Konformist: Enrongate 01-11-02 (fwd)

---------- Forwarded message ---------- Date: Fri, 11 Jan 2002 19:17:59 -0000 From: robalini Reply-To: konformist-owner@yahoogroups.com To: konformist@yahoogroups.com Subject: Konformist: Enrongate 01-11-02 ------------------------ Yahoo! Groups Sponsor ---------------------~--> FREE COLLEGE MONEY CLICK HERE to search 600,000 scholarships! http://us.click.yahoo.com/vf6MrB/4m7CAA/ySSFAA/zgSolB/TM ---------------------------------------------------------------------~-> Please send as far and wide as possible. Thanks, Robert Sterling Editor, The Konformist http://www.konformist.com Justice Opens Criminal Probe Of Enron By Kevin Drawbaugh 1-10-2 WASHINGTON (Reuters) - The Justice Department said on Wednesday it had opened a criminal investigation of Enron Corp., as the controversy over the energy giant's collapse widened. Officials declined to say exactly when the criminal probe began. But they said it was centered in the department's criminal division and that a task force was being set up to handle the case. Robert Bennett, attorney for Enron, said, "When this investigation is finished, a lot of the things that people are reading and hearing will be proven to be not true." He said he was pleased the Justice Department was centralizing its inquiry. "It is very difficult to deal with multiple entities ... We have been in contact with several different prosecutors," Bennett said. Once the world's largest energy trader, Enron slid in mere weeks last year from Wall Street stardom to making the largest bankruptcy filing in U.S. history on Dec. 2. Its downfall, after withdrawal of a rescue takeover bid by rival Dynegy Inc., threw thousands out of work and devastated investors. The episode sapped the life savings of many Enron employees whose 401 (k) retirement plans depended on the company's stock, while top executives allegedly pocketed fat profits by selling ahead of a dizzying plunge in the share price. The White House on Wednesday said it was likely to soon propose new policies to guard against a repeat of the Enron debacle. White House spokesman Ari Fleischer, asked about the Justice Department probe, told Reuters it was important to get to the bottom of the Enron collapse and develop new policies to protect workers and pensioners. "It's important for the investigation to proceed to determine what was done and why it was done. The president also believes it's important to explore new policies so it (a similar collapse) can never happen again," Fleischer said. Asked whether new policies would be announced soon, he said, "likely." ENRON FACES MULTIPLE PROBES The Houston, Texas-based company, once ranked No. 7 on the Fortune 500 list of large corporations, is also being probed by five congressional committees, the market-regulating Securities and Exchange Commission and the Labor Department. At the heart of Enron's problems were complex financial partnerships - - known as special-purpose entities -- set up by Enron executives and used to keep debt off the company's highly leveraged books. After some deals involving the partnerships went sour, Enron in October had to take a $1 billion charge against earnings and cut shareholder equity by $1.2 billion. Those moves drew market attention to the partnerships, triggering a crisis in investor confidence and credit-rating downgrades that ultimately led to bankruptcy court. The SEC said its 10-week-old probe of Enron and its long-time auditor, the accounting firm Andersen, would not be altered by the Justice Department's action. "The Justice Department and the SEC frequently run concurrent investigations," said SEC spokeswoman Christi Harlan. The decision at Justice to move to a full-fledged criminal investigation came after weeks of examining whether such a probe was warranted, officials said. They were unable to say whether any charges would ever result from the investigation. "I'm not assuming they will file charges," Bennett said. "This is a very preliminary investigation ... To my knowledge there's no evidence of wrongdoing yet. You have a business failure and you have a lot of allegations. But allegations are not the same as evidence." The departmental task force on the case is expected to include federal prosecutors from Houston, New York and San Francisco. Also on the task force will be members of the Justice Department's fraud section, officials said. Enron was a major contributor to the election campaign of President Bush, as well as many other lawmakers in Washington. The once politically powerful company also advised the Bush administration on energy policy. The head of Congress' investigative arm said on Wednesday he would decide within a month whether to sue the White House over its refusal to name industry executives the administration met with last year while drafting its new energy policy. Shares in Enron closed on Wednesday at 79 cents on the New York Stock Exchange, off an August 2000 high of $90.56. ***** Enron Auditor Says Documents Gone Associated Press Last Updated: Jan. 10, 2002 at 3:39:49 p.m. WASHINGTON - The firm that audited the books of collapsed Enron Corp., Arthur Andersen LLP, disclosed Thursday that its employees had destroyed a ``significant but undetermined'' number of documents related to the company. Federal law enforcement agencies and congressional investigators are seeking the documents as part of their inquiries into the failure of the giant energy-trading company, which left countless investors burned and employees out of work with billions of dollars of losses in their Enron-heavy retirement accounts. Rep. Billy Tauzin, R-La., whose House Energy and Commerce Committee is among the agencies and panels investigating, called the destruction of documents ``a deeply troubling development.'' ``Anyone who destroyed records simply out of stupidity should be fired. Anyone who destroyed records to try and subvert our investigation should be prosecuted,'' Tauzin said. The Big Five accounting firm said in a statement that in recent months, electronic files and other documents related to its auditing of Enron had been destroyed or deleted. Chicago-based Andersen said its company policy ``required in certain circumstances the destruction of certain types of documents.'' However, the firm said, millions of documents related to Enron still exist, and it has managed to retrieve some of the deleted electronic files. Andersen said it is continuing retrieval efforts through electronic backup files, ``and is continuing in its efforts to fully learn and understand all the facts related to this issue.'' Andersen has asked John Danforth, the former Missouri attorney general and U.S. senator, ``to conduct an immediate and comprehensive review of Andersen's records management policy and to recommend improvements.'' Andersen's auditing work for Enron, which entered last month into the largest corporate bankruptcy in U.S. history, is being investigated by the Securities and Exchange Commission. The surprise announcement by Andersen came in a day punctuated by revelations from members of the Bush administration concerning Enron. The White House disclosed that Enron Chairman Kenneth L. Lay reached out to two of President Bush's Cabinet officers when the energy company was collapsing. Attorney General John Ashcroft, who received campaign contributions from Enron executives during his failed 2000 senatorial bid, said he will recuse himself from the criminal investigation of Enron being conducted by the Justice Department. Andersen said that in recent months, people in the firm involved with the Enron auditing ``disposed of a significant but undetermined number of electronic and paper documents and correspondence.'' Ken Johnson, a spokesman for Tauzin, said Andersen officials told committee investigators Thursday that thousands of documents had been destroyed. ***** http://www.wsws.org WSWS : News & Analysis : North America New York Times defends Bush on links to Enron corporate fraud By David Walsh 10 January 2002 True to form, the editors of the New York Times have rushed to the defense of President Bush against suggestions that his administration could be implicated in one of the largest corporate frauds in history, which produced the collapse of Enron Corporation, the energy trading giant. Bush administration officials, and George W. Bush personally, had the most intimate ties to top Enron officials, including Chairman and CEO Kenneth Lay, one of the biggest fundraisers for the Bush 2000 campaign and the finance chairman of the Bush inaugural. The company filed for Chapter 11 status in December, the largest corporate bankruptcy in US history, leaving thousands of workers unemployed and with decimated retirement savings, and devastating thousands more small investors. Ten congressional committees and federal agencies have announced investigations into suspected illegal activities at the once high- flying firm, which at one time ranked seventh on the Fortune 500 list of the largest companies in the US, and whose stock price, once more than $90, had fallen to 66 cents a share by January 4. The Senate Governmental Affairs Committee, chaired by Joseph Lieberman, the Connecticut Democrat, will open hearings January 24. A January 4 Times editorial, "The Enron Post-Mortem," noted: "No company has more generously backed President Bush throughout his political career than Enron," adding that company Chairman Kenneth Lay, "was among the influential advisers to Vice President Dick Cheney's secretive energy task force last spring." Then the Times arrives at its central theme: "Democrats ... should resist the temptation to use the Enron saga for cheap political gain. Talk of a `cancer on the presidency' [a reference to the Watergate scandal] and of a `Bush Whitewater' is unwarranted at this point, and threatens to trivialize and unduly politicize an inquiry vital to the health of the American economy." One has to rub one's eyes in disbelief. This comes from the newspaper that helped launch Whitewater—with a notorious article by Jeff Gerth in March 1992—and elevate it into a national scandal. Countless editorials appeared in the Times over the years portraying Whitewater as of monumental significance and declaring that every other scandal and misstep of the Clinton administration somehow flowed from it. Looked at objectively, Whitewater was small change. The real estate scheme was liquidated years before Clinton entered the White House and involved a failed investment, on the Clintons' part, of less than $100,000. It had no financial or political significance until the American media, led by the Times, and Clinton's far-right political opponents, seized on it as a pretext to undermine the Democratic administration. The collapse of multibillion-dollar Enron, on the other hand, has vast implications. It is a serious economic blow to tens of thousands of people, its former workers first of all. As the Washington Post noted, "Enron's employees were encouraged to invest their 401(k) plans in Enron stock, which came to make up more than half the assets in the company's retirement system. Enron's collapse therefore left many of the 4,500 U.S. employees who were laid off pensionless as well as jobless." A 33-year-old employee of the firm told senators in December that the value of his Enron stock had fallen from $1.3 million to $20,000. Charles Prestwood told his questioners, "I'm a very broke person. I lost everything I had." Company officials, according to widely reported allegations, forced employees to hold on to their stock as its value plunged in October and November. Executives reportedly meanwhile sold their shares and, on the eve of the declaration of bankruptcy, distributed some $100 million in bonuses to hundreds of high-level employees. Enron and the Republican Party Everything one learns about the operation of this company, to put it bluntly, stinks to high heaven. And linking the scandal to the Republican Party and the current White House is not an exercise in partisan "politicizing," let alone "trivializing." Enron is itself the product of the policies pursued by the Republican right—and largely supported by the Democrats—over the past decade and a half, through the deregulation of energy markets. And the personal ties between Enron and the Bush administration are so extensive that one can only indicate them in outline form: * Kenneth Lay, Enron's chairman, has been George W. Bush's chief financial supporter and key backer since the latter went into politics. The connection between Lay and the Bush family goes back to the administration of the elder George Bush. Lay, known to the current president as "Kenny Boy," was a White House guest during the first Bush administration, which sponsored the passage of the 1992 Energy Policy Act. This legislation compelled established utility companies to open their transmission lines to electricity distributed through Enron's speculative marketing. * Lay and Enron together have given $2 million to George W. Bush's election efforts. In 2000 a company memo "recommended" that employees contribute to the Bush campaign: low-level managers were urged to give $500 and senior executives at least $5,000. Lay was listed by the Bush-Cheney campaign in 2000 as one of the "Pioneers" who raised at least $100,000, while Enron gave $100,000 to the inauguration gala, a contribution matched by Lay and his wife personally. * Lay was the only energy company executive to meet alone with Cheney when the latter was holding his secret discussion last year on a new energy policy. Cheney has so far rebuffed efforts by the General Accounting Office to reveal the others participants at those meetings and what they discussed. * Between 1995 and 2000 Enron donated $4.4 million to presidential and congressional candidates, more than any other company except UPS and Lockheed Martin. Enron contributed to the campaigns of 71 of the 100 current senators and nearly half the 435 members of congress. The investment paid off. In 2000 Enron secured exemption for its energy derivatives business under an act regulating commodity trading futures. * Another major beneficiary of Enron financial generosity has been Senator Phil Gramm, the Texas Republican right-wing demagogue, who pushed through the 2000 legislation just cited and whose wife Wendy sits on the company's board of directors. Wendy Gramm served under the first Bush as chair of the Commodity Futures Trading Commission at the time it allowed for an exemption in the trading of energy derivatives, which later became Enron's most lucrative activity. Gramm resigned from her government position to take a seat on Enron's board. In November 1998 she sold $276, 912 in Enron stock. * A number of other members of the first Bush administration joined Enron after Clinton's victory in 1992, including James Baker (who helped mastermind the hijacking of the Florida vote in 2000) and Commerce Secretary Robert Mosbacher. * Numerous officials went directly from Enron to the new administration in 2001, following the installation of George W. Bush. For example, Thomas White Jr., Bush's secretary of the Army, had been Vice Chairman of Enron Energy Services; he also served as a member of Enron's Executive Committee and Chief Executive Officer for Enron Operations Corporation. Bush's top economic adviser, Lawrence Lindsey, was an Enron consultant. Trade representative Robert Zoellick, an official in the Reagan administration and former counselor to Baker when he was secretary of the Treasury, served on Enron's Advisory council. Chief White House political adviser and dirty tricks operator, Karl Rove, at one time owned Enron stock worth $250,000. * In December Bush named former Montana governor Mark Racicot, and a registered lobbyist for the firm of Bracewell & Patterson where he personally represented Enron, as chair of the Republican National Committee. Racicot insisted that he would continue representing Enron and his other corporate clients—with the blessing of the White House— even while heading the Republican Party, making him "instantly," in the words of one commentator, "the most powerful influence peddler in Washington." There is another sense in which the Enron collapse is connected to the White House. Both the Houston-based corporation and the Bush administration have engaged in massive misrepresentation of their financial books. Enron systematically shifted debts to off-book partnerships set up by company executives, to disguise the fact that it had relatively few assets. The Bush administration engaged in financial flimflam on an even larger scale in pushing through its record tax cut for the wealthy. If it happened under Clinton? What if the spectacular collapse of a massive corporate enterprise, operated by one of the president's closest cronies, had occurred under the previous administration? Columnist Molly Ivins legitimately asks her readers to imagine that "Clinton's long-time, all-time biggest campaign contributor, a guy for whom Clinton has carried water over the years, a guy with unparalleled `access,' a shaper of policy, a man with a veto on regulatory appointments affecting his business, with connections at every level of the administration, a political fixer beyond the wildest dreams of James Riady—imagine that this guy's worldwide empire has tumbled into bankruptcy in just three months amid cascading reports of lies, monumental accounting errors, evasions, iffy financial statements, insider deals, a board of directors rife with conflicts of interest, top executives bailing out with millions while regular employees see their life savings shrink to nothing—imagine all this back in the day of Bill Clinton.... [W] e'd have four congressional investigations, three special prosecutors, two impeachment inquiries ... by now." This seems perfectly obvious, but not to the Times editors. As a corporate entity, Enron proved to be a criminal conspiracy. It shares this characteristic with the Bush administration. Indeed Enron's fingerprints are all over the present regime; its officials have helped draw up policy; its former officials are running important departments of the US government. In the face of this, the Times editors caution the Democrats against seeking "cheap political gain" from the affair. (The Washington Post editorialized January 6 along the same lines, chastising Democrats who "seem tempted" to focus "on links between Enron and the Bush administration.") The attempt by the Times to minimize the political significance of the Enron disaster and thus render aid and comfort to George W. Bush is consistent with the rightward turn by what passes today for American liberalism, a thoroughly rotten and compromised political force. Throughout the Clinton administration, the Times collaborated with ultra-right-wing forces in keeping the pot boiling in a series of largely concocted scandals, which did not lead to criminal charges but disrupted the administration politically, culminating in Clinton's impeachment and Senate trial. The Times joined in the witch- hunt over Clinton's affair with Monica Lewinsky, giving a political cover to Independent Counsel Kenneth Starr, the congressional Republican leadership and a cabal of right-wing lawyers, judges and political operatives. While the Times warns today about "trivializing" the Enron collapse, it engaged in just such conduct throughout the Whitewater-Lewinsky years, insisting that the central issue was always the minutiae of Clinton's financial dealings in the 1980s, or his sexual activity in the 1990s, or whether he lied about one or the other, and not the right-wing campaign to stage a political coup d'état and oust an elected president. This campaign culminated in the theft of the 2000 presidential election and the installation of Bush in the White House by the Supreme Court. Having fueled the anti-Clinton fires and having accepted the hijacking of last year's election with barely a murmur of complaint, the Times editors have a vested interest in covering up for the regime that has come to power in part as the result of their own reactionary and cowardly positions. Moreover, their support for Bush's war in Afghanistan would be further discredited if they were obliged to admit that it was being run by the associates of corporate gangsters. In general, the Times editors react with hostility to anything that might encourage the growth of political and social opposition to the established order. Their January 4 editorial begins by referring to the need "to restore confidence in American capitalism and in the integrity of its financial markets." A dishonest and ill-fated project. The Times editors know—as well as anyone, for this is their milieu—that the American corporate and Wall Street establishments are corrupt to the bone and wracked by crisis. It will take considerably more than this kind of cynical and hypocritical editorializing to put that Humpty Dumpty together again. If you are interested in a free subscription to The Konformist Newswire, please visit: http://www.eGroups.com/list/konformist Or, e-mail konformist-subscribe@egroups.com with the subject: "I NEED 2 KONFORM!!!" (Okay, you can use something else, but it's a kool catch phrase.) Visit the Klub Konformist at Yahoo!: http://clubs.yahoo.com/clubs/klubkonformist Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/