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.
As Molly Ivins put it in a recent column: "Across the length and breadth of this land of ours, from the mountain to the prairie, from every hill and dale comes the question, 'Where are the Democrats?'" For weeks pundits have dismissed Democrats as having no clue about how to mount a credible challenge to the failed domestic policies of the Bush Administration. But when representatives of the party's core progressive constituencies gathered in Washington in mid-April at the Reclaiming America conference, sponsored by the Campaign for America's Future, it was possible to imagine the lineaments of such an opposition. Members of Congress like Representatives Jan Schakowsky and Sheila Jackson Lee and Senator Paul Wellstone, who have been pressing for months for a more aggressive Democratic stance on domestic issues, no longer sounded like voices in the wilderness of post-September 11 politics. These leaders of the democratic wing of the Democratic Party were joined at the podium by House minority leader Dick Gephardt, Senator John Edwards and Vermont Governor Howard Dean--all prospective presidential candidates--who seconded Schakowsky's message that the Republican agenda of tax cuts for the wealthy and service cuts for the majority is making the rich richer, the poor poorer and the middle class less secure.
A Democracy Corps survey, released by pollster Stan Greenberg at the conference, provided evidence of public support for an issues-based assault on the Bush Administration's domestic agenda. As Joel Rogers, co-author of America's Forgotten Majority, aptly summed up: "On a broad range of basic concerns, ranging from investing in education, securing affordable healthcare for all, protecting Social Security, lifting the minimum wage to a living wage, leveling up not down in trade, protecting workers on the job as well as the food we eat, the air we breathe and the water we drink, large majorities of Americans stand with us and oppose Bush's policies." And as Senator Jon Corzine argued, the Enron scandal reminded a lot of people "that the pendulum has swung far too far to the right, now endangering our prosperity as well as our core values."
So if progressive values are flourishing at the grassroots, how come Democrats in Congress continue to be cautious? That's a question that speakers like the Rev. Jesse Jackson, Ivins, National Organization for Women president Kim Gandy and populist political agitator Jim Hightower asked in well-received speeches at the conference. We'd like to think that Gephardt and others headed back to Capitol Hill as ready to fight as their rhetoric suggested. But we know Gandy was right when she said that progressive activists must keep the pressure on by refusing to be satisfied with a little bit of Congressional opposition to the Administration's right-wing agenda. It is time, Gandy and others said, for progressive Democrats to start demanding that our representatives give us more victories like the defeat of Mississippi Federal Judge Charles Pickering's nomination to the Court of Appeals for the Fifth Circuit. As long as there is no bold challenge to the extremism of this Administration, it will exploit the tragedy of September 11 to stifle debate and push national policy in an ever more regressive direction.
Having a hard time finding a new apartment to fit your budget? Consider a move to the blocks around Ground Zero. The Lower Manhattan Development Corporation, the body set up by former New York Mayor Rudy Giuliani and Governor George Pataki to oversee the rebuilding of downtown post-September 11, will pay you up to $12,000 to relocate south of Chambers and west of Broadway for two years, or stay there should you live there already. I know--I couldn't believe it either. This bounty to adventurous tenants is federal money and comes even as area rents are already down by as much as 30 percent since 9/11. Think of it as a mini-version of the millions ladled out to keep corporations from abandoning lower Manhattan for New Jersey. I figured out that I could sublet my apartment on the Upper West Side, move downtown and actually be able to live on my Nation salary (well, almost).
It's true downtown is a mess right now--depending on whom you talk to, the air quality's somewhere between itchy and lethal, a lot of little shops and restaurants have folded, and Ground Zero is not everyone's idea of a view. Still, whatever happened to the survival of the fittest? To the market and its omnipotent invisible hand? Why shouldn't downtown apartments fall to their "natural" price--the rent at which sufficient numbers of people will want to take out a lease despite the angst and aggravation? And if that figure turns out to be so low that the current landlords can't make a go of it, isn't it the capitalist theory that other, cleverer landlords will step into the breach, with the consumer the winner? Why should the federal government pay middle-class professionals to live in one neighborhood rather than another? The answer is, to keep downtown a great place for those same middle-class professionals to live and for real estate interests to invest in.
Public subsidy is certainly not the principle animating housing policy for low-income people and homeless families like the ones whose tribulations were superbly, unforgettably chronicled by Jennifer Egan in The New York Times Magazine ("The Hidden Lives of Homeless Children," March 24). Five hundred dollars a month to brighten a scruffy and underpopulated district with their presence? The housing allowance for a family of three on welfare is $286. It's one thing to herd women and kids into filthy motels at the city's edge, miles from grocery stores and hours away from schools and jobs--at daily rates for which they could be happily ensconced in their own apartments. It would be quite another matter to treat low-income New Yorkers as members of society with contributions to make that are equal to (or greater than) those of bond traders or publicity agents, and to see their children as no less deserving of a safe and stable place to live than any other kids.
As Egan points out, homeless families--now 75 percent of the city's shelter population, including 13,000 children this past winter--are caught between falling or stagnant wages and skyrocketing housing costs. The housing market is just too tight, no public housing is being built and the waiting list for section 8 vouchers, which poor families can use toward private-market rents, has more than 200,000 names. Homelessness is a civic emergency, an affront to human dignity and a threat to the city's future, affecting everything from public health to public schools to public safety. But can you imagine Mayor Bloomberg, inspired by Egan's crusading journalism, proposing that we move homeless families--virtuous, sober, quiet homeless families, to be sure--into those hard-to-rent vacancies downtown? Middle-class New Yorkers would lie down in traffic to prevent it.
As society polarizes between rich and poor, differential treatment becomes ever more blatant and punitive. Thus, George W. Bush, seconded by Congressional Republicans and the Democratic Leadership Council, proposes forcing welfare mothers to work forty hours a week--nearly double the national norm for working moms. Thus, the Supreme Court, in a staggering 8-to-0 verdict (Justice Breyer recused himself), decides that public housing authorities can evict tenants if someone in the household uses drugs--including pot, which Mayor Bloomberg himself has acknowledged enjoying in his flaming youth. The rule applies even if they don't know about the drug use or do all in their power to prevent it, and even if it takes place outside the apartment. The plaintiffs? Two grandmothers whose grandsons smoked pot, one mother whose mentally disabled daughter was found thirty blocks away using cocaine, and one elderly disabled man whose health attendant had a crack pipe. Patricia Williams and others have wondered out loud why Jeb and Columba Bush didn't have to vacate the Florida governor's mansion because of their daughter's drug problems. Is it only poor grandmothers who are expected to have perfect control of the young?
The same law of punishing all for the crimes of one, which HUD has titled "One Strike and You're Out," is being used against battered women who seek help from the police, only to find themselves threatened with eviction from public housing because the household was the site of "criminal activity"--the assault. Can you imagine the headlines if the management at Battery Park City tried to evict a woman because her husband beat her up?
In the words of that noted social theorist Jesus Christ: "For unto everyone that hath shall be given, and he shall have more abundance: but from him that hath not shall be taken away even that which he hath." He was speaking of spiritual riches, but these days his words seem to apply to material ones as well.
* * *
My apologies to Tricycle, which did indeed cover strife in Sri Lanka, contrary to my reckless assertion ("God Changes Everything," April 1). No apologies, however, for failing to include Billy Graham's thirty-year-old anti-Semitic remarks in my catalogue of sins of the cloth. Why do I suspect that had I given to that ancient evangelist the space I allotted to West Bank settlers, priestly molesters, Islamic fanatics, Hindu arsonists and murderers or other contemporary religious rampagers, Christopher Hitchens would have suggested I was ignoring current crises in favor of musty Nixoniana?
Now that the recommendations of George W. Bush's Social Security task force have been quietly shelved, it's time to recall that there are simple and equitable solutions available to deal with Social Security's potential future problems resulting from the retirement of millions of baby boomers.
Five years ago, four former senators--Alan Simpson of Wyoming, John Danforth of Missouri, David Pryor of Arkansas and I (two Democrats and two Republicans)--met on the campus of Southern Illinois University with the deputy chief actuary for Social Security. After looking at many possibilities, we recommended two changes:
First, all income should be taxed for payments into the Social Security Retirement Trust Fund. Today income up to only $84,900 is taxed. While the benefit payments are mildly progressive, the taxes are regressive. Most Americans pay more into Social Security than to the IRS. Covering all income would not only help Social Security, it would reduce the growing gap between those more fortunate and those less fortunate. If you earn $1 million a year, your increased tax would be less than $57,000. You could afford that. And you would pay it knowing that you are helping insure a more secure old age for your children and grandchildren.
Second, the Consumer Price Index, which is used to measure inflation for the purpose of determining cost-of-living increases in Social Security benefits, should be corrected. If the price of beef goes up, more people buy chicken, but the cost of food in the index reflects the price of beef--substitution is not considered. Similarly, although drug costs have shot up, boosting the inflation rate, the index does not reflect that generic drugs can be substituted, lowering the cost of prescriptions slightly. If adjustments in the CPI are made, Social Security benefits could continue to rise with inflation, but the rate of increase would be slightly reduced.
Adopting just the first of our proposals would bring in most of the funds needed to meet increased Social Security costs. Adopting both of them, according to the actuaries, would keep the retirement fund solvent for seventy-five years, barring an economic disaster. Neither of these proposals is popular. Political parties don't like to do unpopular things, but a bipartisan Congressional commission could reverse this. It should be created. The longer we wait, the more difficult it will become.
The alternative advocated by George W. Bush and his carefully rigged commission--that a portion of Social Security payments be designated for investments in the stock market--should be a nonstarter. It would be a bonanza for stockbrokers but could hurt most retirees. Has anyone tabulated the cost of auditing millions of private accounts? Does the performance of the stock market during the past two years argue for subjecting people already living on the margin to greater risk? And not simply the experience of the past two years. From December 31, 1964, to December 31, 1981, the Dow Jones average went up less than 1 percent for all those seventeen years. The inflation increase for that period was 95 percent. Interest on government bonds looks good compared with that performance.
The wildest scenario came from a former Reagan Administration economist, Martin Feldstein, who suggested that the federal government should guarantee these investments. I would love to have the government guarantee my investments, but the S&L bailout would look tiny compared with what that idea could cost.
Social Security has a problem. Let's face up to it and deal with it in a way that makes our tax system slightly more progressive.
The Bush Administration has vigorously and effectively responded to the terrorist attack of September 11. The country seems united behind that effort. Certainly there was no hint of a doubt in the repeated standing ovations Congress gave the President's State of the Union address, including his bold declaration that the war on terrorism has just begun. The President singled out Iran, Iraq and North Korea as the most likely next targets of America's aroused ire against terrorists and governments that attempt to acquire weapons of mass destruction that we, the Russians, the British, the French, the Chinese, the Indians, the Pakistanis and the Israelis already possess.
No longer in government, I do not have the benefit of national security briefings or Congressional committee deliberations. So perhaps instead of making assertions, it may be more appropriate for me to ask some questions that have been on my mind both before and since September 11.
Which course might produce better results in advancing American security? Is it by continuing to boycott, diplomatically and commercially, such countries as Iran, Iraq, North Korea, Libya and Cuba and threatening to bomb them? Or would we be better off opening up diplomatic, trade and travel relations with these countries, including a well-staffed embassy in each? If we are fearful of a country and doubtful of its intentions, wouldn't we be safer having an embassy with professional foreign service officers located in that country to tell us what is going on?
Our leaders frequently speak of "rogue nations." But what is a rogue nation? Isn't it simply one we have chosen to boycott because it doesn't always behave the way we think it should? Do such nations behave better when they are isolated and boycotted against any normal discourse? What do we have to lose in talking to "rogue nations" diplomatically, trading with them commercially and observing their economic, political and military conditions?
Instead of adding $48 billion to the Pentagon budget, as the President has proposed, wouldn't we make the world a more stable, secure place if we invested half of that sum in reducing poverty, ignorance, hunger and disease in the world? We are now twentieth among nations in the percentage of gross national product devoted to improving life in the poor nations. If we invested half of the proposed new military spending in lifting the quality of life for the world's poor we would be the first among nations in helping others.
Is it possible that such an achievement would reduce some of the gathering anger that the poor and miserable of the earth may be inclined to direct at the rich and indifferent? Why does a wealthy zealot like Osama bin Laden gain such a huge following among the poor and powerless of the world? Acting on the old adage "charity begins at home," why not invest the other half of the proposed new money for the Pentagon in raising the educational, nutritional, housing and health standards of our own people?
Our military services are the best in the world. But with a military budget at record levels, do we need to allocate another $48 billion--an amount greater than the total military budget of any other nation? Is not the surest foundation for our military forces a healthy, educated, usefully employed citizenry? And is not the best way to diminish some of the international trouble spots, which might embroil our young men and women, by reducing the festering poverty, misery and hopelessness of a suffering world?
Of course we need to take reasonable precautions in our airports and other strategic points to guard against terrorists or nut cases. As a World War II bomber pilot, I appreciate the role of both tactical and strategic bombing in all-out warfare. But is sending our bombers worldwide in the hope that they might hit terrorist hideouts or such hostile governments as Iraq an effective way to end terrorism? May it not more likely erode our current international coalition, while fanning the flames of terrorism and hatred against us as the world's only superpower, hellbent on eradicating evil around the world?
The Administration now has seventy-five officials hidden in bunkers outside Washington poised to take over the government in the event of a terrorist attack. Is it possible that paranoia has become policy? No such extreme measures were undertaken in World War II, nor in the half-century of cold war between the two nuclear giants, Russia and the United States.
All of us who love this land want our President to succeed. Nothing would give me greater happiness than to see him become a great President. But is it possible that our well-intentioned President and his Vice President have gone off the track of common sense in their seeming obsession with terrorism? Is there still validity to the proverb "whom the Gods would destroy, they first make mad"?
For half a century, our priorities were dominated by the fear of Russian Communism--until it collapsed of its own internal weakness. As I listen to the grim rhetoric of Messrs. Bush and Cheney, I wonder if they are leading us into another half-century of cold war, with terrorism replacing Communism as the second great hobgoblin of our age.
There is enough blame to go around for the events that have turned the Camp David promise of peace into the killing fields of the Mideast without dragging in President Bush.
Two years after a tragic accident, activists are celebrating a major victory.
They helped set the stage for the current scandals.
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.
"I went down to Tommy Thompson's house," the crowd sang.