Don't kid yourself. If you think the conviction of Ken Lay means that George W. Bush is serious about going after corporate bad guys, think again.

First, Lay got away with murder - or at least grand larceny. Like Al Capone convicted of failing to file his taxes, Ken Lay, though found guilty of stock fraud, is totally off the hook for his BIG crime: taking down California and Texas consumers for billions through fraud on the power markets. Lay co-convict Jeff Skilling and Enron did not act alone. They connived with a half dozen other power companies and a dozen investment banks to manipulate both the stock market and the electricity market. And though their co-conspirators have now paid $3 billion to settle civil claims, the executives of these other corporations and banks get a walk on criminal charges. Furthermore, to protect our president's boardroom buddies from any additional discomfort, the Bush Justice Department, just days ago, indicted Milberg-Weiss, the law firm that nailed Enron's finance industry partners-in-crime. The timing of the bust of this firm - the top corporation-battling law firm - smacks of political prosecution, and is a signal to Big Business that it's business as usual. Lay and Skilling have to pay up their ill-gotten gains to Enron's stockholders, but what about the $9-plus billion owed to electricity consumers? The Federal Energy Regulatory Commission, Bush's electricity cops, have slapped Enron and its gang of power pirates on the wrist. Could that have something to do with the fact that Ken Lay, in secret chats with Dick Cheney, selected the Commission's chairmen? Team Bush had to throw the public a bone, so they threw us Lay and Skilling for the crime - note - not of ripping off the public, but of ripping off stockholders - the owner class. This limited conviction, and the announcement of only one more indictment - of the crime-busters at Milberg-Weiss - is Team Bush's "all clear!" signal for the sharks to jump back into the power pool.

That leaves one question: If Bush's Justice Department let Ken and company keep the California loot, what about that state's own government? If you want to know how Californians' $9 billion went bye-bye, read on...

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When Ahnold Got Lay'd

Peninsula Hotel, Beverly Hills. May 17, 2001. The Financial Criminal of the twentieth century, not long out of prison, meets with the Financial Criminal of the twenty-first century, who fears he may also have to do hard time. These two, bond-market manipulator Mike Millikin and Ken Lay, not-yet-indicted Chairman of Enron Corporation, were joined by a selected group of movers and shakers - and one movie star.

Arnold Schwarzenegger had been to such private parties before. As a young immigrant without a nickel to his name, he put on private displays of his musculature for guests of his promoter. As with those early closed gatherings, I don't know all that went on at the Peninsula Hotel meet, though I understand Ahnold, this time, did not have to strip down to his Speedos. Nevertheless, the moral undressing was just as lascivious, if you read through the 34 page fax that arrived at our office.

Lay, who convened the hugger-mugger, was in a bit of trouble. Enron and the small oligopoly of other companies that ruled California's electricity system had been caught jacking up the price of power and gas by fraud, conspiracy and manipulation. A billion here, a billion there, and pretty soon it was real money - $6.3 billion in suspect windfalls in just six months, May through December 2000, for a half-dozen electricity buccaneers, at least $9 billion for the year. Their skim would have been higher, but the tricksters thought they were limited by the number of digits the state's power-buying computers could read.

When Ken met Arnold in the hotel room, the games were far from over. For example, in June 2003, Reliant Corporation of Houston simply turned off several power plants, and when California cities faced going dark, the company sold them a pittance of kilowatts for more than gold, making several million in minutes.

Power-market shenanigans were nothing new in 2000. What was new was the response of Governor Gray Davis. A normally quiet, if not dull, man, this Governor had the temerity to call the energy sellers "pirates" - in public! - and, even more radically, he asked them to give back all the ill-gotten loot, the entire $9 billion. The state filed a regulatory complaint with the federal government.

The Peninsula Hotel get-together was all about how to "settle" the legal actions in such a way that Enron and friends could get the state to accept dog food instead of dollars. Davis seemed unlikely to see things Ken's way. Life would be so much better if California had a governor like the muscle guy in the Speedos.

And so it came to pass that, in 2003, quiet Gray Davis, who had the cojones to stand up to the electricity barons, was thrown out of office by the voters and replaced by the tinker-toy tough guy. The Governator performed as desired. Soon after Schwarzenegger took over from Davis, he signed off on a series of deals with Reliant, Williams Company, Dynegy, Entergy and the other power pirates for ten to twenty cents on the dollar, less than you'd tip the waitress. Enron paid just about nothing.