Risk & Compliance

Trash Authority Makes Best of Enron Deal

An agreement to buy power from a Connecticut trash-to-energy facility collapsed when the Houston-based company filed for bankruptcy.
Stephen TaubMarch 30, 2007

Connecticut Attorney General Richard Blumenthal and the Connecticut Resources Recovery Authority (CRRA) have announced a $16.25 million settlement with Hartford-based Murtha Cullina over the law firm’s advice on a deal between the CRRA and Enron.

According to the announcement, the deal called for Enron to buy power produced by the CRRA’s trash-to-energy facility and pay the authority $2.375 million per month over more than 11 years, beginning in March 2001. As part of the agreement, the CRRA transferred $220 million to Enron. When Enron filed for bankruptcy that December, it stopped paying the CRRA.

According to Blumenthal, Murtha Cullina “failed to recognize the deal’s fatal flaws, waving [the CRRA] over the cliff, instead of warning it away.”

Murtha Cullina did not admit wrongdoing under the settlement, reported The Hartford Courant, which noted that the firm is still eligible to continue or pursue legal work for Connecticut. “We continue to firmly believe we represented our client well,” managing partner Alfred E. Smith Jr. told the newspaper. He reportedly added that Murtha Cullina’s insurer will cover the cost of the settlement.

Blumenthal’s announcement also stated that the law firm agreed to cooperate with the attorney general’s other ongoing litigation related to the Enron contract. He added that nearly $151 million of the $200 million the CRRA lost has now been recovered.