LOS ANGELES -- An epic clash between corporate America and its most vocal critics -- including leading members of the US Congress, investors and trade unions -- is gathering steam as yet more disturbing revelations about big business continue to rock the nation's capital and financial community.
But reform of corporate mismanagement, malpractice and tax-dodging is being overshadowed by George W Bush's latest fiscal plans and preparations for war. Economists estimate the Enron and WorldCom scandals cost the US up to £26 billion in a year.
Bush -- who most voters see as overly cozy with big business and who has several multi- millionaires in his Cabinet -- is proposing to eliminate taxes on corporate dividends. Over the next decade, that alone will cost the country almost as much as the projected deficit.
The federal deficit, sure to continue ballooning if there is war, is expected to reach a record 3% of the gross domestic product next year. In a rare split with the Bush administration that grabbed the headlines earlier this month, Alan Greenspan, chair of the Federal Reserve Bank, warned that the projected shortfall of £190bn will endanger consumers.
The New York Times has dubbed parts of Bush's proposal mean-spirited. Now in the hands of Congress, it would increase rents for the poorest people in public housing -- those who are ill or jobless and facing eviction.
On Friday, Bush was taking the day off at his Texas ranch, while Cabinet members sold his budget proposal -- a new round of cuts for upper-income individuals and businesses. This weekend, new US Treasury Secretary John Snow was to sell Bush's fiscal policy at the G7 meeting in Paris.
Even so, corporate reform within the US is continuing, despite international turmoil, the recession and debate over Bush's newest tax cuts. That is according to Carol Graham, an economist at the Brookings Institution think-tank and co-author of Cooking The Books, a study of the cost of recent corporate scandals.
'There is gradual progress,' she said on Friday. She noted that last year, the most far-reaching corporate reforms since the Great Depression were enacted.
Next month, trade unions, with $400bn (£253bn) in pension fund assets, will step up their demands for change in companies that are publicly traded. Those targeted by the AFL-CIO, the US equivalent of the TUC, include General Electric, Coca-Cola, Dow Chemical, American Express and AOL-Time Warner Inc.
More impetus for change came this month on Capitol Hill, following the release of the most extensive probe yet into Enron, the disgraced Texas energy trader. Testimony detailed its deceitful and 'incestuous' tactics. Enron avoided paying taxes from 1996 to 1999, during Clinton's presidency, which was also remarkably pro-business.
Enron, which has had close ties to the White House, later tumbled into bankruptcy, costing taxpayers billions of pounds and erasing pensions for thousands of people less than a year after paying almost £1bn in compensation to its 200 top executives. That was three times their compensation the year before and more than 1.5 times the company's reported corporate profit.
Ken Lay, president of Enron, was such a close friend and backer of Bush that it was his corporate jet that ferried the would-be president around during his campaign.
The report is the most extensive glimpse yet of practices that have become common among America's largest businesses, from General Electric to Microsoft. In fact, several economists have calculated that 'abusive' tax shelters are costing the government about £31bn annually .
Blue-chip Wall Street banks, accounting firms and top lawyers helped Enron skirt taxes, according to the report.
'What hit me most was the moral fibre of the people involved,' said furious Senate finance committee chairman Chuck Grassley after hearing testimony . Enron's maneuvering was just short of illegal, he said, a sign of how much laws need to be changed. Grassley is vowing to push through legislation to halt such practices. A moderate Republican, he however backs Bush's tax cuts. Already corporate lobbyists and lawyers are planning a massive counter-attack.
In another sign of the fight ahead, the usually pro- business Republican Party is placing loyalists in top lobbying jobs and trade associations that will be involved in an upcoming government probe of the mutual fund industry.
Adding fuel to the push for reform are recent news reports that have highlighted hundreds of billions in questionable tax write-offs by Sprint chief executive officer William Esrey, Tyco's Dennis Kozlowski and Global Crossing's Gary Winnick. Glenn Tilton, CEO of bankrupt United Airlines, also reportedly stays in a plush hotel in his company's home city that costs a five-figure dollar sum every month.
'Show me the money!' was the title of the front page of one Enron tax shelter, the Steele Project, said investigators. Indeed, macho names were all the rage in the shelters and in Enron's previously disclosed energy trading schemes -- from Renegade, Get Shorty to Death Star and Fat Boy.
Enron's tax department was set up as a profit-making division with annual revenue targets, testified chief investigator Lindy Paull. Enron swapped assets between divisions, when almost nothing of value was exchanged, and sometimes counted tax deductions twice.
Even for lower-level executives at Enron, life was anything but taxing. In 1998, Deutsche Bank Americas, now owned by Bankers Trust, flew Enron tax specialists to a top Florida resort for the Potomac Capital Investment Corporation Conference. For four days, the agenda was packed with golf, a casino visit, fishing, receptions and lunches. Bankers Trust managing director Thomas Finley even wrote to the guests: 'We would advise wearing rubber-sole shoes on the boat. With all the fish we are going to catch, the decks will get slippery.'
Grassley, who represents the farming state of Iowa, reacted to this with customary bluntness: 'No amount of lipstick is going to make that pig pretty.'
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