LOCKYER SLAPS SEMPRA WITH GOUGING LAWSUIT.

Byline: Harrison Sheppard and Beth Barrett Staff Writers

SACRAMENTO - Denying allegations that his office is trying to influence the ongoing trial of a class-action suit against Sempra Energy, Attorney General Bill Lockyer filed a massive lawsuit Wednesday against a subsidiary of the company, claiming it gouged California consumers by hundreds of millions of dollars.

But Sempra Energy officials stood by their claims, reported in the Daily News on Wednesday, that Lockyer's office had tried to intimidate the company into settling a $23 billion class-action lawsuit, filed by private attorneys, with a threat to sue on behalf of the state even while a jury trial is under way in San Diego in the class action in which Continental Forge is among the plaintiffs.

``Executives from Sempra Energy were present at meetings or participated in conversations where high-ranking officials in the Attorney General's Office threatened to file lawsuits against Sempra Energy and its companies if our company did not agree to the state's terms in a comprehensive settlement involving the Continental Forge litigation,'' W. Davis Smith, Sempra Energy vice president and associate general counsel, said Wednesday.

In filing the new lawsuit Wednesday, Lockyer flatly rejected what he called unethical allegations by Sempra Energy that his office has used the threat of a lawsuit to pressure the energy giant, parent of Southern California Gas Co., into a settlement in the case that would benefit a close political ally of Lockyer's.

One of the lead attorneys in the San Diego trial is Tom Girardi, who personally and through his firm has given more than $260,000 in campaign contributions and gifts to Lockyer in recent years. Girardi and other attorneys stand to make $100 million or more in legal fees if the suit is settled in their favor.

``It's like the bank robber claiming the arresting officer was the bad guy,'' Lockyer said. ``Yes, we're filing a lawsuit on behalf of California consumers who were ripped off by Sempra. And they (Sempra officials) want to cloud the issue. But the issue is: How much did they steal from California ratepayers and can we get it back?''

Girardi did not return a call for comment Wednesday.

Lockyer said his office has had no involvement in the San Diego trial and has not made any attempt to influence it. He said he called Sempra Energy's president and chief operating officer, Donald E. Felsinger, on Wednesday to ``make note of my objection to their unethical comments to the press.''

In a printed statement Wednesday, Sempra Energy's Smith said Lockyer's charges against subsidiary Sempra Commodities ``have no merit whatsoever.''

``In recent days, officials in the Attorney General's Office repeatedly have threatened that if our company did not agree to the state's terms, the attorney general would file lawsuits against us and today delivered on these threats, filing a meritless lawsuit against our Sempra Commodities unit. The timing of this action is highly inappropriate given the trial under way in San Diego.''

Smith said the case Lockyer's suit refers to already has been addressed by the Federal Energy Regulatory Commission. He said Sempra Commodities did not engage in any improper market activities and abided by the law, regulations and market rules in existence.

Assemblyman Keith Richman, R-Granada Hills, said the allegations, including potential conflict of interest against Lockyer, ``are very serious and warrant investigation by an independent federal agency.''

Richman could end up running against Lockyer for state treasurer next year, as both are seeking their party nominations in the June 2006 primary.

``The appearance of the problem - if the allegations are found to be true, the use of the Attorney General's Office to benefit campaign contributors and gift givers who stand to make more than $100 million (in legal fees) - is appalling and potentially criminal,'' Richman said.

San Diego-based law professor Robert Fellmeth said it would be improper for a public case to be used to leverage a private one. But he remains skeptical that Lockyer was pursuing any such course.

``You can't use one case to leverage another; the threat of a public case to leverage a private case is improper,'' said Fellmeth, a professor of public interest law at the University of San Diego Law School. ``I'd be surprised if that is what happened.

``Sempra is going to whine because they don't want a credible public agency to come in and act,'' he added.

By filing the suit, he said, Lockyer gets to take credit for going after Sempra and returning money to the public himself, rather than just having private attorneys do it.

Lockyer said his office has filed almost 100 lawsuits against various energy companies since the crisis and has reached settlements or judgments that could return up to $5.3 billion to California businesses and consumers - though $1.5 billion of that is in doubt because it is owed by bankrupt Enron.

The suit Lockyer's office filed Wednesday in Sacramento County Superior Court alleges that Sempra Energy Trading Corp., now Sempra Commodities, manipulated the energy market during the 2000-01 power crisis to drive up prices and shrink supplies. The company engaged in more than 5,000 transactions that gamed the market, he alleges, using schemes with nicknames such as ``Fat Boy,'' ``Ricochet,'' ``Death Star'' and ``Get Shorty.''

Gov. Arnold Schwarzenegger supported Lockyer's lawsuit, saying his administration has been working to obtain refunds for California consumers.

``For months, my administration has been involved in intensive negotiations with Sempra Energy and other parties in an effort to lower costs, compensate ratepayers and resolve ongoing disputes,'' Schwarzenegger, who is currently on a trade mission to China, said in a written statement.

``My position has always been that the Attorney General's Office has legitimate claims to pursue in this case and that if a comprehensive settlement could not be reached, the state of California would take its case to court on behalf of the ratepayers.''

Harrison Sheppard reported this story from Sacramento. Beth Barrett reported from Los Angeles.

Harrison Sheppard, [phone]

harrison.sheppard(at)dailynews.com