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The Houston company was part of the biggest "big idea" of the past decade.

Bush Sr. and others open doors for the Carlyle Group.

Tom White, who pocketed millions running Enron Energy Services, one of Enron's more egregious frauds, remains Army Secretary even after lying to the Senate about his Enron holdings. White continues to say he didn't mislead investors about EES's profitability even as his former Enron employees describe how he goaded them to pretend the unit was making money when it was losing money.

Harvey Pitt, lawyer-lobbyist for the big five accounting firms, continues to serve his former clients as head of the Securities and Exchange Commission, where he defends self-regulation. George W. Bush rebuffed Treasury Secretary O'Neill's recommendation that executives and accountants be held personally responsible for misleading investors, relying instead on Pitt's SEC to oversee executives--even as his budget starves the agency of resources needed merely to retain its staff, much less police the Fortune 500.

Enron's Ken Lay and Andrew Fastow remain at large, neither yet having seen the inside of a grand jury room. The secret partners in the off-balance-sheet enterprises remain undisclosed. The Justice Department--in an investigation headed by Larry Thompson, whose former law firm represented both Enron and Arthur Andersen--appears to be joining Pitt's SEC in pushing Arthur Andersen to cop a plea and settle claims before discovery.

The Bush Administration is staffed with more than fifty high-level appointees with ties to Enron, as documented by Steve Pizzo in a study for American Family Voices. It dismisses all Enron inquiries with imperial disdain. The President stonewalls Government Accounting Office efforts to gain access to Dick Cheney's Energy Task Force records while he continues to peddle the Enron energy plan, which lards more subsidies on big oil companies. Republicans held unemployed workers hostage to win passage of the corporate tax giveaways that Ken Lay lobbied for personally. And Bush continues to argue for turning Social Security into 401(k)-type retirement accounts like the ones that evaporated on Enron employees.

Each day brings another revelation of Enron's remarkable penetration of the Bush Administration, but the White House refuses to reveal the contacts its appointees had with Enron officials and executives. One result is that too little attention has been paid to the delay in imposing price controls when energy companies, led by Enron, were gouging California and other Western states in last year's ersatz "energy crisis." Bush brags that his Administration did nothing to help Enron, but holding off on price controls bought enough time for Lay and other executives to unload substantial amounts of stock.

The Administration's attempt to dismiss Enron as a business scandal, the case of a rogue company run by desperado executives, is laughable on its face. After all, Enron's "Kenny Boy" Lay was Bush's most generous financial patron. Enron's business plan, such as it was, depended on political favors. Enron's freedom from regulation was the result of political fixes. And now the fate of Enron's policies and principals depends in large part on political calculations.

Yet the Bush dodge seems to be working. The press has done its job, but Democrats have failed to find their voices or their spines. If Enron had been a Clinton patron and Gore was in the White House, Congressional Republicans would have forced a special counsel and resignations of compromised officials weeks ago.

Concerned citizens--and Democrats with a pulse--should take off the gloves. White and Pitt should be forced to resign. The criminal investigation should be taken out of the hands of compromised Republican appointees and placed under an independent prosecutor. Enron's energy, tax and privatization plans should be exposed and defeated. And fundamental reforms to protect investors, defend retirement accounts, shut down tax havens, and hold corporate executives, accountants and lawyers personally and criminally accountable are long overdue. For that to happen, voters will have to teach a lesson to the Enron conservatives of both parties who continue to betray their trust.

On February 21 the California Public Employees Retirement System stunned financial markets in Asia when it said it would withdraw its $450 million investments in publicly traded companies in Indonesia, Thailand, the Philippines and Malaysia to comply with new investment guidelines on human rights, labor standards and other political factors.

But the new guidelines don't apply to the fund's substantial investments in private equity markets, including its $475 million stake in the Carlyle Group--nor does CalPERS, the nation's largest public pension fund, see any reason why it should. "I don't have any moral reservations at all" about Carlyle, said Michael Flaherman, chairman of the investment committee of CalPERS.

The $151 billion CalPERS retirement fund, the largest such fund in the world, is invested on behalf of California's 1.2 million state workers and includes $35 billion invested overseas. The fund's relationship with Carlyle began in 1996; over the next four years it invested $330 million in two Carlyle funds, including $75 million in Carlyle Asia Partners. The relationship deepened last spring when CalPERS invested $175 million to buy a 5.5 percent stake in Carlyle. The relationship--so close that CalPERS owns the elegant office building in Washington, DC, where Carlyle's headquarters are located--is far more important to Carlyle than it is to CalPERS, industry analysts said. "CalPERS is called an anchor investor," explained David Snow, editor of PrivateEquityCentral.net, an industry newsletter. "When Carlyle goes to other investors, they can say CalPERS is in."

Carlyle's experience with CalPERS has apparently whetted its appetite for labor pension money. According to an official close to Carlyle, the bank is raising money for a $750 million fund to invest in "worker-friendly companies." Of that total, Carlyle hopes to attract at least $250 million in labor pension money, the official said. Questions about pension fund investments in private equity have become more relevant since the collapse of Enron, with which CalPERS had extensive private business partnerships. Several unions, including the Service Employees International Union (SEIU), strongly opposed the partnerships as well as CalPERS investments in Enron stocks and bonds. Those concerns included Enron's support for energy privatization, its employment of former government officials to lobby for privatization and its sordid human rights record in India. (CalPERS made $133 million from one Enron partnership and may see a gain on another; it lost $105 million on its stock and bond holdings.)

Within the labor movement, CalPERS is highly respected for its cooperation in challenging managers and corporations suspected of violating human rights or abusing workers. In 1999 CalPERS supported two union-backed candidates for the board of Maxxam during a bitter strike by the United Steelworkers of America (USWA). Two years ago CalPERS joined the AFL-CIO in an investors' boycott when the Chinese government and Goldman Sachs took Petrochina, a state-owned oil company, public. The fund's new standards for public investments in emerging markets are the culmination of more than two years of sometimes fierce internal debate. CalPERS investment managers must now consider a wide range of non-economic factors, including a country's political stability, financial transparency and record on labor standards, workers' rights and building democracy. Based on a review by Wilshire Associates, the CalPERS pension consultant, thirteen emerging markets, including Turkey, South Korea and South Africa, passed the test, compared with four that failed. The fund had already banned its managers from investing in publicly traded companies in China and India. "CalPERS is taking more steps in this direction than any pension fund we know about," said Damon Silvers, the AFL-CIO's associate general counsel who focuses on investment strategy.

In December Carlyle sent its three founding partners to Sacramento to brief the CalPERS investment board. One, David Rubenstein, made passing reference to the budding media interest in Carlyle, noting that Carlyle's activities are "visible and under increasing scrutiny." To protect the Carlyle and CalPERS names, he assured the board that Carlyle is "following the highest ethical standards" by "avoiding investments in industries including tobacco, gambling and firearms."

But Carlyle's deep involvement with the military-industrial complex and its ties to the Bush Administration continue to raise questions. Both the SEIU and the Communications Workers of America are collecting information on Carlyle to provide to their pension trustees.

Down the road, Carlyle's investments in Asian companies facing downsizing, manufacturers in China and military conglomerates in Turkey could present serious dilemmas. It's not hard to find contradictions: Carlyle already has investments in China, which is on the CalPERS blacklist for public stock markets, and it is gearing up for more. Liu Hong-Ru, a former official with China's central bank who sits on Carlyle's Asian Advisory Board, is a senior adviser to Petrochina, the company whose public offering CalPERS boycotted in 2000. Until last year, Carlyle was the official adviser to Saudi Arabia's offset program, which allows buyers of US military hardware to use their purchasing power to pressure companies to transfer technology and jobs to their economies. "In effect, Carlyle was telling another country how to leverage their purchases of military equipment in ways that create the most jobs in that country, not this country," said Randy Barber, an expert on offsets at the Center for Economic Organizing in Washington.

Some trade unionists also know from experience that private equity funds aren't the best judge of what constitutes a worker-friendly environment. In 1998 several unions involved with CalPERS were shocked to learn that CalPERS was a partner with a private restructuring fund for Asia run by New York financier Wilbur Ross that played a key role in the suppression of a strike in South Korea. The strike led to the imprisonment of forty Korean trade unionists.

Investors in Carlyle's equity funds include state pension plans in Delaware, Florida, Louisiana, Michigan, New York and Texas, as well as in Los Angeles County. Others are the Ohio Workers Compensation Bureau and Union Labor Life Insurance, a union-run insurance company. According to industry newsletters, union pension funds with significant holdings in private equity markets include SEIU, the USWA, the Hotel and Restaurant Employees, the United Food and Commercial Workers, and the Union of Needletrades, Industrial and Textile Employees.

Did George W. Bush once have a financial relationship with Enron? In 1986, according to a publicly available record, the two drilled for oil together--at a time when Bush was a none-too-successful oil man in Texas, and his oil venture was in dire need of help. (In early March The Nation broke the story on its website; two days later the New York Times covered this Bush-Enron deal.)

In 1986 Spectrum 7, a privately owned oil company chaired by Bush, faced serious trouble. Two years earlier Bush had merged his failing Bush Exploration Company with the profitable Spectrum 7, where he was named the company's chief executive and director. Bush was paid $75,000 a year and handed 1.1 million shares, according to First Son, Bill Minutaglio's biography of Bush. Bush ended up owning about 15 percent of Spectrum 7. By the end of 1985 Spectrum's fortunes had reversed. With oil prices falling, the company was losing money and on the verge of collapse. To save the firm, Bush began negotiations to sell Spectrum 7 to Harken Energy, a large Dallas-based energy company mostly owned by billionaire George Soros, Saudi businessman Abdullah Taha Baksh and the Harvard Management Corporation.

In September 1986 Spectrum 7 and Harken announced a plan under which Spectrum 7 shareholders would receive Harken stock. Bush said publicly that Spectrum 7 would continue to operate in Midland, Texas, as a wholly owned subsidiary of Harken and that he would become an active member of Harken's board of directors. As Minutaglio reports, the deal would give Bush about $600,000 in Harken shares and $50,000 to $120,000 a year in consultant's fees. It also would provide $2.25 million in Harken stock for a company with a net value of close to $1.8 million.

As the details of the Spectrum-Harken acquisition--which Bush badly needed--were being finalized, Enron Oil and Gas Company, a subsidiary of Enron Corporation, announced on October 16, 1986, a new well producing both oil and natural gas. A press release reported that the well was producing 24,000 cubic feet of natural gas and 411 barrels of oil per day in the Belspec Fusselman Field, fifteen miles northeast of Midland. Enron held a 52 percent interest in the well. According to the announcement, 10 percent belonged to Spectrum 7. At that point, Spectrum 7 was still Bush's company. Harken's completion of the Spectrum 7 acquisition was announced in early November.

To spell it out: George W. Bush and Enron Oil and Gas were in business together in 1986--when Ken Lay was head of Enron. (Lay was named Enron chairman in February of that year.) How did this deal come about? Was this the only project in which Bush and Enron were partners? The White House did not respond to a request for information but later was quoted as saying there had been nothing unusual about the arrangement. Spokeswomen for Enron and EOG Resources (formerly Enron Oil and Gas) said they could not provide information on the well or on other possible Bush-Enron ventures.

Does the relationship between the younger Bush and Lay go back further than heretofore reported--to the mid-1980s? The deal could have happened with no contact between Lay and Bush. But most company heads would be quite interested to know that the son of a sitting Vice President had invested in one of their enterprises. Is it possible that Bush and Spectrum 7 received undue consideration from Enron? Given Enron's penchant for using political ties to win and protect business opportunities, it's tough not to wonder whether this Bush-Enron venture involved special arrangements. This is one more Enron partnership that deserves scrutiny--especially since George W. Bush failed to acknowledge it before the details became public. The Spectrum-Enron deal is either an odd historical coincidence or an indication that there's more to learn about the Bush-Enron association.

Thomas White, the former Enron vice chairman appointed by George W. Bush to be Secretary of the Army, should resign immediately. The case against White is self-evident. Touted as "one of the most outstanding managers in corporate America" by Enron's favorite senator, Phil Gramm, he was named Army Secretary, promising to bring "sound business practices" to the Pentagon. But White's entire business experience was at Enron, where he participated directly in the lies and mismanagement that resulted in its bankruptcy and the betrayal of investors and employees. Enron's business practices generally, and White's in particular, are the last thing that should be inflicted upon the Department of the Army.

Before being named Army Secretary, White was vice chairman of a venture called Enron Energy Services from 1998 through May 2001. He was paid $5.5 million in salary and bonuses in his last year alone and walked off with stock and options valued at about $50 million and homes in Naples, Florida, and Aspen, Colorado, worth more than $5 million apiece.

Touted as a burgeoning profit center, Enron Energy Services reported a pretax operating profit of $103 million on revenues of $4.6 billion in 2000. But EES was a fraud, hemorrhaging money while covering up its losses with accounting maneuvers. Its profit in 2000, according to Enron vice president Sherron Watkins, was created by counting ersatz financial trading gains from one of the infamous off-budget Raptor partnerships. The recently released special investigation of Enron's board of directors concluded that those transactions violated accounting rules. White and EES chairman Lou Pai made millions, but the venture they ran was so mismanaged that in February 2001 Enron executives brought in another leadership team to clean up the mess.

Enron Energy Services was set up to compete with public utilities in selling energy to large enterprises like JC Penney, the Catholic Archdiocese of Chicago and the US Army. Enron would sign long-term contracts to provide energy at a sharply reduced fixed price. It would then install energy-saving devices to lower its clients' energy needs and use its trading savvy to supply that energy at bargain prices.

From the beginning, though, Enron's follow-through was something of a joke. "They knew how to get a product out there, but they didn't know how to run a business," former EES employee Tony Dorazio told the New York Times. Glenn Dickson, an EES director laid off in December, charged that White and Pai "are definitely responsible for the fact that we sold huge contracts with little thought as to how we were going to manage the risk or deliver the service."

Perhaps Pai and White were more concerned about selling than fulfilling contracts because they were making their money on the front end, benefiting from Enron's aggressive accounting practices. When Enron signed a ten-year contract with a customer, it would project its revenues and profits over the ten years and book all of them as received in the first year of the sale. This "mark to market" accounting is a generally accepted accounting practice--but only when the revenues and costs can be reliably projected. EES had to predict future energy prices, the pace of energy deregulation in different states and the conservation savings of its customers over many years. It then paid its managers and sales personnel bonuses based on those projections. This was an irresistible invitation to what former EES employee Jeff Gray called "illusory earnings."

And illusion there was. "It became obvious that EES has been doing deals for two years and was losing money on almost all the deals they had booked," wrote former employee Margaret Ceconi in an e-mail to Enron's board in August, warning that more than $500 million in losses were being hidden in Enron's wholesale energy division. Enron used its bankruptcy to walk away from EES's losing deals and dismissed most of its 1,000 employees.

Where was White during all this? His emerging defense is that he was out of the loop. He didn't do numbers. He provided a dashing can-do military figure for the customers, a rainmaker who helped land the deals. And EES was tasked to show growth. Bidding for a fifteen-year, $1.3 billion contract with Eli Lilly, it paid Lilly $50 million up front to seal the deal. The contracts could be projected as profitable, even if they were to bleed money in the succeeding years. So long as EES kept expanding fast enough and the contracts kept rolling in, no one need know. Under White's leadership, Enron Energy Services turned into a classic Ponzi scheme.

White still maintains that EES was "a great business...there were no accounting irregularities that I was aware of." It is hard to imagine a clearer self-indictment. Either he knew that EES was a lie and is potentially guilty of fraud, or he was oblivious to the lie and thus is utterly incompetent to manage the Department of the Army with its annual budget of $91 billion.

Tyson Slocum of Public Citizen argues that White is a walking conflict of interest. He came to the Army pledging to get it out of the energy business, even as Enron was bidding to supply the military with energy. He pledged to sever all financial ties with Enron but elected privately to receive an annuity payment, part of which came from the company. Enron's bankruptcy ended this conflict, but it doesn't put an end to White's complicity in a scheme from which he pocketed millions while running his venture into the ground, betraying the trust of investors and employees alike.

Ultimately Enron is about values, about integrity and responsibility. It is a story of executives who cashed out more than $1.1 billion in stock while misleading employees and investors. Thomas White is one of those executives. Personal responsibility should apply to the powerful as well as the weak. If it means more than election-year campaign rhetoric for this Administration, then it is time for Thomas White to go.

You have to hand it to George Bush the senior for hustle. Back in 1998, he took at least $80,000 in stock from Global Crossing in return for speaking for the company in Tokyo.

Enron, maker of big promises and big donations, stands revealed as a four-flusher.

(A Houston version of the Irish folk song)

Oh, Kenny Boy, your friends are disappearing.
They don't know you, much less your kvetchy wife.
Yes, it's sad when pols that you've been shmeering
Now hope that you'll get twenty years to life.
They sang your song: They passed deregulation.
They passed your laws. They bent the regs your way.
But now they track your every obfuscation.
Old Kenny Boy, their Kenny Boy's now Mr. Lay.

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