Michigan:
CMS Involved in Fraudulent Energy Sales

Jun 3, 2002

In mid-May, phony electricity sales by CMS Energy Corporation came to light. This company owns Consumers Energy Company, which provides gas and electricity to 3.2 million customers in Michigan. The company was forced to admit that its trading unit had booked five billion dollars in so-called power swaps. The chief trader, Tamela Pallas, bought electricity and resold it simultaneously, while chalking up the sales. This is considered legal activity, although federal regulators “frown” on it. Interestingly, while this was going on, CMS’s auditor was none other than Arthur Andersen–which became infamous for covering up fraudulent activity for Enron. CMS now has a new auditor, and a new chief executive officer since William McCormick was forced to resign.

People in Michigan may have thought that the energy crisis that hit California in the winter of 2000 and the scandal of Enron was far removed from them. Think again! In the 1990s, CMS used the profits it made as a regulated utility company to expand into unregulated businesses, and it took advantage of the federal deregulation of the energy business, as have other utilities around the country, in order to raise its revenues. It’s likely that CMS’s power swaps helped boost the price of electricity consumers had to pay.

The new chairman of CMS is Ken Way, not the Ken Lay of Enron. The name may be slightly different, but CMS too was up to Enron-like double dealing.