Joe Conason’s Journal

When Arnold Schwarzenegger gets around to attacking Gov. Gray Davis for the state's energy fiasco, someone should ask why he appointed Pete Wilson his campaign chairman.

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Arnold’s secret meeting with Kenny Boy
If you’re compiling a list of public figures even less popular in California than Gray Davis, one name is likely to top it: former Enron chairman Kenneth “Kenny Boy” Lay. Voters in the Golden State are behaving like sheep these days, but even the dimmest of them can probably remember how Enron and the other corporate vultures descended on them during the electricity “crisis” of 2001.

What California voters may no longer remember, however, is that after the third wave of rolling blackouts hit their state, Kenny Boy quietly summoned a select group to the Beverly Hills Hotel on May 11, 2001. And they may also have forgotten that one of the prominent Republicans who showed up at Lay’s request was Arnold Schwarzenegger.

On June 21, 2001, the Associated Press reported that “Lay met secretly with California Republicans at the Beverly Hills Hotel and pushed a plan that called for ratepayers to pay the billions in debt racked up by the state’s public utilities. The plan contended that federal investigations of price gouging are hindering the situation.” According to William Bradley, the L.A. Weekly’s sharp political columnist who wrote about Enron for the American Prospect, the meeting revolved around Lay’s plans to “preserve deregulation” in California. The L.A. Times noted that Lay was seeking the support of Schwarzenegger and the other GOP luminaries for even greater deregulation. Apparently Lay wanted help in saving a lousy system, squeezing the unfortunate Californians even more, and avoiding accountability for their plight.

Only those who were present — including then-Mayor Richard Riordan and convicted junk-bond fraudster Michael Milken — know exactly what happened at Lay’s covert conference. The meeting briefly became an issue early in the 2002 governor’s race, after Riordan opportunistically attacked Davis over the governor’s telephone contacts with Lay during the crisis. “What is Gray Davis trying to hide?” he demanded. But then, instead of answering pointed questions about the Beverly Hills meeting, Riordan quickly backed off from the Enron angle.

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So the intriguing question put by California’s leading consumer advocates last year has yet to be fully answered:

“What was the purpose and substance of the May 11, 2001, meeting with then-Mayor Richard Riordan, former junk-bond king Michael Milken, and Arnold Schwarzenegger?” To that might be added a few other pertinent queries, directed to the campaign of the leading recall contender: Why did Schwarzenegger go to a secret meeting with Ken Lay in the midst of the crisis? Did Schwarzenegger ever have any dealings with Enron? Did he hold Enron equities in his portfolio — and if so, when did he sell?

If and when he gets around to discussing issues, Schwarzenegger will probably attack Davis for the state’s energy fiasco, which cost Californians upward of $70 billion over the past few years. And the governor does deserve his share of the blame for the mishandling of the “crisis.” But perhaps then someone will ask Schwarzenegger why he appointed Pete Wilson, the former governor who signed the misbegotten deregulation bill that caused the crisis, as his campaign chairman.
[1:30 p.m. PDT, August 11, 2003]

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