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Army Secretary Thomas White appears to be inching closer to becoming the
first Bush Administration casualty of the Enron scandal. Senators Dianne
Feinstein and Barbara Boxer of California have asked Attorney General
John Ashcroft to launch a criminal probe into Enron's role in
manipulating California's electricity market, after Enron memos released
by the Federal Energy Regulatory Commission showed how Enron boosted
electricity prices in California and created shortages.

People close to Feinstein and California Congressman Henry Waxman said
the lawmakers will ask Ashcroft to direct that the criminal
investigation include White and whether the unit he helped lead, Enron
Energy Services, played a part in California's two-year energy crisis.
"We believe we have evidence, based on our conversations with former
Enron employees, that Mr. White and other executives from Enron Energy
Services may have worked side by side with Enron's traders and supplied
inside information about the amount of electricity California needed,"
an aide to Feinstein said. "We believe, based on this information, that
the traders were then able to create shortages and manipulate the price
of power in the state."

Neither a spokesman for White nor for Enron returned calls for comment.
Enron is already under investigation by California Attorney General Bill
Lockyer for allegedly manipulating the price of electricity and natural
gas. White is being investigated by the FBI on the timing of his sale of
Enron stock last year and by the Inspector General's office on his use
in March of a government airplane to fly to Aspen to sign papers on the
sale of a $6.5 million house he owned, prompted by Enron-related
financial problems. Separately, he engaged in a dispute with Defense
Secretary Donald Rumsfeld over the Crusader weapons system; Rumsfeld
continued to express support for him.

Former employees of EES have come forward saying that the retail unit,
under White's leadership, played a role in California's power crisis and
that White told his staff that EES would earn millions in profits
because of the crisis. In addition, former employees are coming forward
with information about White that indicates that his involvement with
Enron's suspect accounting was far deeper that he has let on. White has
said that EES was a legitimate operation and not a house of illusory
profits.

John Olson, an analyst now with Sanders Morris Harris, recalls asking
White in 1999 how EES, a relatively small operation, could show millions
of dollars in profit with barely a shred of business. "I did not believe
Mr. White, nor any of the other Enron executives I spoke with, were
being honest or forthcoming about EES's profits," Olson said. "When I
pressed Mr. White for an answer he said, 'One word: California.'"

White told EES's sales team in 1998 that they could earn hefty bonuses
by signing energy contracts with large businesses in California to
manage their electricity needs for a substantially cheaper price than
these companies had been paying through their local utilities. But
promising customers a discount at the beginning of the contracts meant
EES wasn't earning enough money to cover what the local utilities were
charging for gas and electricity. Moreover, EES was spending much more
than anticipated setting up the infrastructure for the contracts, said
Lee Jestings, a former EES executive who worked directly with White.

Jestings said he told White that EES would actually lose money this way,
but White said Enron would make up the difference by selling electricity
on the spot market in California, which Enron had bet would skyrocket in
2000. Jestings said he continued to complain to White that the profits
declared by the retail unit were not real. "Tom told me those are the
orders," Jestings said. "He said he never questions a direct order. This
man spent thirty years in the Army and was a four-star general. His life
was based on taking orders." Jestings said he resigned from EES in 2000
because he did not agree with the way EES reported profits. He is now
working as an energy consultant.

The ex-employees, more than a dozen interviewed, said White often
clashed with Lou Pai, chairman of EES, over the company's use of
"aggressive" accounting methods to make the unit appear profitable when
it wasn't but that ultimately White agreed that EES would have to use
such methods because the unit was hemorrhaging cash right from the
start. Steve Barth, a former EES vice president of special projects who
attended meetings with White and Pai, said White's job was that of
cheerleader--he was supposed to motivate the EES sales force to show, by
any means necessary, that the retail unit made a profit. "That meant
lying to Wall Street," Barth said. "White did it, and so did I." Barth,
who transferred from EES to Enron's broadband unit in 1999 and left last
July to start a broadband firm, said his experience at the company had
been positive.

Enron reported that EES, founded in 1997, became profitable during the
fourth quarter of 1999 and had steadily rising profits every quarter
thereafter. Those reports helped send Enron's stock price to $83 by the
end of 2000, from $43 at the beginning of the year. As part of his
employment contract with Enron, White was given a small financial stake
in EES, later converted into Enron stock, which he sold for more than
$50 million.

Eventually, with Enron becoming a target of California lawmakers, White
may have decided it was time to get out. In early 2001, according to
Barth, when then-Enron chairman Kenneth Lay was under consideration to
be Energy Secretary, Lay met with George W. Bush and urged him to
appoint White as Secretary of the Army. Barth said White told him that
the California energy crisis was hurting EES and that the unit's profits
would never materialize. White "just wasn't happy with his role at the
company anymore," Barth said.

The recent decision of the Supreme Court in the case of Hoffman Plastic
Compounds, Inc. v. National Labor Relations Board
makes it plain that
the Court's majority lives in denial of the social reality millions of
working people face every day. The Court began by making worse an
already bad precedent. As a result of a previous decision in the case of
Sure-Tan Inc. v. National Labor Relations Board, millions of
undocumented immigrants lost the right to be reinstated to their jobs if
they were fired for joining a union. Now the Rehnquist Court says they
can also forget about back pay for the time they were out of work.

The decision rewards employers who want to stop union organizing efforts
among immigrant workers--the very people who've built a decade-long
track record of labor activism, often organizing themselves when unions
showed little interest in them. Their bosses can now terminate
undocumented workers who join a union, without monetary consequences.

But the Court's logic goes further, willfully ignoring social reality.
Today in 31 percent of union drives employers illegally fire workers,
immigrant and native-born alike. Federal labor law may prohibit this,
but companies already treat the cost of legal battles, reinstatement and
back pay as a cost of doing business. Many consider it cheaper than
signing a union contract. In the Court's eyes, however, retaliatory
firings are not even a violation of law.

William Gould IV, former chair of the National Labor Relations Board,
points to "a basic conflict between US labor law and US immigration
law." The Court has held that the enforcement of employer sanctions,
which makes it illegal for an undocumented immigrant to hold a job, is
more important than the right of that worker to join a union and resist
exploitation on the job.

According to Rehnquist, Jose Castro, the fired worker in the Hoffman
case, committed the cardinal sin of falsely saying he had legal status
to get a job. This lie, told by millions of workers every year, is
winked at by employers who want to take advantage of immigrants' labor.
It is only in the face of union activity that bosses suddenly wake up to
the fact that their workers have no papers (and usually then fire only
the ones involved with unions).

This decision isn't about enforcing immigration law, despite Rehnquist's
pious assertion that employers can already be fined for hiring people
like Castro. It's about money. When it becomes more risky and difficult
for workers to organize and join unions, or even to hold a job at all,
they settle for lower wages. And when the price of immigrant labor goes
down, so do the wages for everyone else. The decision has already been
misused by some employers, who have told their immigrant workers they no
longer have the right to organize at all, or have illegally refused to
pay them the minimum wage or overtime.

A recent study by the Pew Charitable Trust counts almost 8 million
undocumented people in the United States. They make up almost 4 percent
of the urban work force, and more than half of all farmworkers. The flow
of workers across the border will not stop anytime soon. The National
Population Council of Mexico reports that "migration between Mexico and
the United States is a permanent, structural phenomenon--the intense
relationship between the two countries makes it inevitable."

Sacrificing the rights of those workers will not stop people from
crossing the border, nor end the need for the work they do. If they are
to have legal status, the door to legal immigration must be opened and
sanctions repealed. But come they will, regardless. The Court's message
to them, however, is: Know your place. Do the work, stay in the shadows,
accept what you are given and never think of organizing to challenge the
structure that holds you in chains.

Since the fall of the House of Enron, Republicans have been polishing
their populist patter. George W. Bush cast aside his patron, Enron CEO
Ken "Kenny Boy" Lay, and proclaimed himself the champion of executive
rectitude. When the Corporate and Auditing Accountability Act passed in
the House, Republican Richard Baker crowed, "We have taken action. We
have stood up to Wall Street."

This crowd has no shame. The bill--which lobbyists for big-five
accounting firm Deloitte and Touche praised for not going
"overboard"--fails to ban accountants from peddling consulting work to
the companies they audit, fails to shut the revolving door between
accountants and the companies they audit and fails to create an
accounting oversight board with subpoena power and independence. As
Representative John LaFalce noted, "The opportunity to enact meaningful
reform had been passed, eluded and avoided."

The House pension bill was even more disgraceful. As Representative
George Miller noted, it "doesn't deal with the lessons of Enron." It
doesn't put employees on the boards of their pension funds, doesn't
guard workers against biased investment advice and doesn't require
immediate notification of large stock sales by high-level
executives. Worse, it carves a huge new loophole in pension protections,
and as Daniel Halperin, a pension law expert at Harvard Law School,
notes, it will "basically gut" current rules that protect average and
low-wage workers. After Enron, where twenty-eight executives walked off
with more than $1 billion while workers watched their retirement savings
vanish, the Republican version of reform will make it easier for the big
guys to pocket lavish benefits while the workers get stiffed. The
provision, no surprise, was championed by the business lobby and
supported by Bill Thomas, the corporate bag man who chairs the House
Ways and Means Committee.

Republicans are certain that token reforms and stentorian rhetoric will
give them cover while they continue to bank the contributions of a
grateful financial and business community. Many Democrats
opportunistically voted for the Republican bills after their tougher
reforms were voted down on virtual party line votes.

Now the Republican "reforms" head to the Senate, where Democrats are in
control, but Enron conservatives in both parties are legion. Ted Kennedy
offers a real alternative on pension reform, but Democratic finance
committee chairman Max Baucus is already talking about a compromise bill
that would accept much of the corporate agenda.

Meanwhile, House and Senate conferees are putting the finishing touches
on a bankruptcy bill pushed by the credit card industry; it will make it
much harder for working people to get a fresh start at a time when
millions are losing their jobs. Democratic Senate leaders could (but
probably won't) demonstrate their solidarity with working people by
burying the bankruptcy bill instead of passing it. The power of money,
alas, speaks to both parties.

Millions of Americans are appalled by the bilking of Enron's workers.
And millions are concerned about their own pension savings. Progressives
and labor should raise hell about sham reforms that actually help the
big guys screw their workers. If Enron conservatives in both parties are
exposed, voters might show them this fall that they are paying more
attention than anyone thought.

Some prestigious Wall Street firms may have been involved in a Ponzi scheme.

California GOP gubernatorial candidate Bill Simon Jr. has portrayed
himself as a savvy businessman who can deal successfully with the
state's financial woes. But Simon's ties to Enron, the bankrupt energy
company that has been charged with manipulating the electricity market
in California and is under federal investigation, raise questions about
his business acumen and his fitness for the state's top post.

Former business associates of Simon say that he personally persuaded
Enron to invest in Hanover Compressor, a Houston company he founded in
1990 and on whose board he sat between 1992 and 1998. Hanover makes
pumps that move natural gas and oil through pipelines and from wells.
According to several people at Enron and Hanover involved in the
transaction, the Enron investment was made in 1995 through an Enron
partnership called Joint Energy Development Investments, or JEDI, which
is now at the center of the federal investigation into Enron's collapse.

Simon held a 1.4 percent stake in Hanover, which after the JEDI
investment was worth tens of millions of dollars. His father, William
Simon, the former energy czar and Treasury Secretary under Richard
Nixon, ran a private investment firm, William E. Simon & Sons,
which owns more than 4 percent of Hanover. The younger Simon declined
requests for an interview. He has previously dodged questions about his
relationship with Enron.

JEDI was at one time Hanover's second-largest shareholder, with an $84
million stake in the company, according to a Securities and Exchange
Commission filing. Last June, JEDI shifted most of its shares to another
off-balance-sheet Enron partnership. JEDI's stake in Hanover allowed the
Enron executives who managed JEDI to attend Hanover board meetings.
Hanover executives said Simon and Enron came up with several
joint-venture ideas.

Simon was also involved in Hanover in matters separate from the Enron
deals that could raise legal concerns. Hanover said in February that it
would have to restate its financial results beginning in January 2000
because of improper accounting for a partnership that--as with
Enron--made the company appear more profitable than it was. Over several
years during this time, according to the Wall Street Journal,
Hanover officers sold millions of shares of stock--again much like
Enron, where officers who were allegedly aware of the company's
accounting practices were encouraging employees and others to buy shares
even as they were selling their own. Hanover is now the target of at
least four class-action lawsuits by shareholders who have alleged the
company misled investors; and it is also under investigation by the SEC.

Simon wasn't a member of Hanover's board at the time of the improper
accounting, but a week before Hanover made the announcement, the company
reported that every annual report it has issued since going public in
1997 contained errors. Simon, as a member of Hanover's audit committee,
was responsible for approving the company's annual reports. The audit
committee, according to Hanover's investor relations department, was
held responsible by Hanover for the error.

Simon helped Hanover set up a partnership in the Cayman Islands, Hanover
Cayman Limited, as a tax shelter. In addition, he assisted Hanover in
setting up a joint venture with Enron and JEDI to construct a
natural-gas compression project in Venezuela.

Jamie Fisfis, Simon's campaign spokesman, said Simon has been
forthcoming about his business dealings with Hanover and Enron. But when
asked about JEDI's investment in Hanover and what role Simon played,
Fisfis said he did not know and would only confirm that Simon was a
member of the Hanover board at the time. Moreover, he could not offer an
explanation when asked about the other joint ventures with Enron that
Simon's former business associates said he had a hand in creating. Simon
has told reporters on the campaign trail that he was barely involved in
Hanover's business activities, but Hanover executives say Simon was
intimately involved during his six years on the board. When Simon left
the board in 1998, he sold most of his 430,000 shares in the company.
However, he still has more than $1 million invested in Hanover,
according to the Associated Press.

Sherry Bebitch Jeffe, senior scholar of the University of Southern
California's School of Policy, Planning and Development, said Simon has
to start answering questions about his dealings with Enron, "whether it
be good or bad," or risk alienating voters. "The symbol that Enron has
become is negative, cheating and ruthless."

Roger Salazar, a spokesman for Governor Gray Davis, who currently trails
Simon according to the latest polls, said Simon's close ties with Enron
pose questions about his track record: "For a man who touts himself as a
business manager, these types of activities raise questions whether
that's true."

It's hard to imagine a tale of corporate mischief that would shock veteran observers of the US tobacco industry. But even the most jaded reader may raise an eyebrow at the allegations reported on page 11 that major American tobacco companies smuggled cigarettes and laundered money on a vast scale, defying US and foreign law and defrauding foreign governments of hundreds of millions in tax revenues before engineering a rewrite of the USA Patriot Act last fall to shield themselves from international liability. For this special report, the result of an investigation by The Nation, the Center for Investigative Reporting, and NOW With Bill Moyers--with support from the Investigative Fund of the Nation Institute--journalist Mark Schapiro traveled to Colombia, whose state governments are suing the companies in US court, to assess the charges and to inspect the scene of the alleged smuggling operations. (NOW airs its investigative report on April 19.)

The Bush Administration ought to cooperate with authorities in Colombia and other countries in their efforts to hold US corporations accountable. It should support legislation to establish clearly the principle of jurisdiction in US courts over allegations of wrongdoing by American companies overseas. And the Justice Department should launch an investigation into the activities of US tobacco firms in Colombia to determine whether laws were broken and prosecution is warranted. It is important for the rest of us to raise the political cost of inaction. Republicans in Congress and in the White House may one day realize that with friends like Philip Morris, they don't need enemies.

The IMF deserves to be blamed. But so does the country's willing political class.

The Enron "outrage," AFL-CIO president John Sweeney told a rapt crowd of several hundred workers at Milwaukee's Serb Memorial Hall, is "not the story of one corporation's abuses, but sadly it's an example of business as usual in boardrooms and executive suites all across the country." Over the coming months, at a series of town-hall meetings around America, the AFL-CIO will warn workers that they, too, could be "Enroned," and it will call for "no more business as usual."

In an unprecedented way, argues AFL-CIO corporate affairs director Ron Blackwell, the Enron scandal "opens up a channel of public discourse on issues of retirement security and corporate accountability." In the booming nineties nobody wanted to hear why corporations and capital markets had to be better regulated, and reformers were left pleading for corporations to be "socially responsible." But today, "new economy" job-hoppers as much as steelworkers have good reasons to listen to union warnings about deeply flawed 401(k) plans and Social Security privatization.

The labor movement helped win millions in severance pay for laid-off Enron workers, provided legal counsel for workers battling Enron's creditors, sued Enron executives (through union-affiliated Amalgamated Bank) on behalf of pension funds that lost hundreds of millions of dollars in Enron's collapse and helped ex-Enron workers--both union and nonunion--tell Congress and the public how they were misused. The AFL-CIO requested new Securities and Exchange Commission rules and forced four Enron directors to withdraw from renomination at other corporate and public boards. Now labor is challenging Enron director Frank Savage's renomination to Lockheed Martin's board, sending the message that independent directors have a public trust.

Besides supporting auditor reform, the AFL-CIO is promoting legislation to strengthen the rights of workers in 401(k) plans--to a point. Senator Jon Corzine, backed by the Pension Rights Center, initially proposed prohibiting employees from holding more than 20 percent of their employer's stock in their plans. But after complaints from unions representing some workers who had bet big with their employers' stock, like pilots and GE employees, the AFL-CIO backed Senator Ted Kennedy's legislation, which places a less stringent limit on the employees' 401(k) holdings of their employers' stock but which, quite importantly, would require equal worker and employer representation in governing the plans. Enron worker Dary Ebright, who lost $300,000 from his 401(k), argues that limits make sense. "If that had been in place," he said in Milwaukee, "I wouldn't be here today."

Sweeney hopes that unions can use votes on Enron-related reforms to draw lines in this year's elections showing what candidates put first--corporations or workers. The AFL-CIO attacked Republican Representative John Boehner's legislation, passed in April, for "wip[ing] out existing retirement protections for workers under the guise of responding to" Enron. The House bill would permit investment firms to advise workers about financial products, like mutual funds, from which those firms profit--precisely the kind of 1990s conflict of interest that is under investigation at several Wall Street brokerages. While providing limited protections for workers and preserving executive privileges, the House bill would also make it easier for corporations to exclude most employees from retirement plans. Labor's advocacy for Enron workers and retirement security could also strengthen organizing, including efforts among white-collar workers, by sparking a more "enlightened" view of a collective voice at work, as it did with former Enron vice president Dennis Vegas, now a union enthusiast.

But a budding labor scandal threatens the movement's credibility on corporate accountability. It appears that a few labor leaders, sitting on the board of ULLICO, parent of Union Labor Life Insurance Company, personally profited from privileged deals in the Enronlike boom and bust of telecommunications upstart Global Crossing, while their unions' pension funds were denied the same opportunity. Robert Georgine, president of ULLICO and former president of the AFL-CIO's building and construction trades department, former Iron Workers president Jake West, Plumbers president Martin Maddaloni and Carpenters president Douglas McCarron are among those who got windfalls of several hundred thousand dollars. In March Sweeney, who did not take part in the deal, called on ULLICO, like Enron, to appoint an independent committee and counsel to investigate, but in mid-April Georgine said he would take a "somewhat different" approach. "We're not going to ask Enron to live by one set of standards and ULLICO to live by another," Sweeney insisted. Many union officials say they were shocked and disgusted by the news, a reminder that "no more business as usual" is a widely applicable slogan, even within union ranks.

Uncovering the industry's multibillion-dollar global smuggling network.

Six weeks ago, The Nation called for Army Secretary Tom White's resignation. White, former vice chairman of an Enron Ponzi scheme called Enron Energy Services (EES) was self-evidently not fit to bring sound business practices to the Pentagon. Since then, new revelations have created a bill of particulars against White serious enough to warrant probes by a federal grand jury and the Defense Department's Inspector General. White has stated that "if I ever get to the point...where the Enron business represents a major and material distraction...I wouldn't stay." That point has come. If White does not resign, he must be fired. The recent revelations show that White continues to practice the same squirrelly ethics that made Enron infamous. Since becoming Army Secretary, he has:

§ infuriated Republican Senator John Warner and Democrat Carl Levin of the Armed Services Committee by masking the full range of his Enron holdings;

§ violated his pledge to divest himself of those holdings, in accordance with ethics guidelines. After requesting an extension to sell his 405,710 shares, he finished dumping them in October, after a flurry of calls to executives at Enron and just before the SEC's public announcement of a formal investigation of the company, which caused the stock to tank. This has made White a target of a grand jury probe on insider trading. White says he was just commiserating with his former friends about Enron's troubles;

§ concealed those supposedly innocent contacts with Enron executives, failing to include them in response to a request by Representative Henry Waxman. White claims that he forgot to include the calls from his home phone;

§ misused a military plane to fly his wife and himself to Aspen, Colorado, where he completed the sale of his $6.5 million vacation house. This earned him an Inspector General's review of his past travel. Military transport is available only for official duty. White claims he had official business in Dallas and Seattle and that Aspen was directly between the two. He also states that he was required to fly a military plane as part of the Bush Administration's secretive continuity-in-government plan, which apparently requires top officials to fly military aircraft to resorts where they maintain mansions.

The more we learn of White's past at Enron, the worse it gets. EES cooked the books to register immediate earnings and profits, when in fact it was suffering hundreds of millions in losses--most of which were then secreted in Enron's notorious accounting scams. White has claimed that he knew nothing about improprieties at EES. But former EES employees interviewed by Dow Jones Newswires affirm that White was part of the scam. He signed off on the EES contracts that produced immediate paper profits and long-term real losses. He urged the sales force to make the company look like it was making money. He even participated in the notorious Potemkin Village trading floor, a fake trading room that EES threw together to impress visiting stock analysts. And then White walked off with millions, while investors were fleeced and the workers discarded. For conservative military analyst Eliot Cohen this alone is grounds for White's resignation, because he cannot profess the core military ethic of "mission" and "men" before self since "he was an integral part of an organization that violated those principles."

These days George W. Bush scarcely remembers his leading political patron, Enron CEO Ken "Kenny Boy" Lay. The President now poses as a champion of corporate accountability, calling for executives to be held personally responsible for their companies' financial statements. Yet he hasn't held his own Army Secretary personally responsible for his fraudulent actions at Enron and his misdeeds as Army Secretary. If White doesn't have the grace to go, he should be dismissed. The Army and the country would be better served if he defended himself from scandals past and present on his own time and with his own dime.

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