Five bankruptcies, a dodged bullet, and lessons for voters

During six years of my service in the Montana Senate and all eight years of my service on the Montana Public Service Commission, I had a ring-side seat with four major bankruptcies that had huge impacts on Montana residents, and I helped Montana avoid being taken down by a fifth. The first four, in order, were Enron, Montana Power/Touch America, NorthWestern Corporation, and Southern Montana Electric. The fifth, and dodged bullet, was Babcock & Brown Infrastructure — BBI — an Australian investment conglomerate that proposed to merge NorthWestern into its operations before BBI itself went bankrupt, and that the Public Service Commission I chaired at the time had the wisdom to say no to.

Though there were some differences among these bankruptcies, mostly differences in how badly certain parties suffered financial injury, there were some common features among all. The precursor to all was the push for utility deregulation. The suits from Enron and Montana Power who infested the hallways of the Montana Capitol building in 1997 promised the malleable politicians in the Legislature and Governor’s Office that deregulation would yield lower prices, higher profits and riches for all. Well, we know how that turned out.

Most of the top executives of these companies were variously described as brilliant, engaging and, even, charismatic. A top executive of a major corporation from Seattle came to a forum in Great Falls to recommend the president/CEO of Montana Power be elected governor of Montana! But in reality, they all shared a minimal acquaintance with the truth or any measure of competence.

Except for a couple executives at Enron who the U.S. Justice Department, at the time, had the integrity to charge and convict of criminal behavior despite their political connections, the top executives who led these companies into bankruptcy came out all right. Though their resumes for future employment may have been soiled by the bankruptcy, these executives’ high salaries, compensation packages and golden parachutes enabled most to slink away to lives of leisure in a variety of exotic locations, say an island in Flathead Lake, or a villa in Italy.

The losers in these bankruptcies were numerous. The employees and retirees of Enron, a big player in the natural gas industry in north-central Montana, lost their retirements. Wiped out. The pre-bankruptcy stockholders lost everything, especially those Montanans who had included stocks in these companies in their retirement portfolios. The member/owners of Southern Montana Electric, a cooperative, have been saddled with among the highest electricity rates in the country, and the taxpayers of Great Falls have had to devote a portion of their property taxes every year to cover the city’s losses in the venture. Only in the case of NorthWestern, where the Montana PSC intervened, were employees, company retirees and customers protected from the losses caused by bankruptcy.

While secured creditors, typically large banks and investment firms, may recover some or all of their investment in bankrupt companies, a large group of losers in these bankruptcies are the unsecured creditors. The unsecured creditors group usually consists of small businesses who operate as sub-contractors, or provide project specific services to the company and haven’t yet been compensated for their products or services by the time of bankruptcy.

After our shared pain and suffering from these major bankruptcies, I remain baffled why a majority of Montana voters supported the election of the self-proclaimed “master of debt and bankruptcy” four years ago as our president. Though the COVID-19 pandemic started out small, just like the challenges that finally resulted in the bankruptcy of NorthWestern, inattention, inaction, and incompetence related to the pandemic by this administration and congressional allies, has this country teetering on bankruptcy. The mounting costs for our taxpayers are like the losses stockholders experience in business bankruptcies. Our Social Security recipients are the retirees at risk, and the mounting business losses and increasing unemployment rolls are like the unsecured creditors in business bankruptcies. And there is absolutely no parallel in business bankruptcy to the terrible loss of over 200,000 fellow Americans.

The current president and his yes-men in Congress should not be trusted with public office. Having stumbled their way into this awful mess, they are simply not up to the task of fixing it. It would be a major act of generosity to let them slink away in their private jets to their cushy resorts, islands, and chateaus.

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Greg Jergeson served for 24 years in the Montana Senate, and eight years on the Montana Public Service Commission, six as chair. He and his wife, Barb, are retired and make their home in Chinook.