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.
How are we to read the International Conference on Financing for Development, which recently concluded in Monterrey, Mexico? Just another United Nations talkathon?
On the eve of George W. Bush's recent tour of Latin America, Mexican writer Carlos Fuentes equated the advantages of a global free market with the peaks of the Himalayas, characterizing them as summits so inaccessible that the poor cannot even see them, let alone scale them. Fifteen years of US-prescribed free markets and trade liberalization in Latin America have generated an average annual growth rate of only 1.5 percent, far short of the 4 percent needed to make a serious dent in poverty levels. Add to that the Mexican peso meltdown of 1994, economic stagnation in Central America, the Brazilian currency crisis of three years ago, the political and economic collapse of Peru, endless war in Colombia, coup jitters in Venezuela and the staggering crash in Argentina, and one can understand Fuentes's pessimism.
"Trade means jobs," Bush said as he met with regional leaders and promised a harvest of benefits from his proposed Free Trade Area of the Americas (FTAA)--a thirty-two-nation pact Washington hopes to implement by 2005. But for all Bush's talk of a prosperous hemispheric future, his policy initiatives are mired in a cold war past. The Administration has just anointed a former Oliver North networker and interventionist hawk, Otto Reich, to head the State Department's Latin America section. And much as in the days of the Reagan wars in Central America that Reich helped promote, the Bushies seem to believe that the region's ills are better solved by guns than butter. No sooner had Washington signed off on the sale of a new fleet of F-16s to Chile (ending a two-decade ban on sophisticated-weapons sales to Latin America) than the Administration began asking Congress to increase military aid to Colombia and to lift all restrictions on its use. Those critics who argued that the $1.3 billion antidrug "Plan Colombia" would suffer mission creep and inevitably morph into a prolonged counterinsurgency war are now seeing their darkest fears confirmed.
On the economic front, Bush offered little more than warmed-over trickle-down Reaganomics to a continent in desperate need of a lift from the bottom up (the three countries he visited--Mexico, Peru and El Salvador--all suffer poverty rates of 50 percent or more). Certainly not lost on his Latin American audiences was the one-sided nature of the free trade offered by Bush. For nearly two decades now, Latin Americans have been told that by adhering to the "Washington Consensus" of market liberalization they will be able to partake of the rich American pie. But the cold fact is that the US market has remained closed to a cornucopia of Latin American goods.
Some remedy was found in the past decade's Andean Trade Preference Act, designed to lure impoverished Latin Americans away from local drug economies by allowing them to freely export a list of 4,000 goods into the United States. But since ATPA expired last year, the Senate and the White House have balked at its reauthorization because of protectionist pressure from conservative, primarily Southern, textile and agriculture interests. Its reinstatement could shift 100,000 farmers in Peru alone from coca to cotton cultivation.
Washington's refusal to depart from such unequal and inflexible models has--unwittingly--provoked some positive alternative stirrings. The use of armored cars and tear gas barrages in downtown Lima during the US-Peruvian presidential meeting was an official acknowledgment of the growing restlessness with the status quo. Newly elected President Alejandro Toledo has seen his popularity plummet to 25 percent as he has failed to offer economic alternatives. In Brazil center-left candidate Luiz Ignacio "Lula" Da Silva leads in this fall's presidential polls and vows to block the FTAA if elected. Even the incumbent, more conservative, President Enrique Cardoso has begun to steer Brazil toward more independence from Washington. It's still too early to predict how the developing debacle in Argentina will play out.
Finally, El Salvador, where Bush ended his Latin American tour, couldn't have provided a more fitting showcase for the current disjuncture between Washington and its southern neighbors. During the 1980s the United States was willing to spend billions to fight a war against leftist insurgents and promised a bright, democratic future. That conflict was settled ten years ago with a pact that opened up the political system but did nothing to address the social ills that provoked the war in the first place. And once the guerrillas were disarmed, Washington lost interest; in the past decade US aid has been reduced to a paltry $25 million a year. Today El Salvador languishes with vast unemployment, radical economic disparities and a murder rate forty times higher than that of the United States.
Democrats like California Assembly Speaker Antonio Villaraigosa are probably right when they claim that Bush's trip was aimed more at luring the domestic Latino vote than at building bridges to the South. During his 2000 campaign, Bush excoriated Bill Clinton for squandering a chance to improve relations with Latin America. But now Bush seems to be following in that same sorry tradition.
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.
A probe of the company's White House ties should begin at his door.
While most of the media focused, with good reason, on the huge increase in military spending and dramatic cuts in domestic programs in President Bush's $2.1 trillion budget proposal for 2003, a fe
Those who place the blame on executive greed may be missing the larger point.
They helped set the stage for the current scandals.
In early March, the Bush Administration adopted a policy that the steel industry as well as the United Steelworkers of America (USWA) have long been agitating for--tariffs on steel imports. The official reason is to give the industry some "breathing space," so it can restructure while shielded from foreign competition. It's more likely that Bush wants to carry some important industrial states in 2004.
Thanks to NAFTA, Canada and Mexico are exempted, as are some poorer countries. Imports from elsewhere will face initial duties ranging from 8 percent to 30 percent, though the levels will decline over the next three years as they are gradually phased out. This is less than what labor and management wanted, but it's still striking coming from a professed free-trader. The Clinton Administration never did anything remotely like it--and if it had, Wall Street, which was unfazed by the Bush announcement, would have panicked about the protectionist threat.
Loud complaints did come from abroad, though. Even British Prime Minister Tony Blair, usually found waving the Stars and Stripes with hysterical glee, denounced the move as "unacceptable and wrong." He urged the industry to restructure rather than hide behind trade barriers--exactly the prescription the United States usually gives other countries (with similar indifference to displaced workers). Blair was joined by politicians, businesspeople, unions and pundits around the world--and by Bush's own frequently indiscreet Treasury Secretary, Paul O'Neill, who told the Council on Foreign Relations that the tariffs would cost more jobs in steel-using industries than they could save in steel.
Indeed the industry is in dire shape. It's lost 35,000 jobs in the past two years. Sixteen producers are operating in bankruptcy. Steel employed 1.5 percent of US workers in 1950, 0.6 percent in 1980 and 0.2 percent in 2000, versus 0.1 percent today. It's hard to believe three years of protection can reverse that long slide.
Clearly the Administration structured its tariffs with an eye on the political map. The kinds of steel offered maximum protection happen to be produced in the electoral battlegrounds of Ohio, Pennsylvania and West Virginia. There's a political pattern to the victims too: Turkey, an important factor in the likely war on Iraq, was spared. Brazil, key to any future hemispheric free-trade agreement, got off relatively lightly, as did Russia, key to many things. The most affected producers are in South Korea, Japan, China, Taiwan and the European Union. Most have filed complaints with the World Trade Organization. The EU is also threatening to retaliate against US steel and textiles, which could limit Bush's political gain in steel country and alienate the textile-intensive South.
Defenders of the tariffs--from US Steel to the union-friendly Economic Policy Institute--argue that everyone subsidizes and protects its steel industry except us. As a result, the US steel industry is getting killed. So the tariffs are necessary to defend it.
Not everyone agrees with this picture of America as victimized innocent. According to the EU's count, the United States has imposed more than 150 measures over the years to protect steel. More than subsidized foreign competition, the US steel industry is suffering from the high value of the dollar, recession, global overcapacity and high pension and healthcare costs.
The United States could have filed a complaint with the WTO, but it would have had a hard time proving its case. Another multilateral route was available too--negotiations to reduce world steel capacity by some 12 percent are well under way. But the Administration and its supporters claim that having the tariffs will strengthen Washington's negotiating hand.
The USWA seems to have no idea of how offensive foreign workers find Bush's big stick policy. Most of the affected countries have higher unemployment rates than ours. The EU, Japan and Latin America haven't seen a boom in decades, and Asia is still recovering from its 1997 financial crisis. Gary Hubbard of the Steelworkers' Washington office conceded that the EU and Japanese unions were annoyed but wasn't sure whether the USWA had consulted at all with its counterparts abroad (no one had ever asked the question before). So much for solidarity.
It's nice to imagine another world, where we protect workers, not their jobs. If we had a good system of income support, retraining, job placement and job creation, we wouldn't have to disemploy foreign workers to fight what's probably a losing battle to save jobs here. Sweden has long had such an active labor market policy, as it's called. Workers wouldn't have to fear innovation if they knew they wouldn't end up on the sidewalk. But that's not the way the world works these days. It's all about market solutions--except when George W. Bush is cruising for votes.