Scrutiny of Davis and crew is  taking hold.  The state controller, Kathleen Connell, also has a well  written op-ed critical of Davis in today's LA Times.
 
Kevin
213-926-2626
 

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GOP  rival of governor requested the inquiry.             [IMAGE] [IMAGE]  Times Headlines   *  Latinos  Assured Water Is OK  *  Car  Dealer Not Bound by Ad Error, Court Rules  *  Suspect  in Simi Valley Serial Rapes Arrested  *  New  LAPD Radios Get Negative Reviews  *  2  Shot to Death, 1 at Home by Stray Bullet  more  >          [IMAGE] [IMAGE]   Subscribe    By WALTER HAMILTON JEFFERY L. RABIN and DARYL KELLEY, TIMES  STAFF WRITERS  The Securities and Exchange Commission has launched a  preliminary inquiry into whether energy consultants advising Gov. Gray  Davis used inside information to trade stocks of power companies doing  business with the state, a source with knowledge of the matter said  Monday.  The federal agency began its review late last week, the  source said, in response to a request from California Secretary of State  Bill Jones. A Republican rival of Davis, Jones charged that stock trading  by consultants may have violated federal laws barring buying and selling  based on information not available to the public.  On Friday, top  aides to the governor disclosed that five consultants had been fired for  possible conflicts of interest between their official positions and their  personal finances. As news of the SEC inquiry spread through the capital  Monday, Davis officials were confronted by a flurry of questions about who  in the administration owns energy stocks.  Financial disclosure  records filed by the governor's spokesman, Steve Maviglio, show that he  owns between $10,000 and $100,000 in a Texas company he and his boss have  accused of making "obscene" profits while California has been "on its  knees." Maviglio said he bought the shares in Houston-based Enron Corp. in  1996.  "It's not a crime to own energy stock," Maviglio  said.  He also owns 300 shares of San Jose-based Calpine Corp.,  which has the largest share of the $43 billion in long-term state power  contracts.  Maviglio placed the order for the stock on May 31, one  day after San Jose's mayor dropped his opposition to a controversial  Calpine plant favored by the governor and others. Under the terms of  Maviglio's purchase, the transaction was completed about three weeks later  when the stock reached $40 a share, a value of $12,000. It has since  fallen in value.  "I viewed it as a good long-term investment,"  Maviglio said, adding that he purchased the shares for his retirement  account based on publicly available information.  The Davis  administration has spared Calpine the kind of fierce criticisms that it  has leveled at other electricity suppliers, such as Enron. But  California's grid operator has identified the company as one of many  energy merchants to overcharge the state millions of dollars.  The  fired consultants also owned shares in Calpine, ranging in value from  several thousand dollars to more than $100,000, records  show.  Another top Davis administration official, legal affairs  secretary Barry Goode, disclosed in his economic interest statement that  he recently held between $100,000 and $1 million in another out-of-state  company accused of multimillion-dollar price gouging.  In a  statement, Goode said he sold his stock in Williams Co's. a month after he  began working for the governor in February. Goode said the shares were  supposed to be sold before he went on the state payroll, but his broker  failed to do so.  In light of the recent disclosures, Secretary of  State Jones said the governor must do more to ensure the public that its  interest comes first.  "The governor should direct all of his staff  to immediately file updated conflict of interest statements that reflect  current holdings and any activity since their last statement of economic  interest was filed," said Jones, who is seeking the GOP nomination for  governor.  Word of the SEC's entry into California's energy problems  comes as the governor faces harsh criticism from lawmakers and others for  the quick and broad hiring of highly paid private consultants to guide him  through the crisis.  In his written request to the SEC, Jones said  that recently filed disclosure documents showed that at least one  consultant bought and sold shares of two energy companies within the same  month, raising "a red flag" about the possibility of insider  trading.  State law prohibits officials from participating in  decisions involving their personal financial interests.  The five  consultants fired last week were among 11 named in Jones' letter,  delivered to the San Francisco office of the SEC last Wednesday. It was  not clear which individuals are the focus of the SEC's inquiry, or whether  the agency's review would result in any charges.  Two of the former  traders said Monday that they had not been contacted by federal  investigators and knew nothing of an inquiry into possible insider  trading.  But William Mead, fired Thursday, said it is no mystery  why so many of his colleagues owned Calpine stock.  Mead said he  bought it 2 1/2 years ago and made so much money he recommended it to his  colleagues last year, while they all still worked for the now-defunct  California Power Exchange in Alhambra. Calpine power was not traded on  that exchange, so there was no conflict of interest, he said.  Mead  and three other energy traders--hired by the state in February and  March--were terminated by the Davis administration for allegedly buying  power for the state from Calpine while owning the company's stock. Fired  traders Herman Leung, Peggy Cheng and Constantine Louie did not list the  date of their Calpine purchases on financial statements that the state  required to be filed only two weeks ago.  "But I'm sure they bought  it while they were still at the power exchange, because that's when we  discussed it," Mead said. "It was kind of like a hobby. I'm sure it wasn't  done with the intent to manipulate."  Former trader Elaine Griffin,  who also owned Calpine stock and resigned two weeks ago to take another  job, said she didn't know she owned energy securities until she checked  with her financial advisor July 13, just before leaving her state  job.  Griffin said she and her husband own about $10,000 worth of  Calpine stock in individual retirement accounts managed by their advisor,  who bought the stock Feb. 1 without their knowledge, she said, after  research found it to be a good investment.  "I kind of feel like  we've been used for political reasons," Griffin said. "We would have  disclosed anything right at first, but they never asked."  As a  trader, Griffin said she occasionally bought Calpine power for the state,  but only at market prices.  Meanwhile, two Democratic political  consultants, who helped Davis polish his image after the ongoing energy  crisis caused his poll numbers to plummet, have agreed to accept no  payment for their work as part of an out-of-court settlement of a taxpayer  lawsuit.  Tom Hiltachk, a lawyer for conservative anti-tax activist  Lewis Uhler, said the settlement was reached last Friday after  negotiations with lawyers for communications consultants Mark Fabiani and  Chris Lehane.  "Now they will not receive one red cent," said  Hiltachk. "Very simply Mr. Fabiani and Mr. Lehane have agreed to cease all  activities for the governor, to accept no payments for their services and  to basically get out of the consulting business with the  governor."  As his part of the agreement, Hiltachk said, Uhler  withdrew his lawsuit Monday morning.  Uhler had filed a lawsuit  against the two consultants and Controller Kathleen Connell in June  contending that they should not receive any payments because of a conflict  of interest. The two men also did consulting work for financially troubled  Southern California Edison, which was seeking help from Davis and the  Legislature.  Connell, a former Los Angeles mayoral candidate who  has been at odds with Davis since he endorsed an opponent, had held up the  payments pending the outcome of the lawsuit.  Under an agreement  with Davis, the men were to have been paid $30,000 a month for six  months.  Fabiani and Lehane could not be reached for  comment.  *  Times staff writers Nancy Vogel and Virginia  Ellis in Sacramento and Robert J. Lopez in Los Angeles contributed to this  story.   For information about reprinting  this article, go to http://www.lats.com/rights/register.htm   	[IMAGE]	  a d v e r t  i s i n g  Subscribe NOW and SAVE on your home delivery subscription!     [IMAGE]Cool down rooms without touching the  thermostat     A floor lamp that spreads sunshine all over a  room     Bring the power of the digital revolution to  your fingertips     Private DVD theater puts a floating 6-foot  screen right before your eyes!     It?s time to put all of your photos onto your  computer   NASA research creates "smart bed" sleep  surface     [IMAGE]       	


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