Konformist: Enrongate 01-11-02 (fwd)

[Jei]

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Date: Fri, 11 Jan 2002 19:17:59 -0000
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Subject: Konformist: Enrongate 01-11-02

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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.


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