Nation Topics - Bush Administration Enron Connections
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Ken Lay and Jeffrey Skilling would have remained small time crooks were it not for the energy industry deregulation measures they effectively purchased from Bush I and II.
This letter was originally published on January 29, 2002 at www.michaelmoore.com
There are no blue dresses to analyze in this one, or interns in berets to quiz. But make no mistake. The Enron scandal is the real thing--a window on the nexus of money and politics in Washington that is revealing our corrupted electoral, legislative and regulatory infrastructure.
Perhaps that's why the Bush White House is pushing the line that this is a business scandal, as opposed to a political one. But with mounting evidence that Enron executives were dictating Bush Administration appointments and policies affecting their company in particular and energy policy in general, Karl Rove is having a hard time getting his spin up to speed. Sure, there's a business component to the Enron affair. But, like most corporations these days, Enron was able to practice its brand of cutthroat cowboy capitalism only because of the ties it nurtured with the political class, which sets up the playing field on which businesses "compete." The Enron scandal reveals not just the lengths to which Wall Street and corporate America will go for obscene profits and personal enrichment at the expense of employees, shareholders and taxpayers but also the lengths to which politicians from Bush on down will go to help them.
Enron is about values, but not about the kinds of sexual peccadilloes condemned by Kenneth Starr and Ralph Reed--a notable beneficiary of Enron's largesse--or the traditional John Wayne-style flag-waving values of George W. Bush. As Michael Tomasky writes in the Washington Post, "'Values' can mean something else now, like integrity in business and government. It means that a president who ran on a promise of 'restoring dignity' to the White House ought to tell the truth about how long he's known the CEO who has been his biggest corporate backer. It means that the vice president should recognize as a simple ethical matter that the people...have a right to know which lobbyists he met with while formulating a major policy, just as Republicans demanded similar information from Clinton's health policy panel back in 1993."
If the political system works, if the opposition actually engages in opposition, if there is any justice--three huge ifs--the Enron scandal ought to shake Washington to the core and send tremors through the 2002 and 2004 elections. But that will happen only if Congress gets serious about performing its intended role in what is still supposed to be a system of checks and balances. The Senate must be aggressive not merely in issuing subpoenas to former Enron chief Ken Lay and his cronies but in pursuing the political players who associated with Lay. Representative John Conyers Jr., the Michigan Democrat who is the ranking member on the House Judiciary Committee, got to the heart of the matter when he announced that he will ask Rove to provide any information linking the Bush 2000 campaign with Enron. But Conyers will need a lot of help preventing the executive branch from weaving a cloak of invisibility around its inner operations (see Russ Baker on page 11).
Secrecy is a favored tool of the imperial presidency, and the Bush Administration's stonewalling on its Enron connections signals that it's declaring war on openness and is bent on quashing this scandal by any means. How about, for instance, distracting us with an endless war on an "axis of evil"?
Democrats must not be deterred by the Bush camp's attempts to erect a firewall of false patriotism as its defense against investigation. There are no longer any legal, moral or political grounds for not unleashing a multipronged, wide-ranging investigation into the Washington political culture that allowed an Enron--and how many more like it?--to operate unchecked. We already know a lot about who legally gave what to which politician, who lost pensions, who made out like bandits, how the scam worked, whose wheels were greased by soft money.
Now it's time for Congress to put the pieces together. Democrats in Congress should join reformer Republicans--yes, there are a few--to expose this scandal for what it is: a gamy display of excessive corporate power and a lack of economic democracy and government oversight. Congress needs to remember it's representing the people and deal with the tough issues raised by the cozy collusion between government and business (it should start with campaign finance reform in the House now and move on to putting labor and consumers on corporate boards, restoring defined benefits pensions, penalty-taxing excessive executive salaries, stopping stock price inflation and holding tricky auditors financially liable). The key vote on campaign finance is set for February 13. The outcome should tell us how serious the reform talk is.
What would Jesus do? It's a no-brainer; he would leave the Christian Coalition, take a consulting job with Enron and then use his divine power to make George W. Bush president.
It was a mistake--and a beaut--in Matt Bivens's piece "The Enron Box" where he confused the Houston Astros and the Texas Rangers. It is hereby duly acknowledged and regretted. But what really astonished us was the way it unleashed a slick triple play by the Right-Wing Conspirators (a Class C club that plays the Washington-New York corridor). You've heard of Tinker to Evers to Chance? Well, this was Wall Street Journal to The Weekly Standard to Fox News's Brit Hume. The WSJ caught Bivens's blooper; then The Weekly Standard grabbed amd waved it long enough to say "Nyah, nyah" before Brit (Mr. Inside) Hume gobbled up the ball and hinted darkly of cover-up (or something) on Fox News. This dazzling play illustrates how the opposing team will seize on a minor miscue and use it to clear George W. Bush of any involvement in the Enron scandal. OK, we admit the error shows we are sometimes sports-challenged; next time we'll check with a baseball expert like George Will. Lest the real issues be lost out in right field, however, we bring you a comment on Bush and baseball posted by the witty sportswriter Charles Pierce, a commentator on NPRs Only a Game and the author of Sports Guy: In Search of Corkball, Warroad Hockey, Hooters Golf, Tiger Woods, and the Big, Big Game. He posted it on Jim Romenesko's Media News (www.poynter.org):
"As to The Nation's unfortunate collision with the national pastime--the passage ought to read:
'When George Bush co-owned the Texas Rangers with a bunch of businessmen who had all the real money, construction began on The Ballpark At Arlington, after the ownership group finagled the eminent domain laws in order to swindle some property owners out of the market price for some valuable land. The property owners sued and won, but The Ballpark arose anyway, enabling Mr. Bush to cash out his original investment several times over without ever having done any actual work. This helped launch the successful portion of his political career, culminating in his becoming President of the United States, a job from which he took an evening off last spring in order to be the guest of Kenneth Lay for the opening of Enron Field in Houston. Mr. Lay was CEO of Enron and a well-known political supporter of the president who, these days, of course, would not recognize him from a box of turnips.'
"The Nation, I am sure, regrets the error."
Indeed we do.
One of the major falsehoods being bandied about by apologists for the Bush Administration is that while Enron may have bankrolled much of the President's political career it got nothing for those
Concerned about potential taint from the metastasizing Enron scandal, George W. Bush met with reporters recently to distance himself from Enron's chairman, Ken Lay (nicknamed "Kenny Boy" by W. before the scandal). It is testament to how indelible that taint may become that Bush found it necessary to lie about his friend. He claimed that Lay supported Ann Richards in 1994 when Bush ran for governor of Texas and that he only got to know him later. In fact, Lay was a leading contributor to Papa Bush's re-election run in 1992, and by his own account was "very close to George W." Enron's PAC and executives pumped $146,500 into W.'s 1994 race (while Richards received all of $12,500 from Enron sources). Bush "was in bed with Enron before he ever held a political office," reports Craig McDonald, director of Texans for Public Justice.
W. has good reasons for trying to minimize his relationship with Lay and Enron in the dying days of his father's presidency. After Clinton's 1992 victory, Enron pushed hard to exempt its energy futures contracts from regulatory oversight before the new Administration took office. The lame-duck chairwoman of Bush's Commodity Futures Trading Commission, Wendy Gramm, wife of Texas Republican Senator Phil Gramm, brought the exemption to a final vote on January 14, 1993, six days before Clinton took office. Enron, a leading contributor to Phil Gramm's campaign coffers, then named Wendy Gramm to its board of directors, where she pocketed about $1 million in payments and stock benefits over the next nine years. She served on the company's audit committee and helpfully turned a blind eye to the shady private partnerships Enron set up off the books to hide debt and mislead investors. In 2000, as the Supreme Court was naming Bush President, Senator Phil Gramm slipped a bill exempting energy trading from regulation into Clinton's omnibus appropriations act, avoiding hearings, floor debate and notice. Enron was all set to operate in the dark.
What is the Enron saga about? Enron's bankruptcy, the largest in history, exposes the decay of corporate accountability in the new Gilded Age. No-account accountants, see-no-evil stock analysts, subservient "independent" board members, gelded regulators, purchased politicians--every supposed check on executive plunder and piracy has been shredded. Enron transformed itself from a gas pipeline company to an unregulated financial investment house willing and able to buy and sell anything--energy futures, weather changes, bandwidth, state legislatures, regulators, senators, even Presidents.
It is Enron's rise that lays bare the hypocrisy of modern conservatives--call them Enron conservatives. Enron conservatives fly the flag of free markets but actually use political and financial clout to free themselves from accountability, rig the market and then use their position to ravage consumers, investors and employees. These are not the small-is-beautiful compassionate conservatives George Bush advertised in the election campaign, or the tory conservatives who protect flag, family and honor. Enron conservatives make the rules to benefit themselves. "They have clout and the ability to get the rules written their way," said Stephen Naeve, chief financial officer for Houston Industries, Inc. about Enron in 1997. "They play with sharp elbows."
Ken Lay learned about regulation while working at the Federal Energy Regulatory Commission (FERC). After he created Enron, he lavished millions on lobbyists and campaign contributions to free Enron from regulation and to push energy deregulation. His lobbyist stable has included James Baker, Bush I's Secretary of State; Jack Quinn and Mack McLarty of the Clinton White House; and Marc Racicot, current head of the Republican Party.
Enron's lobbyists played a large role in California deregulation--setting the state up for a hit. Most experts believe that Enron, controlling about a quarter of wholesale trading in electricity with no regulatory oversight, was central to the market gaming that led to last year's "energy crisis," which cost Californians about $50 billion. For six months Pat Wood, Enron's handpicked head of FERC, refused to impose price controls. The White House, led by economic adviser Lawrence Lindsey, a former Enron consultant, ridiculed the very notion. In those six months, Public Citizen reports, Enron posted increased revenues of nearly $70 billion. When the price controls were finally enacted, the "crisis" disappeared. Spencer Abraham, Bush's clueless Energy Secretary, now informs us that this is a triumph of deregulation.
Enron conservatives prefer plunder to production. Enron's twenty-nine top executives cashed in a staggering $1.1 billion in stock in the three years before the firm went belly up. Small investors got soaked, and faithful employees got stiffed. In August, after Lay and CEO Jeffrey Skilling had cashed in more than $160 million in Enron stock, Skilling abruptly resigned. Lay personally e-mailed his employees to assure them that "our growth has never been more certain." Enron then maneuvered to ban its employees from selling the Enron stock in their retirement accounts as its value plummeted, leaving thousands stripped of their life savings.
Enron conservatives aren't limited to the Houston boardrooms. Enron conservatives in the Administration pushed through the $15 billion airlines bailout that included zero for workers. Enron conservatives in the House passed the "stimulus" package that featured tax cuts for corporations and the wealthy while scorning unemployment insurance and healthcare assistance for those losing their jobs. Enron itself was slated to receive $254 million from retroactive repeal of the minimum corporate tax. Enron conservatives in Congress passed the President's tax cut, which showered almost half its benefits on the wealthiest 1 percent. And they even repealed the estate tax, insuring that Lay and his fellow executives could pass along their ill-gotten gains intact to their heirs.
Enron conservatives aren't all Republicans. Enron's deregulation plans, and its contributions, were popular with the Clinton White House. Enron gave $10,000 to the New Democrat Network, the money wing of the Democratic Party. With his employer, Citigroup, owed at least $750 million by Enron, Clinton Treasury Secretary Robert Rubin didn't hesitate to call Treasury to suggest it intervene to forestall the downgrading of Enron's credit rating.
But the leading Enron conservative is W. himself. After all, Bush made his own fortune with inside connections while other investors in his company were getting soaked. Lay and Enron were Bush's leading supporters, contributing $113,800 directly to his campaign and another $888,265 to the Republican National Committee, an arm of the campaign, according to the Center for Responsive Politics. Bush repaid Lay and other "Pioneers"--those who raised $100,000 or more for his campaign--with his shameful tax plan. He continues to push for a stimulus plan that benefits corporations over workers. He is pressing Congress to pass the Enron energy plan, which features massive subsidies to energy companies and further deregulation. And while the White House has begrudgingly admitted to six meetings between Enron representatives and the Cheney energy task force, it continues to stonewall efforts by the General Accounting Office to find out who met with Cheney to draw up the plan.
Public Citizen reports that Enron set up a staggering 2,832 subsidiaries, with almost a third located in the Cayman Islands and other tax havens. On taking office, the Bush Administration announced that it was abandoning Clinton efforts for a multilateral crackdown on these havens, saying, in Treasury Secretary O'Neill's words, that the Administration will not "interfere with the internal tax policy decisions of sovereign nations."
The Administration crows that there is no smoking gun vis-à-vis Enron. We'll see. But the real scandal is not what was done illegally but what was done under cover of law. Enron conservatives don't violate the rules; they change the rules to suit themselves.
As Bush was distancing himself from his old friend Kenny Boy, one of the President's first regulatory acts in office went into final effect: the repeal of the Clinton rules that allowed the government to deny contracts to companies that are repeat violators of workplace safety, labor, environmental and other federal laws. Enron conservatives don't see why corporate lawlessness should get in the way of federal largesse. After all, in this Administration Enron's rise and fall are seen, in the words of Treasury Secretary O'Neill, as a "triumph of capitalism."
When George W. Bush was first running for governor of Texas, Washington editor David Corn took a look at Bush family activities on behalf of Enron in Argentina--itself now suffering the results of untamed financial markets. We reprint this November 21, 1994, article to show how Enron's connections with the Bushes stretch not just to Washington but around the world.
Several years ago, says Rodolfo Terragno, a former Argentine Cabinet Minister, he received a telephone call from George W. Bush, son of the then-Vice President. When he hung up, Terragno was annoyed, he recalls, for the younger Bush had tried to exploit his family name to pressure Terragno to award a contract worth hundreds of millions of dollars to Enron, an American firm close to the Bush clan.
During this past year, as George W. campaigned across Texas to replace Governor Ann Richards, he portrayed himself as a successful businessman who relied on "individual initiative," not his lineage. Contacted in Buenos Aires, Terragno, now a member of the Chamber of Deputies, offered an account that challenges Bush's campaign image.
In 1988, Terragno was the Minister of Public Works and Services in the government of President Raúl Alfonsín. He oversaw large industrial projects, and his government was considering construction of a pipeline to stretch across Argentina and transport natural gas to Chile. Several US firms were interested, including the Houston-based Enron, the largest natural gas pipeline company in the United States. But Terragno was upset with the corporation's representatives in Argentina. They were pressing Terragno for a deal in which the state-owned gas company would sell Enron natural gas at an extremely low price, and, he recalls, they pitched their project with a half-page proposal--one so insubstantial that Terragno couldn't take it seriously. Terragno let the Enron agents know he was not happy with them.
It was then, Terragno says, that he received the unexpected call from George W. Bush, who introduced himself as the son of the Vice President. (The elder Bush was then campaigning for the presidency.) George W., Terragno maintains, told the minister that he was keen to have Argentina proceed with the pipeline, especially if it signed Enron for the deal. "He tried to exert some influence to get that project for Enron," Terragno asserts. "He assumed that the fact he was the son of the [future] President would exert influence.... I felt pressured. It was not proper for him to make that kind of call."
George W. did not detail his relationship with the pipeline project or with Enron, according to Terragno. The Argentine did not know that Enron and the Bush set are cozy. President Bush is an old friend of Kenneth Lay, Enron head for the past ten years and a major fundraiser for President Bush. After the 1992 election left Secretary of State (and Bush pal) James Baker jobless, he signed as a consultant for Enron. An article by Seymour Hersh in The New Yorker last year disclosed that Neil Bush, another presidential son (the one cited by federal regulators for conflict-of-interest violations regarding a failed savings and loan), had attempted to do business with Enron in Kuwait. The Enron company and the family of its top officers have donated at least $100,000 to George W. Bush's gubernatorial campaign.
Shortly after Terragno's conversation with George W., more Bush-related pressure descended on him, the former minister claims. Terragno says he was paid a visit by the US Ambassador to Argentina, Theodore Gildred. A wealthy California developer appointed ambassador by President Reagan, Gildred was always pushing Terragno to do business with US companies. This occasion, Terragno notes, was slightly different, for Gildred cited George W. Bush's support for the Enron project as one reason Terragno should back it. "It was a subtle, vague message," Terragno says, "that [doing what George W. Bush wanted] could help us with our relationship to the United States."
Terragno did not OK the project, and the Alfonsín administration came to an end in 1989. Enron was luckier with the next one. The pipeline was approved by the administration of President Carlos Saúl Menem, leader of the Peronist Party and a friend of President Bush. (The day after Menem was inaugurated, Neil Bush played a highly publicized game of tennis in Buenos Aires with Menem.) Argentine legislators complained that Menem cleared the pipeline project for development before economic feasibility studies were prepared.
Replying to a list of questions from The Nation asking whether George W. Bush spoke to Terragno about the pipeline project and whether he had any business relationship with Enron, Bush's gubernatorial campaign issued a terse statement: "The answer to your questions are no and none. Your questions are apparently addressed to the wrong person." This blanket denial covered one question that inquired if George W. Bush had ever discussed any oil or natural gas projects with any Argentine official. George W.'s response on this point is contradicted by a 1989 article in the Argentine newspaper La Nacion that reported he met that year with Terragno to discuss oil investments. (The newspaper noted that this meeting took place in Argentina, but Terragno says he saw Bush in Texas.)
Theodore Gildred, a private developer again, is traveling in Argentina; his office says he is unavailable. An Enron spokesperson comments, "Enron has not had any business dealings with George W. Bush, and we don't have any knowledge that he was involved in a pipeline project in Argentina."
In late August, several members of the Chamber of Deputies--Terragno not among them--submitted a request for information, calling on President Menem to answer dozens of questions about the business activities of the Bush family in Argentina. (In 1987, Neil Bush created a subsidiary of his oil company to conduct business there. In early August, a Buenos Aires newspaper reported that on a forthcoming trip to Argentina the former President would lobby the Menem government to allow a US company to build a casino there. The onetime President said this was not true.) One of the deputies' queries was, Does Menem know whether George W. Bush attempted to capitalize in Argentina on his father's position? So far Menem has not responded.
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