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March 2002, Volume 4, Number 3
Edited by Jim Hightower and Phillip Frazer
Ken Lay’s ambition was to make Enron a household name, and now he’s got his wish. All the cogs and wheels within America’s corporate establishment (politicians, Wall Street analysts, pundits, the business press, think-tanks, etc.) are rushing to scold Enron bosses Lay and Jeffrey Skilling as rogues and rascals, to portray the collapse of this empire as retribution for its betrayal of the corporate order, and to bellow in Shakespearean tones: “Greed, thy name is Enron!”
Whatever happened to loyalty? The same politicians now deleting Ken Lay from their Christmas card lists were eagerly accepting his cash and running governmental errands for him just a few months ago. The same slick business publications that now wag their editorial fingers at the Enroners were only recently hustling to get Lay’s smiling mug on their covers. The same Wall Streeters who now turn their backs and wash their hands of Enron were still prodding investors to “buy, buy, buy” Enron stock on the very day last fall when the company confessed that it had been cooking its books and would soon be worthless.
Enron is no aberration: It is what Corporate America has become, and now the people who created this system are palpably fearful that other middle-classers will bond with the thousands of Enron employees who got “Layed.”
Indeed, the mantra is “The System Worked.” They say that the “genius of capitalism” let a corrupt company fall, that Washington will make a few nips and tucks in the laws to tighten a few loopholes, and then all will be right with the world and we can just keep shopping.
As Skilling himself once advised in a company newsletter: “If it doesn’t make any sense, don’t believe it.” While most of the media and congressional attention is on theminutiae of who-violated-what-law-when, Enron’s illegalities are the least of the story. Instead, this is a tale of how the execs who run the Bush administration and the “new economy” amassed such power that they can make legal any crooked and rotten thing they want to do.
For the past 25 years, corporate lobbyists and attorneys have rigorously rigged our economic and political systems to suit their clients, fabulously enriching the wealthiest 1% of Americans (40% of all the wealth gains of the past 25 years went to these Fabulous Ones) and taking care of the professional class that makes up the next-wealthiest 19% — all at the expense of the rest of us, America’s 80% majority.
Enron is both a creator and a product of the rigging: unregulated profiteering, funny-money accounting, offshore tax havens, money laundering, price gouging, corporate welfare, pension manipulation, CEO looting, hand-picked regulators, see-no-evil auditors and boards of directors, privatization of public resources, voluntary compliance with environmental rules, tax avoidance, pro-corporate media bias, a compliant judiciary, decriminalized thievery, subsidized globaloney, monopolization, crony capitalism, and so much more — all of it part of the “legal” system. While Enron is the current focus, it is but one of many Ponzi schemes posing as legitimate business in the “new economy.”
Take the public outrage over the Enron executives who secretly bailed out of the company’s stock ride before small investors and employees knew the plane was in trouble. Gary Winnick, founder of Global Crossing Ltd., has done the same thing. A protégé of junk-bond finagler Michael Milken, Winnick founded this fiber-optics marketer five years ago, strategically incorporating it in the notorious tax haven of Bermuda.
Global Crossing was a Wall Street and media darling, attracting billions from investors and quickly enriching such favored politicos as Poppa George Bush (who made $14 million on an $80,000 investment) and the honcho of the Democratic Party, Terry McAuliffe (who raked in $18 million on a $100,000 investment). Like Enron, Global Crossing stands charged with doctoring its books to deceive investors, and its bankruptcy wiped out the 401(k) funds of thousands of employees.
Gary, however, had been quietly selling his Global Crossing shares well before the crash, walking off with $734 million. Other top execs did the same, but, as one Wall Street observer dryly noted: “What they did is not a crime.” Tyco International, Polaroid, Colgate-Palmolive, WorldCom, Williams Companies, and Waters Corporation are among the other “non-criminals” that recently have been found playing Enron games
But nothing’s amiss, claim the Bushites, who’ve puffed up like a swarm of blowfish to assert that Enron is proof that money doesn’t buy favors. Their line is that as Enron was collapsing, Bush & Company did not lift a finger to help their buddy Ken, righteously abandoning him to the immutable workings of perfect capitalism.
Horsedooties. The only reason the White House backed off was that, by then, Enron was radioactive — way too hot for Bush to touch. Besides, it wasn’t the top executives who were going to be devastated. Prior to the bankruptcy, 29 of them had tiptoed away with $1.1 billion of the Enron treasury, with Lay and Skilling personally cashing in for $160 million.
When the White House saw that the Enron empire was about to topple — yet chose to say and do nothing — the people it was abandoning were the thousands of workers and small investors who, unknowingly, were about to be crushed.
It’s not the fall of Enron that tells this revealing saga of awesome corporate power; it’s the rise of Enron. As Woody Guthrie sang about outlaws, “Some will rob you with a six-gun, and some with a fountain pen.” Lay, Skilling and Gang were fountain-pen bandits whose expertise and “genius” were not in business, but in buying political connections and using bad ol’ Big Government to rewrite the rules so money and power would flow uphill to them.
Enron itself wasn’t even a business in the legitimate sense of producing anything. It was an economic parasite that engaged in a form of gambling called “derivatives,” essentially betting on the future price of energy . . . or anything else.
In the “new economy,” this is what passes for business genius, and even the New York Times’ editors finally had to concede that “Enron at its core may have been a corporate mirage created to deceive the public while enriching insiders.”
To become the seventh-largest corporation in the world, this Ponzi scheme had to have friends in high places. Lay and his corporation methodically began to buy political power, starting with George H.W. Bush, then the Clinton administration, then Little George in Texas, who not only shilled for Kenny Boy’s de-reg agenda there, but also telephoned fellow governors to get on board.
With George W. in the White House, Enron hit the mother lode of political rigging. Even though he now claims that he barely knows whatsizname, Bush’s tush had barely hit the presidential chair before he was doling out favors to Enron:
Lay was the only CEO to get face time with Dick Cheney when the veep was secretly drafting the Bush energy legislation — which contains 17 provisions that specifically benefit Enron.
Lay was allowed to handpick a new chairman of FERC, the agency that regulates Enron’s business. Then FERC refused for six months to stop the gouging of electric consumers in California by energy traders like Enron. By the time FERC finally acted, Enron had racked up an extra $70 billion in revenues from ripped-off consumers. (This alone is a tidy return on Enron’s $700,000 investment in George’s campaign.)
Treasury Secretary Paul O’Neill’s first action in office was to scuttle a Clinton initiative to crack down on infamous off-shore tax havens that let corporations dodge their tax bills and hide money. With 2,832 subsidiaries tucked away in these havens, Enron had more than any other corporation and, as we now know, much to hide.
While O’Neill did announce an agreement last fall to shut down the Cayman Islands tax haven, his slippery deal provides a two-year “holiday” on any prosecutions, giving companies plenty of time to move their assets to another haven and destroy their Cayman records. Enron, with 874 subsidiaries there, undoubtedly was grateful to get this reprieve.
Bush’s infamous economic “stimulus” bill definitely would have stimulated Enron by rebating $254 million in previously paid taxes; Bush kept this giveaway in the bill even after Enron’s collapse — and after his loud claims that he provided no assistance.
Enron — and corporations like it — would not exist except for their political clout. Bought with campaign cash, politicians have used the fork lifts and wrecking balls of government to reconfigure the business landscape according to a corporate blueprint.
Phil and Wendy Gramm, for example, are Enron retainees. As head of the Commodity Futures Trading Commission, Wendy exempted Enron’s derivatives business from her agency’s regulatory oversight in 1993, then promptly joined the company’s board and made off with more than a million bucks before the house of cards collapsed. Hubby Phil went further, exempting his patron’s energy trading from all federal oversight.
Also, Enron’s fast-and-loose accounting, now the subject of inquiries by such luminaries as Sen. Joe Lieberman was not technically illegal, since Washington loosened the accounting rules and fired the watchdogs — all in the name of encouraging “new economy” entrepreneurship. Lieberman, a longtime recipient of Enron cash, backed a bill that lets CEOs hide their multimillion-dollar stock payments.
Likewise, Enron’s global ambitions were greased by its political connections, starting as early as 1988, when Little George — then nothing but the ne’er-do-well son of Vice President Big George — called Argentina’s minister of public works to strongarm him into awarding a $300 million contract to Enron, even though the corporation’s one-page proposal was deemed “laughable” by the Argentine authorities.
In Mozambique, it was the Clinton team at bat for Enron in 1995, with the ambassador, USAID officials, U.S. senators, and even national security advisor Anthony Lake hammering the natural-resources minister to accept an Enron bid for a gas project there. Even though the bid was deemed not good for his country, the minister says, “There were outright threats to withhold development funds if we didn’t sign and sign soon.” He added that a top embassy official pressured him so hard that “It was as if he was working for Enron.”
Ambassador Frank Wisner, who did heavy lifting to help Enron get a power-plant management contract in the Philippines, did end up working for Enron. This management deal was so costly for the Philippines that the entire utility board resigned in protest.
Enron execs, on the other hand, were so thrilled with Wisner that they hired him to push for a $2.9 billion power-plant contract in India. The deal was done, and Wisner was rewarded with a seat on Enron’s board. Back in India, locals were vehemently opposed to the plant and mounted a protest movement, which Enron dealt with by hiring police to beat the protesters and engage in what Human Rights Watch wrote up as “serious, sometimes brutal human rights violations.”
Again, the deal turned out to be one-sided for Enron, so the Indian government backed out. But that unleashed an extraordinary effort by George W.’s National Security Council to browbeat India’s government into paying $2 billion to Enron — an effort they abandoned only on the day last fall when the SEC filed formal charges against the company.
By the way, practically all of Enron’s “free-market” globalization was financed by us taxpayers. Over the years, it got $2.4 billion from OPIC and the ExIm bank — wtwo piles of welfare money that our government provides for subsidizing corporate globaloney.
What we have here is not the implosion of a company, but the implosion of the myth that corporate gigantism and globalization are somehow wondrous and pre-ordained. Just a year ago, Ken Lay proclaimed, “I believe in God, and I believe in free markets,” megalomanically equating the two. But Lay’s free-market idolatry cloaked his true philosophy of milking the very Big Government he constantly declared to be passé, and the Enron ethic was nothing but crony capitalism, lying, cheating, and stealing from investors and taxpayers alike. Far from wondrous or new, this is the ancient worship of Mammon.
Enron is gone, but the hubris of its executive-suite ethos is alive in a thousand other Enrons, and the orthodoxy of proclaiming market supremacy over all human relationships marches on, accompanied by the same chorus of politicians and the media that so recently were prostrating themselves before Enron, the company Fortune magazine dubbed the “Elvis” of the New World Order.
Enron didn’t game the system; it is the system, and it’s the system itself that must be fixed. We must deal with the fact that these profiteers have already amassed too much of the world’s money and power, not only usurping the people’s inalienable right to be self-governing, but also minimizing the world’s democratic possibilities.
Fundamental reforms include a RICO-type law (as a reader from Arizona wrote to suggest) for confiscating the loot and imprisoning the likes of Lay and Skilling; full public financing of all elections to end Washington’s addiction to corrupt corporate money, and to open our political system to ordinary citizens; reversal of the Supreme Court’s absurd and corrupt 1886 ruling that these paper entities called corporations are “persons” with rights equal to or greater than us living human beings; and restoration of the power of the public’s corporate-chartering process, as established by the Founders, so these scofflaws and greedheads periodically have their actions publicly reviewed and are held to a community standard of responsibility.
If we don’t change the system, Enron lives.