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Power plants that led to corruption probe were never built

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Posted: Monday, January 24, 2005 10:00 pm

Four years ago, three government officials formed a partnership designed to take advantage of the state's energy crisis by lobbying for a power plant in the Port of Stockton and against rival plants.

Their efforts led to a series of federal corruption indictments that will culminate Wednesday with the trial of former county marshal and sheriff's deputy Monte McFall -- and yet none of the plants under discussion at the time have ever been built.

"The prices were really high, and there was a lot of demand for electricity," said Chris Davis, a spokesman for the California Energy Commission. "But then the prices came down, Enron collapsed, and now we're in a situation where the lenders' confidence in investing in power plants is really shaken, and it's very tough to get lenders."

McFall, 57, will be tried on charges of mail fraud, extortion, fraud, lying to federal prosecutors and conspiracy Wednesday in Sacramento. Most of those charges stem from two business ventures McFall formed in 2001 with former San Joaquin County Sheriff Baxter Dunn and former head of a state criminal justice office, N. Allen Sawyer.

The purpose of the ventures, called SMTM Inc. -- which stands for Show Me The Money -- and MSD Inc., the trio's initials, was to help Los Angeles-based Sunlaw Energy build a power plant in the Port of Stockton. Doing so meant a commission of more than $2 million for the partners, prosecutors said.

To that end, the men pushed for Sunlaw's plant while on the clock as officials, and also worked against proposed projects by Calpine Energy Corp. in both the port and northwest of Tracy, the latter called the East Altamont Energy Center.

Earlier this month, Sawyer and Dunn both pleaded guilty to honest services mail fraud and agreed to testify against McFall, and Dunn resigned as county sheriff. Former county supervisor Lynn Bedford and his former aide, J. Tyler Reves, also each pleaded guilty earlier this month to a charge of lying to federal investigators.

But the power plants fell by the wayside long before.

Sunlaw withdrew its proposal for a Port of Stockton plant, and though the California Energy Commission gave San Jose-based Calpine a license to build the East Altamont Energy Center in 2003, the acreage where the plant would be situated is as empty now as it was then.

Blame an energy market in California that's shifted dramatically since 2001, said Bob Sarvey, a Tracy resident and business owner who vocally opposed the plants when they were proposed.

"The fact is, it takes a long time to get one of these things built," Sarvey said. But that was compounded by the fact that in 2001, he said, state officials signed a number of long-term power contracts designed to provide the state with dependable energy at a fixed price.

That locked up demand for electricity, and make it harder for a company to sell power, Sarvey said.

Katherine Potter, a spokeswoman for Calpine, said that's the problem for East Altamont.

"The timeframe is based on the marketing of power," she said. "The market just changed radically in California, and we've been waiting to see from a regulatory standpoint what happens."

Calpine also has financial difficulties. The company liquidated more than $2 billion in assets last year, and the value of Calpine shares dropped in 2004, from a high of $6.42 to $3.25 today.

"It's been a challenging year for almost all power companies in our sector," Potter said.

Sunlaw had already experienced one setback when company officials looked to the Port of Stockton.

The company originally planned to build a plant in South Gate, a city eight miles south of Los Angeles, but voters rejected the idea by nearly a 2 to 1 margin in a ballot initiative in March 2001.

Federal prosecutors said the same day South Gate voters went to the polls, Sawyer talked with Sunlaw officials about putting their plant in Stockton instead.

Sunlaw officials did not return calls seeking comment. A Web site for the company, Sunlawsale.com, states that company is also liquidating assets.

The project never even came before the energy commission for licensing, though that wasn't unusual at the time, Davis said.

"We had word of lots of applications that never came to fruition," he said.

Contact reporter Ben van der Meer at benvan@tracypress.com.

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