Breaking News & Views for the Progressive Community
We Can't Do It Without You!  
     
Home | About Us | Donate | Signup | Archives
   
 
   Featured Views  
 

Printer Friendly Version E-Mail This Article
 
 
The Two Enron System
Published on Saturday, February 16, 2002 in the New York Times
The Two Enron System
by Frank Rich
 
If you're having trouble keeping up with the Olympian scandals in Washington, just think of the Republicans and the Democrats as the French and the Russians and all the rest of us as Canadians. But at least those Canadians got their gold back.

The head of the Republican Party, hand-picked by the president, is Marc Racicot, who served as an Enron lobbyist as recently as last fall. His Democratic counterpart, Terry McAuliffe, is a former consultant to Gary Winnick, the founder of Enron's twin in bankruptcy, Global Crossing, which is now under investigation by the F.B.I. and the S.E.C. and will soon have its own inquisition in Congress. For anyone left holding these companies' stock after their executives and insiders cashed out, there is no gold, not even silver — just handsome stock certificates that will brighten someone's day on eBay.

Democrats want to believe that Enron is the Republicans' Armageddon. Republicans hope Global Crossing will prove the Democrats' comeuppance. Dream on. Political cross- dressing is a distinguishing feature of this systemic scandal, much of it entirely legal, in which the only currency that counts comes in green, not the red and blue of the electoral map. As countless Democrats have turned up on the lists of Enron and Arthur Andersen campaign beneficiaries, so the former President Bush is among those who joined Mr. McAuliffe in test-riding the Global Crossing gravy train.

Surveying the landscape this week, John McCain told Larry King that while he'd like to believe Enron was merely a tale of corporate malfeasance, he thought it would prove "a lot more than that" and "lead a lot of places that we never thought it would." We'll soon need an Olympics-grade scorecard to keep track.

For starters, keep your eye on two private lists of names that are being held onto for dear life by their keepers. The first, of course, is the list of those who met with the Cheney energy task force last year. Why is the vice president risking a Congressional lawsuit to hide the identities of the Enron executives and their cronies, even though a CNN/USA Today poll says that Americans overwhelmingly support full disclosure? Every time this question gains speed there seems to be another terror alert — a kind of "Wag the Dog" scenario in which the dog never barks.

The second list is of the "individual investors" who joined Andrew Fastow and other Enron executives at the trough of the 3,000 off-the-books partnerships that turned nominal investments into fortunes overnight while regular stockholders got stuck with the debt. Enron has told Congressional investigators it can't provide the names, even though it usually owned 97 percent of each of these entities.

To get to the bottom of such mysteries, Congress has leaned heavily on the Powers report — the in-house Enron investigation hyped by Democrats and Republicans alike as (in the words of the North Dakota senator Byron Dorgan) a "devastating indictment" of the company's misbehavior. But this "devastating" document examined a grand total of 3 of those 3,000 partnerships and provided no names of the individual investors in those either. Nor did it look into Enron Energy Services, a nearly defunct division that may have overstated its profits while hemorrhaging cash under the leadership of Thomas White, who is now the secretary of the Army, entrusted with $81 billion of taxpayers' money during the biggest expansion of the military budget since the Vietnam War. Mr. White, in fairness, was only vice chairman of Enron Energy; the chairman was Lou Pai, who took more out of the pre-bankrupt Enron than anyone ($270 million) and was last seen trying to duck an ABC News reporter while denying that he had brought dancers from "a top Houston strip club" into Enron headquarters.

What is most revealing about the Powers report is its provenance. One author is Herbert Winokur Jr., an Enron outside director who was in the fortunate position of having a big say in a report passing judgment on his own questionable corporate citizenship. Appearing before the House Commerce Committee with condescension in his voice and a flag pin in his lapel, he contradicted himself so much under questioning that one member, Bart Stupak of Michigan, told me he had "impeached his own testimony."

The Powers of the report, William Powers Jr., is the dean of the University of Texas School of Law, an academic institution subsidized in part by Enron. In his testimony before Congress, Mr. Powers conceded that the interview with Ken Lay conducted for his investigation had not been transcribed and that any notes from it had been discarded. This is "standard, accepted" practice, he said — and presumably is taught as such in his school as Enron 101. Asked to explain other holes in his report, this law school dean repeatedly asserted that he was "not an expert" on the relevant laws, or apparently much else.

As for Global Crossing, keep your eye on Mr. McAuliffe. The story that he's sticking to is that after making a brave early $100,000 investment he got out in 1999 with a profit approaching $18 million (the exact figure remains elusive) through sheer capitalistic ingenuity. "The company went from zero to 50 billion in market cap," he said on CNN late last month. "It's a great success story." That great success story, which hit its peak of $64 a share in the same year that Mr. McAuliffe cashed out, never turned a dime of profit, ultimately lost $7 billion and has since traded for pennies.

As it happens, The Wall Street Journal reported last week that Global Crossing executives and insiders also started unloading shares in 1999 — hauling home $1.3 billion, even more than Ken Lay and company netted when they dumped Enron stock while telling their employees to buy. Did these brilliant capitalists — among them Mr. Winnick, who made off with $735 million — know something that other Global Crossing shareholders didn't? Did any of them tell Mr. McAuliffe? On Tuesday I asked the Democratic National Committee merely for the dates of the party chief's Global Crossing sales within 1999. The answer has been silence.

Then again, maybe Mr. McAuliffe doesn't remember. These days even Democrats can go Skilling on you. Listen to the curious answer given by Joseph Lieberman when asked by Don Imus about the $2,000 he received from Enron in 1994: "I hadn't even remembered it because I hadn't had much contact with people from Enron." True, no doubt, but more than a shade Cheneyesque coming from one of the Senate's high Enron moralizers. It's been widely reported that Mr. Lieberman's friend and former chief of staff, Michael Lewan, arranged three meetings between Enron officials and Lieberman aides while working as an Enron consultant last year.

Because Democrats, and not just Mr. Lieberman, are terrified both by President Bush's poll numbers and the number of dollars they have themselves received from Enron, Andersen and Global Crossing, they don't have the guts to join the California congressman Henry Waxman in pursuing former Enron executives like Thomas White into the current administration. Granted, that's a full-time job — without Enron alumni, the Bush team would be as depopulated as an après-ski party thrown by the Lays this winter in the Aspen hacienda they have just unloaded at an $8 million profit to the producer of the CBS soap "The Bold and the Beautiful."

But surely someone should consider the case of Lawrence Lindsey, the president's top economic adviser and a $50,000-a-year Enron consultant while advising the Bush campaign in 2000. Let's take the administration's word that there's no reason for Mr. Lindsey to stay away from Enron matters, despite having taken at least as much Enron money as John Ashcroft, who has recused himself from the Justice Department investigation. Even so, is this the best financial seer American taxpayers' money can buy? In mid-January the White House proudly declared that Mr. Lindsey had helped lead an October review to see "the potential impact" of Enron's woes and had delivered a thumbs-up prognosis, seeing no situation that could "harm the national economy." Try explaining that to anyone who's taken a beating in the stock and bond market declines since Enron declared bankruptcy on Dec. 2.

The good news is that 70 percent of Americans, up from 55 last month, are telling pollsters they care about this scandal. Already this has driven the House to take its momentous step to slow the spigots of corporate cash. Should Congress subpoena any of those Houston strippers to testify about any or all kinds of Enron partnerships, accounting reform may not be far behind.

Copyright 2002 The New York Times Company

###

Printer Friendly Version E-Mail This Article
 
     
 
 

CommonDreams.org
Breaking News & Views for the Progressive Community.
Independent, non-profit newscenter since 1997.

Home | About Us | Donate | Signup | Archives

To inform. To inspire. To ignite change for the common good.