Don’t Hold Your Breath for Rebate
from The New York Times

Gregory Palast for The Observer/Guardian UK

GOV. George E. Pataki says he is mailing out checks of $100 to $232 to every home on Long Island, a bonus as part of Mr. Pataki’s plan to cut electric rates 23 percent.

If it were true, I would leave out a glass of milk and cookies for Governor Santa when he comes down my chimney. But alas, the rebate, like the rate reduction, is as real as reindeer on the roof.

The Governor failed to mention that the rebate has nothing whatsoever to do with his Long Island electricity scheme. Every Long Island consumer will receive the payments as part of a Federal court settlement in which the Governor had no role. Despite the Governor’s claim, consumers will receive this rebate even if Mr. Pataki’s deal falls through.

In December 1988 a Federal jury in Brooklyn found the Long Island Lighting Company guilty of civil racketeering. The jury found that the president of the utility, Dr. William J. Catacosinos, had given false testimony three times to Government regulators to obtain financing for the doomed Shoreham nuclear power plant.

Although judge ultimately threw out the verdict, Lilco settled the case by agreeing to rebate $400 million to its customers over 13 years. Those who pay Lilco’s breathtaking electric rates probably do not notice the small refunds subtracted from their monthly bills. The utility still owes three payments of $60 million each. The Governor, to sell his shaky plan to the public, has simply requested that Lilco pay the money as a single check rather than continue to deduct the sum from bills.

By using this rebate to sell his own Lilco plan, the Governor is trying to bribe the public with its own money. And that makes Gordian Raacke livid. Mr. Raacke directs the Citizens Advisory Panel established by the Federal court to monitor Lilco’s payment of the racketeering rebate.

Because I initiated the Government’s 1988 fraud investigation, Mr. Raacke called me to ask: “Isn’t this just the kind of deception you charged Lilco with? Pataki’s got every politician on Long Island believing he’s discovered $100 bills to give away! Should we bring new fraud charges?”

The deeper problem, Mr. Raacke and other experts note, is that the plan, which begins with the deceptive rebate, continues in that devious vein. The Governor claims that he can rebate cash, cut rates 23 percent and halt property-tax increases.

Ah, were it so!

Last year the Governor floated a plan to cut electric rates, though only by 12 percent. I audited that plan for county legislators and found the Governor’s savings projections perfectly honest. But last year his numbers were calculated by accountants – specifically Wilbur Ross, husband of Lieut. Gov. Betsy McCaughey Ross.

For this year’s plan, the claimed savings appear to have been calculated in Santa’s workshop. Recently released documents confirm that despite the hoopla the “new” plan is an identical twin to last year’s; yet state negotiators assert savings have nearly doubled.

How did Mr. Pataki pull off this legerdemain? His plan includes as savings property-tax refunds that, like the racketeering case money, have to go back to consumers no matter the outcome of his deal.

Income-tax credits of $480 million, already scheduled to return to ratepayers, also bloat the putative benefits of the deal.

The state’s Public Authorities Control Board has to judge that scheme, because it turns Lilco’s private debts into a huge debt of a state agency, the Long Island Power Authority. It is the mandate of the control board to reject proposals like this one, laced with specious accounting and sold by flimflam. Likewise, the Federal District Court should quickly halt the Governor’s using fraud-case settlement money to fund a new deception on the public.

Correction: April 20, 1997, Sunday

Because of an editing error, a Long Island Opinion article on April 6 about a proposed rebate for customers of the Long Island Lighting Company misidentified the president of the utility who, in 1988, was found guilty of false testimony to Government regulators about the Shoreham nuclear power plant. The president was Wilfred O. Uhl, not Dr. William J. Catacosinos. (Dr. Catacosinos is Lilco’s chairman and did not testify.) The verdict was later reversed. Letters on this subject appear today on page 15.

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Gregory Palast writes the award-winnning column, “Inside Corporate America” fortnightly in Britain’s Sunday newspaper, The Observer, part of the Guardian Media Group. For comments or request for reprint, contact us.