed a possible violation of the confidentiality order signed by all parties.

Rapid-fire letters and phone calls continued through the rest of May. But the back-and-forth ended after Taylor came to Portland for a much-anticipated meeting with the city's negotiating team. In a June 3 e-mail that summed up the meeting, Ater Wynne partner Jonathan Ater told his colleagues at the firm that the city and Enron were at an impasse over the liability question and the structure of Newco.

Mayor Katz tried to lure Enron back to the table in a June 5 letter. She defended the city's approach to the liabilities and even said the city was likely willing to offer a higher price. She also argued that Enron creditors would get their money significantly quicker if the city bought PGE. Unlike a private-sector buyer, the city would need neither Oregon Public Utility Commission or U.S. Securities and Exchange Commission approval.

Enron's lack of interest became clear when it filed its bankruptcy reorganization plan on July 11. In an interview that day with media, Cooper confirmed that the deal with the city had crumbled. "Between the proposed economics and other commercial terms and conditions, we just were too far apart," Cooper said. The city attempted to restart talks with Enron in September and October with a sweetened offer. But Enron again rejected the city's entreaties, explaining it was in the final stages of negotiations with someone else.

At the time, city officials didn't know that Texas Pacific was about to prove itself the victor. In fact, as late as mid-October, Grewe was hearing "on the street, right or wrong, that the other deal has cratered," he wrote in an e-mail. That possibility only added to officials' frustration. "It is now clear that Enron is not going to meet," Grewe added in the Oct. 13 e-mail. "They have yet again stiff-armed us without even hearing our proposal."

Texas Pacific announced its tentative agreement to buy PGE at a news conference on Nov. 18. The company's base offer of $2.35 billion includes $1.25 billion in cash and $1.1 billion in assumed PGE debt. Further adjustments linked to 2003 and 2004 PGE earnings brings the total to an estimated $2.5 billion. That is not far off the city's offer of $2.33 billion plus additional cash linked to PGE retained earnings, although the documents do not specify an amount.

After the deal was announced last fall, Texas Pacific's stature as one of the country's leading buyout funds persuaded Sten and the City Council to back off. Enron advisers invited the city to enter a rival bid for PGE to the bankruptcy court in early 2004. The city declined. In a Jan. 27, 2004, letter of explanation, the city's Grewe said it would have been a wasted effort, given Enron's past reluctance to deal with the city.

A bid also would have been expensive. The city still hadn't asked commissioners for another $2 million to complete the required due diligence. More daunting, overbids required a $20.25 million deposit, though losing bidders would get their deposits refunded.  Months later, a rivalry between the city and Texas Pacific still simmers.

In June, the City Council vowed in a letter to the Oregon Public Utility Commission, which must approve the Texas Pacific purchase, that it could lower rates 10 percent if it owned the utility. PGE, according to its own surveys, has some of the highest rates for residential customers among the Northwest utilities.

Texas Pacific claims the 10 percent rate reduction is based on a low-ball purchase price, and unrealistic debt and equity requirements. In a meeting with The Oregonian, Texas Pacific founder David Bonderman called the city's claims "delusional."
The dispute heated up Wednesday, when staffers from the PUC issued a strongly worded recommendation to reject Texas Pacific's purchase application. The staff cited the company's failure to offer rate concessions to PGE customers and said increased debt from the deal could affect the utility's financial stability.

The staff recommendation, while a setback for Texas Pacific, follows the pattern in such cases. Staff opposed Enron's purchase of PGE in 1997 and Scottish Power's purchase of PacifiCorp in 1999. The deals eventually won approval after the companies made rate concessions.

Sten vowed the city will continue its efforts to buy PGE. "Both Enron and Texas Pacific have come from a clear point of view that the local community isn't particularly important to them," Sten said. "Their goal has been to make as much money as possible for Texas Pacific and to keep Enron in its comfort zone. I think we all need to be uncomfortable with Enron's comfort zone."

Analysis and Commentary:  Perhaps most remarkable about this story is the conclusion not prominently made, this being that when you net out all the details the City of Portland made a signficantly higher offer for PGE than TPG and that the law firm representing Enron's unsecured creditors, Milbank, seriously breached its fiduciary responsibility to these same creditors by not requiring Enron to accept the offer and more quickly distribute proceeds to creditors.  These creditors include the State of Oregon and therefore this analysis has been forwarded to Oregon Attorney General Hardy Myers office for review with the hope that an official statement will be issued to Milbank and the Bankruptcy Court Judge Gonzalez clarifying this serious breach of fiduciary responsibility by Milbank.

Both TPG and the City offerred roughly $2.3 billion yet the City did not require that the $240 million in cash on PGE's balance sheet be considered as part of its offer.  What this means for creditors is that the City offerred a full 20 percent more based upon the cash purchase price of $1.2 billion.  Both the City and TPG agreed to assume the same amount of liabilities, roughly $1.1 billion.

Even more surprising regarding Milbank's conduct is that TPG was using PGE's future profits incurred up until the closing date as part of its offer, providing the illusion that they would be actually offerring more than the City.  It is of course standard practice for a sellor to have a vested interest in maintaining profits created prior to closing.

2004 July 14  A New Snout in the Trough, Willamette Week

Back in November, some wranglers called the Texas Pacific Group hired Neil Goldschmidt to help tie up the loose ends of their proposed purchase of Portland General Electric, the state's largest utility.

The Nose was confused then about Goldschmidt's role. Here was a paid consultant to PacifiCorp riding to rescue that utility's biggest rival. Here was the chief spokesman against public takeover of PGE, not disclosing his plans to join up with the boys from Texas Pacific. How could the former mayor and governor treat us that way?

Turned out Goldschmidt had bigger problems than conflicts of interest and duplicity--but that's another story (see "The 30-Year Secret," WW, May 12, 2004). Now, with Goldschmidt off in some undisclosed wine cellar, the Texans, who are using $300 million of Oregon pension money to buy PGE, need a new frontman.

Last week, they introduced the new Goldschmidt: Dr. Peter Kohler, president of Oregon Health & Science University. In some ways, Kohler looks a lot like the man he replaced. He's got that same white hair a car dealer would kill for, he doesn't know much about utilities, and he comes to the party with at least of couple of glaring conflicts of interest.

First, Kohler currently works for an outfit that is counting on the city government to bankroll OHSU's tram and billion-dollar gamble on the Willamette.

One of the Nose's pals at City Hall says the good doctor never mentioned an interest in electricity prior to signing on with Texas Pacific. Maybe he forgot that his partners at the city are dead set against PGE falling into the Texans' hands.

But there's money to be made. Kohler, who hauls down $600,000 a year (making him the state's highest-paid public employee who doesn't play with pigskin), will pick up another $95,000 a year in cash and stock for attending a few PGE board meetings.

And despite his lack of utility experience--a quality he shares with the other five locals Texas Pacific tapped for its bid last week--Kohler is convinced this is a good deal. So good, in fact, that he's personally investing $500,000 in the deal, a stake that puts him in an awkward position.

You see, OHSU, which serves more poor people than any other local hospital, is Portland's biggest employer and one of PGE's biggest customers. You might think, then, Kohler would want low electricity rates for his patients, his employees and his institution.

But Kohler's now got 500,000 reasons to want to help his new Texas amigos jam electricity rates sky high. Kohler's renting his name for a share in a monopoly business that his partners are buying dirt cheap, in large part with customers' money. And instead of asking tough questions about TPG's plan, groups like the Oregon Investment Council and The Oregonian are cheering it on.  Link to complete story:

Analysis and Commentary:  In response to numerous requests from clients who work at OHSU I asked Peter Kohler to resign from his role with PGE on July 15, 2004 and followed up one week later with the following letter.  This was in response to a letter Kohler sent to all 11,500 employees at OHSU trying to justify his role with TPG.  Most employees found Kohler's letter "patronizing."  Again, this is my response to his letter.


Peter Kohler
President - OHSU
3181 S.W. Sam Jackson Park Rd.
Portland, OR 97239

cc:  Pat Hearn - Oregon Government Standards and Practices Board
       William Donaldson, Catherine Fisher -  Securities and Exchange Commission
       David Bonderman, Tom Imeson, Kelvin Davis - Texas Pacific
       Ray Baun, John Savage, Lee Beyer, Bryan Conway - Oregon Public Utility Commission
       Ted Kulongowski - Oregon State Governor
       Diana Goldschmidt, Mark Gardiner - Oregon Investment Council Members
       Ron Schmitz, Jay Fewel - Oregon Chief Investment Officer, Portfolio Manager
       Randall Edwards - Oregon State Treasurer
       City of Portland Commissioners
       bcc: Journalists and other Interested Parties

Dear Peter,

Although you have done a fine job at the helm of the Oregon Health Sciences University (OHSU), Portland's largest employer, I would like to again respectfully ask that you resign from your proposed role as Chairman of PGE on behalf of the Texas Pacific Group for the following reasons:

1)  With 11,500 employees, OHSU is the largest regional provider of public pension funds to the state public pension system (PERS).

2)  Oregon PERS single largest private equity investment is with the Texas Pacific Group, totaling more than $1 billion.  What this means is that you are leveraging your private role as Chairman of PGE off the pension contributions of your fellow OHSU employees.

3)  OHSU itself also directly receives more than $50 million in funding per year from the State of Oregon and, even though now a "public corporation,"  your role as President of OHSU, for which you receive total compensation in excess of $600,000 annually, falls within the purview of ethical rules identified by the Government Standards and Practices Board here in Oregon.  These rules  prohibit public officials from using public positions and assets for private gain.

4)  As Chairman of PGE you will be receiving both salary and stock in addition to directly investing $500,000 in the venture.  Clearly, you stand to profit personally from your public role.

5)  As a sitting board member for Stancorp, an SEC regulated and publicly traded company based in Portland, Oregon, your role as Chairman of PGE should fall within the SEC's guidelines regarding board member conflicts of interest.  For this reason SEC Chairman William Donaldson is copied on this letter with the hope that his office might choose to clarify directly to you the inappropriateness of your dual role as President of OHSU and Chairman of PGE as proposed by Texas Pacific.  Board level conflicts of interest have been a key focus of the SEC under Chair Donaldson.

Some might also argue that since Diana Goldschmidt is also on the board of a publicly traded company, Umqua Holdings, it might be appropriate for a similar letter given her role selecting fund managers as a member of the Oregon Investment Council since her husband has still not agreed to disclose which investment companies his lobbying firm is representing.

6)  Overall, the public is now especially sensitive to such conflicts given national scandals involving Enron and Worldcom and local scandals including Neil Goldschmidt and his relationship with the State Accident Insurance Fund (SAIF).  It is rather startling to most that Neil's wife Diana still sits on the Oregon Investment Council as Vice Chair, the group responsible for choosing investment managers for both the PERS and SAIF funds, while her husband's lobbying firm is representing SAIF and currently being investigated by the Federal Bureau of Investigation, as reported in the Oregonian.

The Oregon Investment Council's next meeting is Wednesday July 28th from 9-12 in Tigard and if you are serious about attempting this role you might consider a request to Chief Investment Officer Ron Schmitz that you be able to address the council and explain why it is not a conflict.

Although clearly not intended, many outside observers might consider your dual role as a textbook example of public corruption, especially given recent scandals unrelated to your fine work at OHSU. Sadly, your role could also seriously damage the overall credibility of OHSU itself.

Although you have done a fine job at OHSU and may have a sincere interest in such a role with PGE, you might instead consider contacting the City of Portland and offering your services on a similar board when a municipal utility with private management is advanced after the TPG proposal is withdrawn.

Perhaps you might also be interested in viewing my 5 minute testimony before the Oregon Public Utility Commission on April 28, 2004.  To do so you need only select this link , and then once there, select "Bill Testifying Before the PUC. Clearly, you have not been apprised of many key facts surrounding TPG's proposal.  In the event the link does not work via the email you might visit www. and then select the archive followed by the PGE reference link.

Best wishes for continued success at OHSU and, although a rather unpleasant request to make, I hope you are thankful for the direct "heads up."

Bill Parish

2004 July 10 Bidwell quits investment panel by Harry Esteve, Oregonian.

Jerry Bidwell, one of Portland's most successful investment brokers, has resigned from the Oregon Investment Council, part of the continuing fallout from former Gov. Neil Goldschmidt's sex abuse admission.

Bidwell, a close friend of Goldschmidt, turned in a resignation letter earlier this week, said Mary Ellen Glynn, spokeswoman for Gov. Ted Kulongoski. The resignation was effective July 1. Glynn said the letter gave no reason for the resignation. Bidwell, 62, did not return several messages left on his home answering machine.

Bidwell recently sold his business, Bidwell & Co., to Ameritrade for $55 million. He lives in Vancouver, which has caused some political grumbling that he might not be focused enough on Oregon. Glynn said Kulongoski's policy is to appoint people who live in the state.

Bidwell and other investment council members have faced increased public scrutiny for several converging reasons, all touching on Goldschmidt. Goldschmidt's wife, Diana Goldschmidt, sits on the council, and Bidwell and Drummond have close ties to the former governor, prompting concerns that Neil Goldschmidt was wielding hidden influence on the council.

The concerns surfaced after the council agreed to invest $300 million in public money in Texas Pacific Group, which is attempting to buy Portland General Electric from embattled energy giant Enron. Only later was it revealed that Neil Goldschmidt was to lead the new PGE board if the deal with Texas Pacific Group closed.

Goldschmidt took himself out of that deal, and withdrew from all other public positions after his May 6 admission to The Oregonian that he had sex multiple times with a 14-year-old girl while he was mayor of Portland in the 1970s. Bidwell was with Goldschmidt when he made his admission to the newspaper and was introduced by Goldschmidt as his "best friend." "I'm sure (Bidwell) was not happy about" all the publicity the Goldschmidt story generated, Drummond said. "That could not have pleased him very much."

Bill Parish, a Portland investment adviser who closely follows council activities, said he long has been concerned that members often face potential conflicts of interest when dealing with investment matters. He called Bidwell a "successful business person" who, because of his financial connections "had no business being on the council."  Parish called on Kulongoski to seize Bidwell's resignation as an opportunity to upend the council and "clean house."

Analysis and Commentary:  At the June 30, 2004 meeting of the Oregon Investment Council a public comment suggested expanded conflict of interest rules.  Three examples were cited as follows:
1)  Gerry Bidwell - Significant PERS rule changes during the last two years resulted in many employees cashing out of the system into self directed IRA's.  The question being, how much did Bidwell benefit from such changes and what part of the $55 million in cash he received from the sale of his brokerage firm resulted from accounts and assets resulting from PERS employees cashing out of the system.
2)  Gerard Drummond - Drummond is a former Pacific Power executive and was CEO of NERCO, Pacific Power's coal mining subsidiary that was doing Enron like speculations in the coal market in the 1980's.  The resulting losses so weakened Pacific Power that many believe this is why it ultimately sold out to Scottish Power.  Since Scottish Power is leading the effort to block the City of Portland's efforts to establish a municipal utility and the OIC is funding this effort indirectly via its investment in TPG, coupled with the reality that the OIC has expressed no interest in speaking with the City, one of the largest providers of PERS funds to the system, some are questioning whether a conflict of interest exists.
3)  Diana Goldschmidt - Diana's husband Neil will still not disclose which investment firms are clients of his lobbying firm.  Given that TPG is a client and that his partner Tom Imeson is reported to occasionally sit in on the Governor's staff meetings, in addition to leading his transition team and having a major voice in appointments, it would seem appropriate to disclose whether such firms as Credit Suisse, OakTree, etc. have been clients of his and Neil Goldschmidt's lobbying business during the last few years.

2004 June 22 Digging deeper into the Texas Pacific Deal by Steve Duin, Oregonian
G iven that PGE bills itself as family, our neighbors, our friendly little homegrown utility, PGE's insistence that its ratepayers continue to pay income taxes that end up in the hands of Texas corporations may seem, well, just a trifle unneighborly.

Bill Parish -- a Portland investment manager who is tracking the Oregon utility better than Oregon's governor, Oregon's state treasurer or Oregon's public utility watchdog -- is just as blunt: "PGE is Enron. For some reason, we don't want to accept that.
Actually, that's the beginning of this story. The new company desperate to get its hands on those state and federal taxes --which total $93 million each year -- is the Texas Pacific Group.

Texas Pacific is not Enron. Or, as City Commissioner Erik Sten puts it, "Texas Pacific is an honest version of Enron. They've told me what they do. They come in, buy distressed property and roll it. The only question about Texas Pacific is why anyone would support it who cares about the long-term interest of the Oregon economy."

That's a great question, of course, for several Oregonians, including Neil Goldschmidt, Tom Walsh, Jim Francesconi, Ted Kulongoski and Randall Edwards, all of whom are either on board with this deal or unable to muster an opinion. "The neutral stance has become almost absurd," Sten said.

For reasons only the accountants understand, private equity groups such as Texas Pacific can use the losses from one company to offset the profits of another company and not pay a dime in taxes. Back in the 1980s, the Senate Finance Committee realized profitable companies were buying companies with such operating losses -- for pennies on the dollar -- and deducting those losses against net income to escape any federal tax obligation. Then-Sen. Bob Packwood, R-Ore., led the effort to shrink that loophole.

"We changed the law when a profit-making company buys a losing company," Packwood said Friday. Instead of writing off the entire loss, the profitable company could write off only a small percentage of those losses each year.

"That effectively stopped the practice," Packwood said, "because profitable companies weren't interested in buying losses if they had to spend five to 10 years spreading those losses out."  Packwood and the tax gurus never anticipated, however, that the companies with the huge operating losses would turn around and purchase corporations with the profits. They did not set similar restrictions on tax write-offs for the money-losing operations.

That, Parish argues, gave America-Online the incentive to buy Time-Warner and, after combining losses and profits, pocket $4 billion in saved tax receipts. Closer to home, it is a key element in Texas Pacific's proposed purchase of PGE.

"The name of the game," Parish added, "is to get the tax payments PGE owns so they can pocket the cash flow." The real shame is this deal isn't all business for the state of Oregon. As Meek and Parish both point out, there are two business proposals for PGE on the table. In one, PGE ratepayers will continue to stuff $93 million in "taxes" each year into the pockets of Texas-based speculators. In the other, the city of Portland buys the utility at much the same price Texas Pacific is offering and those same ratepayers save more than $100 million each year.

Analysis and commentary:  In this column Steve Duin explains why Texas Pacific's proposal to purchase PGE could indeed be nothing more than a sophisticated tax avoidance scheme designed to pocket PGE's tax payments charged to ratepayers.

Including former Senate Finance Committee Chair Bob Packwood's comments helps put the nature of the scheme into perspective and also raises the question regarding why Oregon's two sitting Senators, Ron Wyden and Gordon Smith, have not weighed in on the importance of closing this loophole.

2004 June 10 The curious convergences in Neil's world by Steve Duin, Oregonian.
We have finally shaken loose of the fantasy that Neil Goldschmidt is looking out for us. "In Neil We Trust" is no longer etched on the coin of the realm. Thus, it's long past time to revisit the man's last great illusion, his insistence that Texas Pacific's proposed purchase of PGE benefits Oregonians.

To the end, Goldschmidt traded on his connections and his credibility to make money. If his profits came at the expense of Willamette timber workers or Saif's bottom line, he didn't blink. If they required him to perpetuate the fairy tale that the city of Portland's interest in the utility was a bad, bad deal, Goldschmidt was happy to sign off on that, too.

He had the unique ability to maintain a straight face while he argued that he was involved not for the millions he would make in these deals, but owing to his commitment to public service. "It's not different than any time I ran for office," Goldschmidt told me in November. "The implied promise is I won't lie to anyone, and I'll do the best I can."

Does anyone still believe that Goldschmidt only agreed to front for Texas Pacific because, as he protested at the time, he "wasn't so sure the city could pull off" the acquisition of PGE through condemnation? Does anyone still believe that Goldschmidt was so stunned to be invited into the deal on Oct. 30 that "you could have knocked me over with a feather"?

Consider this: Five months earlier, Ron Schmitz, the state Treasury's director of investments, informed Randall Edwards, the state treasurer, and Gerard Drummond, chairman of the Oregon Investment Council, that Texas Pacific was considering a purchase of PGE.

Also last summer, City Commissioner Erik Sten said, Mark Dodson, the president and CEO at Northwest Natural, "told me that he knew who the buyer was." Confidentiality agreements prohibited Dodson from disclosing the buyer's name, but Sten added that Dodson "described them pretty well to me." Drummond and Dodson are two of Goldschmidt's closest friends.

John Carter, who sits on Dodson's board, is a partner in Goldschmidt's lobbying firm. Yet Goldschmidt -- who long made a living off being in the know -- wants us to believe he never heard even a whisper about Texas Pacific's interest. He told The Oregonian he first learned about the group's offer in an Oct. 29 phone call from a Seattle-based buddy, Jerry Grinstein.

His professed ignorance is Goldschmidt's only explanation as to why he happily authored an opinion piece -- which ran in this paper on Oct. 31 -- that argued two public electric takeover measures were "dangerous" and "self-defeating," leaving us "with the prospect of higher electricity rates." It would also explain why his wife, Diana, never felt compelled to declare a conflict of interest when she and the rest of the Oregon Investment Council voted Oct. 29 to invest $300 million in a Texas Pacific fund.
But is it believable?

Much of what we've been asked to believe about the Goldschmidts' involvement strains credulity. What are we to make of the fact that the law firm Ater Wynne -- which shares a floor with Neil's firm at KOIN Tower -- resigned in November as the city of Portland's rep in the PGE sweepstakes and promptly hooked up with Texas Pacific?

What are we supposed to think of Diana Goldschmidt's continued participation in the investment council?  And who has the power, and who is to be trusted, to seek answers to questions that continue to erode the state's credibility? Gov. Ted Kulongoski? (Stop laughing.) Attorney General Hardy Myers? The sorry remains of the emasculated state ethics commission?

"That's the kind of issue our office has jurisdiction over," said Kevin Neely in the AG's office, adding that at this point, the Department of Justice has seen no sign of illegal or criminal activity. Neil Goldschmidt has dismissed all these coincidences as "convergences in a small world." Does anyone still believe we should shrug and leave it at that?

Analysis and Commentary:  In this outstanding column Steve Duin connected numerous key players surrounding the Texas Pacific bid that neither the Oregonian's business section nor its editorial page was able to see.  One rather interesting player not identified;however, is Ron Saxton, senior partner at Ater Wynne, candidate for Governor in 2002 and personal attorney to Neil and Diana Goldschmidt.

It was Saxton who ran his campaign on PERS reforms that ultimately led to major concessions by participants yet no additional oversight of the Oregon Investment Council, the body distributing the funds to various investment firms including Texas Pacific.  Diana Goldschmidt strongly supported Saxton in his bid for Governor in 2002.

It is somewhat ironic that Saxton's law firm dumped the city as a client and took on Texas Pacific,an adversarial client.  Not only is this a clear violation of Oregon State Bar ethics yet it also startling how the primary advocate of  PERS reforms law firm would sell out the State of Oregon in order to gain such PERS generated legal business.

2004 June 9 Oregon Hearing to look at Utility Charging for Taxes it did not pay by Davidcay Johnstone, NY Times
A state judge has ordered a regulatory hearing into whether Portland General Electric, a unit of Enron, fraudulently collected more than $665 million from ratepayers to cover corporate income taxes that Enron never paid.
Because utilities are legal monopolies, the prices they charge are set by state utility regulatory boards, federal and state corporate income taxes are some of the expenses to be included in rates paid by customers. Historically, the regulators assumed that whatever taxes were included in electric rates would then actually be paid by the utility or its parent, though the rise of tax shelters and changes in federal tax law have raised questions about whether that assumption remains valid.
The judge's order, made on Friday, comes as a group of Texas investors is trying to buy Portland General Electric under terms that would allow it to collect $92 million a year for taxes that it would not necessarily have to pay to the federal and state governments. The intended buyer, the Texas Pacific Group, has said that it will not promise to return to ratepayers any taxes it collects but does not have to pay.
The judge ruled in a case brought by Dan Meek, a lawyer who runs the Utility Reform Project, a local watchdog group. Mr. Meek publicized the decision on Wednesday.
"The fact is that Enron is in bankruptcy; it is not paying taxes," he added. "Yet tax money is still flowing from ratepayers and going to Enron at the rate of $254,000 a day." Portland General Electric confirmed that, to the best of its knowledge, the only state corporate income tax paid by the company since 1997 was a single $10 payment in 2002.
If Portland General Electric is charging us for taxes that are not actually paid to the government, that is just stealing," said Kenneth Lewis, a retired cargo company executive.

Analysis and Commentary:  To Follow

2004 May 20 Governor's top adviser leaving job by Janie Har, Oregonian
Gov. Ted Kulongoski's chief of staff is resigning this summer to become a vice president with his former employer, Columbia Sportswear. Peter Bragdon's departure as the governor's top adviser and manager comes at a time when the administration has been roiled by a sex abuse scandal involving another Kulongoski confidante, former Gov. Neil Goldschmidt. But Bragdon, 41, said the controversy has nothing to do with his decision to switch jobs.
House Speaker Karen Minnis, R-Wood Village, said she found Bragdon's "real world" experience "refreshing."
"He was accessible, he worked hard to work with people, and I think he was very conscientious," Minnis said. "His leaving will be a loss for the governor."

Analysis and Commentary:  Perhaps now is an excellent time for Bragdon to encourage the Governor to call Erik Sten at the City of Portland and learn more about the City's proposal to make PGE a municipal utility.  Both the Governor and State Treasurer Randall Edwards had been strangely silent regarding Oregon's most important electric utility due to Neil Goldschmit's previous involvement and plan to Chair its new board.

2004 May 8 Business leaders adapt to Goldschmidt's absence by Brent Hunsberger, Oregonian
Goldschmidt shocked the Portland establishment by revealing that, while mayor of Portland in the 1970s, he was involved in a sexual relationship with a baby sitter who was 14. He said Thursday he would bow out of public life and take a leave of absence from his consulting firm, Goldschmidt Imeson Carter.
"There's nobody more effective at this intersection of government and the corporate world," said Portland City Commissioner Erik Sten, whose push for the city to publicly acquire PGE was thwarted, at least in part, by Goldschmidt's presence as Texas Pacific's local frontman.
"He has an amazing touch for getting deals done," Sten said. "It's no wonder TPG went to Neil."
Goldschmidt's firm still advises Schnitzer Investment. Novack declined to detail the nature of Goldschmidt's consulting work for Schnitzer, other than to say it was strategic, varied and private. He said the company would continue working with Tom Imeson, Goldschmidt's former gubernatorial chief of staff, who is a partner in the firm, along with John Carter, a former executive at construction giant Bechtel.
In the 1990s, after serving four years as Oregon's governor, he started his own consulting firm, advising such high-powered companies as Burlington Northern Santa Fe Railroad, Bechtel and Portland-based PacifiCorp.
Often working behind the scenes, he helped swiftly extend light rail to the airport without federal money, giving Bechtel development rights in exchange. He guided developers Homer Williams and Pat Prendergast as they got the city's blessing to transform the once-industrial Pearl District into a vibrant swath of restaurants, art galleries and condos.
He also helped Hyundai Semiconductor America, now Hynix, locate in Eugene and Oregon Health & Science University become quasi-private. He counts Blazer owner Paul Allen and Eugene timberman Aaron Jones as ex-clients.
Two years ago, he helped Weyerhaeuser Co. in its hostile takeover of Willamette Industries. And last month, the state ethics commission voted to investigate whether Saif, the state-owned company providing workers' compensation insurance, had underreported the nearly $1 million in lobbying fees paid to Goldschmidt's firm.
His wife, Diana, best friend Jerry Bidwell and close friend Henry Drummonds sit on the Oregon Investment Council, which manages the state's $43 billion public pension fund and has invested $950 million in Texas Pacific Group. OIC's investments have drawn criticism since Texas Pacific recruited Goldschmidt to help with its proposed acquisition of PGE.

Analysis and Commentary:  While most are focused on Goldschmidt sexually abusing a 14 year old girl for 3 years while Portland's Mayor, little discussion has taken place regarding his role in influincing investments made by Oregon's $43 billion public pension system.  Goldschmidt will still not reveal his client list and will most certainly also be swept into an ethics inquiry regarding his firms "long standing" relationship with Texas Pacific.  In Oregon it is a clear ethical violation for a public official, in this case Diana Goldschmidt, to participate in decisions that could result in private gain to her husband's consulting firm.  As head of the State System of Higher Education Mr. Goldschmidt, until his recent resignation, was also covered by the same rules.

2004 May 7 The Admission, sexual relationship occurred while mayor by Harry Esteve and Gail Kinsey Hill, Oregonian
Former Gov. Neil Goldschmidt admitted Thursday that he had a sexual relationship with a 14-year-old girl when he was 35 and mayor of Portland, and said he is resigning all his public and private positions to "rebuild my life."
Joining him for the interview were his business partner Tom Imeson and his best friend, Jerry Bidwell, a prominent Portland area financier and a member of the Oregon Investment Council.

Analysis and Commentary:  Goldschmidt noted he will take a leave of absence from his firm but will not separate from it with respect to financial ties.  This leaves significant conflicts of interest remaining regarding his wife and best friend, both of whom are sitting members of the Oregon Investment Council, the group responsible for managing Oregon's $43 billion in public pension assets.

2004 May 7 Two high-profile efforts lose a forceful advocate by Steve Carter & Jeff Manning, Oregonian
Erik Sten, the Portland city commissioner who has advocated a city takeover of PGE, said Goldschmidt's withdrawal does not change his dim view of the purchase. The proposed acquisition "has been bad for the state from the start, with or without Neil," Sten said.
Dan Meek, a Portland lawyer and public power proponent, predicted Goldschmidt's departure actually could help Texas Pacific. The resignation may defuse a conflict-of-interest controversy over his wife's actions on the Oregon Investment Council, Meek said. Diana Goldschmidt voted twice to invest state money with Texas Pacific or one of its fellow investors in the Portland General acquisition either shortly before or while her husband had a financial stake in the purchase.
Goldschmidt said he told Texas Pacific Chairman David Bonderman last Friday of his pending resignation for health reasons. Goldschmidt said Thursday that he wishes he never had gotten involved in the Texas Pacific deal. "If I had been thinking clearly at all, I wouldn't have done it."

Analysis and Commentary:  Perhaps Neil Goldschmidt said it best ..  he wishes he never had gotten involved in the Texas Pacific deal. "If I had been thinking clearly at all, I wouldn't have done it."
Clearly, Texas Pacific's bid for PGE is not good for Oregonians.

2004 May 7 Goldschmidt in crisis, resigns by Kristina Brenneman, Portland Tribune
Former Gov. Neil Goldschmidt has resigned from two high-profile positions and is taking a leave of absence from his consulting firm in advance of an article alleging past sexual misconduct to be published by Willamette Week.
The Goldschmidt fallout will have a major effect on the firm, which is facing not only the departure of its most visible and lucrative partner, but also the loss of the Texas Pacific deal. Nor will Imeson remain as spokesman for Oregon Electric.
“They’ve been long-standing partners, and this will have impact on their business,” said Texas Pacific’s Davis. See complete story at

Analysis and Commentary:  TPG representative Kelvin Davis noting that they have been "long standing" businesss partners with the firm Goldschmidt/Imeson has raised many questions here in Oregon, especially since Mr. Goldschmidt's wife Diana sits on the public pension board and TPG now represents one of the public pension funds largest investments, almost $1 billion.

2004 May 4 Yes on PUD: What's wrong with comparison shopping? by Ernest Delmazzo, In My Opinion, Oregonian
Passage of these ballot measures would provide further study, public discussion and input. The PUD would act as an insurance policy should Texas Pacific Group take us to the cleaners like Enron. This is because the PUD could, with a yes vote now, be activated within a few months, after an additional vote.
PGE paid the cost of 19 of 20 Voter Pamphlet arguments opposing the Clackamas County PUD. It appears some or perhaps all were written by PGE, though signed by others ("To PGE, our ignorance is worth $300,000," Andy Parker, The Oregonian, April 16). PGE has contributed every penny in the anti-PUD campaign.
The only director of the so-called "Clackamas Citizens Against" anti-PUD political committee is a senior executive of PGE's public relations firm.
A recently completed PUD feasibility study, conducted by a respected engineering firm with 35 years experience, is evidence that PGE is gouging ratepayers. The study found that a Clackamas County PUD could lower rates 10.2 percent immediately and 19.8 percent in its second year. In 10 years, annual rate decreases may reach 32.7 percent, a total savings to ratepayers of $860 million. The in-depth feasibility study is online at
On March 8, PGE registered a separate political committee to contribute to local politicians. Within a few days of receiving PGE cash, three Clackamas County politicians, in addition to the elected wife of one of them, signed on to anti-PUD Voter Pamphlet arguments. Details are at the Web site mentioned above.

Analysis and Commentary:  Once again it does appear clear that Texas Pacific and PGE, identical to what Enron and PGE did in 1997, are trying to purchase public opinion to defeat public ownership efforts when such ownership is squarely in the best interest of Oregon's businesses and consumers.

2004 May 4 Oregon wants to lead creditor line in Enron bankruptcy by William McCall Assoc Press Business Writer
State Treasurer Randall Edwards and Attorney General Hardy Myers said Tuesday they have filed a motion in U.S. Bankruptcy Court in New York seeking to elevate Oregon's claims above other creditors who may have participated in decisions that caused Enron to go bankrupt.
The state's claims in the Enron bankruptcy include investments by the Oregon Public Employees Retirement Fund, which had to sell Enron shares at a great loss.
"The Enron bankruptcy is like a chess match -- many of the moves made now will have a profound effect on the final outcome," Edwards said. "We want to ensure that the people of Oregon are no less protected than any of the big financial institutions involved in this disaster."
In a 500-page complaint, current Enron managers approved by the bankruptcy court list detailed reasons why various banks, investment firms, their subsidiaries and affiliates cannot claim that Enron owes them up to $26 billion.
The current managers allege the banks acted improperly to help former Enron insiders conceal the company's true financial condition.
To date, creditors have filed over 24,000 claims in the Enron bankruptcy case seeking more than $900 billion. The state of Oregon has submitted claims totaling nearly $420 million in direct and indirect losses.

Analysis and Commentary:  Imagine the irony of State Treasurer Edwards saying that he wants to protect the people of Oregon when he has said absolutely nothing about PGE's proposed new owners when these new owners are primarily backed by the same financial firm, Credit Suisse, that structured many of Enron's failed partnerships.

2004 April 30  Editorial erred: PUDs in Oregon pay property taxes, letter to Oregonian, Tom Civiletti
The editorial claims that Clackamas PUD would take utility property off tax rolls. Oregon law clearly requires PUDs to pay all property tax. Since the PUD headquarters would be in Clackamas County, local government would actually receive more property tax.
We commissioned a feasibility study by D Hittle & Associates, electrical engineers and consultants with 35 years experience ( Its in-depth findings are very encouraging.
Ratepayers can expect to save $860 million over 10 years, with rate savings of more than 10 percent immediately, increasing to 32.7 percent in year 10. These significant savings account for all PUD costs: paying principle and interest on bonds used to purchase PGE assets, establishing all services, separating systems, ensuring reliability, paying legal costs and supplying power. The Clackamas PUD feasibility study (available at confirms sufficient power availability from the Bonneville Power Administration to serve customer needs at the indicated savings.
I know of no development or program being implemented or planned that can offer such enormous economic benefit to Clackamas County as does the PUD. Families will have more spending money, businesses will see improved bottom lines, schools will have more money to put teachers in classrooms, and governments will have more to maintain programs.

Analysis and Commentary:  D Hittle is a highly respected firm and its findings are a testament to the deception practiced by both Portland General Electric and Enron.  It is also quite surprising that the Oregonian's fact checker did not catch such a significant error when stating its editorial position, clearly voters would be concerned with a loss of property tax revenue yet this is not the case.

2004 April 30  Clackamus County mails ballots on PUD by Sarah Hunsberger, Oregonian
The Clackamas County PUD would exclude customers of the Canby Utility Board, a municipal public utility.
Clackamas County PUD supporters face a similar uphill battle, with PGE pouring more than $300,000 into an opposition campaign, according to campaign finance reports filed earlier this month. Several groups supporting the PUD raised about $20,000 altogether. But what's different about this election is that for the first time, PUD supporters are offering hard numbers they say show a PUD would save ratepayers money.
A preliminary study completed this week by Washington-based consultant D Hittle & Associates estimates that ratepayers would save $860 million in the first 10 years.

Analysis and Commentary:

2004 April 18  The many friends of Jim Francesconi by Steve Duin, Oregonian
Last fall, Francesconi demanded an endorsement from Leonard over dinner. When Leonard wavered, Francesconi said, "I'm going to remember the people who supported me early." "I'll be the first to say," Leonard noted, "that sometimes when Jim is explaining his reasoning, I want to pull my hair out. I want to take my pen and jab it in my eye. It can be torture." He finally endorsed Francesconi last month, telling him, "I'm endorsing you not for what you've said, but for what your friends have said."
Francesconi's obsession for the office has generated $858,000 in contributions for the May primary, or 19 times the amount raised by his nearest competitor in the field, Tom Potter.
There are at least 11 "utility executives" donating to the campaign of the commissioner most opposed to a public purchase of PGE.

Analysis and Commentary:  Mr. Francesconi is hoping to gather 50 percent of the votes required in the May primary to be elected mayor and avoid a fall runoff.  His stance on public power, however, may indeed prevent both a May victory and also cost him the election in November.

2004 April 14  Huge Savings with Public Power, Letter to Editor by Tom Civiletti, Oregonian
In his April 6 column, Steve Duin wonders "if (Gov. Ted) Kulongoski will ever weigh in on the advantages of a public purchase of PGE, a move that might save Oregon ratepayers $100 million a year?" Last fall, public utility district supporters met with the governor's adviser on energy policy, David Van't Hof. We urged that Kulongoski get involved in the future of the utility. Van't Hof told us the governor saw Portland General Electric as a "local issue."
This attitude was bewildering. PGE is our largest utility, serving an area that produces a huge portion of Oregon's economic activity and tax revenue. Electric power is as crucial to the local economy as oil is to the national economy.
My bewilderment turned to disappointment when I learned that Neil Goldschmidt, trusted adviser to Kulongoski, is point man for Texas Pacific Group's effort to buy PGE.  By the way, $100 million annually greatly underestimates the saving with publicly owned power.  See complete letter for purchase at

Analysis and Commentary:  In a previous news article the Oregonian reported that PGE serves 40 percent of all Oregonians, including the regional agency Metro, one of its largest users.  The current President of Metro is David Bragdon and Bragdon's brother Peter, a former lawyer for Stoel Reeves, is Governor Kulongowski's Chief of Staff.  Perhaps now is an ideal time for both the Governor and Metro to weigh in more with respect to the future of PGE.  See the following press release indicating Peter Bragdon, a former attorney with Stoel Reeves, is indeed the Governor's Chief of Staff:

2004 April 14  Crow On The Menu by Staff Writer (Murmurs Column), Willamette Week
Last week's raucous City Council worksession on the Texas Pacific Group's takeover of PGE left little doubt that Mayor Vera Katz and her brethren will make life difficult for the buyout group. They'll get help from big labor, judging by a letter delivered to Commissioner Sten last week. It said the 40,000 members of the Joint Council of Teamsters No. 37 opposed the purchase. "Texas Pacific is widely known as a corporate raider. We do not believe that Texas Pacific has the best interest of the PGE customers in their future," wrote Oregon Teamsters boss Lynn Lehrbach. See complete story at:

Analysis and Commentary:  Public officials are often too easily criticized for making difficult decisions, especially when those supplying information, in this case Kelvin Davis of Texas Pacific, openly lie regarding details.  Davis specifically told the City Council that the PUHCA (Public Utility Holding Company Act) was not relevant in Texas Pacific's purchase of Portland General Electric.  He also stated stated that its "negative consent rights" do not give Texas Pacific any power over the local Oregon based board even though these rights include veto power over all key decisions ranging from hiring to utility rates.

2004 April 5 Delta descends toward B-Word by Russell Grantham, Cox News Service Wire Story Featured in the Oregonian.  Chief Executive Gerald Grinstein tells workers he will "fight like hell" to avoid the "b-word," as he called it at a recent meeting with pilots.  But at the same time he bluntly says the Atlanta airline must bring down pilot wages and other costs or it cannot survive.  No one is predicting a Chapter 11 filing in the next few months.  But, barring signs of a turnaround, the issue could come to a boil by early 2005, analysts think.
A Chapter 11 decision point could come sooner if Grinstein and Delta's board come to believe a court filing - or the threat of one - is the only way to achieve cost cutting goals. The more likely scenario, they say, is that Delta's management eventually could conclude it's making no progress in wage cut talks with its pilots union, an and that it's better to use Chapter 11 to cut cots while it still has adequate cash reserves to keep operating.
Karen Miller, spokeswoman for the Air Line Pilots Association, said no new talks have been scheduled since the union shifted its focus from concession talks to getting ready for regular contract negotiations.  The contract becomes amenable in May 2005.  "Our position hasn't changed. We're still willing to negotiate with the company," she said.  Management's going to have to be willing to engage in these discussions with something other than demanding their opening position."

Analysis and Commentary:  Grinstein has close and significant financial ties to the Texas Pacific Group via his role with Oregon Electric.  With Texas Pacific a major investor in airlines competing with Delta, one has to wonder how much union employees will be willing to bargain with Grinstein.  A good faith gesture on Grinstein's part, at a minimum, should be to resign from his role with Oregon Electric.

2004 April 4  Fund Ties cloud PGE bid by Gail Kinsey Hill, Oregonian.  A state investment puts more pension money into a Texas Pacific deal and renews talk of the Goldschmidts' conflicts.  The Oregon Investment Council in February agreed to invest $75 million in an Oaktree Capital Management fund that has joined Texas Pacific Group's effort to buy Portland General Electric from the bankrupt Enron. The unanimous vote came four months after critics questioned a similar decision that committed $300 million to a Texas Pacific fund that would provide most of the $1.25 billion in cash for the proposed transaction.
And the action raises conflict-of-interest issues with the council's vice-chairwoman Diana Goldschmidt, whose husband, former Oregon Gov. Neil Goldschmidt, would invest about $830,000 in Oregon Electric Utility, the holding company created to execute the buyout. Goldschmidt also would chair a reconstituted PGE board. The earlier vote involved an Oct. 29 decision authorizing an investment in TPG Partners IV, the fund that would provide the bulk of the cash for PGE's acquisition.
The following day, Diana Goldschmidt pledged to the investment council that she would "no longer participate in any discussions, or actions, direct or indirect, that involve Texas Pacific Group in the future."
Yet, on Feb. 25, she seconded the motion that authorized the investment in Oaktree's OCM Principal Opportunities Fund III and participated in the unanimous vote.
Patrick Hearn, executive director of the state Government Standards and Practices Commission, which oversees the state's ethics laws, said that if an official isn't aware that a conflict might exist, it's difficult to show that a violation has occurred.
"The notion that they (the Goldschmidts) didn't know is just ridiculous," said Bill Parish, a Portland investment adviser who is a close follower of Oregon Investment Council proceedings. "Teachers custodians and other participants in PERS (Public Employees Retirement System) deserve more transparency."
Portland City Commissioner Erik Sten, who last year led an unsuccessful push to buy PGE and put it under government ownership, also is disturbed by the council's claims of naivete.
Sten said council members should know where the pension money is being spent and whether the state might be affected by the investments. State investment policy includes no such requirements. Texas Pacific and Oaktree are private equity investment firms that raise much of their money for various funds from pension funds and other large institutional investors. These contributors, such as the Oregon Public Employees Retirement Fund, are limited partners contributing to what experts call "blind pools."
"That's not our job -- to invest in individual companies," said state Treasurer Randall Edwards, who is a member of the council. "We don't dictate, nor can we dictate what the funds invest in," added Jay Fewel, the Treasury's senior equities investment officer. Fewel and Edwards said neither the investment council staff nor its members knew at the Feb. 25 council meeting that Oaktree was a participant in the pending PGE deal.

Analysis and Commentary:  Hill provides an excellent detailed summary of what many would consider a significant conflict of interest, not unlike other such conflicts surrounding Texas Pacific's efforts to purchase PGE.  Most surprising to some is that Diana Goldschmidt sat through a five hour meeting of the Oregon Investment Council on March 31st and made no mention of this potential perceived conflict, knowing full well that in the previous meeting she had just voted to give $75 million of public pension assets to the very same Oaktree fund that would own 10 percent of Oregon Electric, the company in which her husband Neil will be Chairman.  Investment officer Jay Fewel similarly made no mention of the potential perceived conflict during the same meeting on March 31st, nearly three weeks after the disclosure that Oaktree would be a major investor in PGE.  Also noteworthy is Oaktree's relatively poor performance in managing private equity funds on behalf of Oregon PERS. In addition, there was no comment from Pat Hearn of the Government Standards and Practices Commission regarding the need for Neil Goldschmidt to disclose his lobbying firms client list, especially given the existing ethical complaint before the commission filed by fellow Democratic State Senator Vicky Walker over Goldschmidt's role at SAIF.  Story available for purchase in Oregonian archive at  Also see February 25, 2004 OIC minutes and specific reference regarding Oaktree at:

2004 March 30 Firms deplore powers of PGE by Kristina Brenneman, Portland Tribune.  West Linn Paper Co. has a gripe about Portland General Electric.  Its managers say the Portland utility dragged its heels on the paper company's plan to build a 45-megawatt power plant at its West Linn mill and sell the excess electricity back to PGE.
Boise Cascade Corp., Oregon Steel Mills Inc., Intel Corp. and 32 other companies are lined up behind their lobbying group, Industrial Customers of Northwest Utilities, which is seeking a reduction in PGE's rates.
 Intel and companies like that moved to this state because of the low rates; it was more competitive," Konen said. "We're trying to say, 'Gosh, if you want jobs here, the cost of utilities is going to be a big cost.' If you're not competitive, people move jobs elsewhere. One of the things they can do is keep power rates low."
 So, when state regulators begin their review of PGE's $2.35 billion sale from Enron Corp. to Texas Pacific Group, West Linn Paper General Manager Brian Konen will be right there to testify about the steep power rates that have soaked up his company's profits and forced 9 percent salary cuts.
The 1979 Public Utility Regulatory Purposes Act gives private entities the right to build a power plant and sell excess electricity back to the utility.  "They can drag their feet artfully because they don't want to lose the customer," Portland-based energy consultant Robert McCullough said of PGE. "The law is definitely in West Linn's favor."
Managers at Intel, which pays $24 million a year in electricity costs, haven't decided what role the company will take in the PGE sale. "Certainly we're interested in the discussion, but as to whether or not we'll testify, we have not decided," said Diana Daggett, Intel Oregon's public affairs manager. "We're following it closely."
ICNU's executive director, Ken Canon, said the lobbying group's response to the Texas Pacific purchase "is going to be every bit as intensive as it was on Enron.

Analysis and Commentary:  Brenneman does an outstanding job of profiling the impact of higher power rates, in particular the their impact on job creation. She also asks several key questions and allows readers to formulate an opinion based upon a broad mix of pertinent facts. In my opinion, no reporter has covered the Texas Pacific / PGE acquisition better than Brenneman.  See full article at:

2004 March 28 PGE Backers Question Control by Gail Kinsey Hill, Oregonian. Provisions in acquisition documents give Texas Pacific wide veto powers over Oregon Electric Utility's board. Consider the following provisions, contained in the purchase application filed with state utility regulators on March 8:
Although Texas Pacific would hold just 5 percent voting control in Oregon Electric, it could veto virtually all significant decisions regarding PGE operations, including executive hirings and firings and large capital expenditures.
Any changes in rates charged PGE's 755,000 customers would be subject to Texas Pacific's approval. Rates also would be subject to the approval of the Oregon Public Utility Commission, as currently is the case.
Texas Pacific would immediately take voting control of Oregon Electric if a controversial federal law that places limits on utility purchases were repealed. The Public Utility Holding Company Act would face elimination under versions of an energy bill stalled in Congress.
In addition, Grinstein, a Northwest native with extensive business expertise, on Jan. 1 began a job as chief executive officer of Delta Air Lines in Atlanta, a move that critics say uproots his credentials as a standard bearer of Oregon interests.  "About the only public benefit they offer is local control -- and it isn't," said Portland City Commissioner Erik Sten, who earlier this month urged the PUC to reject the application outright.
Critics point to "Exhibit 7" of the bulky acquisition documents in the filing as proof of where the control actually lies. The exhibit lists the types of utility decisions that would require Texas Pacific's approval, regardless of what local board members might decide.
"These consent rights essentially give the (Texas Pacific) applicants veto power with respect to certain major corporate decisions," the investment firm's Davis stated in accompanying testimony.
Asset sales, operating budgets and rate requests are among the matters that would require Texas Pacific's nod.
Voting control doesn't mean much if (local board members) can't do anything," said Bob Jenks, executive director of consumer watchdog group the Citizens' Utility Board.  Oregon's pension fund -- which invests on behalf of the state's 300,000 public employees, working and retired -- is Texas Pacific's largest investor, with a total of $950 million in the firm's four funds.
It committed $300 million to TPG Partners III and another $300 million to TPG Partners IV, the funds that would be tapped to provide the $525 million cash piece of the PGE deal.
"Practically, boards always are in a partnership with capital," Goldschmidt said.
Texas Pacific's veto powers would prevent the board from "lurching off sideways," he said. "We couldn't do something stupid."
Bryan Conway, the PUC's case manager for the Texas Pacific proposal, said in scrutinizing the role of local representatives, agency analysts will be "looking very closely at how much local control they are actually bringing to the table."
Another source of anxiety among critics is the possible repeal of the Public Utility Holding Company Act, a Depression-era law limiting utility mergers.
Texas Pacific created the holding company, Oregon Electric Utility, and the local board representation to meet PUHCA conditions. If the law were repealed, the holding company would remain intact, but the portions of board voting control shared between Texas Pacific and others would flip-flop.
Upon repeal, "Oregon Electric's economic ownership and voting control will be adjusted so that the (Texas Pacific) applicants will have voting control consistent with their equity interests," according to the acquisition proposal. That means the investment firm would hold at least 80 percent voting control.
Nevertheless, Jenks and other critics consider the PUHCA provision further evidence that the claims of local control are a sham. Complete article available at

Analysis and Commentary:  Hill does an excellent job of explaining the nature of "negative consent rights" maintained over Oregon Electric by Texas Pacific.  These broad veto powers seriously dilute the power of Oregon Electric's 95 percent stake in voting shares. Clearly, Oregon Electric is a sham organization, as noted by Bob Jenks of the Citizens Utility Board in the article.  Hill also painted an excellent overview of other ownership related issues, including that Oregon PERS has invested $950 million with Texas Pacific, $600 million of which went to Texas Pacific III and IV Partnerships, the source of the funds for the purchase of PGE.  Still unreported, however, is the significance of Texas Pacific I and II.  Texas Pacific will not disclose companies these funds have invested in, who the investors are and the related returns.  Oregon PERS invested $300 million in TPG II in 1997 and as of September 2003 its annual return over a 7 year period was 1 percent, a period in which the DOW increased 100 percent.  The PUC should demand full public disclosure for TPG I and II so that it can evaluate potential conflicts of interest.

2004 March 28 Sphere of influence by Harry Esteve, Oregonian. Last spring, a group of men gathered around Gov. Ted Kulongoski's long, dark dining table in Salem and took turns telling the governor how he ought to run the state.
It was no ordinary gathering. Retired U.S. Sen. Mark Hatfield was there, along with two former congressmen, Les AuCoin and Bob Duncan. By all accounts, former Gov. Neil Goldschmidt dominated the discussion. The focus was Kulongoski's crusade to reconnect jaded Oregonians to their government, and the governor was looking for guidance. Some, such as Goldschmidt, are familiar names. Others, such as Gordon Sondland, a Portland hotel developer, and Roy Behr, a Los Angeles media consultant, are more obscure. While they remain all but invisible to the public, the impact of Kulongoski's advisory circle is starting to show, from his "time-out" stand on taxes to his shake-up of the state's higher education system.
"If a governor selects people who are capable in their fields, it works to his advantage," Lunch says. But it also can be risky. "If there are hints of back room dealing, or secrecy, these kinds of folks can turn out to be liabilities," Lunch says.
The clearest example of outside advisers holding sway came last fall when Kulongoski began what could turn into the most sweeping reform of his administration: a reconstruction of the higher education system.
Kulongoski's decision to replace most of the members of the state Board of Higher Education came after close consultation with Goldschmidt, Goldschmidt's partner Tom Imeson and AFL-CIO President Tim Nesbitt, who has been advising the governor informally since before the election.
Not only did Kulongoski act on Goldschmidt's and Nesbitt's advice, he appointed both to the newly formed board, which Goldschmidt now leads.  Complete article available at

Analysis and Commentary:  Esteve provides a good overview of the Governor's top advisors yet does not prominently note that Tom Imeson, Neil Goldschmidt's lobbying partner and a key player in Texas Pacific's bid to purchase PGE, was head of the Governor's transition team.  Clearly, Imeson deserves more prominent attention, especially since he was a recent head of the very same State System of Higher Education that the Governor proposed to reconfigure using his partner Goldschmidt as the new Chairman.  Imeson served as board Chairman in 4 out of the last 7 years, see note on July 1, 2002.

2004 March 28  The Blackstone Group, a private equity firm, like Texas Pacific, that was hired to value the shares of Portland General Electric for Enron.  It maintains strategic alliances with Enskilda Securities in Sweden, Roland Berger in Germany and Kissinger McLarty Associates here in the United States. It's domestic advisory board includes Reed Hundt, former FCC Chairman, John Young, retired CEO of Hewlett Packard, Maurice Greenberg, CEO of AIG Insurance and Paul O'Neill, former CEO of Alcoa and more recently Treasury Secretary.  AIG, one of the world's largest insurance companies and asset managers,  is reported to be a major investor in Blackstone.
Blackstone notes its relationship with Roland Berger, one of Europe's largest consulting firms, "provides access to proprietary deal flow, preeminent intellectual capital and local knowledge of various European marketplaces."
Blackstone's alliance with Henry Kissinger Mclarty Associates (McLarty is former President Clinton's Chief of Staff ) is designed to help provide financial advisory services to corporations seeking high-level strategic advice. See details at
A rather interesting and well referenced, but unofficial background, on Kissinger McLarty can be seen at
One of the key deals between Kissinger Mclarty and Blackstone involved the bankruptcy of Global Crossing.  The Washington Post reported that Kissinger McLarty was paid $30,000 a month to represent Global Crossing and would receive a $200,000 success fee if a sale were approved.  The Post also reported in a March 29, 2003 article by Christopher Lee that Defense advisor Richard Perle would receive a similar success fee if Global Crossing, the Pentagon's telecommunication company, were sold to a Chinese firm.  Like Enron, Global Crossing showered public figures with cash with even former President Bush reportedly accepting stock in lieu of an $80,000 speaking fee, stock he sold one year later for $4.5 million.
A July 2, 2003 Fortune article reprinted on Blackstone's website notes that  "no one else on Wall Street has created anything close to it. The other buyout firms like KKR, Texas Pacific, and Carlyle are rivals, but Blackstone is bigger and in a wider range of businesses."
Key figures at Blackstone involved with Portland General Electric adn Texas Pacific include Raffiq Nathoo, Senior Managing Director, John McNicholas, Managing Director and James Warner, Associate. Warner worked on the Global Crossing restructuring and had previously been an associate at Texas Pacific and also worked in the leveraged finance group at Credit Suisse. See link at for detailed staff backgrounds.

Analysis and Commentary:  The Oregon Public Utility Commission should evaluate this range of Blackstone's businesses and determine if the City of Portland received a fair chance to bid for Portland General Electric since Blackstone is not independent of the Texas Pacific Group. One example of this lack of independence is the joint $2.5 billion buyout of Scottish & Newcastle pubs and restaurants in which both Blackstone and Texas Pacific are major private equity investors.
The Oregon Public Utility Commission might also inquire if Texas Pacific has been a client of Kissinger McLarty Associates, with whom Blackstone maintains a strategic alliance.  It would also seem reasonable for Kissinger McLarty to disclose its client list to the commission to ensure that its clients have not been positioned to purchase valuable PGE assets to be spun off by Texas Pacific if the Commission approves the sale.

2004 March 28  Milbank, Tweed, Hadley & McCoy Law Firm. Milbank is the primary law firm responsible for representing the interests of Enron's unsecured creditors.  Key staff on this issue include Luc Despins, Co-Chair of the Financial Restructuring Group and a member of the Official Committee of Unsecured Creditors of Enron Corp, in addition to Michael Banks, David Cohen and Susheel Kirpalani

Milbank's website is  Once at the site select "practice capabilities" followed by "power and energy" and see the following description:   "Milbank's Power & Energy Group offers the combination of corporate transaction experience and specialized regulatory skills necessary to successfully analyze and implement the strategies necessary to compete in the infrastructure industry today. Milbank's ability to structure around regulatory impediments allowed private equity investors to participate in the sector. Milbank has served as counsel to participants in many of the major industry consolidations of the 1990s including most of the cross-border transactions and all the utility bankruptcies reorganizations including Enron and Pacific Gas & Electric. Milbank has counseled infrastructure providers seeking to diversify into areas such as fiber optics, factoring and nonregulated energy projects, and has assisted in companywide reorganizations of generating, transmission and distribution assets. Milbank has also established an international reputation as counsel in foreign power projects and infrastructure financing and both inbound and outbound cross-border acquisitions. In 1999, Milbank represented Scottish Power in the acquisition of PacifiCorp, the first foreign utility to acquire a U.S. utility. Milbank also represented the private equity group in the acquisition of TNP Enterprises, the first leveraged buyout of an electric company."
Milbank also advised the Long Term Capital Hedge Fund, the fund made famous for destabilizing the global financial markets in the fall of 1998.  It also offers specialized workshops on topics ranging from synthetic leases to accounting for special purpose entities. (SPE's)

Analysis and Commentary:  Milbank takes great pride in its work on behalf of private equity firms like the Texas Pacific Group yet has limited experience working with public entities such as the City of Portland.  One partner, Eric Silverman, is founder of the "International Private Energy Association," highlighting this orientation. Given that the City of Portland was able to offer a much higher quality offer for PGE than that of Texas Pacific, one might argue that Milbank has breached its legal responsibility to Enron's unsecured creditors by not forcing Enron to provide bidding guidelines that would have allowed such a purchase.  Even more disturbing to Enron's creditors might be the conflict of interest between Milbank and Scottish Power.  Milbank represented Scottish Power in its $7.4 billion takeover of Pacific Power in 1999, as noted on its website.  Pacific Power, a competitor of PGE, does not want to see a City of Portland takeover of PGE for fear that such an action would bring a Public Utility District one step closer.  Prior to the Texas Pacific Group's bid for PGE, Pacific Power was Neil Goldschmidt's lobbying firm's largest client. In fact, Goldschmidt led the fight to block the formation of a PUD.  Again, the key issue here is whether this actual conflict of interest has impaired Enron's creditor's ability to get a higher quality bid for Portland General Electric. Such a bid should provide both short-term and long term stability for creditors given the large amount of assumed debt, the Texas Pacific Group provides neither while the City could provide both.

2004 March 28  Cleary Gottlieb, Primary Law Firm for the Texas Pacific Group.  Cleary Gottlieb is advising it's "long-time client" on the purchase of Portland General Electric.  Other major Cleary advisory deals involving TPG include the $1.9 billion buyout of Quintiles and its database of patient medical prescription information and services, and TPG's $2 billion joint purchase, together with Blackstone, of Scottish Newcastle's restaurants and pubs.  Cleary also rregularly represents Goldman Sachs, Citigroup and another "long-time client" Credit Suisse on bond offerrings and various mergers.
In addition, Cleary has represented Citigroup, FleetBoston and other firms, and their executives, who structured Enron's failed partnerships, including Fleetboston's Backbone I and II.  The Cleary website is a little confusing to navigate yet the following link refers to Texas-Pacific as a long-time client.

Analysis and Commentary:  The Oregon Public Utility Commission should examine Texas Pacific Group's key partners and advisors because doing so will reveal a structure very similar to that Enron used.  To date no major newspapers in Oregon have connected the dots nor appreciated the importance of these relationships.  Credit Suisse plans to issue $700 million in bonds to finance the transactions and the fact that Cleary is advising both TPG and Credit Suisse, in addition to the same firms that structured Enron's failed partnerships, should be of interest.

2004 March 28  Weil, Gotshal & Manges, the law firm representing Enron in its bankruptcy.  Weil advised Enron in its sale of PGE to Texas Pacific. Available at its website is its interpretation of the Public Utility Holding Company Act (PUHCA) at:  This is a helpful document in evaluating its strategy for repealing the act.  Its press release announcing the sale of PGE and the legal advisors involved is at:
Weil led a failed effort to restructure Enron as a $10B integrated energy company called OpCo, prior to some key assets such as PGE being sold at auction, according to a Weil March 5/2002 press release.  Another press release notes Enron's legal and accounting fees are $1 million per day, surpassing $500 million by 12/31/2003. Managing partner Bienenstock said the fees are large due to the number off issues involved.

Analysis and Commentary:  Weil's job is to represent Enron and help it emerge from bankruptcy.  Key to this will be a successful sale of PGE and the City of Portland therefore has tremendous leverage over Enron if it blocks the sale to Texas Pacific and dictates terms of a City purchase. Exerpts from a March 19, 2003 Enron press release include:
HOUSTON – The Enron Corp. Board of Directors voted today to move forward with the creation of a new pipeline operating entity rather than sell the company’s interests in its three North American pipelines. This decision, which is part of an extensive due diligence and auction process for 12 of Enron’s core domestic and international assets, was made after the Board
received and considered multiple bids for the three pipeline interests.
PipeCo is expected to be a new corporate entity governed by an independent board of directors. Upon resolution of Enron’s Chapter 11 bankruptcy case, it is anticipated that shares of PipeCo would be distributed to creditors in connection with Enron’s plan of reorganization. The formation of PipeCo will require various Board, bankruptcy court and other regulatory
approvals, as well as the consent of the Official Unsecured Creditors’ Committee.
In connection with the decision to retain the pipelines, Enron also is evaluating the potential sale of a minority interest in PipeCo.
Enron also is moving forward with the auction process for the sale of certain major assets, including Eco-Electrica, Portland General Electric Company, Sithe/Independence Power Partners, and Compagnie Papiers Stadacona, as well as other assets in the Enron estate. The entire press release can be viewed at:

2004 March 28  Arnold & Porter, Leading National Bankruptcy Law Firm.  Arnold claims a diverse client list including secured and unsecured creditors, bondholders, landlords, asset purchasers, etc.  It has worked with Daved Bonderman, the Texas Pacific Group, Robert M. Bass Group and others. Generally, clients are large banks and insurance companies and defendants in complex securities class actions adn derivative actions involving accounting, financial reporting, corporate governance and fiduciary and ERISA issus.

Analysis and Commentary:  Although it is listed as one of four primary firms involved with the Enron bankruptcy, its specific role is not clear to me at this time.

2004 March 24  Summary of Campaign Contributions for Governor in 2002, source
Neil Goldschmidt, Neil Goldschmidt Inc., Goldschmidt Imeson Center and Goldschmidt Imeson all made contributions to now Democratic Governor Kulongoski's 2002 campaign for a total of $18,500.  Tom Imeson and Diana Goldschmidt also gave $1,000 and $6,072 respectively to Ron Saxton's failed campaign in the Republican primary.

Analysis and Commentary: Ron Saxton is both Neil and Diana Goldschmidt's personal attorney. Saxton's law firm also shares offices with the lobbying firm Goldschmidt Imeson.  It was Saxton's firm that approached the City of Portland to help advance its bid to purchase PGE only to later drop the City and represent the Texas Pacific Group after Texas Pacific made its bid for PGE in November 2003.  See Feb 1, 2004 reference titled City of Portland, law firm part ways over PGE by Jeff Manning, Oregonian.  Campaign contribution details at

2004 March 24 Public Utility Commission Chair Lee Beyer and PGE/Enron Contributions.  Recently appointed Chair of the PUC Lee Beyer received two campaign contributions from the "Portland General Electric/PGE Employee Candidate Assistance Fund", one in 1997 for $1,500 and a second in 1998 for $500.  Source

Analysis and Commentary:  It is often stated that PGE/Enron bought the Oregon legislature when it purchased Portland General Electric in 1997.  With only two votes required on the 3 member PUC board needed to approve the Texas Pacific Group's bid to purchase PGE, it is interesting that the Governor's office did not consider Beyer's receipt of contributions from PGE/Enron in its decision to make Beyer Chair of the Commission in August 2003 or for that matter his mere presence on the commission.

2004 March 24  Murmurs, Willamette Week.  While governments around the world have decided they can save money by using "open-source" software like the Linux operating system, Multnomah County doesn't seem ready to make the leap. Though county technology staff heard a spiel Tuesday morning from the Beaverton-based Open Source Development Lab, IT boss Lisa Yeo emphasized .. "We do not have plans to 'go open source' at the County". "You should be able to explain to customers why." See complete story at:

Analysis and Commentary: See Nov 21, 2003 article by Jeff Mapes of the Oregonian for additional background.  Mapes notes that Oregon Electric's Chairman Neil Goldschmidt's lobbying  firm has represented Microsoft's Paul Allen on a variety of issues. It was interestingly not long after  Microsoft's Chief Operating Officer Bob Herbold was added to Weyerhaeuser's board that the hostile takeover of Portland based Willamette Industries was initiated.  Weyerhaeuser hired Goldschmidt to silence local opposition to the takeover.
Microsoft has heavily lobbied the State of Oregon to prevent the adoption of Linux, a tragedy to school districts because the related savings could put more teachers in the classrooms. Goldschmidt will not reveal whether or not Microsoft or its heavily funded lobbying arms, including the American Electronics Association, the Business Software Alliance or Citizens for a Sound Economy, have been a client of Goldschmidt Imeson any time in the last 5 years. It would be most ironic if they were since Goldschmidt is now head of the State System of Higher Education, a system that could realize dramatic cost savings and also better prepare students with expanded skills if able to adopt open systems using Linux. Again, the basic question is the following:  have Microsoft, the American Electronics Association, The Business Software Alliance, Citizens for a Sound Economy or other groups wanting Goldschmidt Imeson to lobby on Microsoft's behalf been clients of Goldschmidt Imeson.

2004 March 24  Hundreds of millions at stake, Letter to Editor by Aubrey Russell, Oregonian.  This is what Portland General Electric ratepayers would save if PGE were publicly owned (see Steve Duin column, March 14). This was not mentioned in your paper's coverage of the City Club forum..  Think of it in terms of $100 million of free energy. Think of it in terms of a $100 million stimulus to Oregon's economy. Think of it in terms of an equivalent tax cut. Think of it. And please, report on it.  See complete letter at

Analysis and Commentary:  None

2004 March 23  PGE earnings soft for third year by Gail Kinsey Hill, Oregonian.  PGE reported earnings of $58 million for the year ended Dec. 31, down 12 percent from 2002 and less than half the levels it regularly posted in the late 1990s. Yet company officials see improvements ahead, as one-time costs are absorbed and ties with Enron are severed.
Most immediately, Texas Pacific Group, a private equity investment firm based in Fort Worth, Texas, is trying to buy PGE for $2.35 billion, including $1.1 billion in assumed debt. If the deal falters -- it still needs the approval of several state and federal regulatory agencies -- Enron's fallback plan calls for the distribution to creditors of newly issued shares of PGE stock.
It's unclear whether the city of Portland might try to orchestrate a takeover bid for PGE if Texas Pacific's offer fails. Earlier city-led efforts to negotiate a government purchase of the utility hit resistance from Enron management and the bankrupt corporation's creditors.
Consumer groups have fought PGE's recent efforts to raise rates to cover extra power costs, arguing that customers should not bear the costs of faulty power-purchase decisions. Many customers are still smarting from the huge rate increases PGE imposed 21/2 years ago -- 30 percent for households and as much as 70 percent for some businesses.
"In some respects, the worst is behind them," said consumer advocate Bob Jenks, noting the settlement with federal investigators and an improving economy. "But they still have a fundamental problem. They have among the highest rates in the region and among the lowest earnings."
Compensation last year for Peggy Fowler, PGE's chief executive and president, topped $1 million, including a performance bonus of $240,000 and a retention payment of $400,000. Her salary was $350,000. Recently retired Fred Miller, executive vice president of public policy and consumer affairs, received $557,000, including a performance bonus of $140,000 and a retention payment of $200,000. Senior executives also received retention bonuses from Enron in 2002.  Full story at

Analysis and Commentary:  Kinsey provided an excellent summary of the current status of PGE yet still no reporter has fully examined the relationships between Texas Pacific's offer for PGE and Enron. See January 14, 2002 reference from the Wall St. Journal,  How Wall Street Greased Enron's Money Machine. The article highlights that Credit Suisse was one of the biggest, perhaps the biggest, underwriter of Enron's stock and bond deals.  The same Credit Suisse is working with Texas Pacific to issue $700 million in debt to finance the PGE purchase.  Another major Enron creditor, Oaktree Capital Management, is also a significant investor along side Texas Pacific.  Enron's reluctance to negotiate with the City given the capacity to scratch insider's backs should be obvious.  The good news for the City is that the threat of condemnation will require the creditor's committee to accept its offer, rather than allow Enron to distribute the stock.  Failure to do so would be a breach of its fiduciary responsibility to other creditor's. The only missing ingredient is a meeting of the City Commissioners to redeclare their intent to purchase PGE and proceed accordingly.  Kinsey does indeed highlight that the City's intentions are not clear at this point.

2004 March 21  Litmus Test for Ethics: Options by Gretchen Morgenson, NY Times.  There are two types of companies today: those that understand they must be more responsive to their owners and those that do not. Unfortunately for investors, the second group is far larger. Consider the 10-year war over stock options accounting. Even the scarecrow can see that options should be deducted from revenues along with other employee costs.

Analysis and Commentary:  Neil Goldschmidt has stated that he will be receiving stock options as Chairman of Oregon Electric. He will not disclose how many nor under what terms. If options are indeed a litmus test for ethics as Morgenson notes in the NY Times, Goldschmidt is clearly failing before he even gets started. The Public Utility Commission should demand complete and full public disclosure regarding all options invovled with this deal.

2004 March 21  Concerns Raised Over Consultants to Pension Funds by Mary Wiliams Walsh, NY Times.  A small but growing part of the $2 trillion in state and local pension funds is being steered into high-risk investments by pension consultants and others who often have business dealings with the very money managers they recommend. After making such investments, a few of these pension funds have come up short, forcing the governments to draw on tax dollars.
The Securities and Exchange Commission is so concerned that it has begun an inquiry into the practices of pension consultants, who serve as gatekeepers for thousands of money managers. The regulators will find not just financial consultants but a web of intermediaries — marketing agents, lobbyists, brokers and world leaders — between pension funds and the investments they choose.
Under the consultants' watch, more money is flowing into private or alternative investments, which are not publicly traded like stocks and bonds and whose performance cannot be tracked in any agreed-upon way. Private investment pools attracted virtually no state pension money a decade ago, but the typical state pension fund now has nearly 5 percent of its assets in them, and some states have far more.
Specialists say the structure of public pension funds leaves them particularly vulnerable. Fund boards are responsible for investing hundreds of millions of dollars, but only the biggest ones can afford professional investment staffs. Public trustees are often drawn from the ranks of firefighters, teachers and other public employees whose retirements they are protecting. They often have little financial training and are expected to serve as volunteers. Most public funds therefore rely heavily on consultants, even though the consultants may have business ties with the very money managers they are supposed to help select.
In December, the S.E.C. sent 12-page letters to about two dozen pension consultants, requesting extensive information about what they do for pension funds, how they are paid and how their pension work may conflict with their other business operations. The agency appears to be trying to learn how often pension consultants work for both sides of the table, receiving compensation from their pension clients and money managers. Lori A. Richards, director of the commission's inspections unit, said the study was still in progress and the commission had not drawn any conclusions.  Complete story available for purchase at

Analysis and Commentary:  The SEC is now clearly moving quickly to address concerns with respect to private equity funds, in particular the accuracy of represented returns and associated fees, and other issues involving public pension funds. Few situations highlight these specific SEC concerns more than that here in Oregon, in particular those surrounding the Texas Pacific Group's proposed purchase of Portland General Electric, as outlined in this list of references.

2004 March 19  PGE Credit Rating at Risk, Portland Tribune. Standard & Poor's Rating Services placed Portland General Electric on credit watch last week and plans to drop its BBB+ corporate credit rating after the Oregon Electric Utility Co. deal goes through.   Based on filings with the Oregon Public Utility Commission, Standard & Poor's analysts raised concerns about the level of PGE debt in the proposed $2.35 billion deal. Oregon Electric, the holding company for buyer Texas Pacific Group, is paying its $1.47 billion portion of the deal by using a combination of $707 million in bank loans, $525 million in equity and $240 million in PGE cash.
   "In effect, this deal will replace PGE's equity with equity and debt," said Swami Venkataraman, director of utilities, energy and project financing for Standard & Poor's. "That's why the rating will go down." If the Texas Pacific purchase is approved by the Oregon Public Utility Commission, PGE will have about $1.8 billion in debt, "too high for this rating," he said.
   Venkataraman said he doesn't know what the exact rating will be until after the Texas Pacific deal goes through. See complete story at:

Analysis and Commentary:  This rating change will effectively raise the cost of all debt issued to finance the transaction, in particular the $707 million to be issued by Credit Suisse, the company chosen by Texas Pacific to finance the debt part of the transaction.  According to the Wall Street Journal, Credit Suisse was the largest underwriter of Enron's equity and debt offerrings, see referrence dated January 14, 2002. Oregon's public pension system(OPERS) is an equity investor and therefore will not participate in this higher rate but instead will bear increased risk to its equity position due to this downgrade.  Oddly, OPERS has invested more overall that any other company in Texas Pacific, close to $1 billion, yet they are not participating in the debt offerring.  This means that if another bankruptcy occurrs, Credit Suisse takes over.

2004 March 19  Regulators, critics focus on debt load in PGE deal.  Texas Pacific's highily leveraged bid for the utility likely would preclude rate cuts by Gail Kinsey Hill, Oregonian.  Last week, a major ratings agency, citing the acquisition's "heavily leveraged" nature, warned of a likely downgrade in the utility's various forms of debt. And, on Thursday, Lee Beyer, chairman of the Oregon Public Utility Commission, emphasized in a meeting with The Oregonian's editorial board that "we'll be very concerned about the capital structure."
Furthermore, we have made clear that this transaction will not require an increase in rates," he said.
While Texas Pacific has assured regulators and PGE customers that rates would remain unchanged under the new ownership, consumer groups are pushing for guaranteed reductions. They argue that lower rates are the best way to meet state regulatory law requiring a "net benefit" to customers when a utility changes hands. Already, the commission staff has asked Texas Pacific for additional information to add to the 25-page application and 2-inch-thick file of supporting documents, Beyer said.
In its application, Texas Pacific says customers would benefit because PGE would be under more stable ownership with local control. Jenks said his organization thinks that the application is inadequate and that the PUC should demand Texas Pacific submit a more thorough filing, one that more clearly defines customer benefits. Texas Pacific is "trying to get away with platitudes," Jenks said. "These folks aren't willing to tell us what their operational plans are, and we find that unacceptable."
Complete story available for purchase at

Analysis and Commentary:  Lee Beyer was just appointed to the Public Utility Commission by Governor Kulongoski in August 2003, long after the state knew of Texas Pacific's interest in purchasing Portland General Electric.  His meeting with the editorial board at the Oregonian highlights the politicized mature of this commission and its advocacy with respect to approving the Texas Pacific proposal.  Beyer's referring to a two inch thick file being something substantial is almost laughable and clearly indicates how incomplete the filing is, as noted by Mr. Jenks of the Citizens Utility Board.  The same day Beyer was trying to defend the PUC's independence and its capacity to represent the citizens of Oregon before the editorial boards at the Portland Tribune and Oregonian, Neil Goldschmidt, Tom Imeson, Tom Walsh and Kelvin Davis of Texas Pacific had scheduled half hour afternoon meetings with each of the City Commissioners and the Mayor at City Hall.  A casual observer might argue this coincidence is indicative of the inside nature of this deal.

2004 March 17 Propping Up PGE by Nigel Jaquiss, Willamette Week. As the proposed sale of Portland General Electric moves forward, ratepayers' interests are supposed to be protected by the state Public Utility Commission.
But details of an obscure December decision by the federal Securities and Exchange Commission show why observers worry about the PUC's resolve.
At issue was whether PGE's parent company, Enron, should enjoy an exemption from the Public Utility Holding Company Act. Although the SEC denied Enron's request, Attorney General Hardy Myers argued on behalf of the PUC in support of Enron. In other words, the PUC intervened, albeit unsuccessfully, in a way that would have raised PGE's price tag. Although PGE's purchase price theoretically shouldn't affect rates, it's likely that a high price would curtail service and put upward pressure on rates. Moreover, PUHCA is a law explicitly devised to protect the average Joe from corporate shenanigans, which would seem to be of more concern to the PUC than safeguarding Enron's assets.
PUC spokesman Bob Valdez says the commission wasn't out to prop up Enron but merely considers SEC oversight of Oregon's largest utility redundant. "We're confident the existing regulation is adequate," Valdez says.Jason Eisdorfer, a lawyer for the Citizens Utility Board, disagrees.  See complete article at:

Analysis and Commentary:  Calling the SEC's oversight redundant is quite astonishing, especially given that private equity firms like Texas Pacific provide almost no disclosure of their activities. Texas Pacific will not even disclose returns to its investors.  Perhaps even more surprising is that Oregon's own Attorney General, Hardy Myers, argued in support of the PUC in its effort to waive the exemption on behalf of Enron and PGE.

2004 March 16 Quintiles Announces Board of Directors. Press Release. Texas Pacific has invested in Quintiles and its board members include Jonathan J. Coslet, Senior Partner, Texas Pacific Group. Responsible for Texas Pacific Group's healthcare investment activities, Coslet also is a member of the firm's Investment and Management committees. Prior to joining Texas Pacific, Coslet was with Donaldson, Lufkin & Jenrette, specializing in leveraged acquisitions and high-yield finance. He received a bachelor's degree in economics from the University of Pennsylvania Wharton School and a master's in business administration from Harvard. Coslet serves on the boards of Magellan Health Services, Oxford Health Plans, Burger King, and J. Crew, among others.  See complete list of directors at:

Analysis and Commentary:  Accumulating sensitive health care information from Quintiles could be very valuable to Texas Pacific, especiallly if ultimately provided to insurance companies. This highlights the risk of allowing Texas Pacific to obtain sensitive power usage information from local Oregon businesses that could find themselves competing with Texas Pacific affiliates companies in a variety of industries. The point here is that Texas Pacific knows the value of such profiling information.

2004 March 14  Tarrant and Bankrupcy Insider Definition. See page 13 for interesting legal ruling involving TPG Parent Tarrant. Court ruled Tarrant was an insider in bankrupcy proceeding even though had no economic interest at time.

Analysis and Commentary:  Texas Pacific's parent name is Tarrant yet this name is rarely referred to.  It seems that Texas Pacific has often been considered somewhat of an insider in bankruptcy proceedings, perhaps owing to David Bonderman's experience as a bankruptcy attorney.  It was exactly this skill that got him noticed by the Texas billionaire Bass Group.

2004 March 14  Oregon PERS Alternative Equity Portfolio.  Note that this portfolio was on the web prior to my highlighting the true history of Texas Pacific.  It has since been removed by the State Treasurer's office. Oregon PERS has invested in three TPG partnerships and returns as of Sept 30, 2003, are as follows.  Note the poor performance for the larger $300 million fund over a 7 year period, the same period in which the DOW increased 100 percent.  It is surprising how little scrutiny these actual returns have had. Of course the TPG principals have done just fine over the same period in terms of investment and management  fees, leading one to believe that OR PERS has been a second class investor. Also relevant is the performance of the other major passive investor in the TPG buyout of PGE. This is OCM or Oaktree Capital Managment, for whom the returns are consistently poor.

Name            Amount Invested    Years Invested    Annualized Return
Texas Pacific Group(Tarrant) - Main Investor
TPG 1            $50 million             10                        36% (good return on small amount)
TPG 2            $300 million             7                         1% (best indicator)
TPG 3            $300 million             3                        22% (only 3 years)
Oaktree Capital Mgmt - Large Passive Investor
OCM Opp    $48 million                9                        10%
OCM Opp    $50 million                8                        -1%
OCM II        $75 million                7                         3%
OCM III      $100 million               4                          8%
OCM OPP2  $50 nillion                2                        N/A
OCM IVB    $75 million                1                        N/A

The current overall portfolio summary on the web at the Oregon State Treasury indicates a YTD return as of 12/31/2003 of 23 percent and a five year annualized return of 5.5 percent.  What really matters are long term returns and clearly the poor management of its alternative equity portfolio has cost Oregon public employees dearly.  Again, while firms such as Texas Pacific boast about specific returns, they do not disclose the actual returns earned by its various investors, i.e. public pensions.  See more more information on the Oregon Investment Council. Note that there is no biographical information on its five board members and also that the alternative equity portfolio was removed from the website at about the same time the PUC filing by TPG was made.

2004 March 14 Frank Potter Draft Letter to PUC.  A member of the Oregon Bar and with years of experience in national energy policy in congress and on capital hill, Frank wrote the commission opposing the buyout of PGE by TPG.

Analysis and Commentary:

2004 March 14 "Do I Hear An Opening Bid on Bull Run by Steve Duin, Oregonian. Duin is one of the top columnists at the Oregonian and wrote an anlysis of the City Club debate between Erik Sten and Tom Walsh.  Sten presented a compelling argument and Duin noted that "The Oregon veneer on the Texans' proposed purchase of Portland General Electric didn't show up Friday with its most persuasive mouthpiece Neil Goldschmidt or a persuasive argument."

Analysis and Commentary:

2004 March 13  Face off Over PGE by Gail Kinsey Hill, Oregonian.  Portland City Commissioner Erik Sten on Friday urged state regulators to reject Texas Pacific Group's offer to buy Portland General Electric, likening the Fort Worth-based investment firm to the tycoons of the 1920s. "To understand what is happening to our community today, we must look back to the time when the term 'robber barons' was coined," Sten said at a City Club of Portland forum. "Because they are back, and they want our electric company."

Analysis and Commentary:

2004 March 12 Utility Watchers Fret Over PGE Deal by Kristina Brenneman, Portland Tribune.
Excerpts:  Complaints about Texas Pacific Group, Portland General Electric's proposed buyer, sound like some of those aimed at Enron Corp., PGE's notorious parent. In its application to buy the Portland utility, Texas Pacific proposes to pull $240 million out of PGE's cash account to help finance its $2.5 billion acquisition. That would leave PGE with a cash balance of about $10 million. Citizens Utility Board of Oregon executive director Bob Jenks said, "They're draining cash out to pay their debt. They have a responsibility to customers, and it (the money) came from them."   Jenks called the Texas Pacific application, filed last Monday with the Oregon Public Utility Commission, "woefully inadequate."  The Securities and Exchange Commission on Tuesday ruled that Enron register as a holding company under the Public Utility Holding Company Act. The decision means Enron's sale of PGE to Texas Pacific will be closely scrutinized by federal regulators, a move sought two weeks ago by Reps. John Dingell, D-Mich., and Edward Markey, D-Mass., of the House Energy and Commerce Committee  Public Citizen, a nonprofit consumer advocacy group based in Washington, D.C., also is closely monitoring the PGE sale. "I can't take this Oregon Electric seriously; it's what we used to call the 'stooge' company, which means they don't have the real control," said Lynn Hargis, an attorney and utility expert with Public Citizen. "It's a real loss of Oregon control over an Oregon utility."
The complete Tribune article is available at

Analysis and Commentary:

2004 March 12 Erik Sten Speech before the City Club.  "The future of PGE." Sten gave an outstanding speech and likened TPG's attempt to purchase PGE to that of a Robber Baron early in the last century. Unfortunately the speech does not include the 25 minute question and answer session yet that can be obtained from the City Club at

Analysis and Commentary:

2004 March 12 Commissioner Sten Press Release Urging PUC to Reject TPG offer for PGE.

Analysis and Commentary:

2004 March 9  Lawmakers raise legal questions in PGE deal by Kristina Brenneman, Portland Tribune.  Highlights include:  Two Democratic congressmen have raised objections with federal regulators over the Texas Pacific Group's proposed $2.35 billion purchase of Portland General Electric.  In a letter last week to Securities and Exchange Commission Chairman William Donaldson, Reps. Edward Markey, D-Mass. and John Dingell, D-Mich., who sit on the House Energy and Commerce Committee, said the sale appears to violate the Public Utility Holding Company Act. The two congressmen -- who think the SEC has been lax in enforcing the law limiting utility ownership -- also questioned whether Texas Pacific plans "to divest the rest of their holdings" to acquire PGE from its bankrupt parent, Enron Corp. "What's notable about this deal is they are not mergers of two utility companies, but a Wall Street investment firm that is highly diversified acquiring a utility company," said Jeff Duncan, legislative director for Markey. "Some interested group or consumer group could sue them, saying they are not enforcing PUHCA." Complete article at:

Analysis and Commentary:

2004 March 9  Rate cuts absent from application to buy PGE by Jeff Manning, Oregonian.  Highlights of the article included" Texas Pacific Group filed with state regulators Monday its anxiously awaited application to acquire Portland General Electric and in so doing drew a line in the sand that sets up an almost certain clash with customer groups."
At first glance, key players in the PUC review said they see very little to like in Texas Pacific's application.  "What is stunningly omitted here is any discussion of driving down rates to where they can be competitive," said Ken Canon, executive director of Industrial Customers of Northwest Utilities, a trade group representing large industrial users of electricity. PGE raised rates for industrial customers by 50 percent in 2001. Canon and others questioned the relevance of the "significant Oregon representation" on the proposed PGE board. Goldschmidt, Walsh and Grinstein will own 95 percent of the voting stock of Oregon Electric, according to TPG's application and Texas Pacific would own 5 percent of the voting stock. But Texas Pacific will own nearly 80 percent of the equity of the acquired company, while the local trio will own less than 1 percent. Critics also questioned Texas Pacific's claims that it will bring stability to PGE. The equity investment firm typically sells off its holdings after just a handful of years and can, by its own internal rules, hold no asset longer than 12 years. "It doesn't look like there are a lot of specific public benefits," said Erik Sten, the Portland City commissioner who fought for a city takeover of the utility. "But I want to take a good look at the filing." Eisdorfer, of the Citizens' Utility Board, said his immediate response was to oppose Texas Pacific's acquisition.  "If this becomes a case of benefits by platitude, the deal is in trouble," Eisdorfer said. "TPG has the burden of proof in this case on why it should be approved. And there's not a lot of meat on this bone. Our initial reaction is, it's not good enough."

Analysis and Commentary:

2004 March 9 Weyerhaeuser Settles Suit by Dylan Rivera, Oregonian.  Weyerhaeuser has agreed to pay $34.5 million to four Oregon and Washington sawmills to settle their antitrust lawsuit, bringing the timber giant's tab to $113 million so far in a series of suits contending that it ran an illegal monopoly in the alder log market.  Neil Goldschmidt represented Weyerhaeuser in its hostile takeover of Portland based Willamette Industries in 2001.

Analysis and Commentary:

2004 March 8 Oregon Electric Application to PUC. Document and all related exhibits available at Note that Ater Wynne Llp is Legal Counsel Counsel for Oregon Electric

Analysis and Commentary by page number.

Page 2: Gerald Grinstein, one of three local principals of Oregon Electric, was named CEO of Delta Airlines after Oregon Electric was formed.  See 20040313 comment for background stories on all three principals of Oregon Electric.  Mr. Grinstein's situation presents a direct conflict of interest with Texas Pacific's significant investment in other airlines and will inevitably require him to distance himself from Texas Pacific and Oregon Electric.  TPG CEO David Bonderman had a similar conflict in that he was simultaneously on the board of two airlines until the Teamsters Union objected.  Clearly, Grinstein's presence on Oregon Electric's Board is temporary, that is until such time Delta's management or unions raise an objection.  Interestingly, Tom Walsh, a widely respected local leader and along with Goldschmidt the third local principal of Oregon Electric, publicly stated in a City Club address on 3/12/2004 that if not for Grinstein being on the board, he would not have joned Oregon Electric.  If true, this would lead one to believe that Walsh's participation is also temporary.

Page 5:  Juristiction and Review Process:  This requires the commission to review any party that would become an "affiliated interest" with such public utility and refers to such parties being identified in Exhibit 1.  Remarkably, Texas Pacific only identified its TPG Partners III and IV investment pools. Other key affiliates include TPG I and TPGII.  Oregon PERS alone still maintains over $225 million invested in TPG I and TPG II.   Not only should these be listed yet any company within these partnerships to which TPG ownes more than 5 percent should also be identified in the related parties section.  TPG will claim that funds for PGE will only come from TPG III and TPG IV yet the TPG umbrella organization is intimately interwoven to all four funds, including employees who sit on the boards of companies in each of the four funds.

Originally funded by the Bass Group, TPG should also disclose its own ownership structure given its interlocking relationships with other major blind private equity investment pools.  Who exactly owns TPG, in terms of percent, and what percent does TPG own in other investment pools outside I, II, III, IV.  This is highly relevant information in meeting the affiliate and related party disclosure requirements.  This would of course include Tarrant Partners LLP, the underlying business which uses the TPG name.  This is especially important because to date Tarrant has escaped all SEC disclosure.

Since both the Gates foundation and Oaktree Capital Management (OCM) each will have a roughly 10 percent economic interest, although "classified' as passive investors, each is clearly a related party and should therefore disclose any company for which it has an ownership interest exceeding 5 percent.  This is especially important for the Gates foundation since they have $24 billion in assets and successfully liquidated its entire holding in Microsoft during the last 4 years.

Page 6:  Introduction to Oregon Electric and Members:  Oregon electric is noted as having a .4 percent economic interest yet 95 percent voting rights.  These rights are however impaired by "negative consent right" as noted by Tom Walsh in his City Club address on 3/12/04.  Such impairments, called consent rights, are noted in Exhibit 7 and highlight in dramatic fashion what little control Oregon Electric will maintain. In addition, it is stated that if Congress repeals the Public Utility Holding Company Act (PUHCA) then TPG would immediately assume voting rights of 80 percent, its stated economic interest, and leave Oregon Electric a powerless shell.  TPG is lobbying Congress heavily for such an appeal and neither Oregon Senator, Ron Wyden nor Gordon Smith, have been queried by the local media regarding whether they will help block such an effort.  See link at  for link to exhibit 7 and complete list of negative consent rights.

Also noted on page 6 is that Neil Goldschmidt was appointed to head the State Board of Higher eduation.  This role requires him to conform to the ethical standards, as enforced by the Government Standard Practices Board.  Specifically, he can not use his public role for private gain.  He was not technically a public figure until this appointment. Since he has refused to disclose his lobbying firm's list, such conflicts are hard to determine.  This would of course also include disclosing if Texas Pacific itself has been a client. Not even his long-time friend and current Govenor, Ted Kulongoski, has been able to convince Goldschmist to disclose the list.

Due to the recent controversy regarding State Treasurer Randall Edwards choice of Oppenheimer to manage the College Savings Plan, what will soon be a $500 million investment pool with more than 100,000 parents involved, many question whether Oppenheimer or its parent Mass Mutual have been a client of Goldschmit's.  Remarkably, State Treasurer Edwards has been completely silent on the TPG deal to purchase PGE.   The Oppenheimer college savings program was non-competitive due to higher costs and market lagging returns yet wasstill chosen by Edwards and his assistant Michael Parker.  Although it will give State Treasurer Randall Edwards free television advertising opportunities, he also previously appeared in the Strong family of fund ads, one has to question how he could so boldly betray parents and their children trying to save for the rapidly increasing cost of college.  Again, maybe Goldschmidt was not involve and if he wasn't, he should just say so and end the controversy.  This is a very reasonable question to him since he is not head of the State System of Higher education.

Page 9:  The TPG Applicants.  TPG highlights that Oregon PERS is the biggest single investor in TPG funds yet it does not indicate the return on such investments.  See note at  20040314  Oregon PERS Alternative Equity Portfolio.  Exhibit 12 shows a breakdown of investors in TPG, showing that most funds come from large public pensions.  Surprisingly, TPG only lists its TPG III and TPG IV pools in the breakdown of investors.  This is very misleading in that it is an attempt to not disclose numerous related parties and companies in which TPG has an ownership interest greater than 5 percent.  To summarize, for purposes of the Oregon PUC TPG is defining itself as only two investment pools, those it says will be investing in PGE, yet this view grossly mischaracterizes exactly who Texas Pacific is.  In addition, TPG claims it is not a holding company yet cross pool board membership by employees and other factors clearly indicate otherwise.

Page 10:  David Bonderman's and Kelvin David background.  As a bankruptcy attorney, Bonderman was clearly very valuable to the Bass Group and its numerous hostile takeovers.  TPG has not disclosed the nature of its financial relationship with the Bass Group nor its relationship with investment pools controlled by the Bass Group. Like Bonderman, Kelvin Davis,  also worked for the Bass Group, specifically its Colony Capital real estate arm.

Page 16:  Transaction Financing: Texas Pacific is claiming a $240 million owed by PGE to Enron will provide a major part of the equity involved in the buyout.  No such dividend is owed but rather significant amount are owed by Enron to PGE.

Page 16:  Debt financing:  Credit Suisse plans to issue roughly $700 million of 4-10 year bonds as debt financing for the transactions.  Combined fees from such an offerring (management concession, sellor's concession and broker's commission) should total more than $35 million.  This is also unstable financing given the shorter term duration of a major portion.  In addition, this also holds a major risk to Oregonian ratepayers given that if PGE declares bankruptcy again in 5-7 years, this diffused group of bondholders would take control and create another fee mill for bankruptcy attorneys and investment bankers.

Page 18:  Debt Paydown and Capital Expenditures:  Given TPG's short-term philosophy it is unlikely that necessary capital improvements will be made to ensure the long-term stability of PGE.  Generally, these situations result in the corporate raider stripping out valuable assets and spinning the shell to the public in an IPO.

Page 22:  Taxes:  It is stated that "Oregon Electric will file taxes on a consolidated basis with PGE."  This consolidation again highlights that TPG will own PGE, not Oregon electric, since Oregon Electric's tax returns will be consolidated to those of TPG.

Page 25:  Simplicity and Transparency:  The document states "Oregon electric is not positioned to use PGE's utility experience to furthur a competitive agenda or to advance the business of an affiliate."  Of course this is difficult to determine because Mr. Goldschmidt has refused to disclose his lobbying firms clients list.
Also of considerable concern to all industrial power users is corporate espionage conducted by TPG to gain valuable information in doing takeovers or advancing the causes of affiliates.  Power users often divulge manufacturing sectors, etc. since power and its management is critical to such processes.

2004 February 25  Oregon Investment Council Minutes:
II. OCM Principal Opportunities Fund III, L.P. – Presentation & Recommendation. Jay Fewel addressed the Council and discussed the long-standing relationship between the OIC and Howard Marks of Oaktree Capital Management. He invited Howard Marks and Steve Kaplin to address the Council. Mr. Marks and Mr. Kaplin gave an overview of OCM Principal Opportunities Fund III, L.P.  The fund will make investments of $25 to $100 million in approximately 12 – 18 companies. Mr. Marks and Mr. Kaplin answered questions from the Council.
MOTION: Jerry Bidwell moved to authorize a $75 million commitment to the OCM Principal Opportunities Fund III, L.P.  The motion was seconded by Diana Goldschmidt and passed unanimously by the Council.

Analysis and Commentary:  See Oregonian story reference dated April 4, 2004.  Full text of OIC minutes, including comments on Oaktree at

2004 February 17  (Added March 18, 2004) Wake Up PUC Editorial, The Daily Astorian.  Don’t give Texas Pacific Group a free pass to buy Portland General Electric. Oregon has an enormous opportunity to correct a mistake, give electricity ratepayers a break and create a new corporate headquarters of a home-owned utility. The chance we have involves Portland General Electric. Because of Enron’s bankruptcy, PGE is up for sale. The only formal suitor is Texas Pacific Group. In the Sunday edition of The Oregonian, two eminent Oregonians – Ken Lewis and Sid Lezak – made an excellent argument for creating a “publicly owned but privately operated power utility.”
It is a misconception that Goldschmidt and Walsh will protect Oregon ratepayers. Wrote Lewis and Lezak, “... (T)hese local participants are investors. Their bottom-line interests are for higher rates and higher profits, which distinctly conflicts with the interest of Oregon homeowners and businesses for lower rates.”
The biggest flaw in the deal with Texas Pacific which the state Public Utility Commission should recognize is the company’s short-term financial perspective. Thus “long-term commitment to service will not be realized because TPG is not a long-term investor,” wrote Lewis and Lezak.
It was a mistake to allow Enron’s purchase of PGE in 1997. As this newspaper pointed out in a series of seven editorials in 1996 and 1997, Enron’s interest in PGE was all about California, never about Oregon.
The PUC of 1997 erred by letting Enron into this state. It should not repeat the mistake by giving a free pass to Texas Pacific Group, no matter how blinding Neil Goldschmidt’s persuasive powers might be. See complete article at:

Analysis and Commentary:

2004 February 15  Protect Oregon Economy by Defeating PGE Sale by Kenneth Lewis and Sidney Lezak, special feature to the Oregonian. A publicly owned but privately operated power utility would bring lower rates and a firmer commitment to service. We and a growing number of Oregonians are astonished at the lack of scrutiny that the proposed sale of PGE by Enron to Texas Pacific Group is receiving -- and the lack of serious consideration being given to alternatives that would protect our economy and our power. Enron has siphoned off more than a billion dollars from Oregon ratepayers ince 1997.  Enron now wants to sell PGE to another Texas corporation, the Texas Pacific Group. Kenneth Lewis is former president of the Port of Portland and former president of Lasco Shipping Co.  Sidney Lezak is a mediator and was U.S. attorney for Oregon for more than 20 years. Complete article at available for purchase at

Analysis and Commentary:

2004 February 14  Bar Studies Lawyer's U-Turn by Jim Redden, Portland Tribune.  The Oregon State Bar Association has launched a preliminary inquiry into whether Portland attorney Jonathan Ater violated its conflict of interest rules by switching sides in the Portland General Electric deal.  Ater is a senior partner in the Portland law firm Ater Wynne LLP. Until last November, the firm represented the city of Portland in its efforts to acquire PGE from Enron Corp. The firm now represents Texas Pacific Group, the private investment company that has made a $2.35 billion offer to buy PGE from the failed corporate giant.  Complete article at

Also noteworthy and noted in the article is that Ron Saxton, recent canidate for Governor and managing partner of Ater Wynne, is the personal attorney for both Neil and Diana Goldschmidt.  Neil will be Chairman of Oregon Electric, the local shell organization created by TPG, and Diana sits on the five member Oregon Investment Council that has invested more than $1 billion with TPG.  This included $300 approved in a special meeting 8 days prior to the purchase of PGE being announced by Texas Pacific.  She When asked about the timing, Diana is quoted in the media by her attorney Saxton as having no knowledge of the deal.  Neil Goldschmidt also shares offices with Ater Wynne and as recently as March 12, 2004 a call to Goldschmidt during the lunch hour would be received by the receptionist at Ater Wynne.

Analysis and Commentary:

2004 February 6  No. 1: Pharma Services Holdings buys Quintiles, Triangle Business Journal. Gillings also noted the company was in the midst of changing its business model into one that stressed partnering with biotech companies. Being a private company would facilitate that transition, said Gillings.  According to Jay Johnson, senior director of corporate communications at Quintiles, the buyback will help Quintiles further its mission.
"Being private allows Quintiles to be more long-term oriented," he explains. "We can focus even more on enhancing service delivery and developing new services and technologies for customers. It also gives us greater flexibility in structuring partnering agreements with customers who need not only product development or commercialization support, or both, but also financial assistance to bring products to market and peak sales as soon as possible."
One Equity Partners LLC, the private equity arm of Bank One Corp., gave Gillings an equity commitment of $415.7 million. Other investors in Pharma Services include Temasek Holdings, Texas Pacific Group, Perseus-Soros BioPharmaceutical Fund and Mitsui & Co.
Gillings received debt commitments totaling $875 million from Citicorp North America Inc. and Citigroup Global Markets Inc. and said he would tap existing Quintiles cash of about $586 million to finalize the transaction.
In November, Quintiles launched Quintiles Strategic Research Services, a new global business division specializing in the design and delivery of non-registration research studies.
The new division blends Quintiles' existing "late phase" and strategic consulting business units, creating four regional business units - North America, Europe, Australia and Japan.
Strategic Research Services conducts studies designed to further define the safety, effectiveness and value of products.
See complete story at:

Analysis and Commentary:

2004 February 6  Enron Bankruptcy Judge Clears Way for PGE Deal by Kristina Brenneman, Portland Tribune.  Ignoring a letter from city officials saying Portland could pay more, U.S. Bankruptcy Judge Arthur Gonzalez on Thursday quickly approved the $2.35 billion sale of PGE to the Texas Pacific Group, a San Francisco-based private investment group with $13 billion in assets. City officials who wanted Portland to acquire PGE opted not to challenge Texas Pacific's $2.35 billion bid, saying in a letter to the investment group handling the sale, the Blackstone Group, that they were prohibited from competing in a bidding war. In the letter, the city's chief administrative officer, Tim Grewe, left the door open for the city to negotiate to buy PGE.  But on Thursday Judge Gonzalez squelched that effort. He quickly granted approval to the Texas Pacific bid, even after Enron's legal team read the city's letter indicating a potential higher offer for PGE. Mitchell told the court that Portland had never submitted an actual dollar amount. Complete article at:

Analysis and Commentary:
Neil Goldschmidt is quoted in the Oregonian as saying he also had no knowledge of TPG's interest in involving him in the buyout of PGE yet the purchase proposal filed with the bankrupcy court clearly states that TPG had been negotiating since May with Oregon Electric.  From May through the November filing date Goldschmidt led a campaign to defeat a public utility district ballot measure on the November ballot.  This included swaying the Oregonian editorial board to first support a defeat of the PUC and later refer to Goldschmidt's effort as a "solid private market alternative."

2004 February 2  Pension Benefit Guarantee Corp(PBGC) files objection to PGE Sale.  The report indicates PGE is Enron's most important bankruptcy asset and adequate safeguards are not in place to protect the various unfunded pension liabilities.  Complete 9 page filing at:

Analysis and Commentary:

2004 February 1 City of Portland, law firm part ways over PGE by Jeff Manning, Oregonian.  When Texas Pacific Group goes before Oregon state regulators seeking approval of its acquisition of Portland General Electric, it will be advised by Ater Wynne, one of teh city's most politically connected law firms.  Until November, Ater Wynne has represented the city of Portland, Texas Pacific's chief rival in the PGE sweepstakes.  The law firm's decision to change sides has created tension between it and the city--with each side offerring contradictory accounts of events surrounding the decision.
Oregon State Bar disciplinary rules, while complex and full of exceptoins, generally prohibit lawyers from representing a client that is "adverse" to a former client, unless that former client agrees to waive the conflict.  City officials argue that they are adverse to Texas Pacific because both camps want to buy PGE.  City officials add that they refused Ater Wynne's request for a conflict waiver.  "We had long discussions about whether we would give a waiver, said LInda Meng, Portland city attorney. I told them we're not comfortable with them representing Texas Pacific.
It;s clear to me there are people at the city who don't like that we're doing this, said Jonathan Ater, the Ater Wynne attorney who, until November, worked closest with the city.  But it's also clear to me that there is no conflict of interest, so the consent of the city is not required. Wynne has been one of Portland's most visible business leaders for years.  In addition to founding the firm that bears his name, he served as chief executive of Adidas America from 1995 to 2000.  Former gubernatorial candidate Ron Saxton also is a partner in the firm, and former Gov. Neil Goldschmidt is a client and a tenant in the firm's offices.
City Commissioner Erik Sten first floated the possibility of poublic takeover of Oregon's largest electric utility in spring 2002 when he sent a memo to the Portland City Council.  Afterward, Ater contacted Sten, encouraged him to pursue the idea and offered to set up an informal working group to pursue the idea.  The group met regularly between April and August. In early fall, the city hired Ater Wynne to represent the city in its negotiations with Enron.
In late December, Ater again contacted STen to tell him his law firm was going to work for Texas Pacific.  Sten adn Ater agree.  The investment fund had selected Ater Wynne to get the PGE acquisition approved by state regulators at teh Oregon Public Utility Commission.  As Sten recalls the conversation, Ater said he intended to contact Meng, the Portland city attorney, to seeka client conflict waiver.  Meng says ATer and other Ater Wynne attorneys contacted her and asked whether the city would grant a waiver. The firm never submitted a formal written conflict waiver request to the city.
At some point, Goldschmidt also got invovled.  Katz referred Goldschmidt to an internal working group of city employees pursuing the PGE deal.  Ferris and Meng said the working group declined the client conflict waiver.  Goldschmidt was unavailable for comment Friday.  His partner, Tom Imeson, confirmed Goldschimdt contacted Katz.
The conflict equation changes, however, if the city is still a legitimate player in the competition for PGE, STevens said. Agandoning the city to advise another client on the same issue begins to look a lot like a conflict, Stevens said.  YOu don't get to jump ship to another client and help them do something directly related to your representation of a former client.  Complete article available for purchase at

Analysis and Commentary:

2004 January 30  Tough Questions ahead for PUC by Kristina Brenneman, Portland Tribune.  "The prospects for this PUC being tough are remote," said utility lawyer Dan Meek, a sharp critic of Enron and PGE. "None of what this commission has done has been the least bit challenging. I expect the PUC to rubber-stamp this in a heartbeat. Now they are faced with something the utility and Neil Goldschmidt want." Meek says the PGE merger is a conflict of interest for the commission's chairman, Lee Beyer, a former legislator. Beyer raised eyebrows last year when he participated in a forum sponsored by the Portland Business Alliance that was aimed at rallying opposition to a ballot measure that would have created a people's utility district to take over PGE. As a state senator, he received $1,500 from PGE in 1998, the same year the utility and Enron showered almost $45,000 on state legislators and the state's Congressional delegation in its quest for deregulation. Commissioner Ray Baum -- a former Republican legislator and lawyer -- has close ties to Sen. Gordon Smith, who has expressed support for the Texas Pacific-PGE deal. The third PUC member, John Savage, is a longtime state Office of Energy director.  Sten predicted Texas Pacific will try to create public pressure in favor of the sale by "saying we need to get out from under Enron. It's the same thing as Northwest Natural tried to do in terms of local leadership and ownership. We'll see how far they can get with it."  Jenks said Texas Pacific's ulterior motive in hiring Goldschmidt was to discourage the city of Portland from submitting another bid for PGE. The Blackstone Group, the investment consulting group handling the PGE auction, invited city officials to do so, Sten said, but because two previous city bids had been rejected, officials declined the offer. Complete story at:

Analysis and Commentary:

2004 January 29 Window to counter PGE bid expires by Gail Kinsey Hill, Oregonian.  In a letter dated Jan 27 the city says it was locked out of the formal bidding process because, as a governmental body, it was prohibited from purchasing stock directly. The U.S. Bankruptcy Court se the rules for bids.  The City of Portland is in a unique position to offer price, terms and conditions that would be advantageoius to Enron's creditors and provide ownership and rate stability to Oregonians, the letter says. The city has spent about $797,000 in its pursuit of PGE, said Kathleen Gardipee, STen's policy adviser. The city intends to evaluate the Texas pacific deal, including its potential effect on rates, she said.  Gardipee said Enron ignored the city's entreaties in the past and probably would treat the letter in a similar fahioni.  But, she said, it's important that Enron, Texas Pacific and the utility commission understand that we have the money, the ability and the desire to buy PGE.  See complete article at

Analysis and Commentary:

2004 January 28 Portland City Council Agenda, Communication by Bill Parish.  The council was addressed for 3 minutes regarding the future of PGE and an alternative proposal distributed. The council agenda can be seen at:

Analysis and Commentary:

2004 January 28  Where Big dogs Meet White Elephants by Editorial Staff, Willamette Week.  Article states: Neil Goldschmidt has brushed off media questions about his role in the proposed purchased of Portland General Electric and ducked a City Club invitation to debate the merits of the takeover, saying he couldn't talk about the deal until the bidding process was finished. But apparently it depends who's asking. The agenda for the Jan. 23 meeting of the board of Associated Oregon Industries said, "Our luncheon guest will be former Governor Neil Goldschmidt who will speak to us regarding the...proposed purchase of Portland General Electric." See article at:

2004 January 23  Walker: Where are the files now? by Jim Redden, Portland Tribune.  State Sen. Vicki Walker found a new issue to question Neil Goldschmidt about during his confirmation hearing Wednesday -- the whereabouts of his records as Oregon governor. "My purpose was not to evade public scrutiny of my records," he said. Goldschmidt explained that he had forgotten about them because of personal reasons. After Walker raised the issue, Goldschmidt told the committee he would inspect the records and decide which ones should be turned over to the archives. Walker said Thursday morning that she was not satisfied with the answer, and promised to talk with the secretary of state's office, which oversees the archives, to see if it can supervise the transfer. "I don't think Goldschmidt should decide what to turn over and what to keep. Some things might turn up missing, like the missing 18 minutes on the Nixon tapes," she said. Walker said state law did not require Goldschmidt to deposit his records with the archives when he left the governor's office. However, she said, almost every other Oregon governor has done so. The only other exception is former Republican Gov. Mark Hatfield, whose records are available to the public at Willamette University in Salem. Complete article at:

Analysis and Commentary:

2004 January 20 Senator Turns Up Heat on Ex-Guv by Jim Redden, Portland Tribune.  Since Goldschmidt was nominated in November to head the state Board of Higher Education, Walker, the Eugene Democrat, has emerged as his most outspoken critic. She publicly has asked the former governor and Portland mayor to account for nearly $1.5 million in state-sanctioned funds since he became a private consultant in 1991, including $500,000 in state lottery funds he spent as head of the now-defunct Cascade Center for International Business and Policy; and nearly $1 million that his firm received from the State Accident Insurance Fund since 1998. "To me, it's all about accountability. If he's going to have a say in how millions of state -dollars are spent on higher education, he should be accountable for the public money he has already received," Walker said. Complete article at:

Analysis and Commentary:

2004 January 13  Spending Questions Arn't the First by Jim Redden, Portland Tribune.  Retired Portland industrialist Ken Lewis is not surprised by the controversy swirling around the nearly $1 million in consulting and lobbying fees that Neil Goldschmidt received from the State Accident Insurance Fund between 1998 and 2003.  But Lewis remembers that he raised similar questions about Goldschmidt's use of approximately $500,000 in state lottery funds nearly 10 years ago. The money went to fund the Cascade Center for International Business and Policy, a nonprofit organization that Goldschmidt headed in the early 1990s. "This is a valid subject for the committee to delve into. There may be logical, valid explanations for what happened to the money, but the public has a right to know," said Lewis, who owned Lasco Shipping Co. and served as chairman of the board of the Port of Portland before retiring a few years ago.
The Oregon Trade and Marketing Center was created by then-Gov. Goldschmidt in 1987. It was a nonprofit organization intended to increase international trade and consisted of a six-member board of directors, which included Campbell as secretary. It was funded with $1.5 million in lottery dollars channeled through what was then the Economic Development Department.
Lewis said many questions about the center remain unanswered, however, including how its money was spent. No public records seem to exist on how either nonprofit organization spent its money. Because of its nonprofit status, it was not required to file detailed records with any state agencies. Because the structure of the organization was so unusual, the Economic Development Department director at the time, Richard Reiten, asked Frohnmayer for a formal opinion on whether it was subject to the state public records laws.  Frohnmayer issued a nine-page opinion in July 1988. It concluded that the trade and marketing center was not subject to the public records laws but that the organization should be audited by the secretary of state. Frohnmayer could not be reached for comment. "The audit division has no record of any audit on it," said Amy Martins, media spokeswoman for the secretary of state's office. Both Goldschmidt and Campbell insist the money was accounted for, but they can't recall exactly how that was done. "I think someone for the secretary of state's office looked at the books," Campbell said. "I can't remember for sure." Complete article at:

Analysis and Commentary:

2004 January 6 Opposition to ex-guv falls along party lines by Jim Redden, Portland Tribune.  Highlights include: If the committee splits evenly, Senate President Peter Courtney, D-Salem, can vote to break the tie. The full Senate is split evenly as well, with 15 Democrats and 15 Republicans. Goldschmidt must receive 16 votes to be confirmed.
In response to the growing controversy, Goldschmidt's wife, Diana, says she is willing to testify before the committee. Diana Goldschmidt is a member of the Oregon Investment Council, an appointed board that oversees the investment of all state funds. On Oct. 29, she and the other council members voted to allow the state Treasury Department staff to investigate whether to invest $300 million with the Texas Pacific Group. The San Francisco-based takeover firm is putting up $2.35 billion for the new utility company to buy PGE from Enron Corp.
The next day, Neil Goldschmidt met with Kelvin Davis, a Texas Pacific partner. According to Goldschmidt, Davis told him about the proposed purchase at the meeting and offered him a position on the board of the company being formed to buy PGE from Enron. "I have some questions about the timing of the vote," Beyer said.  Diana Goldschmidt said last week that she did not know anything about the PGE purchase when she voted on the potential Texas Pacific investment. According to her, the first time she learned about it was when her husband returned from his meeting with Davis the next day. "If I had known, I would have abstained from the vote. I'm happy to answer any questions from anybody, in a hearing or whatever," she said. Complete article at:

Analysis and Commentary:

2004 January 6 (Added March 18, 2004)  Say It Ain't So Neil Editorial, The Daily Astorian. The former Legal Aid lawyer resembles the spirit of the Bush administration. Many of Goldschmidt’s longtime admirers think less of him because he seems to be nothing but an influence-peddling money grubber. Any hint of moral mission vanished when we were allowed to glimpse what the former governor was charging the Saif Corp. as a consultant. And when it was revealed that Goldschmidt took money from the Weyerhaeuser Co. to make its hostile takeover of Willamette Industries seem like a good thing for Oregon. Or when we learned that Goldschmidt was preparing to have a piece of the action in a purchase of Portland General Electric while he was fronting for the crowd that wanted to defeat the public utility district initiative in Multnomah County.
Recapitulating these developments, Willamette Week labeled the odyssey “The fall of the house of Goldschmidt.”
It can be argued that Goldschmidt has merely done what so many other former public officials have dreamt of or attempted. He capitalizes on the connections he built while mayor, Cabinet member and governor. He peddles influence, which has become more the national pastime for former office holders. Even the first President Bush does it.
No one doubts Goldschmidt’s intelligence. What they suspect is that the man has lost his way. Like so many characters in literature, the man who began his political career as a civil rights worker, a Legal Aid lawyer and a reform candidate for Portland City Council. has mortgaged his soul. In that sense, Goldschmidt is a parable for our time, in which greed trumps moral purpose and community welfare every time. Isn’t that what the Bush administration is all about?
The problem with Goldschmidt heading the higher education board is that many Oregonians will wonder who he’s really working for. See complete article at:

Analysis and Commentary:

2003 December 29  SEC Ruling on Enron/PGE request for PUHCA Exemption.  Oregon Attorney General Hardy Myers and Jason Jones argues on behalf of Enron/PGE/Oregon Public Utility Commission in favor of the exemption.  The exemption was denied as the SEC noted.  "Electric utility is not predominantly intrastate in character and does not carry on business substantially in a single state and holding company is unable to establish that it is only incidentally a holding company and that it derives no material part of its income from an electric utility subsidiary.  Held, application by the public utility holding company for exemption from provisions of the Holding Company Act denied." The SEC also noted that PGE owned a 20 percent interest in two coal fired plants in Montana that along with its related transmission lines account for 14 percent of the entire electric generating capacity of PGE.  PGE also owns 20 percent of the Pacific Northwest AC Intertie linking the Northwest and the Southwest. See 41 page ruling at:

Analysis and Commentary:

2003 December 26  Ex Guv's Job Anything But Certain by Jim Redden, Portland Tribune.  Former Gov. Neil Goldschmidt's appointment to head the state Board of Higher Education, once thought to be routine, appears headed for a challenge. Beyer says he is concerned about a number of issues, including Goldschmidt's controversial work for SAIF and his role with Oregon Electric Utility Inc., the new company that is trying to buy PGE from Enron. "There's a whole lot of questions out there about Neil Goldschmidt and just what exactly he's been up to lately," said Beyer, a tree farmer who's co-leader of the rules committee.
Among other things, Beyer said he wants to know more about a vote that Goldschmidt's wife, Diana, took as a member of the Oregon Investment Council. On Oct. 29, the council voted to invest $300 million in a fund administered by Texas Pacific Group, the firm putting up $2.35 billion for the new utility company to buy PGE from Enron. The next day, Neil Goldschmidt met with Kelvin Davis, a Texas Pacific partner. At the meeting, Davis asked Goldschmidt to serve on the board of the new company that was being created to buy PGE from Enron.
"I have some questions about the timing of the vote," Beyer said. Neil Goldschmidt said he knew nothing about his wife's vote until after he was offered the board job.  "A lot of the investment council business is confidential, and she doesn't discuss it with me," he said. "If he wants to know anything about that, he'll have to ask her."  The Tribune was unable to reach Diana Goldschmidt for comment. Beyer said the SAIF questions are legitimate and wants to go further. He thinks that Goldschmidt is exerting a lot of influence for a private consultant and wonders if the appointment is in the state's best interest.  "Is Kulongoski turning the state over to Goldschmidt?" Beyer asked. Complete article at:

Analysis and Commentary:

2003 December 23 Goldschmidt Feels SAIF Heat by by Jim Redden, Portland Tribune.  Neil Goldschmidt will be questioned about his controversial work for SAIF next month when his appointment to the Oregon Board of Higher Education comes before a state Senate committee. "I think people who receive public money should be accountable for it," Walker said.   Although the payments from SAIF have been widely reported, Goldschmidt so far has declined to discuss what he did for the money. Any disclosure would violate the confidentiality agreement with his clients, said Goldschmidt, who voluntarily ended his relationship with SAIF earlier this month.
The Oregon Legislature created SAIF as a public corporation with its own board of directors to provide workers' compensation insurance coverage to employers who have trouble obtaining it elsewhere. It currently insures about 44,000 employers and had revenues last year of $432 million. Although SAIF is officially part of the state Executive Department, it is funded by premium payments and operates as a private business. Other workers' compensation companies have accused it of having an unfair advantage because of its official status.
The disparity prompted Walker to file an ethics complaint with the commission Dec. 5, the same day Goldschmidt formally ended his relationship with SAIF.  And last week, the agency's top two officials -- Chief Executive Officer Katherine Keene and Senior Vice President Brian Steffel -- resigned and then announced they had taken jobs with Marsh Inc., a New York-based insurance company. Complete story at

Analysis and Commentary:

2003 December 17 Information Blackout by Nigel Jaquiss, Willamette Week.  On Nov. 18, former Gov. Neil Goldschmidt stunned the city with the announcement that, in concert with the Texas Pacific Group, he was buying Portland General Electric from its bankrupt parent, Enron.
Two weeks ago, we sent Goldschmidt 11 questions about his involvement in the transaction and the benefits of the new ownership (see below). On Dec. 5, we got the following response from Goldschmidt's business partner, Tom Imeson: "Most or all of the issues you raised that are pertinent to the transaction will be addressed as the regulatory process moves forward following action by the bankruptcy court. We look forward to addressing these issues at that time."
WW isn't the only organization to get the brushoff from the guy who was supposed to bring local accountability to the proposed sale. Bill Parish, a local financial advisor, has been trying to organize a City Club panel to talk about PGE's future. We've asked him to do it, but his representative says he's not available until the bidding process is over," says City Club Executive Director Wendy Radmacher-Willis.
That's nonsense, Parish says. "By then it will be too late to debate the merits of this proposal, and Gov. Goldschmidt knows that. He's ducking and running out the clock." Former Lasco Shipping boss and Port of Portland Commissioner Ken Lewis is canvassing movers and shakers in an attempt to generate renewed support for public acquisition of PGE. ASK NEIL Three of the questions Goldschmidt declined to answer: 1. How much will you be paid for your time (i.e., rate and total compensation)? 2. Please describe the public benefit of the acquisition, both for residential ratepayers and industrial customers. 3. Did your agreement to assist TPG while leading opposition to the PUD in November constitute a conflict of interest? Complete article at:

Analysis and Commentary:

2003 December 15  The Halifax Group Official Website.  Halifax was founded with the assistance of Thomas J. Barrack of Colony Capital and David Bonderman of Texas Pacific Group. As a result, Halifax is affiliated with these two firms. Colony is a leading international investment firm focused primarily on real estate related assets and operating companies; Colony has invested more than $10 billion in over 100 different property, corporate, and portfolio transactions worldwide since 1991. Texas Pacific Group is a leading private equity firm with more than $10 billion in committed equity capital and which, through itself and its affiliates, operates in North America, Europe, Asia, and Latin America. Halifax from time to time refers potential transactions that fall outside of our investment criteria to our partners which are affiliated funds and receives referrals from those funds from time to time for transactions smaller than they would consider for themselves, given their size. See link at:

Analysis and Commentary:

2003 December 15 Colony Capital LLC Profile in Hoover's Online  Colony Capital is one of the world's top real estate investment funds with some $4.5 billion in assets. The firm invests in operating businesses for which real estate is essential: It owns stakes in the Savoy Group hotel chain in the UK (it has put one property, the venerable Claridge's, up for sale) and Accor Casinos, and continues to expand its casino, hotel, and entertainment properties holdings worldwide, especially in Europe and Asia. Chairman and CEO Thomas Barrack, Jr. was a money manager at Robert M. Bass Group before forming Colony Capital in 1991. The firm is affiliated with fellow Bass alum David Bonderman's Texas Pacific Group. Merchant bank Pacific Capital owns a majority stake in Colony Capital.  Complete Hoover's profile at:

Analysis and Commentary:

2003 December 9  Ex Gov Gives up big SAIF Contract by Don Hamtilton, Portland Tribune. Stung by public criticism, former Gov. Neil Goldschmidt has terminated his consulting contract with the State Accident Insurance Fund, which paid him $1.4 million during the last seven years. In a Friday letter to Gov. Ted Kulongoski, Goldschmidt said the controversy about the money paid to his consulting company, Goldschmidt Imeson Carter, has become a liability to SAIF.
"In recent weeks, this service has become a topic of public controversy, to the point where we believe we are no longer an asset to our client," he wrote. SAIF officials disclosed last month that they hired Goldschmidt as a consultant without following normal procedures for state contracts. Goldschmidt's role came under fire from some legislators who considered the size of his fees unseemly in light of the state's budget problems. Complete article at

Analysis and Commentary:

2003 November 28  City Gets Cold Feet over PGE Bidding by Kristina Brenneman, Portland Tribune. Highlights include:  The Texas Pacific deal also requires six federal and state regulatory approvals.  As proposed, new bids are due to Enron lawyers by Jan. 28. The offers must be accompanied by a $20.5 million deposit, or 1.5 percent of the purchase price, which is refunded if a deal does not happen. Texas Pacific paid a similar deposit to Enron of $20.5 million, said spokesman Owen Blicksilver.
The deposit was not designed to eliminate any one bidder but as a test of a bidder's seriousness, said Enron spokesman Mark Palmer.  Although such deposits are routine, Sten said the bidding war favored private bidders over public bidders, such as the city.  Commissioner Randy Leonard said the city wouldn't have political support to go through a bid for PGE now. "I've been pretty clear about the city being able to intervene unless there was a responsible purchaser," he said. "We do have a responsible purchaser."
Bidders can submit a letter of credit rather than cash. Blicksilver said he won't speculate on whether other bidders "would materialize. Oregon Electric is offering a full and fair price for PGE." The first competing bid must be at least $50 million higher than Texas Pacific's $2.35 billion offer. Opening bids in bankruptcy court are typically based on the value of the asset. Subsequent bids must be $10 million higher than the previous one.
Enron management and its creditors will review competing bids and select a winning bid or distribute shares to creditors at a sales hearing Feb. 5. If a competing buyer is selected, Texas Pacific would receive a $31.25 million "breakout" fee from PGE's new owner, said Tom Imeson, a spokesman for the proposed Oregon Electric. The amount is included in the $50 million overbid. Complete story at

Analysis and Commentary:

2003 November 28 PGE Solution Here All Along by Bill Parish, Special Feature to Portland Tribune.  Highlights include: Suddenly, there's a great investment opportunity before the Oregon Investment Council, the group that manages the $40 billion in Public Employees Retirement System assets. That opportunity is Portland General Electric.
Remarkably, up until now no one has suggested that Oregon PERS, along with perhaps CalPers and a few other public pensions, make a direct investment in PGE. Even Neil Goldschmidt may have missed the obvious, since he is now championing the purchase of PGE by a Texas firm that, like Enron Corp., has significant activity in the Cayman Islands for which no disclosure is available.
This would not be a people's utility district, but rather a private co-op, not unlike co-ops at leading companies ranging from utilities to financial firms such as the Vanguard family of mutual funds. Such a structure would allow the focus to shift to where it should be -- on identifying a management group. It could include Goldschmidt and would work with existing PGE management and then quickly transition into a top-performing utility.
Today, more than half the $40 billion of Oregon PERS investments are managed by firms based in Europe. These include Barclay's in the United Kingdom; Pimco, now a subsidiary of the German insurance conglomerate Allianz; and Alliance Capital, a subsidiary of the French Insurance conglomerate Axa. Even when the Oregon Legislature mandated that $100 million be invested in Oregon startups, the Oregon Investment Council has pushed for this program to be managed by New York-based Credit Suisse.
Gov. Ted Kulongoski has talked about reinventing government; perhaps now is a good time to recognize that a knock on the door of state Treasurer Randall Edwards might bear more economic fruit for Oregon than a trip to China.  Complete article at

Analysis and Commentary:

2003 November 26  PGE: A Dog that don't hunt? by staff, Willamette Week. The Big Dog is back. Not since former Gov. Tom McCall has there been a figure in the state with the charisma, the easy command of power and the persuasive skills of Neil Goldschmidt. So it makes sense that Oregon's Big Dog got called last week to run Portland General Electric. Well, not run it, exactly. Actually, he was asked to front for a Texas equity fund that wanted to buy it but, because of a glitch in federal energy law, needed some local representation on board.
All week, average nostrils have asked the Nose how they should feel about Neil. Will he do "good" and see that the utility is run in the interests of Oregonians, or will he do "good" and pocket millions in fees? And if he does both, what should our expectations be? In a word: transparency.
It's also troubling that Goldschmidt continued to campaign against an effort to make PGE a public utility even after he was offered the job as a private-utility exec.
There's also the awkward coincidence that at the moment the Texans were wooing Neil, his wife, Diana, was agreeing, along with the other members of the Oregon Investment Council, to kick $300 million in state funds to Texas Pacific.  See complete opinion piece at:

Analysis and Commentary:

2003 From Enron to Endrun by staff, Willamette Week The OIC, responsible for investing pension funds for state employees, currently has $950 million with TPG, including $300 million in the fund that is being used to acquire PGE. That investment gives a rare bit of insight into TPG's operations. The investment council pays TPG fees of 1.5 percent of money under management and 20 percent of net profits once TPG has delivered an 8 percent return to investors. Returns on OIC's investments in TPG have ranged from 37 percent to break-even.

Analysis and Commentary:

2003 November 25 More big fish may dangle bait for PGE by Kristina Brenneman, Portland Tribune. Just a week after it looked like Portland General Electric finally would go off the sales block, some of the state's energy and treasury officials say they wouldn't at all be surprised to see a higher bid top Texas Pacific Group's $2.35 billion.
   At least two other buyout firms, New York-based Kohlberg Kravis Roberts & Co. and Los Angeles-based Oaktree Capital Management LLC, reportedly have explored a PGE purchase. The city of Portland also has been a longtime suitor.
   But the higher the bid, the less likely it is that PGE's customers would see any rate cut, say consumer and energy groups. Portland economist Lon Peters, who once projected savings if the city bought PGE, said he doesn't see any economic benefit for consumers in the Texas Pacific purchase.
   Texas Pacific may even look "for a rate increase because they paid a small premium over PGE's rate base" of around $2 billion, said Peters, a partner at Northwest Economic Research Inc. "I don't know what TPG is thinking, that they can get a return. If the PUC is doing its job, the rates aren't going to go up."
      Jay Fewel, a senior equity investment officer in state Treasurer Randall Edwards' office who was tipped off this summer about the $2.35 billion Texas Pacific bid, said he's aware of another buyout firm's interest in buying PGE.
     Oaktree general counsel John Frank said the $27 billion investment firm is a "significant" creditor of Enron and may hold PGE debt.
    The city of Portland also could beat the Texas Pacific bid, said McCullough, a former PGE executive. "The city is tax-free, has a balance sheet and should have an enormous ability to top the bid. It's a question of political will rather than economics."
   McCullough believes that the choice of former Gov. Neil Goldschmidt as one of the three general partners of Oregon Electric, which would oversee PGE, "is almost to discourage the city. But if Enron wanted to maximize its value, they should send a delegate to the city to encourage them to bid. This is the slowest auction of a valuable asset that anyone has seen."
   Since the city doesn't have the authority to buy stock -- just PGE assets, Sten said they'd have to structure the sale with an intermediary.
   Texas Pacific, in which the Public Employees Retirement System has invested $900 million since 1994, is committing $525 million of its own money to the PGE deal and another $180 million dividend to Enron. Walsh said the PERS track record with Texas Pacific was one factor in his decision to come on board.
   The state treasury department's Alternative Equity Investments subcommittee, which reports to the Oregon Investment Council, voted to invest $300 million in Texas Pacific's TPG Partners Fund IV eight days before the PGE purchase was announced. The decision, Fewel said, was based on Texas Pacific's record of generating an "attractive return on investments."
   To date, the state's original Texas Pacific investment of $50 million in 1994 has virtually tripled, to $146.2 million.
   Fewel said Diana Goldschmidt was unaware of the Texas Pacific transaction at the investment council's regular monthly meeting Oct. 29. He said she found out three days later that her husband was involved, the day after he first spoke to Texas Pacific representatives about the deal.
   Fewel also said Diana Goldschmidt would recuse herself from future discussions about Texas Pacific. Diana Goldschmidt could not be reached for comment.
   "We don't see conflict," said Fewel, who expects to meet with Texas Pacific principals next week. "We will have time to talk about how they are structuring the transactions."  Complete article at:

Analysis and Commentary:

2003 November 24  PGE Sale Agreement to Oregon Electric Submitted to Bankruptcy Judge Arthur Gonzalez  Page 15 of this 20 page document states that "Enron, TPG and Purchaser (Oregon Electric)  have been extensively negotiating the terms of the Purchase Agreement at arm's length and in good faith for over seven months."

Analysis and Commentary:

2003 November 24  PGE Bid Guidelines Established by Enron  Blackstone was hired to value the shares and identified a price of $3.75 in the bid guidelines.  Also identified on page 10 is the following paragraph, remarkably Texas Pacific will get a break up fee even if the shares are distributed to creditors.  "The Purchase Agreement provides that the sale of the Shares is subject to higher or better offers.

Pursuant to section 3.4 of the Purchase Agreement, in the event the Shares are not sold to Purchaser, but rather are sold to another purchases or purchasers, or is Seller elects to distribute the Shares to its creditors, Purchaser, as the stalking horse, will be entitled a break-up fee in the aggregate of $31,250,000 to be paid as an administrative expense claim under section 503b1C of the Bankruptcy Code."

Analysis and Commentary: The bid guidelines do not indicate how the $31 million break-up fee would be divided between Oregon Electric principals, led by Neil Goldschmid, and Texas Pacific. That would be Texas Pacific's decision and, at a minimum, this should be disclosed to the PUC by Oregon Electric.

2003 November 23  How PGE deal plugged into local megawattage by Gail Kinsey Hill and Brent Hunsberger, Oregonian.  Over breakfast at a San Francisco hotel, Kelvin Davis, fresh faced and less than three weeks from turnign 40, stunned the more senior Neil Goldschmidt with details of Texas Pacific Group's plans to buy Portland General Electric.  Stunned isn't a word often used to describe Goldschidt, a self assured business consultant and former governor of Oregon.  Or speechless. But, by his own admission, he was both.
Just the day before, David Bonderman, Texas Pacific's founder, had briefed Goldschmidt by phone about the company's $2.35 billion bid for PGE. Bonderman persuaded Goldschmidt to meet with Davis, a San Francisco based partner in the firm.  Goldschmidt figured Texas Pacific wanted advice on the local nuances of doing the deal.  Goldschmidt couldn't do that - the state's other big electric utility, PacifiCorp, was a longtime client. But he was eager to listen to a plan that might sever PGE's ties to the financially and ethically bankrupt Enron.
As Goldschmidt listened, Davis described Oregon Electric Utility Co, a holding company that TExas Pacific would set up to carry out the PGE purchase.  Texas Pacific wanted Goldschmidt to be part of Oregon Electric and to chair a new PGE board. It was such a stunner, I said, I gotta talk to my wife, Goldschmidt said.  It was like someon dropped a water balloon on my head..It was totallly unexpected.  Goldschmidt is married to Diana Goldschmidt, a former executive of PacifiCorp. Diana serves on the board of the Oregon Investment Council, which invests money from the Oregon PUblic Employees Retirement Fund - including $950 million in Texas Pacific Funds.
The number cruncher Kelvin Davis looks younger than 40-a meticulously groomed Irish Clark Kent. Based in San Francisco and co-head of the firm's North American generalist practice, he focuses on investment opportunities in electric power, industrials and leisure.  Davis, a real estate executive and a principal in Robert N. Bass RMB Realty before joining Texas Pacific in 2000, holds an undergraduate degree in economics from Stanford and an MBA from Harvard.
Bonderman practiced civil rights, securities and antitrust law, but his work as a bankruptcy attorney on BRaniff Airways led him to Fort Worth, where he met billionaire Robert N. Bass.  In 1983, Bass picked him as chief operating officer of his investment firm.
When Grinstein called Goldschmidt's office about 2 pm Oct 29, Goldschmidt already had grabbed his coat and headed for the door. Goldschmidt, 63, and a chronic multi-tasker, was taking Diana to San Francisco to celebrate her birthday. He had a plane to catch.  He hesitated long enough to talk to his longtime friend.  He learned about Texas Pacific's offer for the first time, and he agreed to Grinstein's request to take a call from Bonderman on his way to the airport.
The next morning he was sitting across the table from Davis at the Pan Pacific Hotel San Francisco off Union Square and listening to the details of a plan that would take his career and his life in a direction he hardly could have foreseen just hours before. When Goldschmidt returned to his hotel room, he blurted out the substance of the encounter to his wife.  Her eyes got big,, Goldschmidt said, and then she had a surprise of her own to tell.  The day before, the Oregon Investment Council had voted to invest $300 million in Texas Pacific's most recent fund, TPG Partners IV.
Later, critics would attack Goldschmidt for what in the very least was an untimely link between Oregon's pension investmetns and his knowledge of Texas pacific's pursuit of PGE.  Critics also say he should have disclosed his talks with the investment firm when he campaigned against a ballot initiative that, if successful, would have taken PGE's and Pacific Power's Multnomah County customers under the ownership of a public utility district.  A Goldschmidt authored opinion piece callinf for the PUD defeat appeared in The Oregonian on Oct 31.  For Goldschmidt, the true business and ethical dilemna he faced involved longtime client PacifiCorp.  From the beginning, he said, he told Texas Pacific of his association with PacifiCorp and his inability to also advise TExas Pacific on PGE matters.
Grinstein's involvement was important to Walsh.  While at Burlington Northern, Grinstein had done Walsh a favor by brokering a deal among three top railroads that gave TriMet right of way in Washington County.  Without it, Walsh insists, westwide light rail might not have made it to Hillsboro.  But Brinstein, Davis conceded, wasn't yet a sure bet.  He still had other committments running a venture capital firm in Seattle, sitting on the boards of companies such as Delta Air Lines and truck maker Paccar, among others, and presiding over the University of Washington's Board of Regents.  Complete article available for purchase at

Analysis and Commentary:

2003 November 22  SAIF Gives Goldschmidt thousands for advice by Les Zaitz adn Dave Hogan, Oregonian.  Katherine Keene, Saif Corp, president and CEO, described an informal relationship that mixed strategic advice and, in later years, some lobbying.  The work has all been on the phone or in meetings, she said.
There is no written work product.Advising and lobbying Keene said she retained the former governor's consulting firm seven years ago to give her business and political advice and later to lobby legislators.  Goldschmidt charged $8,000 a month at the start and raised the price to $40,000 in March 2001.
He cut it to $20,000 after three months at Keen's request. I told him this is too rich for my blood, Keene said.  In all, Saif had paid $1,136,000 to Goldschmidt's firm through August.  One of Goldschmidt's partners, Tom Imeson, has been part of the contract with Saif since late 2000.  Imeson was Goldschmidt's chief of staff when he was governor.  Imeson said Saif was the only state government client of Goldschmidt's firm.
It's highly valuable.  How do you put a price tag on it? she said.  That's the price for doing business with Neil.

Analysis and Commentary:

2003 November 21  The power broker by Jeff Mapes, Gordon Oliver and Scott Learn, Oregonian.  In just five days, Neil Goldschmidt has cemented his role as the state's most iimportant power broker by taking on two new roles that could shape Oregon's economy for years to come.  Goldschmidt is poised to take ove the chairmanship of one of teh state's most powerful busiensses-Portland General Electric-at the same time he's been tapped to lead an overhaul of the state's higher education system.
His access to the state's political and business leaders is already legendary and will likely grow if he becomes chairman of the state's largest utility as part of a buyout from bankrupt Enron. His higher education portfolio adds to a list of charitable activities, profitable business opportunities and puoblic-private economic development deals that are dizzying in their breath and complexity.
Sometimes though, Goldschmidt mystified and angered amany civic observers-such as when he helped Weyerhaeuser in its hostile takeover of Willamette Industries, a move that stripped Portland of its last Fortune 500 company headquarters and led to job losses at mills.
The current govbernor, Kulongowski, owes his own political resurrection to Goldschmidt.  Left for politically dead after a landslide loss for governor in 1982, Kulongowki recovered when Goldschmidt put him in charge of the Department of Insurance and Finance in 1987.
Goldschmidt said Texas Pacific will pay his firm for work while the deal is still pending, but he doesn't know the amount yet.  Goldy would replace income they are giving up because they have to drop one of their bigeset clients, PacifiCorp, the state's other major private electric utility.  Goldschmidt said he also would receive stock options.
Goldschmidt said Texas Pacific approached him two weeks ago to become chairman of a new company that would own PGE. He acknowledged that he doesn't have a detailed understanding of the finances.  But he said he is convinced that Texas Pacific and its founder, David Bonderman, have the best chance to turn PGE back into a free-standing utility headquartered in Portland.
Public power advocates are livid about Goldschmidt.  Since stepping down as governor, he's been mostly a corporate henchman,said Bill Michtom, a member of the Oregon Public Power Coalition.  Portland Commissioner Erik Sten, who spearheaded the city's effort to look at buying PGE, said Goldschmidt showed no intereset in Enron until he had a stake in it.  If this works out well and Texas Pacific is somebody we can really build a relationship with, then I think it will prove that the decision to bring in Neil was a good one, Sten said.  If they really are just trying to maximize th porofit and get out fast, then it won't reflect real well on his quick decision to get in.
During the past decade, Goldschmitd' name has popped up in one high-stakes battle after another.  He helped Nike on international trade issues.  He sought unsuccessfully to help Eugene lumberman Aaron Jones conduct a huge swap of private forest for federal timberlands.  He worked for Blazers owner Paul Allen, Hyundai Semiconductor, the trade association of the airline industry and at least a couple of railroads.
Perhaps Goldschmidt's and Imeson's most controversial client was Weyerhaeuser of Federal Way, Wash., one of the world's largest wood products firms. In late 2000, it launched a hostile takeover of Willamette Industriesenerated companies.  Immediately, business and political leaders received calls from Goldschmidt assuring them that the takeover would not hurt the state. It surprised me, for a guy who purports to do well for Oregon, said former Willamette Industries CEO Duane McDougall  Goldschmidt and Imson - who has the firm's larger expertise on the timber industry- insisted that Willamette faced an eventual takeover in any event, likely from a European company.  There's absolutely no substance to that at all, said McDougall, insisting that Weyerhaeuser was the only real threat to Willamette's independence.  Complete article available for purchase at

Analysis and Commentary:

2003 November 21  Will New Owners Revive PGE or direct Enron, Part II by Harry Lenhart and Kristina Brenneman, Portland Tribune. Highlights include: "There is almost no weapon more significant than having an electric utility that can be a serious partner," in the quest to attract new businesses and jobs to Oregon, Goldschmidt told the Tribune. "We are in a state that needs jobs badly and needs these people (PGE) back at the starting line willing and able to make commitments, and being believed," Goldschmidt said. "That's one of the reasons I'm here."
Oregon Electric will be controlled by the three general partners "subject to consent rights," which are held by Texas Pacific. That means, joked David Bonderman, Texas Pacific's founder and principal, if Goldschmidt and his partners "screw up" he'll take away the keys.
Walsh was an early player in an informal 2002 round table organized by Sten to consider future options for PGE. As both a private consultant and public transportation executive, Walsh was able to provide insight into the pros and cons of both types of utility ownership. Over time, his advisory role diminished as the city moved forward to buy PGE.  Walsh called Sten on Monday night to tell him he had joined a different team. He said he doesn't think Sten felt hurt or betrayed by his decision. "There's frustration over this," Walsh said, "because Enron didn't want to negotiate with the city. It was clearly a fact."  Sten said Walsh's call "did surprise me. I had had my own work group, and he was advising me. I wasn't upset. He was trying to do what was right for Portland. Tom is an upstanding citizen."
If Texas Pacific only plans to stay in for two or three years and sell for a higher price, said Bob Jenks, executive director of the Citizens Utility Board of Oregon, "that's not stability." "The reason we have regulated utilities is to make investments in power supply over 30 to 40 years, and a utility that is constantly changing owners and doesn't know its direction can't function in that long-term way," he said. Goldschmidt and his firm, Goldschmidt Imeson Carter, are being paid an unspecified consulting fee for their participation in the deal, Blicksilver said. As one of Enron's largest creditors, JP Morgan will have a major say in the PGE sale. Bane said he'd heard about the sale but referred questions to Enron's six lawyers standing at the defense table.  Complete article at

Analysis and Commentary:

2003 November 21  Behind the scenes of the big power deal by Don Hamilton, Portland Tribune.  Highlights include:  The process started 11 months ago when Texas Pacific and its founder, David Bonderman, first grew interested in PGE. Kelvin Davis, who heads Texas Pacific's utility group, was the first to suggest it pursue PGE. He said some were doubtful about getting involved in the Enron mess because "it was a great deal of complexity and risk."
He then contacted the Blackstone Group, the investment firm hired by Enron to market its remaining assets. Negotiations were secret, carried out mostly between Enron's bankruptcy lawyers in New York, Schwabe's Portland office and Texas Pacific in San Francisco. PGE's top 20 managers were in and out of the Portland law firm every day for weeks as Enron managers blew "hot and cold" on the sale.
Three weeks ago, Neil Goldschmidt was planning on ratcheting down his public activities. But, on Oct. 31, he answered Bonderman's call to join the board of the new company overseeing PGE. A few days later, on the night of Nov. 5, Goldschmidt called Walsh at home and asked him to join. Goldschmidt and Walsh, also 63, have a long collaboration dating to 1969, when they both decided to run for the Portland City Council. Walsh lost his 1970 race, but Goldschmidt won and went on to become mayor and governor. Complete article at

Analysis and Commentary:

2003 November 20  Once more, Goldschmidt into the breach by Steve Duin, Oregonian. Increasingly, he's on the wrong side of the issue.  Invariably, he returns to City Hall or the state Capitol at the behest of the highest bidder, whether that's AT&T, Weyerhaeuser or Paul Allen.  Goldschmidt's role in this affair suggests the man has lost nothing in the way of instincts and timing.
On Oct 31, the Oregonian ran his opinion piece in which he reiterated his long-held opposition to PUDs in urging defeat of Measures 26-51 and 26-52.  The previous morning, Goldschmidt said, he sat down with a representative of Texas Pacific Group for the first time to discuss this deal, meeting with lead partner Kelvin Davis over breakfast at the Pan Pacific San Francisco. Does Goldschmidt think his reputation hangs in the balance on this deal?  "Sure, he said."
Any time you sign up with someone who isn't your immediate family, you're asking people to trust you.  But this isn't as much about trust-the PUC process will be quite transparent-as it is about me working in an unfamiliar circumstance in which I can't promise any one particular outcome that people will like.  "But I'd rather be at the table.  It's not different than any time I ran for office.  The implied promise is I won't lie to anyone, and I'll do the best I can."

Analysis and Commentary:

2003 November 20. Press Release. Oregon State Treasurer Randall Edwards, other Pension Leaders, call for greater stock exchange reform.  New York - State Treasurer Randall Edwards today joined California Treasurer Phil Angelides, New York State Comptroller Alan Hevesi, and other pension fund leaders in urging Securities and Exchange Commission (SEC) Chairman William Donaldson to complete the task of reforming the New York Stock Exchange (NYSE). At a New York news conference this morning, the pension leaders said that governance changes proposed by NYSE Interim Chair John Reed and approved by NYSE members yesterday fall short of the recommendations pension leaders made to Reed in September.
"I would give Reed a C on the reforms he's put forward, but investors large and small are looking for an A," said Edwards. "That's why we're asking the SEC to do more to rebuild confidence in the exchange. The small investors we represent put their money in the market to meet their goals and dreams. They are reeling from the financial scandals that have rocked Wall Street. Further reform is needed to restore their trust." See press release at:

Analysis and Commentary:  Oregon State Treasurer Edwards position is somewhat ironic given that he just supervised the choice of Oppenheimer for the state's college savings plan and by doing so completely ignored the SEC's new initiative regarding mutual fund fees.  Oppenheimer was a much higher cost and lower quality alternative, although they did committ to "kick in" $350,000 in advertising.  This advertising was billed as not having a cost and will also provide Edwards valuable television exposure, similar to the exposure he got while appearing in the Strong mutual fund ads.  Strong was later fired due to an SEC investigation.  To date Edwards has been silent on the future of Portland General Electric.

Analysis and Commentary:

2003 November 19 Texas Pacific Makes Big Turnaround Deals Its Specialty by Jeff Kosseff and Brent Hunsberger, Oregonian.  Because of the low annual returns, experts sai, Texas Pacific's best strategy is to sell PGE or take its stock public as soon as possible. "The quicker they're in and out, the better their return looks," Dunn said.
Bill Parish, a Portland investment adviser, questioned whether Texas Pacific's ownership would create a conflict of interest no matter how long they own the utility.  More than 2 percent of Oregon's public pension fund is invested through Texas Pacific.
"Public pensions, via Texas Pacific, could end up financing the buyout of PGE and competing with Oregon's businesses, in terms of reasonable power ratess, when these same Oregon businesses are financing the public pension system in the first place, " Parish said.
Bonderman and Grinstein worked together for mroe than a year on the Enron deal, Goldschmidt said.  The two know each other well.  Grinstein presides over the Board of Regents of the University of Washington, where Bonderman earned his undergraduate degree in Russian and where he continues to finance travel fellowships for law students.

Analysis and Commentary:

2003 November 19 Power Grab by Nigel Jaquiss, Willamette Week.  Highlights include: Who is the big cheese? A rumpled former civil-rights lawyer named David Bonderman, who was at the press conference. Bonderman, who is characterized in the media as a billionaire, knows how to spend money as well as make it.
He reportedly let loose with $7 million to finance his 60th birthday party in Las Vegas last year, at which he hired the Rolling Stones, John Mellencamp and comedian Robin Williams to perform.
Walsh is the former head of TriMet, who gave up his stake in a local family-run construction company to make the trains run. After stepping down from the regional transit post in 1998, he went back into the developing biz, with a Pearl District office across the hall from his wife, Patricia McCaig, a political consultant whose clients have included--you guessed it--Neil Goldschmidt. Not clear.
We do know that Bonderman, who says he'd been eyeing PGE for a year, is a friend of Grinstein's, who is a longtime friend of Goldschmidt's. We also know that Diana Goldschmidt sits on the Oregon Investment Council, the agency that invests billions of dollars of Oregon pension money. And we know that the OIC has invested with Texas Pacific Group for years.  Enron management also spent money like drunken rock stars. To woo PGE shareholders, Enron offered about 50 percent more than the company's stock was worth at the time--a premium of about $1 billion.
Dan Meek, a pasty-faced walking encyclopedia of utility law, testified in front of the Oregon Public Utility Commission that Enron was "a shell game" that could not be regulated. The guy looks like a prophet now. Sten's pursuit of PGE made sense because Enron's bankruptcy left PGE in limbo, a ghost ship sailing across Oregon with no destination in sight and nobody manning the tiller.
Public power might seem radical in Portland, because we're used to PGE and PacifiCorp. But nationwide, according to federal government statistics, there are 2,008 publicly owned utilities and only 232 investor-owned utilities. Public power is about as common as drive-through espresso stands. And if city ownership is a half-baked concept, don't tell people in Seattle, Los Angeles, Sacramento, Orlando and San Antonio, because they buy their electricity from their city governments. But here's the important point--public power is cheaper. In 2001, the last year for which the feds have provided data, investor-owned utility rates were 20 percent higher than those charged by public utilities. The average gap in Oregon was 25 percent.
Leonard says there were lots of supporters of the city's effort to buy PGE but many are too intimidated to speak up. "People are afraid to say anything publicly about PGE," Leonard says, "just like the Iraqis won't say anything about Saddam because he isn't dead."
So how do Leonard, Katz and Sten feel about the announcement by Goldschmidt and Texas Pacific? Here's one clue: None of them was at the press conference. Sten says a lot of questions remain. But the PUC's record isn't exactly comforting. Just last month, Meek and Linda Williams, his partner at the Utility Reform Project, won a court decision that said that since 1995 the PUC had let PGE overcharge ratepayers more than $200 million for costs relating to the mothballed Trojan nuclear plant.
And it was Meek who brought PGE and Enron's tax game to the PUC's attention--not that the commission cared. Last month, the PUC ruled that it was OK for PGE to keep sending our taxes to Texas and added that it would not order refunds or other protections, "even if the rates were based on fraudulent representations."  Bonderman says he won't sell any of PGE's assets to juice up returns. Rather, he says that PGE has performed poorly--"underearning," in industry parlance--and he also expects the utility industry to rebound. Complete article at:

Analysis and Commentary:

2003 November 19 Texas Firm, Northwest trio link up in offer to buy PGE by Gail Kinsey Hill, Oregonian. That governing structure could change if Congress repeals teh Public Utilities Holding Company Act, a 1935 law tht regulates utility mergers and ownership.  The House voted Tuesday to repeal the law, which prevents power companies from using ratepayer funds to finance other unregulated businesses.  The bill is expected to clear the Senate, which approved an earlier version, and be signed by President Bush.  Complete article available for purchase at

2003 November 18 Texas Pacific Group at center of PGE buyout financing by,  "We've spent a lot of time thinking about (PGE's) situation," Bonderman said. These kinds of calculated, strategic moves aren't unusual for Texas Pacific. Texas Pacific now does deals on every continent except Africa, often through affiliated funds with names such as Newbridge Capital. Including such funds, the firm manages about $13 billion and has offices in London and San Francisco. "There's only two prices that matter in our business, the price you get in and the price you get out," another TPG principal, James Coulter, said at the time.
In a 1998 deal, Bonderman agreed to sell controlling shares in Continental to Northwest Airlines Inc. for cash, stock and a board seat. Continental sought to undo the deal in late 2000, after opposition from the Justice Department, by buying the controlling shares from Northwest.
Under the transaction, Continental agreed to pay Bonderman, a director of the airline, $10 million since he had retained first rights to buy the stock back in his deal with Northwest. New York Times financial columnist Floyd Norris complained the financier had participated in an "arrangement that smacked of greenmail."
PGE was founded in 1889 with completion of the first long-distance electricity transmission line in the nation. It now serves more than 750,000 customers in Oregon and southwest Washington state. Complete story at:

Analysis and Commentary:

2003 November 17 Oregon Secretary of State, Corporation Division Filing.  The business name filing for Oregon Electric Utility LLC was done by William J. Ohle of the Schwabe Law firm.  The name was also previously registered by Mr. Ohle on September 18, 2003 as Oregon Electric Company.  See link to registration filing:

Analysis and Commentary:

2003 November 18  Mayor Katz and Commissioner Sten's Statement on the sale of PGE to the Texas Pacific Group.  City of Portland will review proposal with open mind. This is an out of state group of investors with good Oregon connections. We are encouraged by the inclusion of local civic and community leaders as key partners in this new venture however; we need to understand how the financial investors intend to manage our utility for the long-term. See complete press release at:

Analysis and Commentary:

2003 November 14 Cost Advantages of Public Ownership of PGE. Study done by Susan Anderson and Michael Armstrong in the City of Portland Office of Sustainable Development.  Indicates public ownership would provide savings of at least 10 percent per year to business and consumer rate payers.  Principal advantages include no federal taxes paid, access to lower-interest debt and a financial structure that replaces equity with bonds. Study not available on web.

Analysis and Commentary:

2003 November 8  Industry Notes, Oregonian.  Seattle based Preston Gates Ellis has been ranked No. 1 among law firms providing bond counsel services in Oregon for the first half of 2003.  The rankings were published Aug. 18 by Bond Buyer magazine, a division of Thomson Financial.  According to the report, Preston Gates Ellis bond transaction activity topped $2.47 billion, a record amount for the state of Oregon and the firm.  The firm's Portland office managed the largest bond issuance in Oregon history, $927 million for the Oregon School Boards Association.

Analysis and Commentary:

2003 October 6  Teamsters Press Release. Teamster Shareholders Call for Resignation of David Bonderman from Continental Board of Directors. (Washington, DC) - Today, Teamster Continental employee-shareowners called for the immediate resignation of David Bonderman from the company’s Board of Directors. Bonderman, president and founder of Texas Pacific Group (TPG) – who once held controlling interest in Continental Airlines [NYSE:  CAL], recently sold 880,000 shares of Continental stock.
Bonderman’s TPG, which holds a controlling interest in competitor airline America West  [NYSE: AWA] continues to claim two board seats at Continental and one at America West. TPG also continues to vie for ownership of other airlines, including a recently rejected bid for Air Canada.
Bonderman’s directorship at Continental sparked serious concerns and questions at the Company’s shareholder meeting this year due to conflicts of interest caused by financial investment, interest, and/or control in competitor companies and access to highly sensitive business information. “We want to have directors who are invested in the success of Continental Airlines,” said Rodney Rhoades, Continental mechanic and president of Teamsters Local 19 that represents Continental workers, “Not the success of our competition.”  Complete press release at:

Analysis and Commentary:

2003 September 30  Blackstone Group Statement of Fees and Expenses for 9/1-9/30/03  Monthly charges include a flat fee of $300K per month plus $147K out of pocket, $447 total.  The Blackstone Group has partnered with the Texas Pacific Group in a variety of past deals. Detailed expense reports are available at:

Analysis and Commentary:

2003 September 29  An important message from Neil Goldschmidt, Margaret Carter and Phil Keisling.  This letter was mailed to Oregonians in an effort to defeat the PUD.  It noted that "just to get started, this new government owned utlity would have to pay more than $1 billion to take over the poles, wires, substations and equipment currently owned by PGE and Pacific Power.  A takeover would also damage social and environmental programs that are important to low-income, elderly and disabled residents of Multnomah County. It also said "the best way to keep a new layer of government from raising taxes is simple-don't form it to begin with. Please join us in voting NO on both measures 26-51 & 52.

Analysis and Commentary:

2003 August 10 Who Killed Montana Power by Steve Kroft,  60 minutes. CBS) For nearly 90 years, the Montana Power Company exemplified the very best of American capitalism. It provided cheap, reliable electricity for the people of Montana, excellent benefits for thousands of employees and generous, reliable dividends for its stockholders.
The only people not satisfied with the arrangement were the executives at Montana Power. In 1997, their lobbyist pushed a bill through the state legislature to deregulate the price of electricity and open up the market to competition. It was supposed to be good for the consumers, who could decide who they were going to buy their power from at the lowest possible prices.
“Part of the plan involved going to the legislature and pushing through a bill right at the end of the session, with no deliberation to deregulate power in Montana,” says Morrison. “They did that, in order to make the generating assets more valuable on the open market. No price limit on selling power in Montana. Therefore we can go out and sell these generators for more money.”
Sure enough, within six months of the bill's passage, the company began selling off its generating assets.
First it sold the company's hydroelectric dams, coal mines and power plants to Pennsylvania Power and Light. Next, Montana Power announced it was selling its transmission and distribution system and getting out of the business entirely.
It was going to join the revolution by transforming itself into a high-tech telecommunications company called Touch America. The decision was made on the advice of its New York investment banker, Goldman Sachs, without consulting the stockholders.
The company's plan was to take the $2.7 billion dollars raided in the sale of Montana Power's assets, and literally bury the profits in the ground.  The new company, Touch America, was going to lay a 26,000-mile fiber optic network that would carry voice video and data transmission across a dozen western states. It was the brainchild of Montana Power/Touch America CEO Bob Gannon, who was born and bred in Montana.
Why does Morrison think that Gannon and Goldman Sachs decided to get out of the energy business and into telecom?
“He was tired of what he thought was a stodgy utility stock. He owned an awful lot of shares. And I think he wanted to be the Bill Gates of Montana,” says Morrison. “I think he wanted to get into a high flier situation where he could go to a $100 a share instead of sit there at $30. With Sachs, Goldman Sachs, it was simply money.”
It didn't take long before things started to unravel. No sooner had Montana Power sold its dams and power plants, than deregulated electricity prices shot through the roof - and Pennsylvania Power and Light began selling its cheap Montana electricity out of state to the highest bidder.  Electricity prices in Montana doubled, then redoubled, and doubled again - refineries, lumber mills, and the last working copper mine in Butte was forced to suspend operations because they couldn't afford their electricity bills.
Montana Power had 3,000 employees. And now a lot of those are laid off, or transferred or working for different companies,” says Mike Schmechel. “It has had a devastating effect on Butte. Many of the retirees are wondering whether their pension benefits are secure. Their savings are certainly not secure. And then there's a lot of uncertainty.”
Jack Timmer, who worked for Montana Power for 27 years and retired two years ago, says he's lost $350,000 in his 401K.
Timmer had to hang up his fishing pole and return to work. Now, he makes a minimum wage driving and loading trucks for a tire company.
And at the M&M, a 24-hour bar and restaurant that hasn't locked its door since the 1880s, people are out for blood.
“The whole thing was just wrong what they did. People here losing money and they have no retirement,” says one waitress. “They have nothing coming in. Companies shouldn't be able to do that. I don't think anybody ever thought we'd never have Montana Power.”
Some of those involved were in New York City, at the huge Wall Street investment firm of Goldman Sachs. As financial advisors to Montana Power, Goldman Sachs executives made more than 100 trips to Montana urging the company to get out of the utility business. And they made the crucial presentations to the board of directors.
“Bob Gannon could have never sold this plan to the board. He didn't have enough credibility,” says Morrison. “I think Goldman Sachs was in it from the beginning. I think they pushed it. They drove the truck, so to speak.”
Goldman Sachs declined to comment on this story. But according to its contract with Montana Power, Goldman Sachs was to be paid a flat fee as financial advisor. It was also to be paid a transaction fee or commission on every asset that was sold.
Morrison says that it was in Goldman Sachs best interest to have Gannon and the board sell off the assets: “The evidence is going to show that the weeks would go by and then there would be memos in which Goldman Sachs would just keep pushing, ‘This has to be done now. No better time than now. The market for this can only get worse.’ But they were definitely the driver. They were pushing it all the time.”
Morrison believes Goldman Sachs made about $20 million dollars on the deal, and his lawsuit outlines what he calls an end run around the shareholders.
The firm's contract with Montana Power stipulates that "any advice provided by Goldman exclusively for the information of the Board of Directors and senior management of the company..." Morrison translates that into "don't tell the shareholders."
The final insult to the people of Montana came last summer, just days after Touch America announced a second-quarter loss of $30 million dollars. Gannon announced that he and three other executives were going to receive a $5.4 million dollar payout.
“If you look at the market capitalization, at this stage of the market, that's giving 10 percent of the market cap of this company to executives who failed,” says Buchanan.
“It appears to most people that they're stuffing their pockets with the last of the cash before the ship sinks, and taking the life raft off, and leaving everyone else on board,” says Mike Schmechel.
Margery Schmechel tried to raise all of this at the stockholders meeting, which, for the first time, was held outside the state of Montana, in Minneapolis. When Gannon saw her get up to ask a question, the meeting was over.
After hemorrhaging money and laying off more than half of its workforce, after being de-listed from the New York Stock Exchange, Touch America filed for Chapter 11 Bankruptcy protection in June.
Touch America now plans to sell off all its remaining assets to help finance the 14 lawsuits filed against it.
And remember the M&M, the local Butte bar and restaurant that hadn't locked its doors since the 1880s? It has finally locked them permanently because there wasn't enough money in Butte passing through them.
See complete article at:

Analysis and Commentary:

2003 August 5  State of Oregon Press Release.  Governor announces appointments to Public Utility Commission
(Salem) Governor Ted Kulongoski today announced that he has selected John Savage and Ray Baum to serve on the Public Utility Commission (PUC), effective September 1, 2003. Baum will fill the vacancy created by former PUC commissioner Joan Smith's retirement on May 1, 2003. Savage will fill the seat to be vacated by current PUC commissioner Roy Hemmingway on September 1, 2003. The Governor has not yet designated a new chair of the commission.
Raymond Baum grew up in La Grande, Oregon. He received his B.S. in Financial and Estate Planning from Brigham Young University in 1980 and his law degree from Willamette University in 1983. He served in the Oregon state legislature from 1989 through 1996, chairing the House Natural Resources Committee in the 1993 session and serving as the House Majority Leader in the 1995 session. He has served as a commissioner on the Oregon Liquor Control Commission since 1998, and was a member of the Hanford Waste Board from 1991 to 1994. His career as an attorney began in 1983 and he has been a partner at Mautz Baum & O'Hanlon, LLP for the past decade.
John Savage attended Oregon State University, receiving his B.S. in Economics from Oregon in 1975 and his Masters' degree in Natural Resource Economics in 1979. He currently serves as the director of the PUC's Utility Program, overseeing the 70 person regulatory staff and advising the three commissioners. Before working at the Commission, he served seven years as head of the Policy and Planning Division at the Oregon Department of Energy and another eight years as Director of the Department of Energy for Governors Roberts and Kitzhaber. While serving as director, he chaired the Western Interstate Energy Board, the energy arm of the Western Governors Association, and represented Oregon on the regional electricity emergency response team established during the Western electricity crisis. Complete press release available at

Analysis and Commentary: Note that John Savage's background does not mention he was a top administrator in Neil Goldschmidt administration from 1987-1991.  Savage's professional background is as follows: Director, Utility Program, Public Utility Commission 2003, Director, Oregon Dept. of Energy 1993-2003, Administrator, Policy and Planning Div., Oregon Dept. of Energy 1987-1993 His complete biolgraphy is available at

2003 July 25  Kulongoski appoints Port of Portland commissioners, The Business Journal.  Kulongoski names two new commissioners and reappointed Jay Waldron to the board of commissioners of the Port of Portland.  The new commissioners, Steve Corey and Tom Imeson, will begin August 1, 2003.
Tom Imeson attended George Washington University and Johns Hopkins University, from which he earned his B.S. in the Social Sciences. His past experience includes the position of chairperson of the PacifiCorp foundation, chief of staff for Gov. Neil Goldschmidt, and leader of the transition teams of both Gov. Kitzhaber and Gov. Kulongoski. He is currently a principal of Portland consulting firm Goldschmidt Imeson Carter.
Jay Waldron, currently president of the board of commissioners of the Port of Portland, is a partner with Schwabe Williamson & Wyatt and has focused his legal practice on providing environmental and natural resource advice to Oregon businesses and community groups. He has served on the U.S. District Court in Portland, chaired the North Clackamas School Board from 1989-1993, and co-founded the East County Legal Clinic. Complete story at:

Analysis and Commentary:

2003 July 23  News Murmurs by Editorial Staff, Willamette Week.   As the public effort to take over PGE heats up, so do the dueling websites...with varying degrees of candor. Much of the content on is written by utility activist Dan Meek, a longtime proponent of People's Utility Districts. Another site,, is a little trickier to decode, but a look at the website's registrar (as pointed out on Portland Indymedia) turns up the name of Portland PR firm Gard and Gerber, which handles public relations for--gasp!--PGE.  Link to story:

Analyisis and Commentary:

2003 July 7  Deal Puts Nursing Home Residents at Risk by SEIU Report, PR Newswire. Genesis (GHV) is under severe financial pressure to cut costs and generate profits because of changes in Medicare reimbursement and the complex terms of the deal to buy Multicare. Since October 1997, the company's stock price has plunged from nearly $40 per share to $3. Shareholders are not the only ones whose investment is at risk. Other investors, including the Pennsylvania State Employees' Retirement System, have invested in Genesis (GHV)-managed homes through a fund created by Wall
Street financier David Bonderman's Texas Pacific Group (TPG). As a result, Pennsylvania retirees may be getting both a bad deal on their pension investment and a bad deal on their long-term health care. See complete article at:

2003 May 28 Oregon Investment Council Minutes.  Jay Fewel, Equity Investment Officer, outlined the long-standing relationship between OPERF and Texas Pacific Group (TPG) and introduced David Bonderman and Jim Coulter, to present the TPG view of the market.  Mr. Bonderman and Mr. Coulter presented a report entitled, "The State of Private Equity Investing."  They presented information regarding their investments, transactions and experience through several economic cycles.  TPG Funds I,II and III were summarized and they noted significant outperformance compared to public markets.  They discussed recenthistory including fund proliferation, the transaction market, the "post bubble" transaction demands, supply drivers and the return of "value" markets.
Also discussed was the private equity market evolution, fundraising, returns and performance.  The necessity for a broader set of skills required for success was outlined as follows:  Top Line Growth, Multiple Expansion, Leverage, Buying Cheap, Operational Improvements.
Questions were taken from the Council and there was further discussion regarding changes in relationships, fees, creation of valuation guidelines, current deal flow (power & telecom) and future distributions.
Also discussed at the same meeting was a policy change as follows: Ron Schmitz, Chief Investment Officer, addressed proposed changes in two policies from the OIC Investment Manual (4.01.07 & 4.06.01) He noted the addition of language regarding taking advantage of potential instate opportunities and changes dentifying target exposure ranges for various types of private equity investments. Treasurer Randall Edwards motioned to adopt the proposed changes and his motion was secondeded by Diana Goldschmidt and passed namimously by the council. The complete minutes are available at:

Analysis and Commentary:

2003 April 21  David Yaden: The political insider and Kulongowski idea man wants Oregonians to solve the problems of financing schools and services by Jeff Mapes, Oregonian.  But Gov. Ted Kulongowski thnks the ultimate answer to Oregon's money woes is percolating in Yaden's living room, not the Capital.  His long resume includes work as a pollster , the top staff position in a congressional office, lobbying for a mining company, planning for TriMet, and policy jobs with Neil Goldschmidt in Portland, Washington,D.C. and Salem.
Yaden returned to Portland in 1979 to work for Goldschmidt in City Hall but soon followed him back east when Goldschmidt became U.S. transportation secretary.  After becoming governor, Goldschmidt put Yaden in charge of the state Department of Energy, but also leaned heavily on his advice in other areas. Complete article at available for purchase at

Analysis and Commentary:

2003 March 3  Texas Pacific joins Carlyle for U.S. Vivendi by Andrew Sorkin, NY Times.  Fort Worth based Texas Pacific Group has joined The Carlyle Group and an alliance of investors to back a $15 billion offer from oil tycoon Marvin Davis to buy the entertainment assets of Vivendi Universal, executives close to the group said Sunday.

Analysis and Commentary:

2003 February 24  Texas Pacific in talks with United Airlines unions by Staff, San Francisco Business Times.  Texas Pacific Group, rebuffed in its efforts to invest in bankrupt U.S. Airways, reportedly was pondering an investment in bankrupt United Airlines. The private equity firm, based in Fort Worth, Texas with an investment arm in San Francisco, met with United's unions last week to hold preliminary discussions on Texas Pacific's interest in the carrier, according to the Wall Street Journal.
Last year, Texas Pacific made a bid to invest in U.S. Airways, but was outbid by the Retirement Systems of Alabama. It's likely that Texas Pacific opted to walk away from that deal, figuring opportunities would arise elsewhere in the troubled sector.
Texas Pacific made a name for itself investing in troubled airlines. The company invested in bankrupt Continental Airlines, turning a $40 million stake into $400 million. The company also invested in America West Holdings Corp.
David Bonderman, one of three founding partners at Texas Pacific, is also an investor in Southwest Airlines and Ryanair.  See complete story at:

2003 February 22 Oregon Public Employee Pension System (PERS) and Corporate Governance Reform Implications: Governor Kulongowski, Oregon Investment Council, Portland City Club, State Economist Tom Potiowsky and Oregon Senators Ron Wyden and Gordon Smith, PR Newswire Press Release, Parish & Company.  Today Parish & Company, a strong supporter of the Securities and Exchange Commission and global leader in advancing key corporate governance and financial reporting reforms, summarizes related proposals made to the Oregon Investment Council (OIC) at its monthly meeting on January 29, 2003.
The fastest growing expense for many states is pension expense and therefore these expenses are now resulting in significant layoffs. Parish & Company advocates providing an excellent pension plan to public employees and strongly opposes privatization. In most states the majority of participants in such plans are teachers and health care workers, the bedrock service providers for a sound economy.
Now is the time for the Oregon Education Association (OEA), the Portland Association of Teachers (PAT) and the Service Employees Industry Union (SEIU) to lead the effort in fixing PERS in addition to becoming more active on corporate governance issues. Indeed, the newly designated leader of Calpers, a $150 billion public pension, is Sean Harrigan, a union leader.
Parish & Company strongly supports these organizations yet there failure to act on PERS reform has clearly impaired the publics confidence. Some of the PERS and corporate governance reforms advocated by Parish & Company involving Oregon's plan include the following:
1. Making PERS less "top heavy." PERS benefits are often too heavily weighted toward high paid administrative positions and influenced by overtime wages. The IRS and related ERISA guidelines have adopted numerous discrimination testing rules for private pension plans yet these rules were never adopted in PERS. The focus of PERS, as with private plans, should be fairness and providing a good retirement to ordinary workers.
2. Parish & Company therefore advocates new guidelines that would make PERS contributions on qualifying salary up to $60,000 and index this salary amount for inflation going forward. Additional tax deferred vehicles would be available for contributions in excess of $60,000.
3. Such a reform will be difficult because those crafting new rules are mostly higher paid administrative employees, most directly impacted by such a reform, yet this gesture of fairness will help  restore the publics confidence and ensure the systems long term viability. It should also be the cornerstone of Governor Kulongowski's plan.
4. Guaranteed rates of return should be market based, not arbitrary such as the 8 percent rate guaranteed to all pre 1996 Tier I participants. Parish & Company advocates guaranteeing the rate on the 10 year Treasury bond, adjusted semiannually and matched to contributions made by employees, with no mark to market adjustments. Participants deserve a guaranteed rate option yet it must be a trusted market rate that will change over time.
5. Given the significance of the OIC, Parish & Company also advocates making  these paid appointments at a salary of $60,000 per year with a  maximum term of 6 years. It is absolutely ridiculous, given the direct significance of these  decisions to the state, to not make these most important appointments paid. Complete press release available at:

Analysis and Commentary:

2002 December 24  Clandestine Clients by Nigel Jaquiss, Willamette Week.  Kissinger, now a consultant, refused to disclose his client list, which led to questions about whether he might have conflicts of interest in his committee work. Although Imeson lacks Kissinger's name recognition and Teutonic accent, there are striking parallels between the head of Gov.-elect Ted Kulongoski's transition team and the Shuttle Diplomat.
In addition to his transition team duties, Imeson is a political consultant whose firm, Goldschmidt Imeson Carter, has worked on behalf of some of the most powerful and secretive players in the regional power game. Imeson's firm (which includes former Oregon Gov. Neil Goldschmidt and Bechtel Corp. kingpin John Carter) has traditionally declined to name its clients. (Imeson was unavailable, and Kulongoski's spokesman declined to comment.) In some cases, however, word of their identity has leaked out.
Past Imeson clients have included: Bechtel Corp., the nation's largest engineering firm, which developed the light-rail extension to Portland International Airport. Brookhill Redevelopment, which sought to locate a toxic-waste dump at Tomahawk Island in North Portland. Energy Northwest, which has sought to restart mothballed nuclear reactors in the Pacific Northwest.  Imeson, who sits on the board of Oregon Health & Science University, is also a former PacifiCorp executive who has close ties to NW Natural.
"We have no jurisdiction over him since he's not a public official," says L. Patrick Hearn, director of the Oregon Government Standards and Practices Commission. Complete article at:

Analysis and Commentary:  Clearly, Neil Goldschmidt is now a "public official" given his recent appointment to head up the State System of Higher Education.  This could be a good opportunity for someone to ask that he disclose his client list given Randall Edwards choice of Oppenheimer for the college savings plan.  If Oppenheimer, it's parent Massachusetts Mutual or an affiliate were a client, this would be a direct violation of the Government Standards Practices Act.

2002 December 5  Kulongoldschmidtski by Alan Pittnam, Eugene Weekly  When Oregon voters elected Ted Kulongoski governor, they might not have counted on handing considerable power over state government to a corporate lobbyist and consultant. But that's what happened.
Neil Goldschmidt, who's done lobbyist work for local timber baron Aaron Jones and for Hynix, has emerged as a major player in the Kulongoski administration. Goldschmidt, a former Oregon governor, Portland mayor and head of the U.S. Department of Transportation, is one of the highest paid lobbyists in Oregon. Goldschmidt's statements provide the "best clues" to Kulongoski's future economic policies, The Oregonian reported.
Kulongoski's official transition team is chaired by Goldschmidt's consulting/lobbying business partner Tom Imeson. Imeson served as a corporate executive with PacificCorp and as Goldschmidt's chief aide when he was governor. Kulongoski's transition team is dominated by corporate interests. Seventeen of its 23 members are business executives, The Oregonian reported.
Goldschmidt played an active role in Kulongoski's campaign, holding "closed-door" meetings with business interests around the state to get policy ideas for Kulongoski. Goldschmidt was one of Kulongoski's largest political contributors, giving a total of $18,500 to the campaign through his lobbying business and in individual donations. Goldschmidt may have also helped swing big contributions from his corporate friends and clients to Kulongoski. Goldschmidt lobbied for Hynix (formerly Hyundai) efforts to secure permits for wetlands destruction and for huge tax breaks. The lobbying paid off with wetlands fill permits for the west Eugene chip plant and more than $170 million in tax breaks. Goldschmidt also lobbied for state laws to weaken or eliminate Eugene's Toxics Right to Know ordinance. Complete article availalbe at:

Analysis and Commentary:

2002 November 20  Oregon Investment Council - Rogue of the Week by editorial staff, Willamette Week.  Jerry Bidwell, Gerard Drummond, Diana Goldschmidt, Mark Gardiner, James Voytko and state Treasurer Randall Edwards make up the Oregon Investment Council, which oversees investment of all state funds.
Controlling what amounts to the nation's 25th-largest pension fund, the council members have a good deal of sway in corporate boardrooms--if they choose to use it. Earlier this year, several members of Congress decried the growing number of U.S. corporations moving their headquarters offshore to evade federal taxes. Congressional researchers identified at least 20 companies that have set up, or are in the process of setting up, foreign mailboxes, resulting in the estimated loss of $628 million in tax revenue over the next five years.
While Edwards says he doesn't like seeing the bad boys of biz in the state's investment portfolio, he thinks the council needs to move deliberately on issues of corporate responsibility. His counterpart to the south, however, isn't waiting around. On Nov. 18, California Treasurer Phil Angelides announced that the board overseeing California's public-pension system has targeted Tyco and two other expatriate companies in which the state owns stock.

Analysis and Commentary:

2002 November 8 Kulongowki Courts Business Leaders in Victory Lap by Colin Fogarty (Oregon Considered), Oregon Public Broadcasting. Governor elect Ted Kulongowki made what could be described as a victory tour of the state Friday.  The Democrat met with busienss leaders in Eugene, Bend, and Medford, before returning to his home in Portland.  Kulongowki is trying to set a productive tone before he takes office ten weeks from now.
Tom Imeson is heading Juongowki's transition team.  The two have known each other for 16 years-Imeson worked for former Senator Mark Hafield and was chief of staff to former governor Neil Goldschmidt.  In fact, Imeson headed John Kitzhaber's transition 8 years ago.  He says the interim period between administrations is critical.  It helps to set the right tone both in the kind of people that you bring in on state government and on board and commissions, and elssewhere. And coming up with those initial proposals for the legislature and the executive branch.  So i think it really helps the whole or create the environment under which he's going to govern.

Analysis and Commentary:

2002 October 30  Katz says city will not run PGE by Gail Kinsey Hill, Oregonian.  The City is not going to run PGE, Katz said during a public forum at the Holiday Inn in Wilsonville.  I guarantee it.  Katz comments were designed to dispel any doubts the public might have about Portland's plans for a takeover of PGE.

Analysis and Commentary:

2002 October 27 PGE's image keeper hits city hurdles by Scott Learn, Oregonian. Five years ago, when Enron came courting, the reaction from the company--and local politicians-was much different.
Back then, Miller was a top cheerleader for the Enron purchase.  At Miller's request, Sten wrote Enron officials, encouraging them to continue negotiating with Oregon regulators.  A PGE-Enron partnership with the city would enable all of us to provide the city's citizens with valuable benefits, the letter said.
His string of government service, spanning three decades, started with an apointment to head the state's Department of Energy at age 34 and included stints as Oregon's top bureaucrat for Roberts and Gov. Neil Goldschmidt.

Analysis and Commentary:

2002 October 25 The Power Players by Kristina Brenneman, Portland Tribune. At stake is the fate of Portland General Electric, a privately held but publicly regulated company whose output — electricity — in many respects is the lifeblood of the region’s economy.
   Whoever wins control of PGE, a subsidiary of the bankrupt Enron Corp. which has begun a process to auction off the utility, gains powerful economic leverage. For that reason, a groundswell has been building behind both public and private efforts for local control of PGE.  Profiled here are four Oregonians who are playing pivotal roles in separate efforts to shape the outcome in this war of wills.
   Erik Sten: By his own admission, Commissioner Erik Sten is putting his political career on the line.
   The city’s proposed takeover of Portland General Electric is an undertaking of such dimensions that political observers agree the outcome could either ensconce Sten in the mayor’s chair or consign him to political oblivion.
   If the purchase succeeds, Sten — who spearheaded the idea — could gain the pole position in the run for mayor in 2004, a race he admits he is “mulling over.” If it fails, the wrath of the city’s business establishment could doom him.
   Sten got a foretaste of that wrath when PGE Chief Executive Officer Peggy Fowler leveled a ferocious blast at him during a City Council hearing in July after Sten said she was little more than a mouthpiece for her masters at PGE parent Enron Corp.
   At 35, Sten is a council veteran. A graduate of Grant High School and Stanford University, he has served on the council since 1996 after a stint as an aide to former Commissioner Gretchen Kafoury.
    Tim Grewe: If Sten is the political strategist in the city’s bid to take over PGE, Tim Grewe is the point man.
   Grewe is the chief negotiator, the city’s top numbers cruncher, the guy doing the heavy lifting in the multibillion-dollar deal.
   Grewe in effect became Portland’s city manager two years ago when he was named chief administrative officer for the Office of Management and Finance. But he’s been confronting a lot of tough issues at City Hall since 1995, when he was named director of what was then called the Office of Finance and Administration.
   Mark Dodson: Staying true to the utility’s core business has paid off for NW Natural’s new chief executive officer, Mark Dodson.
   While other gas utilities are absorbing losses from telecom and trading operations, NW Natural is cutting its rates and racking up earnings. The gas company also is spending $80 million to expand its storage capabilities.,
   If there is anything out of character for NW Natural, it is its dogged pursuit of Portland General Electric. Though hemmed in by a confidentiality agreement with PGE parent Enron, Dodson made it clear NW Natural — which was thwarted in an earlier bid to buy PGE — is still in the running.
   “We were completely through acquisition plans for PGE when it was called off” in May, says Dodson, 57, who previously worked in the regulatory division at the Portland law firm Ater Wynne LLP. “There’s nothing we need to do now to prepare.”
    The Beaverton native is well connected, meeting regularly with law school friend Neil Goldschmidt, whom Dodson’s wife, Ruth Ann Dodson, worked for while he was Portland mayor and U.S. transportation secretary.
   When it comes to weekends, Dodson, a Harvard graduate, is like many Oregonians. He gets in his car with the big yellow “O” on the window and the trailer hitch in back — his son is a graduate student at the University of Oregon — and heads south to Autzen Stadium to root for the Ducks.
   Dan Meek: Ever since he graduated from Stanford Law School 25 years ago, Dan Meek has been fighting for the energy underdog. Namely, ratepayers.
   He has sued utilities for misuse of ratepayer funds, gone after utilities to provide nonprofit programs and sought to ensure that conservation money is spent on its intended use. At times, he even has butted heads with the watchdog Citizens’ Utility Board of Oregon for what Meek terms “selling out ratepayers.”
   He started his career at the National Academy of Science’s Committee on Nuclear Power. After a stint at the California Energy Commission, he clerked for U.S. District Judge James Burns. He joined the law firm Stoel Rives LLP in 1979, working for its natural resources department.
   At Stoel, Meek crossed paths with another associate, Matt Chapman, now president of Oregonians for Jobs and Power, a group fighting a public takeover of PGE.
   For four years in the mid-’80s, Meek worked on Capitol Hill for then Rep. Jim Weaver, on the House Interior Affairs Committee and as staff director of the Subcommittee on Mining, Forest Management and the Bonneville Power Administration. In 1987, he started his own Portland law practice, specializing in energy litigation. Complete article available at:

Analysis and Commentary:

2002 October 11  Nice Tram, Who pays? by Todd Murphy, Portland Tribune. “We don’t see this as the OHSU tram, the way you write it up,” OHSU President Dr. Peter Kohler said in an interview last month. “We see this as a transportation issue.”  The distinction could be important to Portland taxpayers.
Tram critics call OHSU’s position incredible, in light of what they say were past OHSU promises about paying for the tram, and in light of how little the general public will use it. OHSU’s own study last year estimated that 82 percent of tram ridership will be OHSU employees or others associated with OHSU.
“We have said consistently, from the very first, that we consider the tram to be a public transit” that OHSU would only participate in paying for, Davis said.
A draft of a 1998 business plan obtained by the Tribune seems to suggest otherwise, however.The draft set out proposed commitments that various parties would make relating to North Macadam development, including an aerial tram. Its provisions said OHSU “will construct and operate an aerial tram between Marquam Hill and North Macadam.”  It detailed various funding possibilities for a large tram support tower that would be built in North Macadam.
And, in the sentence that seems to contradict what OHSU representatives say has been their consistent position, the draft plan said: “The remaining cost of the tram … will be funded by OHSU,” adding that “the city and property owners will cooperate with OHSU in seeking federal grant funds for the construction of the tram.” The plan went on: “The aerial tram will be owned and operated by OHSU or an entity assigned responsibility for such purposes by OHSU.” Complete article at:

Analysis and Commentary:

2002 September 27 US Airways Accepts Retirement Sys of Alabama (RSA) Offer by Matthew Barakat, Assoc Press.  US Airways agreed Thursday to accept a $240 million investment from the Retirement Systems of Alabama. In return, RSA would receive 37.5 percent of US Airways shares when it emerges from bankruptcy, and would control 70 percent of the seats on the board of directors.  The deal, approved by U.S. Bankruptcy Judge Stephen Mitchell, replaces a previous $200 million investment from the Texas Pacific Group, a buyout firm whose founder, David Bonderman, has close ties to US Airways chief executive David Siegel.
Even though the pension fund's offer was 20 percent higher than the one from Texas pacific, US Airways officials treated it with skepticism when they received it Sept. 18. As recently as Tuesday, airline lawyers filed papers opposing the pension fund's efforts. But the airline and a committee of creditors were forced to take the fund seriously when it agreed to also provide $500 million in financing to the airline while it's in bankruptcy, in addition to the $240 million investment that kicks in when the airline emerges from bankruptcy. The $500 million replaces a financing package backed by Credit Suisse First Boston for the same amount.
"Having met with RSA CEO David Bronner, I am confident of his strong interest in our successful restructuring, and even more importantly, of his support to the labor-friendly approach that we are taking," Siegel said. Any would-be investor who wants to top the pension fund's offer has 60 days to do so. The deal with the pension fund removes several restrictions that would have been in place with the Texas Pacific Group, making it easier for another bidder to enter the picture.
For instance, Texas Pacific would have received a $7.5 million "breakup fee" if it were supplanted as the lead investor; RSA won't receive any fee. Also, Texas Pacific had the right to review any bids that were made and match them; RSA will not have that option. "It will now be easier for other investors, if they're so inclined, to make an offer," said Lorraine McGowen, a lawyer for RSA.
The fund had previously objected to the hurdles to outside investors that had been put in place under the proposed deal with Texas Pacific. Texas Pacific granted a waiver to US Airways that allowed the airline to negotiate with the pension fund. Complete story at:

Analysis and Commentary:

2002 July 1 Tom Imeson and State Board of Higher Education.  Tom Imeson was appointed to the Oregon State Board of Higher Education in July 1995 and reappointed in October 1999.  He served for two terms as Board president between 1998-99 and 1990-00, after serving two terms as vice president.  Mr. Imeson is a principal at Goldschmidt Imeson Carter, a small consulting firm focused primarily on stragetic planning and problem solving for national and international businessses.  Prior to this, Mr. Imeson was the vice president of government, public affairs, and communications for PacifiCorp.
He was in charge of the transition teams for Oregon Governors John Kitzhaber and Ted Kulongowki and also served as temporary chief of staff in 1994.  From 1987-1990, Mr. Imeson was chief of staff for Oregon Governor Neil Goldschmidt.  His term expires in 2003.

Analysis and Commentary:

2002 May 21  From out of nowhere by Don Hamilton, Portland Tribune. Six months ago, barely one in 20 Oregonians could recognize Ron Saxton’s name. But when the votes are counted tonight, Saxton may well find himself the Republican nominee for governor. Saxton has built connections with the state’s political structure through his law firm, Ater Wynne, which represented city councils, school districts and county boards in every one of Oregon’s 36 counties. But this was Saxton’s first major run for office.
The campaign operated out of Saxton’s law office on the 17th floor of the KOIN Tower, where top advisers met a few times a week.His staff included Laura Cleland, the campaign manager; Elaine Franklin, the top strategist and a veteran of several statewide campaigns, including a few for her husband, former Sen. Bob Packwood, R-Ore.; Bill McCormick, who worked on the finance committee; and Steve Wynne, Saxton’s close friend and law partner whose job was to tell Saxton when he was wrong.
Other supporters included former Rep. Bob Smith, R-Ore., and Antoinette Hatfield, wife of the former U.S. senator, and Diana Goldschmidt, wife of former Democratic Gov. Neil Goldschmidt. No single issue helped Saxton more than the Public Employee Retirement System. He first brought it up in late January during a forum at Willamette University, Saxton’s alma mater. Complete article at:

Analysis and Commentary:

2002 May 14 New nuke idea finds Japanese backers. Portland deal-maker Neil Goldschmidt has identified an international consortium of corporations interested in building a nuclear power plant in Eastern Washington. The consortium would be fronted by the world’s largest supplier of nuclear fuel, U.S. Enrichment Corp. of Bethesda, Md., and backed by two of Japan’s largest multinationals, Toshiba Corp. and Marubeni Corp.
According to a 56-page, $200,000 report released by Goldschmidt’s Portland-based consulting firm last month, the consortium is “extremely interested” in building a modern nuclear plant at the site of an old plant that has sat unfinished for 20 years. Goldschmidt, a former mayor of Portland and governor of Oregon, completed the report for Energy Northwest, the conglomeration of public utilities that evolved from a bungled attempt to build five nuclear power plants in Washington state in the 1980s. Just one of the five plants was finished.
The “Whoops” fiasco, as it is known today, resulted in a $2.25 billion municipal-bond default. In tackling the report, Goldschmidt, his wife, Diana, a former PacifiCorp executive, and his business partner, Tom Imeson, sought ways to squeeze some value out of WNP-1, the uncompleted plant at the Hanford Nuclear Reservation. Complete story at:

Analysis and Commentary:

2002 April 5 As ratepayers dug deep, PGE handed out bonuses by Kristina Brenneman, Portland Tribune. Portland General Electric handed out $2.5 million in bonuses last year at the same time it was raising its customers’ electricity rates by more than 30 percent.
   Peggy Fowler, president and chief executive officer, received $765,000 last year, of which $450,000 was a bonus and $315,000 was salary. Fowler’s base salary has since risen to $353,305.
   The bonuses were awarded for executives’ performance in 2000, when PGE REPORTED NET income of $141 million on revenues of $2.2 billion.
   Thirteen other PGE managers got bonuses, ranging from $200,000 for Fred Miller, executive vice president of retail and distribution services, to $130,000 for Steve Quennoz, head of nuclear and thermal operations.
   The Portland utility, which reported a $5 million loss on $900 million in revenue last quarter, has not produced nuclear power since Trojan closed in November 1992.
   “When you look at the bonuses they were paid, clearly there is a disconnect between utility executives and the rates’ impact on customers,” said Bob Jenks, executive director of the Citizens Utility Board.
   “The rate increase had an effect on Oregon’s economy. What are they being rewarded for, their ability to raise rates? They should be rewarded for holding rates down, not raising them.”  Complete story at

Analysis and Commentary:

2002 March 29. Nuclear thaw? Goldschmidt hunts for potential investors by Ben Jacklet, Portland Tribune. Former Gov. Neil Goldschmidt has made some tough pitches in his time — but a new Northwest nuke?  Portland’s most influential deal-maker is hunting for outside investors to crank up a nuclear power plant near Richland, Wash., that has been mothballed for 20 years.
The Goldschmidt team is charged with selling the nuke plant and its would-be power to potential investors in the nuclear industry. They also are gauging support among elected officials in the Northwest.  But nuclear power gained momentum during the rolling blackouts of last winter. President Bush, Federal Reserve Chairman Alan Greenspan and Intel Chief Executive Officer Craig Barrett all expressed support for more nuclear power plants.
Goldschmidt, his partner Imeson and Goldschmidt’s wife, Diana Goldschmidt (formerly Snowden), all are working on the project. Diana Goldschmidt and Imeson are both former executives with the Portland-based utility PacifiCorp. Goldschmidt has served as mayor of Portland, governor of Oregon and U.S. secretary of transportation.
The original plan was for Goldschmidt to head a panel of respected leaders to sell the completion of WNP-1 to local ratepayers, utilities and elected officials. But it soon became clear that this would be a tough sell, even for Goldschmidt. Complete article at:

Analysis and Commentary:

2002 February 12 Mayor Pins City’s Health on OHSU Plans by Jim Redden, Portland Tribune.  OHSU has been a client of Neil Goldschmidt's lobbying firm and his partner Tom Imeson was also on the board of OHSU. Highlights include:  The new district would be fueled by Oregon Health & Science University’s plan to became a major bioscience research institution in the coming years.  Under a proposal released at a news conference Monday, the quarter would stretch from OHSU’s Marquam Hill facilities to Portland State University, the North Macadam Urban Renewal District and the Central Eastside Industrial District across the Willamette River. Complete article at

Analysis and Commentary:

2002 January 14  How Wall Street Greased Enron's Money Machine by John Emshwiller, Anita Raghavan and Jathon Sapsford, Wall Street Journal. As an official of a prized DLJ corporate client, Mr. Fastow wanted DLJ's help to raise money for a partnership the Houston energy company was putting together. The partnership, Mr. Fastow said, would help Enron by buying assets from the company and keeping debt off its balance sheet. Too much balance-sheet debt would lower Enron's credit rating and hinder growth.  Credit Suisse later acquired DLJ.
Bankers lobbied successfully for Glass-Steagall's repeal in hopes of creating huge supermarkets such as Citigroup and J.P. Morgan.  These institutions now can offer products alongside mutual funds.  On the corporate side, they can lend and arrange credit while also filling out such financings with other lucrative services once limited to investment banks such as stock or bond offerrings or mergers advisory.  It wasn't long ago that Enron was among the ripest of Wall Street's plum clients, with its voracious appetite for capital and was constantly pioneering new businesses trading from electricity future to hedges against bad weather.  Its online trading operation EnronOnline, handled nearly $1 trillion in stransactions in the two years following its 1999 opening.
This article shows a chart indicating Credit Suisse did more deals with Enron than any other investment bank and this included four stock offerings, four debt offerrings and four syndicated loan offerrings.  Complete article available for purchase at

Analysis and Commentary:

2001 December 13 Enron Lobbied Hard to Limit Oversight of Trading Operations by Michael Schroeder and Greg Ip, Wall St Journal.  A year ago, when most of the political world was obsessed with the deadlocked presidential election, Enron Corp, was quietly but aggressively lobbying Congress.  It's object, a little-noticed bill shaping federal policy toward the complex financial instruments known as over-the-counter derivatives. Complete article available for purchase at

Analysis and Commentary:

2001 October 3 Waste Disposal Company Hires Oregon Lobbying Firm (Goldschmidt Imeson) by R. Gregory Nokes, Oregonian.  Former Oregon Gov. Neil Goldschmidt's lobbying company has taken on Waste Management as a client at a time when Metro is considering whether to sharply increase the company's slice of the region's profitable waste pie.
The issue before Metro is whether to raise the ceiling for waste that can be handled at a Waste Management owned transfer station at Troutdale.  Waste Management, based in Houston, is the nation's largest waste disposal company.
I think they are isolating councilors as either being pro or con, and that's too bad, McLain said. The basic rule of lobbying is that everybody should get to hear what you have to say. McLain said she worries that increasing the ceiling could discourage competition.

Analysis and Commentary:

2001 September 24  Alan Webber, Co-Founder Fast Company Magazine Interview
You mentioned my background of working in Portland, Oregon, for a man named Neil Goldschmidt. Neil was my mentor. I had graduated from college. I’d run the newspaper in college and in high school. I went to Portland and at the age of 22, met this man named Neil Goldschmidt. Neil had grown up in Eugene, Oregon, a very small town where there were very few Jewish people.
He went to the University of Oregon, became the president of the student body, graduated, went to law school at UC Berkley, graduated, and went to Mississippi during the days of the freedom marches and freedom summer. He stood with the people in Mississippi who were registering voters.
He and his brother, Steve, finally got out of Mississippi in the trunk of a car because that was the summer that three young men from the north were found dead in a dam because they didn’t get out of Mississippi in the trunk of a car. Neil did, and came back to Portland, ran for the City Council, and at the age of 29 was elected mayor.
I went to work for him and learned a ton from watching what he did. He was onto the basic notion that a city is only as good as its people. A city belongs to the people and that ultimately a community is either inclusive or exclusive. The job of the mayor was to bring as many people together as possible. Complete interview of Webber at:

Analysis and Commentary:

2001 July 20 Hired Grin by Don Hamilton.  Highlights include: He was, at one point, one of the most successful politicians ever produced by Oregon. Legal aid lawyer. Civil rights activist. City Council at age 30. Mayor at 32. Cabinet secretary at 39. But a decade ago, at age 50, he gave up his public life, deciding not to run for a second term as governor. It was a stunning and unexpected political vanishing act.
His career had already taken him to Washington, D.C., and if he’d stayed with it may very well have taken him back. But he jumped off the political merry-go-round and disappeared into the private sector.
Four days after leaving Mahonia Hall in January 1991, he registered his firm with the state and has been operating ever since as Oregon’s best-connected government consultant.
Today, his constituents aren’t the public at large but the corporate clients — transportation companies, real estate developers and timber companies included — who need access to his remarkable connections. He helped Weyerhaeuser Co. navigate its hostile takeover of Willamette Industries, a project that carried reverberations at home.
After a career standing up for Oregon companies, critics asked, why would he aid in the departure of one of Oregon’s two remaining Fortune 500 companies?
Weyerhaeuser hired Goldschmidt, a company spokesman said, “to make sure that we were touching base with all the people who needed to be talked to.” I’ve known Neil for a long time,” said Steve Rogel, Weyerhaeuser’s president and chief executive officer, “and value his advice and his counsel on both public relations locally and advice political. He’s been a good counselor.”
He worked for Paul Allen’s unsuccessful effort to get approval to build an outdoor concert arena at Portland International Raceway. And Brookhill’s landfill near the Columbia River remains on appeal before the Land Use Board of Appeals. Other clients include the State Accident Insurance Fund, the Genesee and Wyoming short line railroad, Evergreen International Aviation, Defenders of Wildlife, PacifiCorp, and Oregon Health & Science University.
His client list doesn’t impress Ron Buel, who worked for Goldschmidt at City Hall before leaving in 1973 to establish Willamette Week: “I see him representing SAIF and Weyerhaeuser. He does what he does now for money. He’s just another hired gun, and that’s not my definition of altruism.”  Complete article at:

Analysis and Commentary:

2001 June 1  Timber Giants Tangle Thursday by Harry Lenhart, Portland Tribune.  The Portland Art Museum will be the scene on Thursday not of a polite, bejeweled gallery reception but what could be the climactic event in a tense, months-long drama to decide the fate of Weyerhaeuser Co.’s $7 billion bid to take control of Willamette Industries Inc.
The outcome of the vote is important here because Willamette is one of the last two Fortune 500 companies with headquarters in Oregon (the other is Nike).
Nevertheless, Weyerhaeuser snared ex-Oregon Gov. Neil Goldschmidt for what Bruce Amundsen, a spokesman for the company, described as “an advisory role.”
Ultimately, for Oregon, the stakes come down to jobs and pride, and perhaps charitable contributions. If Weyerhaeuser wins, the principal losers, Chercover predicted, would be Willamette’s 400-strong corporate headquarters staff. There isn’t a lot of flab in the Willamette system, he said. “They’re extremely disciplined operators.” Complete article at:

Analysis and Commentary:

2001 February 14  The Power of Love by Staff, Willamette Week.  Whether it's Bechtel looking for cheap real estate or a New York toxic-waste king hoping to site a dump next to the Columbia, Big Dog is the man to call. The former mayor, governor and U.S. transportation czar, Goldschmidt remains Oregon's most influential private citizen. He's back in the news in a big way with his controversial plans to extend the Park Blocks--a project so dear to his heart that he's put his lucrative consulting business on hold. But don't start passing a charity basket.
Goldschmidt was a director of Renaissance Bankcard Services when Household Finance bought it from his pal Irving Levin in 1999. SEC records show Goldschmidt walked away with more than $8 million in the deal. Complete article at:

Analysis and Commentary:

1999 Old Ties, new money: Bonderman joins $150M fund by Matthew Burns, Triangle Business Journal. Links between the Triangle and Texas' billionaire Bass family have created a $150 million investment pool that organizers say will fill a gap between venture capital funds and large corporate buyout firms. See complete article at:

Analysis and Commentary:

1998 August 26  Big Dog by Bob Young, Willamette Week.  He's a rare bird, says Irving Levin, CEO of Renaissance Bank Cards, a Portland company that Goldschmidt partly owns and has lobbied for.  He's been a politician and a businessman, and he understands both world's really well.
There's also an air of intrigue, if not secrecy, that surrounds his work.  I keep running into projects and discovering Oh Neil's on that, says Ruth Scott, director of the Association for Portland Progress, a downtown business group.
Goldschmidt himself wouldn't disucss his work with WW.  Through one of his assistants at Neil Goldschmidt Inc. he declined to be interviewed.  Some of his clients and friends also refused to talk with WW after checking with Goldschmidt.
Goldschmidt has also offered paid advice to the Schnitzer and Zidell families, who want to develop a 50-acre parcel south of the Marquam Bridge into another upscale neighborhood, called North Macadam.
Schnitzer Investments president Ken Novack declined to talk with WW. But Mayor Katz says Goldschmidt has lobbied her on behalf of the developers, urging the city to create a multi-million dollar network of street, sewer and other infrastructure improvements in the area.  Goldschmidt has also tried to excite Katz about the idea of running a tram from Oregon Health Sciences University-where Goldschmidt serves on the board of directors-down to the North Macadam development, where OHSU wants to build a new Women's Health Center and office buildings.
Neil is a personal friend and a shareholder and director in the company who appeared at a hearing on one bill, explains the firm's CEO Levin. The bill, passed into law last year, raises the amount Renaissance can chargeon late fees.
Even foreigners love Goldschmidt.  The government of British columbia was so impressed with him that it paid Goldschmidt $75,208 for three months of work in 1992 to lobby against a U.S. Department of Commerce tariff on softwood lumber products.
He must have been good: The government's ministry of forests hired him the next yeare to talk to Oregon editorial writers in five cities.  The 60-day contract earned him $19,701, according to the foreign agent records at the U.S. Department of Justice.  Complete article available only via written request due to date, 1998, at


Bill Parish
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