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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 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.
It has come to this: The investigation of Enron as a political scandal appears for now to depend on Senator Joseph Lieberman, an Enron Democrat who bagged Enron campaign contributions and who worked hard to block accounting reforms. Lieberman's committee agreed to issue subpoenas seeking information that could shed light on Enron contacts with the White House, but the question is, How hard is he willing to push?
For months the White House and the Republicans have put out the message that Enron is nothing but a business scandal, a strategy that seems to have paid off, judging by the dwindling media coverage. But the lack of coverage doesn't mean that the political aspects of Enron have been thoroughly probed. Far from it.
In a letter to Dan Burton, the Republican chairman of the House Government Reform Committee, Henry Waxman, the senior Democrat on the panel, noted many episodes that warrant scrutiny. Among them: Enron-friendly appointments to the Federal Energy Regulatory Commission; Vice President Cheney's timely condemning of electricity price caps during the California energy crisis (see John Nichols on page 14); meetings between Enron execs and Clinton officials; and Congressional passage in 2000 of legislation exempting energy derivative contracts from federal oversight. Army Secretary Thomas White, who previously headed an Enron venture that engaged in fraudulent accounting practices, failed to disclose all his financial ties to the company. And just-released documents from the Energy Department, forced out by public-interest-group lawsuits, show that Energy Secretary Spencer Abraham met with dozens of business representatives and Bush contributors--and no consumer or conservation groups--while he was developing the Bush energy plan. But Burton, to no one's surprise, turned down Waxman's proposed investigation, and other House Republicans, again no surprise, have been more eager to jump on Enron's and Arthur Andersen's funny numbers than on those firms' political connections.
In the Senate, the Democrats have not shown much taste for this kind of probe either, at least until recently. On March 21 Lieberman announced that the Governmental Affairs Committee, which he chairs, is issuing twenty-nine subpoenas seeking information on contacts between the companies and the federal government. The subpoenas--addressed to Enron, Arthur Andersen and twenty-seven past and present members of Enron's board--request materials regarding Enron's communications with the White House and eight federal agencies, starting in January 1992. Lieberman also said his committee will send letters (not subpoenas) to the White House and the US Archivist asking for similar information. Those subpoenaed have until April 12 to respond. Lieberman's staff is quick to note that his investigation targets Enron, not the White House. And the subpoenas and letters are limited in their scope: They do not ask for Enron files on its efforts to develop political muscle. But the subpoenas and letters could produce information on how the Bush and Clinton administrations responded to Enron's attempts to gain political influence.
The Enron mess offers a view into a world where policy is increasingly shaped by money. Few members of Congress, of either party, want to run down that rabbit hole. But Enron is a political scandal, and those who want it investigated should press Lieberman to chase this bunny as far as it goes.
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.
Corzine: You set the right context.
The Texas company has been a scandal in other countries for a long time.
Is the Enron story one of outrageous mendacity or stupefying ignorance?
Back in the spotlight, he condemns the trading of political favors for cash.
"I see Native people dying every day because they can't afford health insurance," Elouise Cobell said over the phone in mid-January from Washington, DC, as she prepared to testify against Interi
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