News and Features
From Padua's Piazza Insurrezione, where I was standing at 11 in the
morning on April 16, the general strike--Italy's first in twenty
years--looked and sounded like a great success. More than 70,000 people
were already jammed inside the mid-sized square along with their broad
union banners and thousands of flags. Three immense vertical
standards--one for each of the labor confederations--loomed over the
crowd. The noise was deafening: drums, horns, gongs, a PA system on the
electronic equivalent of steroids and 70,000 voices cheering each
"We're ten million strong! More than half the labor force is striking
against the antidemocratic policies of Silvio Berlusconi's center-right
government! Three-hundred thousand are marching in Florence, two-hundred
thousand in Rome..."
The demonstrators in Padua--a university town forty minutes west of
Venice--weren't just striking, they were celebrating. Gathering together
70,000 adversaries of Berlusconi in the heart of the miracolo del
nord-est--the economic miracle of Italy's conservative northeast
where small- and mid-scale manufacturers have produced one of Europe's
greatest concentrations of wealth--was a miracle in itself. The union
banners identified the protesters: eyeglass assemblers from Santa Maria
di Salva, carpenters from Iesolo, leather workers from Verona (most of
them African immigrants), poultry processors from San Martino, hospital
workers and schoolteachers from Venice. But students, university
professors, insurance brokers and television producers also carried
union banners. Thousands of others--teenagers, homemakers, young
professionals--marched with family and friends.
The unions called the strike to protest a reform that would undermine
the 1970 Workers' Statute, the key guarantee of labor rights in Italy.
That's why Sabina Tonetto, a 26-year-old software consultant from the
town of San Donà di Piave, said she was in the piazza. Yet the
company she works for doesn't come under the statute's jurisdiction;
it's too small. And with her skills, she said, "I run no risk of being
laid off." She stayed away from work as a matter of principle: "Certain
things"--the Workers' Statute--"must not be touched. All of us have to
do our part."
Just a few blocks away, the stalls in the farmers' market in Piazza
della Frutta and the shops along Via Dante and Corso Garibaldi were open
for business. Well-dressed pedestrians perused the displays of
handcrafted shoes, silk scarves and designer jackets--variations of what
they were already wearing. The espresso bars were serving up sandwiches,
pastries and pricey chocolates. The streets were peaceful. Nothing in
the shoppers' demeanor, nothing in the merchants' conversation,
connected to what was happening nearby. The noise from Piazza
Insurrezione didn't carry. For anyone who wasn't right there, the
general strike might as well not have taken place.
That's Italy today. While much of Europe has been shifting rightward,
Italy tilted somewhat faster and farther and is now precariously poised,
its citizenry both evenly and deeply divided. About half voted
free-marketer Berlusconi into office in May 2001. His supporters include
the business elite and some workers disillusioned with the left, but
most are small and medium-sized manufacturers, store owners,
professionals and self-employed craftspeople. They are numerous in
Italy, prosperous and happy to have Berlusconi as long as he doesn't
raise their taxes. The other half of the citizenry is outraged by a
prime minister who aims to undermine the labor movement, dismantle the
public sector and foil the prosecutors who have indicted him for
After nearly a year of collective depression and political paralysis,
anti-Berlusconi citizens are starting to mount a credible opposition,
coalescing around the left wing of the labor movement but reaching
beyond to include intellectuals, students, media figures and ordinary
people who are getting involved for the first time. Since January not a
week has gone by without a rally or march or strike bringing anywhere
from 3,000 to 2 million people into the piazzas. The protests are
uniting generations and social classes. So far they've remained loose
enough to attract independents and broad enough to incorporate both the
center and left.
According to Valentino Castellani, a left Catholic and former mayor of
Turin, "The healthy parts of society are finally saying, 'Enough! This
can't go on.'" For Luciano Gallino, a prominent sociologist, the social
protest movements that have sprung up in the last few months represent
"an awakening of civic passion."
Berlusconi provoked the uprising by refusing to modify a series of
"reforms" custom-designed to protect his vast business empire and shield
him (and several Cabinet members) from prosecution for corruption. The
naked self-interest, the almost outlandish specificity of the
legislation, was too much for many Italians to take. One law (already
passed by Parliament) decriminalized the falsification of financial
statements in the private sector. This let Berlusconi off the hook
because he was under indictment for that crime. A second law, also
enacted, makes it difficult for Italian prosecutors to use "letters
rogatory," the standard instrument for obtaining evidence from another
country. This conveniently sabotaged a case in which Berlusconi was
accused of bribing judges, a case that depended on evidence from Swiss
Another law, which has passed the Chamber of Deputies, states that
owning a business does not constitute a conflict of interest for a prime
minister as long as he or she does not run the business. Since
Berlusconi has turned over the administration of his enterprises to
members of his immediate family, he would not have to sell any of his
holdings, which include three of Italy's four private television
networks, the nation's largest publishing conglomerate, Mondadori, and
an advertising agency that dominates the national market.
Although the left unions have been fighting Berlusconi's policies from
the start, the spontaneous street protests began in response to a reform
that would allow the government to exert political pressure on the
judiciary. When judges and prosecutors staged a walkout, two professors
at the University of Florence called on citizens nationwide to support
them. The response was overwhelming and persistent. By February a rally
in Milan's Palavobis sports facility, which holds 12,000, drew a crowd
of 40,000. That same month, leftist film director Nanni Moretti (Caro
Diario, The Son's Room) set off a political revolt when he
spoke to a rally in Rome's Piazza Navona organized by the center-left
Ulivo (Olive Tree) coalition. Instead of making the predictable rally
remarks, Moretti lambasted the coalition leaders, who were standing next
to him, for focusing on petty internal power plays rather than offering
an alternative to Berlusconi. He claimed that he no longer identified
with their politics. The crowd's wild applause and the ensuing debate,
which went on for weeks in the newspapers, embarrassed the Ulivo
leadership into admitting they had lost touch with their constituency.
In March the girotondi ("ring-around-a-rosy protests") began.
Resurrecting a feminist tactic of the 1970s, protesters, holding hands,
circle around a building that figures in one of Berlusconi's reforms. If
they are protesting his control over 90 percent of the airwaves, they
circle around the state broadcasting headquarters; if they are
protesting steps toward privatizing education or healthcare, they circle
around a school or hospital. Girotondi are taking place all over
Italy--often initiated by grassroots groups, announced just a few days
ahead of time, and advertised through leaflets and by word of mouth. In
addition to citizen protests against Berlusconi's reforms, there are
frequent demonstrations against corporate-led globalization and racist
treatment of immigrants.
According to Nicola Tranfaglia, dean of the humanities faculty at the
University of Turin and one of the opposition's prominent intellectuals,
"These movements don't trust the political parties. They are similar in
some ways to 1968, but then it was young people. Today you see people of
What anchors this spirited civic engagement is the labor movement--more
precisely, the largest and most left-leaning of the three union
confederations, the Italian General Confederation of Labor, or CGIL. "In
just three months, the CGIL has pushed the center-left so there's a
tougher opposition and greater unity," Tranfaglia said.
If any one issue unites the opposition to Berlusconi, it is the attack
on the Workers' Statute. Berlusconi wants to drop Article 18, which
stipulates that if a judge finds that an employer has fired a worker
unfairly, that worker can choose to go back to his or her job or accept
a money settlement. Italians in the opposition see Berlusconi's move as
an attack on basic individual rights. L'articolo 18 non si tocca
("Article18 cannot be touched") has become the central slogan of the
Berlusconi and his allies in the most powerful business organization,
Confindustria, argue that Article 18 creates labor market rigidity; as
long as it stays on the books, they say, employers will refuse to hire
additional workers, the economy will produce no new jobs and investors
the world over will shun Italy. Sociologist Luciano Gallino thinks this
is nonsense. "Eliminating Article 18 has nothing to do with creating
jobs. It's the first step in labor market deregulation. It would open
the door to creating a class of the working poor"--a phenomenon that
Italians on the left see as typically American. Berlusconi's attack on
Article 18 serves another purpose: "He is trying to split the labor
movement," former Mayor Castellani said. Everyone in the opposition
Italy has had three politically diverse and competing union
confederations since the onset of the cold war. Their ability to
cooperate is endlessly fluctuating. The Italian Confederation of Workers
Unions (CISL) is the second-largest confederation, the most willing to
compromise with Berlusconi's government and the least interested in
defending Article 18. The smallest confederation, the Italian Union of
Labor (UIL), was also inclined to bend on Article 18. But Sergio
Cofferati, secretary general of the CGIL, refused to budge an inch. He
ended up rescuing the entire opposition.
Cofferati is the new hero--patron saint says it better--of Italy's left.
When the other two confederations refused to support a protest march to
defend Article 18, Cofferati insisted that the CGIL hold the
demonstration by itself. Over a million people converged on Rome on
March 23 in the largest rally since the Second World War. Cofferati also
called for the general strike on April 16, and his March triumph
embarrassed the other unions into going along. By the time of the April
25 Liberation Day rallies and the May Day rallies, 200,000 people were
showing up wherever he spoke. The crowds chant "Sergio! Sergio!" no
matter who else is standing on the stage, senior citizens break through
the security lines and throw themselves into his arms, teenagers line up
Cofferati's second and, by statute, final term as head of the CGIL ends
in June. The opposition activists are begging him to lead the
center-left coalition of parties. But he has decided to return to
Pirelli, the giant rubber and tire company where he worked as a
technician two decades ago--to do what, he won't say. He claims that he
has no intention of withdrawing from politics. In April, he helped found
"Aprile," a group that will coordinate the work of the large left
faction within the party of the Left Democrats. But he'll make no bid,
yet, to lead the left formally.
Berlusconi may have made a mistake by going after Article 18. Two of the
several parties in his coalition--the National Alliance (the
ex-neo-Fascists) and remnants of the old Christian Democrats--have
criticized his hard line. Whereas Berlusconi considers himself a
conservative in the mold of Britain's Margaret Thatcher, the other two
parties are less ideologically pure free-marketers. It is difficult to
predict Berlusconi's next move. Some Cabinet members hint that he would
like to find a face-saving compromise on Article 18. His labor minister,
however, claims he will fight the unions to the end. If the reform
becomes law, the unions have vowed to collect signatures for a national
referendum. Organizing for a referendum to revoke the law on letters
rogatory has already begun.
With the right and far right in Europe gaining ground, the ongoing
protests in Italy look like a hopeful sign. But Berlusconi still has the
upper hand. He is the first head of government in post-Fascist Italy
ready and able to disregard "the piazza" and impose his will through his
solid majority in Parliament. "Berlusconi is setting up a regime for
himself. He's not a fascist. He's populist and authoritarian. A
Peronist. Liberal democracy in Italy is in danger," Nicola Tranfaglia
On May 26, about 11 million Italians will vote in local and regional
elections. Although these contests do not necessarily mirror public
opinion on national issues, everyone will interpret them as a showdown
between Berlusconi and the opposition. The center-left has a chance to
improve its standing. The far-left Communist Refounding party has agreed
to cooperate with the center-left coalition--something it refused to do
in last year's election, thereby assuring Berlusconi's victory.
In the meantime, citizens are rallying in the piazzas, collecting
signatures and marching around buildings. As a result, most Italian
small-d democrats would agree with Luciano Gallino when he says, "I'm a
little less pessimistic."
As a Russian studies major at Yale in the 1970s, I observed Soviet
"elections" that were conducted more fairly than the 2002 Yale
Corporation's board of trustees election. Why is the Yale Corporation so
threatened by the candidacy of a prominent New Haven pastor who cares
about Yale and its workers?
The last time a prospective trustee was nominated by petition was almost
forty years ago, when William Horowitz became Yale's first elected
Jewish trustee. Back then 250 signatures were required for ballot
qualification; that has since been raised to 3 percent of eligible
alumni--some 3,200 signatures today. The Rev. Dr. W. David Lee, an
African-American pastor of one of New Haven's largest churches and a
graduate of the Yale Divinity School, gathered 4,870 signatures. If
elected, he would be the only New Haven resident other than Yale's
president to sit on the corporation's board.
But he is also supported by Yale's employee unions, and the
university--one of America's great institutions of higher learning--does
not like that. Normally, the Standing Committee for the Nomination of
Alumni Fellows of the Association of Yale Alumni nominates two or three
alumni to stand for election. This year, apparently threatened by Lee's
grassroots efforts, the committee nominated only one, Maya Lin, creator
of the Vietnam War memorial, around whom the Yale Corporation and its
allies could rally.
As an alumnus, I received no fewer than six mailings--from the alumni
organization, from wealthy Yale alumni, from former corporation board
members--all criticizing Lee for failing to identify who paid for his
mailing, for his "aggressive campaign" and for his "ties to special
interests, labor unions."
In a campaign flier (containing no disclosure of who paid for it), the
Association of Yale Alumni quoted comments from Lee critical of the
university. It is not surprising that a minister of a large church at
which many Yale employees worship might at times express substantial
differences with a university that pays many of those workers less than
a living wage.
As if the Yale Corporation had not already made its interests known,
even the ballot package--paid for by the university and sent to all
voters--was slanted in favor of the corporation's candidate. The
official publication intimates support for its favored candidate from
"over 700 alumni," including the Association of Yale Alumni, the
officers of Yale college classes and Yale clubs and other alumni
associations. The other candidate, the Yale Corporation stated in the
ballot package, was "nominated by petition"--(as though Lee's 4,870
signatures did not indicate the support of those alumni).
Reminiscent of elections conducted in one-party states, the corporation
refused to allow an observer to be present when the ballots are counted.
It is not in the Yale bylaws, he was told.
It is unfortunate that Yale, which has produced so many national
leaders, has earned a widespread reputation for its antiunion activities
[see Kim Phillips-Fein, "Yale Bites Unions," July 2, 2001]. To all but
declare war on Yale's workers and its union, and on an outstanding young
New Haven leader, can only exacerbate city-university tensions and roil
Yale's already troubled labor-management waters.
How could one pro-worker candidate who aspires to a lone seat on a board
of nineteen of America's most influential people unleash the fury of an
entire university hierarchy? Why do powerful people--the kind who sit on
Yale's board--feel so threatened by a local minister? Why can't one of
the world's most prestigious universities--with a multibillion-dollar
endowment--pay its workers a living wage?
For God. For Country. For Yale.
Now that the Enron culprits have been caught red-handed, might not the media inquire of the President whether he takes any responsibility for nearly bankrupting California by refusing to come to
An odd thing has happened in the obscure but spirited fight activists
are waging against NAFTA's notorious Chapter 11 and the exclusive legal
privileges it gives to multinational investors. The Chapter 11
opposition is going mainstream and respectable. Not so long ago, the
only folks raising the alarm were globalization critics like Public
Citizen's Global Trade Watch or the Sierra Club--people the Wall
Street Journal likes to describe as "Luddite wackos." But what will
the Journal's editorial writers say about the National
Association of Attorneys General? Or the National League of Cities, the
US Conference of Mayors and the National Conference of State
Legislatures? These organizations and some others have studied what the
critics say about Chapter 11's true meaning and concluded, Good grief,
they're right! This so-called "investor protection" poses a fundamental
threat to state and local governments' ability to enact laws that
protect the public's health and general welfare.
The issue is currently in play again because the Bush Administration
(and all right-thinking free-trade cheerleaders) is pushing to expand
the same doctrine in the proposed Free Trade Area of the Americas and
asking Congress for blank-check authority to negotiate (better known as
"fast track"). But this time Congressional skepticism is alive and
growing, stoked partly by the prestigious, bipartisan expressions of
concern. Chapter 11 was a sleeper provision in NAFTA that essentially
established a private court for capital--secretive arbitration tribunals
where corporations can bring suits for huge damage claims against the
United States, Canada or Mexico over new regulatory laws or other
actions that may crimp their profit-making. Chapter 11 borrows
property-rights language from the US right wing's domestic "takings"
movement and goes far beyond settled US legal doctrine [see Greider,
"How the Right Is Using Trade Law to Overturn American Democracy,"
October 15, 2001]. That is what alarms the state and local officials.
The Conference of Chief Justices from state Supreme Courts is also
expected to weigh in on the sovereignty issue.
Senator John Kerry is leading the fight for a corrective fast-track
amendment that would instruct the Administration not to negotiate any
new agreement that gives foreign investors greater rights than US
citizens. As a possible presidential candidate, Kerry has a big
problem--he has been an unblinking supporter of trade agreements, so he
has to show environmentalists and labor that he's not totally owned by
the multinationals. If his measure prevails, fast track must go back to
the House, where it was passed by only one vote in December. The
legislative action in any case educates and builds momentum for the
longer fight against these investor-dictated rules stealthily imposed by
so-called free-trade agreements.
The trouble with Kerry's amendment--and with fast-track authority in
general--is that these legislative instructions are really no more than
limp-wristed guidance. The negotiators can ignore Congress, as they have
in the past, and probably get away with it. A pending amendment with
much more bite, first proposed by Charles Rangel and Sander Levin in the
House, would create a mechanism for genuine Congressional leverage over
trade negotiations: the right of either chamber to force a vote on
withdrawing fast-track approval if the negotiators are straying from
their instructions. That would begin to bring daylight and
accountability to the murky politics of globalization. It would also
restore responsibility to where the Constitution says it belongs--in
Congress, not the White House.
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
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
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
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
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
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.
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