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June 6, 2002

Malefactors of great wealth, again
Posted by Teresa at 04:04 PM *

This is an ugly new development in a story that was already ugly enough. It would appear that Perot Systems sold Enron the techniques it used to rip off the state of California by manipulating the state power market:

After Perot Systems Corp. helped develop the computer systems used to track California electricity trading, it peddled a detailed presentation to energy companies on ways to “game” the state’s power market, newly released documents show. The blueprint outlined schemes similar to “Death Star” and others later used by Enron Corp. to inflate profits.

A state Senate committee investigating whether companies manipulated the market during last year’s energy crisis obtained the blueprint from Reliant Energy. Lawyers for the Houston-based company said Perot Systems made the same sales pitch to other companies selling power in California.

California lawmakers said they were stunned by the 44-page presentation, a series of computer graphics that provided a primer on the state’s deregulated electricity market and then illustrated ways to exploit it to raise power prices.

Dang. Just got out their presentation software and produced a picturebook primer on how to manipulate the energy market and gouge its customers. That’s a degree of cynicism that just takes your breath away. Thank you, Ross Perot, Man of the People. (Not that I ever believed he was; but damn him anyway.)

And let us not forget the day’s other testimony, especially since there’s always a chance that someone deliberately scheduled it for the same day as the Perot revelations so it wouldn’t get as much attention. It would seem that some of California’s own municipal utilities recognized what was happening, and moved fast to get in on the plunder:

Though it was largely overshadowed by the Perot Systems revelation, state lawmakers also heard testimony Wednesday from an industry consultant who suggested that some of the state’s municipal utilities should have known — and may well have known — that Enron and other power companies were possibly engaging in questionable business practices.

Robert McCullough, a former utility executive who runs an Oregon consulting firm, said the state’s utilities should have suspected that something was wrong when power companies such as Enron were offering to split profits with them — in some cases 50-50 — for the right to their capacity on power lines, and were then sending little or no power.

Some of Enron’s ploys were specifically tailored to employ the municipal utilities — including one dubbed “Red Congo” that used a portion of the Redding utility’s transmission line, he said, citing new documents obtained by the state.

Glendale’s municipal utility recently announced that it was investigating whether it unwittingly took part in some of Enron’s schemes by participating in similar arrangements. But McCullough said at least one municipal entity, the Northern California Power Agency, appears to have known something was afoot, citing a document that showed it was “aggressively” marketing use of its lines to Enron for a 50 percent cut of profits.

You really can’t call that normal business practices. Really. Not that they aren’t trying:
A lobbyist for the agency, John Fistolera, disputed McCullough’s accusation, saying his client was simply trying to make the best use of its assets, and had actually thought it was helping relieve power shortages during the energy crunch.
Why do I keep making snarky remarks about the Invisible Hand of the Marketplace? Because for people working in corporations, there are lots of ways to aggrandize and enrich themselves that have nothing to do with producing a better product more efficiently for a lower price. If classic economic models were applicable to the daily life, work, and decision-making processes of people in complex corporate structures, Dilbert wouldn’t be funny.
Comments on Malefactors of great wealth, again:
#1 ::: Joel Davis ::: (view all by) ::: June 07, 2002, 02:15 PM:

You mean the Invisible Middle Finger of the Marketplace ...

I think that one of the defining characteristics of humans is the ability to "game" rule structures for their own benefit. Homo Conartistus rather than Sapiens.

#2 ::: James Macdonald ::: (view all by) ::: June 07, 2002, 09:00 PM:

Remember that Ross Perot didn't get rich by making things that people want to buy, then selling those things to people. He got rich by gaming government contracts.

#3 ::: Scott Janssens ::: (view all by) ::: June 08, 2002, 04:07 AM:

So how do I get in on that action?

#4 ::: Glenn Hauman ::: (view all by) ::: June 08, 2002, 11:25 AM:

Now hang on.

It looks like Perot Systems was hired to write code to implement a legally mandated (and publically available) spec. When the Perot engineers looked at the system, they noticed that there were a number of flaws in the way the system worked, and pointed it out to the people they were doing the work for. They apparently said one of the following:

* We can't change it becuase of legal restrictions.

* We can't change it becuase we're getting rid of legal regulations.

* We won't change it because we say so.

It was a dumb hole indeed worthy of Dilbert, but if they left it open, you can't expect others not to take advantage of it.

#5 ::: Bob Webber ::: (view all by) ::: June 08, 2002, 12:03 PM:

The US Gov't still publishes circulars of SBIR and other Federal contracts open for bid, demos, and just-barely-compliant performance. Game away.

#6 ::: Stephanie Smith ::: (view all by) ::: June 09, 2002, 03:36 PM:

Indeed they do.

At the risk of stating the blindingly obvious, the BMDO and DARPA in particular have been throwing a lot of money around for the last ten months or so.

Working for an SBIR contractor was a strange and educational experience, and I'm glad I don't do it anymore.

#7 ::: Teresa Nielsen Hayden ::: (view all by) ::: June 09, 2002, 04:33 PM:

Glenn, can you give me a citation on that? And who exactly were these "people they talked to"?

The world is not a giant game of "Mother, May I."

#8 ::: Bob Webber ::: (view all by) ::: June 09, 2002, 04:33 PM:

I was the main software guy on an SBIR contract once -- mostly a system administrator. In that SBIR contract we were to apply neural networks to the location of the true meniscus during submerged Czochralski growth of GaAs boules as viewed through a fused quartz image guide. My idea for Phase I: broadly characterize the features of interest and develop a coding scheme for them to simplify the problem to neural net dimensions.

My boss's idea of Phase I: do the same geometric transformation business, without image clean-up or feature identification, that failed in previous efforts and led to the creation of this SBIR project in the first place. Thus ended my career working on SBIR contracts, as I quickly sought a company that could pay me honest money for honest work.

#9 ::: Bob Webber ::: (view all by) ::: June 09, 2002, 11:11 PM:

Maybe software engineers aren't like other engineers in having professional obligations to their employers?

I mean, if a civil engineering team were hired to implement a specification for a fuel depot that had features that made it easy for random people with fuel trucks to steal the fuel out of the depot and resell it and failed to keep raising the issue until the problem was fixed, they would be significantly noncompliant with professional ethics. To sell detailed plans for how to rip off the fuel depot would go beyond any possible excuse.

Some bugs are missed by stupid designers, some just aren't expected by the most reasonable experts and crop up during implementation. Engineers are supposed to step up to the plate and refuse to do bad work, not just sit back and say, "I told you so," when somebody discovers the bank vault has a fire door with a panic bar leading to the back alley.

#10 ::: Teresa Nielsen Hayden ::: (view all by) ::: June 10, 2002, 01:06 AM:

The Sons of Mary seldom bother,
for they have inherited that good part;
But the Sons of Martha favour their Mother
of the careful soul and the troubled heart.
And because she lost her temper once,
and because she was rude to the Lord her Guest,
Her Sons must wait upon Mary's Sons,
world without end, reprieve, or rest.

It is their care in all the ages
to take the buffet and cushion the shock.
It is their care that the gear engages;
it is their care that the switches lock.
It is their care that the wheels run truly;
it is their care to embark and entrain,
Tally, transport, and deliver duly
the Sons of Mary by land and main.


To these from birth is Belief forbidden;
from these till death is Relief afar.
They are concerned with matters hidden---
under the earthline their altars are---
The secret fountains to follow up,
waters withdrawn to restore to the mouth,
And gather the floods as in a cup,
and pour them again at a city's drouth.

They do not preach that their God will rouse them
a little before the nuts work loose.
They do not preach that His Pity allows them
to drop their job when they damn-well choose.
As in the thronged and the lighted ways,
so in the dark and the desert they stand,
Wary and watchful all their days
that their brethren's ways may be long in the land.


That's from "The Sons of Martha", of course, by Rudyard Kipling: a poem known to those who wear the iron ring, whether or not they can see predestination in a connecting-rod.

Oddly enough and not oddly at all, I learned the poem from Martha Schwartz, great amongst the book-production crew: another branch of the offspring of Martha. If I could Kipple there's a version of McAndrew's Hymn to be written about the people who make the books happen, come hell and high water and the sensibilities of editors and authors.

I've always fallen halfway between. Editorial has its genuine virtues, but production has bushido. "I quickly sought a company that could pay me honest money for honest work" commands my instant respect, and instant understanding. So does "...would go beyond any possible excuse."

(Production bushido: A publisher with whom I'm acquainted was once making unfair comments about editorial, in re a certain snafu. A head of editorial with whom I'm acquainted was dissatisfied. "Wait," I said. We had a new head of production. I wasn't sure -- and then, perhaps twenty minutes later, the word came down that the new head of production had just been in the publisher's office, explaining (in the teeth of the publisher's considerable ire) that the snafu was his fault; which is to say, his department's fault, though the snafu had begun before he ever came on board.

I nodded when I heard this. "Production bushido," I said. "He has it.")

(Yes, Jeff Dreyfus, I do mean you.)

#11 ::: Glenn Hauman ::: (view all by) ::: June 10, 2002, 01:15 AM:

Teresa, I'm inferring from the article and taking Perot Systems at their word that notified the regulatory agencies about the hole in the way the system worked. And the article does state: " Cal-ISO officials Wednesday reviewed the Perot Systems blueprint and concluded that it did not contain any confidential information".

I'm reminded of a friend of mine who wrote the code for a major sweepstakes web site-- and also wrote a script that allowed him to enter the sweepstakes as many times as the rules allowed.

The world may not be a giant game of "Mother, May I"... but the law certainly is. And particularly in contract law, if it's not specifically spelled out, it's fair game. We know both sides had lawyers looking at the contract, right? Lawyers wrote and rewrote the regulations, yes? You don't think that poorly written law is a system that can (and often should) be gamed? Because that's where the correction had to be made-- legal code, not software code.

#12 ::: Teresa Nielsen Hayden ::: (view all by) ::: June 11, 2002, 12:14 PM:

Glenn, that's just not true. "Anything not explicitly forbidden is fair game" might be an imaginable stance in situations where power is arbitrary and unquestionable, and the laws are imposed from above. But that's not us. We're supposed to be thoughtful, responsible citizens of the republic. Those are our laws. That's our civil order.

And really, "Ha ha, bet you can't catch me!" is never appropriate as an over-all basis for behavior. Civilization, the maintenance of a civil society, and especially the maintenance of a complex urbanized society, is necessarily cooperative.

The other reason it's not appropriate is that "anything not strictly illegal" is only a slip and a slide from "anything not strictly enforced"; and after that, you're just haggling over the price.

#13 ::: Simon Shoedecker ::: (view all by) ::: June 12, 2002, 02:11 PM:

Whether Glenn is right or not, it doesn't matter. We're not instituting legal proceedings against Perot Systems in here. We're merely crying shame at their shameful behavior.

"Technically legal" never automatically equals "admirable", "morally right", or any such free ticket out of condemnation or shame.

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