“Death Star,” “Get Shorty,” “Fat Boy”–the revelation of Enron’s trading schemes in California have turned the Enron scandals virulent again. Just when the White House thought the disease was in remission and relegated to the business pages, the California scams exposed more of a still-metastasizing cancer of corporate corruption.
Internal Enron memos reveal that it and other companies preyed on California’s energy crisis, helping to manufacture shortages and using sham trades to drive up prices. The somnambulant Federal Energy Regulatory Commission (FERC)–headed by Pat Wood III, “Kenny Boy” Lay’s handpicked chairman–decided that its initial finding of no market manipulation in California was inoperable and opened a broader investigation. With stocks plummeting and lawsuits piling up, CEOs at Dynegy and CMS Energy resigned, as did heads of trading at Reliant Resources and CMS.
The Bush Administration was directly implicated as the White House’s Enron stonewall began to collapse. A reluctant Joseph Lieberman, chairman of the Senate Governmental Affairs Committee, finally got sufficient spine to issue subpoenas, stimulating the White House to release more documents about its contacts with Enron. These showed that the White House had lied to House investigators when it reported only six contacts between Enron officials and the White House energy task force. The incomplete White House submissions now admit four times that number, with more surely to come.
Lay and the Enron executives were pressing Vice President Cheney not only to influence the President’s energy policy but also to oppose price controls on electricity in California, even as they were gaming the market. Cheney and Bush responded to their leading contributor by publicly scorning price controls, while White House aides encouraged the energy industry to organize an ad campaign in California against controls. Cheney surely felt comfortable with Enron’s shady side: As we recently learned, when he was CEO of Halliburton and its profits were declining, his accountants–the ubiquitous Arthur Andersen–suddenly started counting as revenue a portion of payments that were in dispute, without informing investors of the change.
The Administration has painted Enron as a business, not a political, scandal. Now it is apparent that the scandal is political and economic, showing the problems of a system with too little accountability and too much corporate influence both in the White House and on Capitol Hill. And with the United States having to import more than $1 billion a day in capital to cover trade deficits, the scandals are already a drag on investment, growth and jobs.
Neither the Administration, Congress nor the business lobby has yet awakened to the perils. Bush retains as Army Secretary former Enron executive Tom White, who claims no knowledge that his subsidiary was involved in the sham trading schemes (although his own bonuses were undoubtedly based in part on the inflated revenues that resulted). Big Five accounting firms lobbyist Harvey Pitt remains head of the SEC, even after repeatedly traducing elementary ethics by meeting privately with representatives of companies under investigation by his agency. Wood remains the head of FERC, even as legislators call on him to recuse himself from the California investigation. Bush and House Republicans continue to resist sensible reforms. The business and accounting lobby, in a victory of ideology over common sense, has mobilized against anything with teeth.
Beltway conventional wisdom dismisses the political fallout of the Enron scandals. But Americans are furious at executives who betray their workers and mislead small investors while plundering their companies. Thus far their anger hasn’t fixed on Washington, but it may if no one is held accountable. It’s long past time for Senate Democrats to rouse themselves, demand the heads of White and Pitt and launch a scorching public investigation of the Administration’s complicity with Enron in California and elsewhere. Any real reform will require displacing Enron conservatives, with their mantra of “self-regulation” and their corrupt politics of money. With the revelations continuing and elections coming up, progressives should be mobilizing independently to name names, exposing those who shield the powerful. If voters learn who the culprits are, Enron may end up reflecting the “genius” not of capitalism but of democracy–the people’s ability to clean out the stables when the stench gets too foul.