Concerned about potential taint from the metastasizing Enron scandal, George W. Bush met with reporters recently to distance himself from Enron's chairman, Ken Lay (nicknamed "Kenny Boy" by W. before the scandal). It is testament to how indelible that taint may become that Bush found it necessary to lie about his friend. He claimed that Lay supported Ann Richards in 1994 when Bush ran for governor of Texas and that he only got to know him later. In fact, Lay was a leading contributor to Papa Bush's re-election run in 1992, and by his own account was "very close to George W." Enron's PAC and executives pumped $146,500 into W.'s 1994 race (while Richards received all of $12,500 from Enron sources). Bush "was in bed with Enron before he ever held a political office," reports Craig McDonald, director of Texans for Public Justice.
W. has good reasons for trying to minimize his relationship with Lay and Enron in the dying days of his father's presidency. After Clinton's 1992 victory, Enron pushed hard to exempt its energy futures contracts from regulatory oversight before the new Administration took office. The lame-duck chairwoman of Bush's Commodity Futures Trading Commission, Wendy Gramm, wife of Texas Republican Senator Phil Gramm, brought the exemption to a final vote on January 14, 1993, six days before Clinton took office. Enron, a leading contributor to Phil Gramm's campaign coffers, then named Wendy Gramm to its board of directors, where she pocketed about $1 million in payments and stock benefits over the next nine years. She served on the company's audit committee and helpfully turned a blind eye to the shady private partnerships Enron set up off the books to hide debt and mislead investors. In 2000, as the Supreme Court was naming Bush President, Senator Phil Gramm slipped a bill exempting energy trading from regulation into Clinton's omnibus appropriations act, avoiding hearings, floor debate and notice. Enron was all set to operate in the dark.
What is the Enron saga about? Enron's bankruptcy, the largest in history, exposes the decay of corporate accountability in the new Gilded Age. No-account accountants, see-no-evil stock analysts, subservient "independent" board members, gelded regulators, purchased politicians--every supposed check on executive plunder and piracy has been shredded. Enron transformed itself from a gas pipeline company to an unregulated financial investment house willing and able to buy and sell anything--energy futures, weather changes, bandwidth, state legislatures, regulators, senators, even Presidents.
It is Enron's rise that lays bare the hypocrisy of modern conservatives--call them Enron conservatives. Enron conservatives fly the flag of free markets but actually use political and financial clout to free themselves from accountability, rig the market and then use their position to ravage consumers, investors and employees. These are not the small-is-beautiful compassionate conservatives George Bush advertised in the election campaign, or the tory conservatives who protect flag, family and honor. Enron conservatives make the rules to benefit themselves. "They have clout and the ability to get the rules written their way," said Stephen Naeve, chief financial officer for Houston Industries, Inc. about Enron in 1997. "They play with sharp elbows."
Ken Lay learned about regulation while working at the Federal Energy Regulatory Commission (FERC). After he created Enron, he lavished millions on lobbyists and campaign contributions to free Enron from regulation and to push energy deregulation. His lobbyist stable has included James Baker, Bush I's Secretary of State; Jack Quinn and Mack McLarty of the Clinton White House; and Marc Racicot, current head of the Republican Party.
Enron's lobbyists played a large role in California deregulation--setting the state up for a hit. Most experts believe that Enron, controlling about a quarter of wholesale trading in electricity with no regulatory oversight, was central to the market gaming that led to last year's "energy crisis," which cost Californians about $50 billion. For six months Pat Wood, Enron's handpicked head of FERC, refused to impose price controls. The White House, led by economic adviser Lawrence Lindsey, a former Enron consultant, ridiculed the very notion. In those six months, Public Citizen reports, Enron posted increased revenues of nearly $70 billion. When the price controls were finally enacted, the "crisis" disappeared. Spencer Abraham, Bush's clueless Energy Secretary, now informs us that this is a triumph of deregulation.
Enron conservatives prefer plunder to production. Enron's twenty-nine top executives cashed in a staggering $1.1 billion in stock in the three years before the firm went belly up. Small investors got soaked, and faithful employees got stiffed. In August, after Lay and CEO Jeffrey Skilling had cashed in more than $160 million in Enron stock, Skilling abruptly resigned. Lay personally e-mailed his employees to assure them that "our growth has never been more certain." Enron then maneuvered to ban its employees from selling the Enron stock in their retirement accounts as its value plummeted, leaving thousands stripped of their life savings.
Enron conservatives aren't limited to the Houston boardrooms. Enron conservatives in the Administration pushed through the $15 billion airlines bailout that included zero for workers. Enron conservatives in the House passed the "stimulus" package that featured tax cuts for corporations and the wealthy while scorning unemployment insurance and healthcare assistance for those losing their jobs. Enron itself was slated to receive $254 million from retroactive repeal of the minimum corporate tax. Enron conservatives in Congress passed the President's tax cut, which showered almost half its benefits on the wealthiest 1 percent. And they even repealed the estate tax, insuring that Lay and his fellow executives could pass along their ill-gotten gains intact to their heirs.
Enron conservatives aren't all Republicans. Enron's deregulation plans, and its contributions, were popular with the Clinton White House. Enron gave $10,000 to the New Democrat Network, the money wing of the Democratic Party. With his employer, Citigroup, owed at least $750 million by Enron, Clinton Treasury Secretary Robert Rubin didn't hesitate to call Treasury to suggest it intervene to forestall the downgrading of Enron's credit rating.
But the leading Enron conservative is W. himself. After all, Bush made his own fortune with inside connections while other investors in his company were getting soaked. Lay and Enron were Bush's leading supporters, contributing $113,800 directly to his campaign and another $888,265 to the Republican National Committee, an arm of the campaign, according to the Center for Responsive Politics. Bush repaid Lay and other "Pioneers"--those who raised $100,000 or more for his campaign--with his shameful tax plan. He continues to push for a stimulus plan that benefits corporations over workers. He is pressing Congress to pass the Enron energy plan, which features massive subsidies to energy companies and further deregulation. And while the White House has begrudgingly admitted to six meetings between Enron representatives and the Cheney energy task force, it continues to stonewall efforts by the General Accounting Office to find out who met with Cheney to draw up the plan.
Public Citizen reports that Enron set up a staggering 2,832 subsidiaries, with almost a third located in the Cayman Islands and other tax havens. On taking office, the Bush Administration announced that it was abandoning Clinton efforts for a multilateral crackdown on these havens, saying, in Treasury Secretary O'Neill's words, that the Administration will not "interfere with the internal tax policy decisions of sovereign nations."
The Administration crows that there is no smoking gun vis-à-vis Enron. We'll see. But the real scandal is not what was done illegally but what was done under cover of law. Enron conservatives don't violate the rules; they change the rules to suit themselves.
As Bush was distancing himself from his old friend Kenny Boy, one of the President's first regulatory acts in office went into final effect: the repeal of the Clinton rules that allowed the government to deny contracts to companies that are repeat violators of workplace safety, labor, environmental and other federal laws. Enron conservatives don't see why corporate lawlessness should get in the way of federal largesse. After all, in this Administration Enron's rise and fall are seen, in the words of Treasury Secretary O'Neill, as a "triumph of capitalism."
When George W. Bush was first running for governor of Texas, Washington editor David Corn took a look at Bush family activities on behalf of Enron in Argentina--itself now suffering the results of untamed financial markets. We reprint this November 21, 1994, article to show how Enron's connections with the Bushes stretch not just to Washington but around the world.
Several years ago, says Rodolfo Terragno, a former Argentine Cabinet Minister, he received a telephone call from George W. Bush, son of the then-Vice President. When he hung up, Terragno was annoyed, he recalls, for the younger Bush had tried to exploit his family name to pressure Terragno to award a contract worth hundreds of millions of dollars to Enron, an American firm close to the Bush clan.
During this past year, as George W. campaigned across Texas to replace Governor Ann Richards, he portrayed himself as a successful businessman who relied on "individual initiative," not his lineage. Contacted in Buenos Aires, Terragno, now a member of the Chamber of Deputies, offered an account that challenges Bush's campaign image.
In 1988, Terragno was the Minister of Public Works and Services in the government of President Raúl Alfonsín. He oversaw large industrial projects, and his government was considering construction of a pipeline to stretch across Argentina and transport natural gas to Chile. Several US firms were interested, including the Houston-based Enron, the largest natural gas pipeline company in the United States. But Terragno was upset with the corporation's representatives in Argentina. They were pressing Terragno for a deal in which the state-owned gas company would sell Enron natural gas at an extremely low price, and, he recalls, they pitched their project with a half-page proposal--one so insubstantial that Terragno couldn't take it seriously. Terragno let the Enron agents know he was not happy with them.
It was then, Terragno says, that he received the unexpected call from George W. Bush, who introduced himself as the son of the Vice President. (The elder Bush was then campaigning for the presidency.) George W., Terragno maintains, told the minister that he was keen to have Argentina proceed with the pipeline, especially if it signed Enron for the deal. "He tried to exert some influence to get that project for Enron," Terragno asserts. "He assumed that the fact he was the son of the [future] President would exert influence.... I felt pressured. It was not proper for him to make that kind of call."
George W. did not detail his relationship with the pipeline project or with Enron, according to Terragno. The Argentine did not know that Enron and the Bush set are cozy. President Bush is an old friend of Kenneth Lay, Enron head for the past ten years and a major fundraiser for President Bush. After the 1992 election left Secretary of State (and Bush pal) James Baker jobless, he signed as a consultant for Enron. An article by Seymour Hersh in The New Yorker last year disclosed that Neil Bush, another presidential son (the one cited by federal regulators for conflict-of-interest violations regarding a failed savings and loan), had attempted to do business with Enron in Kuwait. The Enron company and the family of its top officers have donated at least $100,000 to George W. Bush's gubernatorial campaign.
Shortly after Terragno's conversation with George W., more Bush-related pressure descended on him, the former minister claims. Terragno says he was paid a visit by the US Ambassador to Argentina, Theodore Gildred. A wealthy California developer appointed ambassador by President Reagan, Gildred was always pushing Terragno to do business with US companies. This occasion, Terragno notes, was slightly different, for Gildred cited George W. Bush's support for the Enron project as one reason Terragno should back it. "It was a subtle, vague message," Terragno says, "that [doing what George W. Bush wanted] could help us with our relationship to the United States."
Terragno did not OK the project, and the Alfonsín administration came to an end in 1989. Enron was luckier with the next one. The pipeline was approved by the administration of President Carlos Saúl Menem, leader of the Peronist Party and a friend of President Bush. (The day after Menem was inaugurated, Neil Bush played a highly publicized game of tennis in Buenos Aires with Menem.) Argentine legislators complained that Menem cleared the pipeline project for development before economic feasibility studies were prepared.
Replying to a list of questions from The Nation asking whether George W. Bush spoke to Terragno about the pipeline project and whether he had any business relationship with Enron, Bush's gubernatorial campaign issued a terse statement: "The answer to your questions are no and none. Your questions are apparently addressed to the wrong person." This blanket denial covered one question that inquired if George W. Bush had ever discussed any oil or natural gas projects with any Argentine official. George W.'s response on this point is contradicted by a 1989 article in the Argentine newspaper La Nacion that reported he met that year with Terragno to discuss oil investments. (The newspaper noted that this meeting took place in Argentina, but Terragno says he saw Bush in Texas.)
Theodore Gildred, a private developer again, is traveling in Argentina; his office says he is unavailable. An Enron spokesperson comments, "Enron has not had any business dealings with George W. Bush, and we don't have any knowledge that he was involved in a pipeline project in Argentina."
In late August, several members of the Chamber of Deputies--Terragno not among them--submitted a request for information, calling on President Menem to answer dozens of questions about the business activities of the Bush family in Argentina. (In 1987, Neil Bush created a subsidiary of his oil company to conduct business there. In early August, a Buenos Aires newspaper reported that on a forthcoming trip to Argentina the former President would lobby the Menem government to allow a US company to build a casino there. The onetime President said this was not true.) One of the deputies' queries was, Does Menem know whether George W. Bush attempted to capitalize in Argentina on his father's position? So far Menem has not responded.
As Congress revisits the welfare debate, it's time to look at what the law has wrought.
The rise and fall of the house of Enron should trigger comprehensive investigations--civil, criminal and Congressional. The full scope of relations between Enron and its cronies in the Bush Administration must be dragged out into the sunlight. Miscreants should be prosecuted, and fundamental reforms enacted to bring corporations back to public accountability.
Desperately trying to put a lid on the cascading scandals, White House spokesmen have insisted that since Bush officials did nothing when Enron chairman Ken Lay warned them about its impending collapse, there is no political scandal, only a financial one. Don't fall for that.
The largest scandal, as Robert Borosage suggests on page 4, is not just what was done illegally but what was done legally--for example, the failure of Bush Cabinet members to warn small investors and employees that Enron was going down and that its executives were bailing out. Or the slick way Enron gouged billions from Western energy consumers while its planted head of the Federal Energy Regulatory Commission, Pat Wood, ignored the pleas of Western governors for price controls. Or Treasury Secretary Paul O'Neill's torpedoing of the Clinton Administration's attempt to regulate offshore tax havens, a direct benefit to Enron, among others. Or Enron officials' six meetings with Vice President Cheney to help shape Bush's energy plan. What is Cheney hiding by refusing to reveal the names of those FERC met with?
Clearly, the full range of Administration contacts with Enron should be probed. This will reveal how crony capitalism works and what must be done to curb it. Congress must begin the hard task of rebuilding the legal framework for corporate accountability. As William Greider writes on page 11, Enron's demise reveals that all the supposed checks on executive plunder--accountants, stock analysts, independent board members, regulatory agencies--were either short-circuited or inactive. We need bold reform now. And Congress should take a close look at pensions, boosting defined-benefit plans and returning 401(k) plans to the supplement they were intended to be. And of course Enron once again illustrates the corrosive corruption of big-money politics.
With the House and the White House in Republican hands, Democrats in the Senate, sadly, will have to take the lead in ferreting out the facts and defining the necessary reforms. "Sadly" because too many Senate Democrats mirror Republicans in pocketing corporate bucks and parroting the deregulation/privatization line that comes with them. The chairman of the Governmental Affairs Committee, Joseph Lieberman, was leader of the corporate-funded Democratic Leadership Council and a founder of New Democrat Network, the proud recipient of Enron contributions. Last year Lieberman blew off the probe of Enron's connections to the California energy crisis. He now has another chance to show if he stands with his voters or his contributors.
Enron's bankruptcy is the largest in US history, but it is not unique. It is a product of the conservative offensive to unfetter corporations by dismantling hard-won public protections. Given that freedom, Enron's executives--and their brethren--gouged consumers, fleeced investors, even betrayed their own employees. It's time for Congress and the people to put an end to Enronomics and call corporate marauders to account.
There are more Enrons out there; the rot is systemic.
The pirate ship has sunk beneath the waves.
The swabs who haven't gone to wat'ry graves
Row desperately, though all of them now know
Their water and their food are running low.
They row their wretched boats and curse their lot.
Receding in the distance is a yacht
That carries all their officers, who knew
The ship was doomed but didn't tell the crew.
The officers stand tall. They saw their duty:
Desert the ship by night and take the booty.
If you believe President Bush, Kenneth Lay--one of his top financial backers and his "good friend"--was merely an equal-opportunity corrupter of our political system, buying off Democrats and Rep
"Not over my dead body will they raise your taxes," George W. Bush cryptically proclaimed. The press dutifully translated what he really meant, but few commented on the tastelessness of a wartime leader with troops in the field saying he was willing to die for the cause of lower taxes for the wealthy.
Never mind. The President's speech had no high public purpose or occasion. It was a political document, intended to undercut Senate majority leader Tom Daschle's prescriptions for economic recovery the previous day; it had more to do with gearing up for the 2002 Congressional elections than with speeding up the economic recovery. Bush's riposte signaled that the not-so-great debate of '02 is on.
Besides standing foursquare against any tax hikes, Bush offered only the same prescription for economic recovery as he has in the past: Let those at the top of the heap keep more of what they've got. Despite a stratospheric approval rating and a nation united behind him, he reaffirmed his fealty to his corporate underwriters and offered tax cuts for the rich at a time of obscene inequality. His partisan posturing on the stimulus plan showed that he thinks the economy will recover on its own, leaving the swelling ranks of jobless folk on their own.
Although superior to Bush's package, Daschle's was securely in the lineage of Bill Clinton's efforts to be both fiscal conservative and compassionate centrist. It positioned Democrats to campaign, amid economic recession, as the hair-shirt party of "fiscal responsibility," blaming Bush's tax cuts for the vanished (and largely notional) budget surpluses and evoking public nostalgia for the giddy boom of the late 1990s, which actually began heading south before Bush came to town. Daschle's minimalist list of stimulus measures shows a party leader out of touch with real conditions who thinks this downturn is a nonthreatening event that will soon be over, just as the stock-market cheerleaders are forecasting. Wiser heads on Wall Street, however, warn that any recovery will be weak and perhaps transient.
Even if the recession proves less serious than feared, the Democrats should be advocating spending on badly needed long-term projects, from schools to railroads, while pushing for extended and expanded unemployment compensation and health insurance and aid to states hard hit by new national-security costs.
Along with this expansive agenda the Dems should overcome their timidity and make the case for repeal of the bulk of last year's Bush tax cuts, particularly those provisions that benefit the wealthiest Americans. Those cuts will do little to stimulate the economy (even if they operate as promised--a dubious assumption), since they don't take effect for another three to six years. Instead, by assuring a greater stream of revenue from those who can best afford to pay, the Democrats can help forestall inevitable GOP efforts to claim that social programs must be cut to allow for military needs, while at the same time providing funds to address housing, hunger and poverty.
Teddy Roosevelt, whose biography is on Bush's bedside table, may have been less a foe of the malefactors of great wealth than his rhetoric claimed, but he did espouse a progressive agenda of reform, which included antitrust, financial regulation, the eight-hour workday, even a living wage. And Franklin Roosevelt in 1944 outlined an economic bill of rights that would redeem wartime sacrifices and secure the gains in income of the working class. All Bush can come up with is a thank-you note for his campaign donors.
On terrorism and the new democratic realism.
Last spring Richard Pollak asked in these pages, "Is GE Mightier Than the Hudson?" (May 28, 2001). Given the Environmental Protection Agency's December 4 decision to dredge the PCB-contaminated river, it is tempting to ring in the new year with a resounding No. Despite the company's multimillion-dollar blitz of lawyering, lobbying and PR, the Bush Administration, in the person of its EPA Administrator, Christine Todd Whitman, has come down squarely on the side of those in New York's historic Hudson River Valley who have been agitating for years to make GE clean up the lethal mess it created by dumping more than a million pounds of polychlorinated biphenyls in the river from the 1940s into the 1970s. This pollution has turned 200 miles of the Hudson, from just above Albany south to New York Harbor, into the biggest Superfund site in the nation; EPA law requires that GE pay the cost of removing the toxic chemicals, which the agency estimates at $460 million. More than once, the company has told its stockholders it can well afford this sum, as a multinational with a market value of some $500 billion surely can.
Still, it may be premature to pop the champagne corks. This past fall, fearing that Whitman might follow the lead of her Clinton Administration predecessor, Carol Browner, and endorse the cleanup, GE filed a federal suit attacking as unconstitutional a Superfund provision that allows the EPA, if the company refuses to dredge, to do the job itself and bill GE for three times the final cost plus penalties of $27,500 a day. GE has plenty of time (and cash) to pursue this and other maneuvers against dredging, which is needed to remove some 150,000 pounds of PCBs still in the Hudson. The EPA estimates it will take at least three years to work out the project's engineering and other details--e.g., what kind of equipment is needed, how much stirred-up sediment is acceptable and what landfills can safely handle the contaminated mud. Many residents along the banks of the river are divided--sometimes angrily--on these and several other issues. During the EPA's 127-day comment period in 2001 it received about thirty-eight boxes of letters and 35,000 e-mails, many spurred by GE's scare campaign--on billboards, in newspaper ads and on TV infomercials--warning that dredging will destroy the river.
The EPA has pledged that the public will have even more of a voice in the project's design decisions over the coming months--a welcome process but one that GE is likely to exploit with more propaganda. At its enviro-friendly-sounding website (hudsonwatch.com), for example, the company continues to insist, on no hard evidence, that the citizens of the Hudson River Valley oppose dredging "overwhelmingly." Some residents do resist dredging and the inevitable inconvenience it will bring to their communities, and not all have arrived at their view because of GE's PR tactics. But after almost two decades of review by the EPA, the burden of scientific evidence shows that the remaining PCBs, which cause cancer in laboratory animals and probably in humans, continue to poison the river a quarter-century after their use was banned and GE stopped dumping them.
The EPA's December 4 order could be the precedent that requires the company to clean up forty other sites where it has dumped PCBs. This would cost several billion dollars, a hit not so easy to reassure shareholders about. Even with GE master-builder Jack Welch retired and busy flogging his bestselling How-I-Did-It book, don't look for the company to roll over anytime soon.