ENRON

As he approaches the first anniversary of his inauguration, George W Bush is under siege. He has won the war in Afghanistan, but finds himself engaged in a new battle against a scandal that is threatening to dog his administration and tarnish his reputation .

Bush and his administration have been revealed as entwined in a story of corporate greed and political manipulation by an energy firm called Enron, now under double criminal investigation.

The scandal - in which the life savings and retirement funds of tens of thousands of employees vanished while a number of executive directors lined their pockets - reaches so high that John Ashcroft, the Attorney-General, has had to withdraw from the investigation because he received Enron money, and lawsuits are the pipeline to force Vice-President Dick Cheney for details of his contacts with the company.

The day Bush took office - a year ago next Saturday - was as cold and comfortless as his victory; his motorcade braved driving rain and a gauntlet of demonstrations marking the most contested and ugliest election result in US history. After 11 September, the world changed and so did America's view of Bush. He became the only President since Franklin Roosevelt to maintain the support of over 80 per cent of Americans for weeks on end.

But now the White House is laid bare by what rivals call 'Enronomics' - the political fable of the Enron corporation.

It has long been reported how the Bush administration and family is beholden to the energy industry. Before the Afghan war, an 'Energy Task Force' favourable to the industry was the main concern for Cheney, who himself came to office from the biggest oil equipment firm in the world.

Enron was just the kind of scandal a war would hide. The company plunged from a stock rating worth $60 billion - seventh on the Fortune list of US companies - into the biggest bankruptcy filing in US history, registered on 2 December.

The ethical - maybe criminal - core of the scandal is that Enron trapped its employees into a 'stock-lock', whereby they were not allowed to sell share options bought by way of savings. When the company collapsed, they lost everything. Meanwhile, Enron's executives - blessed by inside information and foresight - made a killing by scrambling to sell shares before the price collapsed.

The victims of Enron's rise and fall were regular employees who opted to join a savings plan by investing in their employer - and why not? With soaring energy prices and giddy profits, the share value quadrupled between 1997 and January last year. The catch was they were not allowed to sell.

They were people like Pat Betteridge, of the subsidiary Portland General Electric company in Oregon, who remembers grand claims by Enron chief executive Kenneth Lay on a visit north: 'We like to think of ourselves,' he bragged, 'as the Microsoft of the energy world.'

Betteridge used his $300,000 retirement savings to buy 3,500 shares - now worth not a cent. 'If I was hired to do electrical work and I botched it as bad as them,' he says, 'I'd either be doing time or get my licence yanked.'

The beneficiaries of the company's surge to power were those who boarded the wheel of perpetual motion that binds the Bush administration to the energy industry. Then the company's brass even tried to make their fortune out of its fall as well.

The Observer has dug into Enron's past to find that intimate connections with Bush and his Texan Republicans started long before the campaigns that brought them to Washington

Enron is a Houston-based utility trading company that sells energy to consumers, industrial and domestic. It is one of the biggest of its kind in the world - a standing it owes in no small part to Bush's governorship in Texas.

Texas's 1992 Energy Policy Act opened a regulatory black hole into which Enron moved and thrived, forcing established utility companies to buy energy from it. Meanwhile, in Washington, the Commodity Futures Trading Commission, under the presidency of Bush's father, allowed for an exemption in trading energy subsidiaries. The practice would be Enron's downfall.

The 1992 trading commission was chaired by Wendy Gramm, wife of Texas Senator Phil Gramm, close friend of the Bush family and recipient of $97,350 in political donations from Enron.

Once the exemption was accomplished, Mrs Gramm resigned to join the Enron board. As a member of its current audit committee, she is expected to play a key role in the forthcoming lawsuits and criminal investigation into bankruptcy and document destruction.

In 1997, Enron was anxious to break into Pennsylvania, one of America's biggest energy markets, with its huge consumers in Philadelphia and Pittsburgh. The company was having difficulty, and Lay asked Bush (who liked to call him 'Kenny boy') to help.

Bush duly called the then state governor, Tom Ridge, to pitch for Enron, whose bid duly succeeded. 'I called George W to kind of tell him what was going on,' said Lay at the time, 'and I said it would be very helpful to Enron if he could just call the governor and tell him Enron is a serious company'. Ridge was made Secretary of Homeland Security - Bush's new White House office - after 11 September.

Lay and Enron have been bountiful contributors to George Bush Jnr. Since 1993, company executives have donated nearly $2 million to him personally. Lay also donated $326,000 in soft money to the Republican Party over the three years prior to Bush's presidential bid and his wife added $100,000 for the inauguration festivities.

The administration is splattered with senior officials owning stock in Enron. Economic adviser Larry Lindsay and Trade Representative Robert Zoellick went straight from Enron's payroll into office.

The biggest holding is that of Army Secretary Thomas White, who as a former Enron executive holds stock and options totalling $50m to $100m. Rove himself holds as much as $250,000 in stock, and other holders include Defence Secretary Donald Rumsfeld, his assistant William Winkenwerder, Assistant Treasury Secretary Mark Weinberger, Economic Undersecretary Kathleen Cooper, Education Undersecretary Eugene Hickock, the ambassadors to Russia, Ireland, the Emirates and officials in the energy department, including its chief financial officer Bruce Carnes. It is not known which - if any - of these privileged stockholders sold their shares along with the Enron bosses, or suffered the same loss as everyone else. Such details will appear when they make this year's filings - leaving any that did so open to ethical, if not criminal, inquiry.

Bush has pursued the aggressive deregulation policies preferred by Enron and its kind, including legislation that exempts key elements of Enron's energy business from oversight by the federal government - pushed by none other than Senator Phil Gramm.

Lay's hand can meanwhile be found behind such episodes as the sudden replacement of Curtis Hebert as chairman of the Federal Energy Regulatory Commission by Texan Pat Wood, a friend of Lay. According to one source, the sacking after only weeks in the job came after 'an unsettling telephone conversation with Kenneth Lay' in which he was 'prodded to back a faster pace in opening up access to the electricity transmission grid'.

For all its troubles, Enron continued to benefit from Bush policies - markedly a refusal to step in and help California during the energy crisis last year, leaving consumers to pay the price... to Enron.

Enron was so close to the bosom of the administration that Lay and other executives were called to the White House for six meetings with Cheney and his staff - the last one only a week before the company made the staggering announcement that it was slashing shareholder equity by $1.2bn.

For Enron was playing a double game. In the run-up to the announcement, its president, Greg Whalley, was frantically lobbying another wing of the administration for help in arranging loans. His point man was Undersecretary Peter Fisher.

Lay discussed the upcoming bankruptcy twice with Commerce Secretary Don Evans - one of the Texan 'Iron Triangle' that propelled Bush to power. Later, he also twice pleaded Enron's case to Treasury Secretary Paul O'Neill.

But the Republicans were not the only political heavyweights to benefit from Enron's greed. The company has made donations to many Democrats too - some 27 per cent of its political contributions, according to the Centre for Responsive Politics in Washington.

And among Enron's top point men in Washington during the bankruptcy saga was Clinton's former Treasury Secretary Robert Rubin, who was revealed by the Washington Post yesterday as having made a representation last November to the current Treasury on behalf of the company. Rubin is now chairman of the executive committee of the Citigroup bank, one of Enron's principal backers, trying, with the JP Morgan bank, to raise $1.5bn in an effort to see the company through the bankruptcy crisis.

These are matters for the six Congressional committees preparing to investigate Enron. But they will have to wait for the two criminal investigations launched this week: one into Enron's bankruptcy, the other into the admission by the company's auditor, Arthur Andersen, that it destroyed thousands of documents about the bankruptcy.

Andersen had good reason to destroy the papers. The reasons for Enron's destruction when all the winds seemed to blow behind the company's fortunes are associated with the labyrinth of subsidiaries built up by Chief Finance Officer Andrew Fastow, fired on 24 October, and other executives.

Fastow created partnerships with what were described as outside, independently-run companies with names such as 'Chewco' or 'Jedi' - after characters in Star Wars - that were owned by him or others with Enron backing.

As a result, hundreds of millions of dollars were slushing overseas to tax havens as Fastow and other executives - so they said - sought to shore up the company against a possible fall in energy prices. What they were allegedly doing was amassing personal fortunes.

The ensuing gaps in the balance sheet became a gaping abyss which could not be hidden and down which the company finally fell. Enron admitted that it had overstated profits by $400m in reports issued since. However, Chewco alone enabled Enron to be able to keep some $600m of debt off its books.

The crucial criminal issue is whether executives misled investors by inflating revenues and minimising debts. The political issue is how closely entwined is the Washington elite - and the immediate circle around Bush.

Seven months of Bush's oil-friendly presidency was driven out of the spotlight by 11 September. It had pleased the industry for its isolationism and determination to withdraw from world affairs - the Kyoto Accords on global warming or arms reduction with Russia.

Domestically, Bush's cause was an articulate one: a tax cut worth $1.3 trillion, of which nine-tenths went to the 1 per cent of wealthiest Americans, and ambitions to drill for oil across the Alaskan wilderness and deregulate controls over the oil and energy industries.

By the afternoon of 11 September, Bush had become the vanishing president during his people's hour of need, cowering underground beneath an Air Force base in remote Nebraska. But by the end of that week, Americans saw in Bush not a spoiled brat, but the man they wanted to lead the nation to war.

Now the Enron scandal brings the presidency home, with Bush as Winston Churchill preparing for the 1945 election in Britain. The would-be Clement Attlee is Tom Daschle, leader of the Senate Democrats, who last week left the unity of war behind to unleash his congressional campaign for November 2002 with an offensive over welfare, tax policy, health care, energy and the environment.

The elections are critical to Bush and the Republicans: no US president apart from Nixon and Reagan has not lost ground at the mid- term polls, and the Democrats, even without making substantial gains, can keep control of the Senate while taking over the House and state governorships.

For the State of the Union address Bush will give on the twenty- ninth of this month, White House staff are scrambling to entwine the war in Afghanistan with the continuing domestic agenda. But the minefield they must cross is named Enron.

http://www.observer.co.uk/focus/story/0,6903,631991,00.html

Daily News (New York), 18 Jan 2002

Veep Tried to Aid Enron Key role in India debt row By TIMOTHY J. BURGER

Vice President Cheney tried to help Enron collect a $64 million debt from a giant energy project in India, government documents obtained by the Daily News show. "Good news is that the veep mentioned Enron in his meeting with [Indian opposition leader] Sonia Gandhi yesterday," a National Security Council aide wrote in a June 28 e-mail. Two other e-mails indicate that President Bush was to bring the subject up with Indian Prime Minister Atal Bihari Vajpayee, but the idea was scrapped before they met. The documents are the latest indication that there were contacts between the Bush administration and Enron on issues directly related to the company's business. The White House maintains Enron enjoyed no special favors from the White House or Cheney. Treasury Secretary Paul O'Neill and Commerce Secretary Donald Evans have conceded that they spoke with Enron chief Kenneth Lay last fall about the energy giant's impending failure, but they insist they refused to help. The new documents, obtained under the Freedom of Information Act, indicate Cheney took a key role in pushing the Maharashtra State Electricity Board to make good on the huge debt claimed by Enron for a power plant it built in Dabhol, India. Cheney spokeswoman Mary Matalin denied yesterday that Enron officials prodded Cheney to raise the issue with Gandhi, widow of slain Prime Minister Rajiv Gandhi and daughter-in-law of assassinated Prime Minister Indira Gandhi. "This is not our issue," Matalin said. "It was in the briefing papers, so he asked the question. The vice president didn't remember that topic at all. I asked him directly." White House and other top officials were interested in the Dabhol project partly because the taxpayer-backed Overseas Private Investment Corp. provided insurance against losses resulting from political problems in India. Overseas could face exposure as high as $300 million. The $3 billion Dabhol project was started in 1992 and built amid political wrangling in India that included allegations of bribery. The plant eventually was completed, but it has never been used. It involved at least 40 international finance institutions, including Overseas, and Enron's partners included General Electric and the Bechtel Corp. The e-mails indicate the State and Treasury departments also were deeply involved in making Enron's case. The highest-level contact they verify was Cheney's June 27 meeting with Gandhi, president of the opposition Congress Party. Other e-mails indicate Lay was expected in Washington around that time, but they do not say whether he was in contact with Cheney's office. Lay — whom Bush used to call "Kenny Boy" — has given more than $600,000 to support Bush's political career. Matalin said Lay and Cheney never discussed the Indian debt or Enron's financial condition. The documents obtained by The News showed that the National Security Council had given the Overseas Private Investment Corp. high hopes that Bush would raise the issue with Vajpayee in a Nov. 9 meeting. The investment corporation had sent the White House "talking points on Dabhol prepared for the President's meeting with Prime Minister Vajpayee," according to a Nov. 1 e-mail. But a Nov. 8 e-mail, whose sender and recipient are blacked out, warned, "President Bush cannot talk about Dabhol." White House economic adviser Lawrence Lindsey, who was previously paid $50,000 a year as an Enron adviser, also "was advised that he could not discuss Dabhol." National security adviser Condoleezza Rice, however, was still expected to raise the issue — but did not, another e-mail says. http://www.nydailynews.com/2002-01-18/News_and_Views/Beyond_the_City/a-138620.asp

By Michael C. Ruppert 1-11-2

© Copyright 2002, All Rights Reserved, Michael C. Ruppert and From The Wilderness Publications, www.copvcia.com. May be copied or distributed for non-profit purposes only. May not be posted on any internet web site without express written consent.

(FTW) - Even as Attorney General John Ashcroft today recused himself from involvement in any Justice Department investigation into the mushrooming Enron scandal, larger conflicts of interest - potentially more damaging to the Bush Administration -- are becoming increasingly apparent. The conflicts involve the Chairman of the Securities and Exchange Commission (SEC), Harvey Pitt and the head of Congress' investigative arm, the General Accounting Office (GAO), David Walker. Both agencies are charged with investigating allegedly criminal behavior by the energy trading firm, once the seventh largest company in America, which has now become the single largest bankruptcy in world history and may soon become the largest financial and political scandal in American history.

As new revelations of Enron s unethical and insider-based improprieties, apparently facilitated by more than $2 million in Bush campaign donations, continue to flash across TV screens on a daily, sometimes hourly, basis -- more serious allegations of criminal money- laundering activities by a respected financial expert suggest that what is already known about Enron s behavior is but the barest tip of a razor sharp iceberg that could sink the Bush presidency.

Spokespersons for Pitt and Walker both denied to FTW in interviews on January 10 that there is any reason for the heads of these two agencies, long regarded as the last and best protections against unchecked government corruption, to recuse themselves from Enron investigations even though their respective agencies have key statutory obligations to investigate the growing scandal.

SEC Chairman Harvey Pitt, who took office in August of this year, after most of the acts leading to the Enron collapse had been committed, was, according to a Jan. 9, 2001 report by the Center for Public Integrity, a partner in the law firm of Fried, Frank, Harris, Shriver and Jacobson. In that capacity he represented accounting firm Arthur Andersen, Enron s auditor, which disclosed in a press release dated yesterday, that in recent months individuals in the firm involved with the Enron engagement disposed of a significant but undetermined number of electronic and paper documents and correspondence related to the Enron engagement.

This is significant because Andersen, one of the big five accounting firms, had routinely signed off on falsified financial statements concealing almost $20 billion in off-balance-sheet debt from stock and bond holders, regulatory agencies and Enron employees. Many of Enron s pre-bankruptcy 20,000 employees were barred by the company from cashing in their 401(k) retirement plans, primarily consisting of Enron stock, while key executives including Chairman Kenneth Lay, former President and CEO Jeff Skilling, and CFO Andrew Fastow reportedly personally made more than $1 billion selling Enron shares before the collapse.

SEC spokeswoman Christi Harlan told FTW, "The Chairman filed an agreement that he would recuse himself from votes in any matters where he had a conflict of interest. The investigation is being run by the enforcement division and they keep him [Pitt] advised.

"Once the Commission launches an investigation to go forward they just do their thing. There's no requirement for a vote until an action is recommended.

Harlan stated that the enforcement division acts autonomously from any input from the Chairman s office and that the head of the division has management oversight for any investigations. This appears to be a different SEC practice from the long-respected partnership of SEC chairman Arthur Levitt and enforcement director Richard Walker who were known as a team for their single-minded and thorough non-partisan investigation of securities violations in the 1980s and 90s. Walker was recruited by Deutschebank shortly after the attacks of September 11th, 2001.

When asked if, in spite of his past representation of Andersen, Pitt was confident that there would be no conflict of interest or any resultant influence on the Enron probe, Harlan said, "Absolutely!"

Comptroller General of the United States David M. Walker, who heads the GAO, has an even more obvious dilemma. Until November 9, 1998 he was a partner, board member and global managing director at Andersen. As persistent questions bubble about Andersen's possible complicity in Enron's criminal falsification of financial statements Walker s past relationship with Andersen management raises a question about his own ability to investigate in an unbiased fashion.

GAO spokesman Jeff Nelligan told FTW, There is no link, no reason to recuse at all. When Mr. Walker was at Arthur Andersen he had nothing to do with Enron and he left well before all of this took place. He's been gone for three plus years now.

The possibility that Walker had no knowledge of Enron activities (Enron was Arthur Andersen s second largest account paying Andersen some $52 million last year) is questionable given his position as a director and board member. And the statement that he was not at Andersen when Enron's financial statements were being falsified is flatly contradicted by a 2001 Enron corporate filing with the SEC (form 8-K) which states that Enron will restate its financial statements from 1997 to 2000 and the first and second quarters of 2001 to account for the fraudulent or grossly negligent financial statements given to the SEC by Enron executives and certified by Andersen.

Walker was on the board of Andersen for almost two years while Enron was cooking the books and Andersen was signing off on it.

Many of the Andersen connections and possible improprieties have been noted by Rep John Dingell (D), MI the ranking member of the House Energy and Commerce Committee. On December 5, 2001 Dingell wrote to Pitt with a series of detailed accounting questions that, when addressed in any one of eight announced Enron investigations, cannot help but draw Andersen deeper into the controversy.

THE ENRON ADMINISTRATION

A January 3 letter from Vice President Dick Cheney (former CEO of oil construction giant Halliburton) to California Congressman Henry Waxman disclosed that between January and September of 2001 Enron executives, including Lay, had met on six occasion with Cheney s National Energy Policy Development Group. The letter did not disclose details of the meetings but did reveal that the last such meeting occurred on October 10th just six days before Enron publicly announced the hidden debt, triggering the collapse of its share price.

The October 10th meeting was approximately two weeks before Enron s Chair, Ken Lay made calls, as reported by the Associated Press on January 10, to Treasury Secretary Paul O Neil and Commerce Secretary Don Evans to discuss the fallout from Enron s pending collapse. Lay is a long-time personal friend of George Herbert Walker Bush and has headed the company which has given over $2 million in hard and soft campaign donations to George W. Bush and the Republican Party since 1999.

A pending constitutional crisis loomed this summer as the GAO and Waxman moved closer to suing the Vice President for refusing to let Congress know what his energy task force was debating behind the same closed doors that proved to be no barrier for Enron. Waxman s letters, frequently copied to Dingell and Walker, established a robust paper trail closing off avenues of escape for the Administration in its repeated refusals to cooperate.

A January 10th letter from Waxman to Attorney General John Ashcroft inquiring about his acceptance or more than $75,000 in campaign contributions from Enron during his 2000 Senate campaign from Missouri was followed, within hours, by Ashcroft s announcement that he would have nothing to do with the Justice Department's investigation of Enron. However, Ashcroft has chosen the less aggressive investigatory tactic of creating an in-house task force to investigate Enron, rather than empanelling a grand jury capable of bringing criminal charges.

As of press time the Department of Justice has not returned a call from FTW asking why the less aggressive approach was chosen.

Other Bush figures connected to or having a financial stake in Enron include Presidential advisor Karl Rove, U.S. Trade Representative Robert Zoellick (formerly on Enron's advisory council) and multi- millionaire Secretary of the Army Thomas White who is a former Enron executive. Lawrence Lindsay, the President's economic advisor, formerly served on an Enron advisory board. The newly elected Chairman of the Republican Party (RNC), former Montana Governor Marc Racicot, is Enron s former chief lobbyist with the firm of Bracewell and Patterson. Racicot has indicated that he will not sever his relationships with the firm and may continue to lobby as he leads the Republican Party. As RNC he has unobstructed access to all key decisions and votes made by Republican members of Congress.

Racicot is not subject to any governmental regulation or oversight because he is not a federal employee.

Enron influence throughout the Bush Administration is nearly ubiquitous. Several news stories have reported that CEO Lay, who had supported Bush since his first run for Texas Governor has actually cast an imperial thumbs up or thumbs down on cabinet-level appointees and key regulatory officials including the head of the Federal Energy Regulatory Commission which controls electrical rates for providers and oil, gas and electricity movements throughout U.S. markets.

CUTTING TO THE CHASE AND CLUES OF GREATER CRIMES

When asked about Justice's decision to create a task force instead of convening a grand jury, a former federal prosecutor with experience in government corruption and energy matters told FTW, on condition of anonymity, "I'm a little relieved by Ashcroft s recusal but a task force is not a grand jury and cannot charge criminal offenses. There is still one or more steps removed from actual criminal charges. Given the evidence of criminal behavior a task force, then, is less than a perfect solution. It's not really any solution.

The former prosecutor added that Andersen's destruction of records, "is extraordinary." Andersen has known for many months that documents in their possession might very well become the subject of civil and criminal discovery. It was incumbent upon Andersen, at the moment that it knew that these documents might become a part of litigation, to suspend their records retention schedules. It was Andersen's lawyers' duty to advise Andersen to err on the side of retention. That is considered 'best practices' for record retention in virtually every major company. The decision makers who failed to flag the documents at the proper time critically ill served the partnership.

Catherine Austin Fitts, a former Assistant Secretary of Housing and Urban Development (HUD) and a past Managing Director of the Wall Street investment bank Dillon Read noted that Enron's trading patterns, internet money movements and [other activities] were consistent with a large-scale money laundering operation.

She told FTW, "The fact that subpoenas were not issued months ago to obtain all Enron Online off shore and onshore digital and paper trading records and corresponding bank records defies logic, unless one presumes that Enron's generous donations have bought them time for a shredding party that protects all the beneficiaries of the real dollars that flowed through the Enron money pipeline. If my years working on the clean up of BCCI and the S&L crisis taught me one thing that I would communicate today to the shareholders, retirees and employees who have been harmed, it is this: People like the people on the board of Enron absolutely make money on insider trading, bid rigging and fraud, and they do so with help from the highest levels. They are superb at financial fraud because they are superb at persuading people that they are respectable and legitimate. The money they steal buys a lot of respectability.

"Presume the worst form of fraud and criminal enterprise is plausible. If not, then we are looking at gross negligence that, according to traditional standards of fiduciary responsibility, in fact constitutes criminality and fraud. Either way the specifics come out -- intentional fraud or gross negligence -- the Enron board and management are criminals. That is a fact. The rule of law says that they should be held to the same standards of accountability as the millions of people they and their institutions have evicted from their homes, thrown into jail, denied health c are and jobs or had burnt at the proverbial stake. The rule of decency says that any American who will continue to do business or associate with these individuals is part of the culture of corruption that has neatly disconnected action from accountability.

"I will bet every last dollar I have that Enron was the largest laundromat of stolen and tax evading dollars in American history and that the Department of Justice's primary goal is cover-up --- to make sure that the money trail disappears forever.

Fitts is also well qualified to speak on issues of government impropriety. She has recently successfully beaten a five-year Department of Justice attempt to destroy her reputation after she had discovered mismanagement of government funds and other improprieties at HUD in the mid 1990s. Her ordeal has recently resulted in statements completely exonerating her and revealing that there was no legal basis for the government to have begun the investigations of her company, Hamilton Securities, in the first place. Emerging from the ordeal as a recognized innovative thinker on economics, Fitts routinely consults with major economic-financial research groups in the U.S. and Europe and has just participated in the New York Times drug policy forum with Nobel Laureate, economist Milton Friedman.

Michael Ruppert is the Publisher/Editor of From The Wilderness, a monthly newsletter read in 27 countries and by two committees and 20 members of the U.S. Congress. He may be reached at <mailto:mruppert@copvcia.com .

Chicago Tribune Chicago, Illinois January 25, 2002

Former Enron exec found dead Officials: J. Clifford Baxter died of apparent suicide The Associated Press Published January 25, 2002, 11:48 AM CST

HOUSTON -- A former Enron Corp. executive who challenged the company's questionable financial practices and resigned last May was found shot to death in a car today, an apparent suicide, authorities said.

Police in the suburb, Sugar Land, confirmed the death of 43-year-old J. Clifford Baxter, a former Enron vice chairman. He was shot in the head.

"We are deeply saddened by the tragic loss of our friend and colleague, Cliff Baxter. Our thoughts and prayers go out to his family and friends," the company said in a statement.

Spokesman Mark Palmer had no additional comment.

Baxter was vice chairman of Enron when he resigned in May 2001, several months before the energy company's collapse.

Baxter was identified by name in the explosive warning that Enron executive Sherron Watkins wrote last August to company chairman Ken Lay.

"Cliff Baxter complained mightily to (then-CEO Jeff) Skilling and all who would listen about the inappropriateness of our transactions with LJM," one of the partnerships that kept hundreds of millions of dollars in debt off Enron's books.

Watkins identified Baxter in a section of her letter stating there is "a veil of secrecy around LJM and Raptor," another entity involved in the partnerships.

Watkins' letter to Lay stated that "we will implode in a wave of accounting scandals" unless the company halted practices that eventually sent it into bankruptcy.

His body was found at 2:23 a.m. today in a car parked in between two medians in a residential area in Sugar Land. He was in the driver's seat of the vehicle and a police officer stopped to check on him after noticing the parked car.

Jim Richard, a Fort Bend County justice of the peace, ruled Baxter's death a suicide.

Baxter was one of 29 former and current Enron executives and board members named as defendants in a federal lawsuit. Plaintiffs' lawyers said the executives made $1.1 billion by selling Enron stock between October 1998 and November 2001.

It said Baxter had sold 577,436 shares for $35.2 million.

At the time his resignation was announced, Skilling said Baxter had made "a tremendous contribution to Enron's evolution, particularly as a member of the team that built Enron's wholesale business."

It said his primary reason for resigning was to spend more time with his family.

Baxter had joined Enron in 1991 and was chairman and CEO of Enron North America prior to being named chief strategy officer for Enron Corp. in June 2000 and vice chairman in October 2000, the company said.

http://www.chicagotribune.com/templates/misc/printstory.jsp?slug=sns%2Denron

Enron Evidence Said To Implicate Treasury Secretary O'Neill

Citizen.org 1-20-1

WASHINGTON, DC - Public Citizen today called on Treasury Secretary Paul O'Neill to explain evidence indicating that he helped Enron continue hiding information about its financial condition and took actions enabling it to funnel potentially billions of dollars belonging to shareholders and employees into offshore tax havens.

In a letter to O'Neill, Public Citizen President Joan Claybrook said she is "deeply concerned" about O'Neill's actions. She asked the secretary to provide detailed information about his communications with Enron executives and Bush administration officials about the tax havens.

"The secretary owes the public an explanation," Claybrook said. "His actions have created a tremendous appearance of impropriety. He has a duty to taxpayers, Enron shareholders and Enron employees to clarify this matter."

In 1998, the Clinton administration began making moves to crack down on countries whose lax banking regulations permit U.S. companies to hide money in offshore tax havens. Clinton threatened strict economic sanctions on all nations with lax banking regulations, effective July 2001, in an effort to create a global trend toward increased financial transparency.

But on Feb. 17, 2001, O'Neill announced that the Bush administration was going to review the matter, effectively delaying it. As a result, Enron and other companies could continue to hide money in the Cayman Islands and other offshore accounts. Enron has 874 subsidiaries registered in the Cayman Islands and other nations with weak bank disclosure laws.

On Nov. 27, 2001, O'Neill's office announced that according to an agreement with the Cayman Islands, that nation would not have to tighten its banking laws until 2004. That would give enough time for companies to move their assets and destroy their records.

O'Neill's efforts must be viewed in the context of the more than $1.1 million Enron contributed to Bush's presidential campaign and inauguration, Claybrook wrote. She noted that O'Neill's responsibility is to collect owed taxes -- not to facilitate tax avoidance -- and that if Enron and other companies are hiding money in the Cayman Islands, he has an obligation to end that abuse.

Public Citizen first raised questions about the offshore tax havens in a report about Enron issued in late December, Blind Faith: How Deregulation and Enron's Influence Over Government Lotted Billions from Americans.

In the letter, Public Citizen asks O'Neill to answer detailed questions about his decisions regarding the tax havens; provide a comprehensive list of his contacts with Enron executives, President Bush, Vice President Dick Cheney and their staffs about the issue; explain the extent of his knowledge about tax havens being used by terrorists to hide money; explain why he took the steps; and more.

http://www.citizen.org/pressroom/release.cfm?ID=1000

*****

Monday January 21 7:39 PM ET

Enron Probing Document Destruction By PETE YOST, Associated Press Writer

WASHINGTON (AP) - Enron is looking into the reported destruction of documents that allegedly took place at its Houston headquarters after the federal government began investigating the company, an attorney for the bankrupt energy giant said Monday night.

In an on-air interview with ABC News, a former Enron executive, identified as Maureen Castaneda, said the shredding of documents took place in an accounting office on the 19th floor.

Castaneda displayed one box of the shredded material which ``I got ... when I was leaving work to basically use ... for packing material.

``There were ... a lot more than this,'' she said, standing next to the box. She said some of the shredding may have occurred as recently as this month.

Castaneda said the destruction began after Thanksgiving and continued to at least last week.

The Securities and Exchange Commission began looking into Enron in mid-October.

``We are investigating the circumstances of the reported destruction of documents,'' Washington attorney Robert Bennett, who is representing Enron, said in a statement.

``In October 2001 the company issued several directives to all Enron employees worldwide that all relevant documents should be preserved in light of pending litigation,'' Bennett added. ``If anyone violated those directives, they will be dealt with appropriately.''

The reported shredding at Enron follows revelations over the past week and a half about document destruction at the Arthur Andersen, Enron's accounting firm.

Some of the shredded Enron paper displayed in the ABC story contained the word ``Jedi,'' one of the entities involved in an array of off- the-books partnerships which kept hundreds of millions of dollars in Enron debt off the company's balance sheet for several years.

Plaintiffs' attorney William Lerach, who is suing Enron's board and officers, said he plans to take the box of shredded documents to federal court.

Enron's inquiry into shredding at its headquarters came as congressional investigators pressed for public testimony by an Andersen auditor fired over the destruction at the accounting firm.

``This whole sorry affair keeps getting uglier by the minute, and we're determined to get to the bottom of it.'' said Ken Johnson, spokesman for the House Energy and Commerce Committee, which has been investigating the destruction of documents at Andersen.

``Making bad business decisions is one thing, but trying to cover up bad business decisions is another,'' said Johnson when told of the reported shredding at Enron.

Fired Andersen auditor David Duncan told investigators that Andersen had ample information when it evaluated the controversial partnership arrangements at Enron that were a big factor in its bankruptcy.

Duncan ``did not sit there and say 'Enron hid all this information from us and therefore we couldn't count right,''' said Rep. Jim Greenwood, R-Pa., who heads a House panel investigating the collapse. ``It was more of ... 'we made mistakes.'''

Rather than giving a ``mea culpa,'' Duncan gave ``a wea culpa; he did not point the finger at Enron,'' Greenwood said Monday, characterizing the comments the fired auditor made last week to congressional investigators.

Duncan's lawyers sought to delay his public testimony, scheduled for Thursday before the House Oversight and Investigations Subcommittee, arguing that Duncan needs more time to prepare.

But Greenwood, who chairs the subcommittee, rejected the request, saying Duncan ``doesn't really need to recall every detail of what he did for Enron. We're focused on the destruction of documents. We'll subpoena him if we have to.''

Andersen chief executive Joseph ``Berardino is saying that the company found fault with Duncan's destruction of documents. He (Duncan) needs to defend himself,'' said Greenwood.

If Duncan testifies, the hearing will pit him against Andersen's legal department and company management in Chicago.

Appearing Sunday on NBC's ``Meet the Press,'' Berardino criticized Duncan and defended attorney Nancy Temple, who advised the Houston office by electronic mail on Oct. 12 about the firm's document destruction policy. That was just four days before Enron announced more than $600 million in third-quarter losses and took the first step in disclosing details of the partnerships.

Berardino said Duncan displayed ``at the least ... extremely poor judgment'' for his part in discarding the documents in October and November.

Berardino said Temple reminded the Houston office of the policy to do away with some documents ``because accountants are pack rats ... We save lots of stuff that's not relevant.''

But Duncan told investigators ``it was unusual'' for a company lawyer to emphasize the document-destruction policy.

Meanwhile, a lawyer for Kenneth L. Lay, Enron's chairman and chief executive, said Lay disposed of millions of dollars in Enron stock before the company's collapse last year because he needed to raise cash to repay loans, not because of concerns about the health of his company.

Attorney Earl J. Silbert said Lay had put up shares of his Enron stock as collateral for other investments. On at least 15 occasions between February and October last year, Lay returned shares to the company to repay $4 million he had received through a credit line.

However, Silbert also said that Lay held onto some stock, detailing one transaction in which Lay exercised options to purchase 68,000 shares of Enron stock on Aug. 21.

``He continues to hold that stock today,'' Silbert said.

In other developments:

-The State Department disclosed that Secretary of State Colin Powell referred to Enron's problems regarding a power plant in India in a discussion with India's foreign minister last April 6. Enron was trying to collect a $64 million debt on the project. According to the State Department, Powell said failure to resolve the matter could have a serious deterrent effect on other investors.

-New Jersey's two U.S. senators, Democrats Robert Torricelli and Jon Corzine, urged the federal government to inspect Enron's natural gas pipelines to ensure against accidents. Enron spokesman Mark Palmer said ``our pipelines are inspected continuously and the hardworking men and women who have devoted their lives to the safe operations of these pipelines would have it no other way.''

-Sen. Barbara Boxer, D-Calif., said accounting firms should be barred from providing management consulting services to the companies they audit. ``These conflicts have led to the kind of hide-the-debt shell game that took place at Enron,'' said Boxer, who will introduce a bill to ban the dual role.

-Consumer advocate Ralph Nader said a special counsel should investigate Enron rather than the Justice Department's criminal division. Nader also said Bush administration officials should have alerted the Justice Department and the Securities and Exchange Commission last fall when contacted by Enron Chairman Ken Lay about the company's growing problems.

*****

Enron, Chase, Citigroup and Bush (The right relationship is everything) 1/18/02 Robert Lederman

robert.lederman@worldnet.att.net

Chase, Citigroup, Bush and ENRON (The right relationship is everything)

Hey, what a surprise. the most corrupt President (Bush) is linked to the most corrupt corporation (Enron) which is financed by the Rockefeller's two main banking groups (JP Morgan/Chase and Citigroup). Bush gets all his ideas (as does Giuliani) from Chase Banks' Manhattan Institute, founded by CIA director William Casey... who funded, armed and trained bin Laden and the Afghan terrorists we are fighting. Ken Lay, Enron CEO and Bush's top contributor is a member of David Rockefeller's Trilateral Commission. It's a small world after all! See http://baltech.org/lederman/ for details on the Chase/Bush/Nazi/CIA connection behind much of modern US history. None of these connections are allowed to be reported on in US newspapers. For example, name one paper since 9/11 that has reported that David Rockefeller built the WTC. Too unimportant a detail to mention? - Robert Lederman -------- London Financial Times Editorial comment: Enron and the role of the banks Published: January 16 2002 20:34 | Last Updated: January 16 2002 20:38 "The more that is learnt about the collapse of Enron, the wider the ramifications become. Failures in the audit process and the vulnerability of many employees' pensions have now been joined by concerns over the actions of the banks. The Enron debacle has highlighted fundamental weaknesses in the US system of financial regulation, which has failed to keep pace with changes in the industry. The latest concern centres on the role of JP Morgan Chase, one of Enron's two main bankers. It was involved in an offshore company used by the energy trader to move risk off its balance sheet. The disclosure of the existence of such off-balance-sheet arrangements accelerated the downward spiral in the company's share price and led to its eventual bankruptcy. The Securities and Exchange Commission is now investigating whether JP Morgan has also misled its shareholders by making loans to Enron in the form of oil and gas trading contracts. Insurers who face a claim from the bank on surety bonds that guaranteed the contracts allege that they were loans dressed up as trades to keep them off the bank's balance sheet. JP Morgan has already revised its estimate of its Enron exposure from $900m to $2.6bn (£620m to £1.8bn.)The SEC probe is adding to the criticism of risk control procedures at the bank, formed in 2000 by the merger of Chase Manhattan with the venerable House of Morgan. JP Morgan and Enron's other lead bank, Citigroup, are the largest of a new generation of banking groups formed by combining commercial banks and investment banks to provide a one-stop shop for big corporate clients. The theory is that companies will give the lucrative investment banking mandates for mergers and acquisitions advice, share issues and bond finance to the banks that put loans on the table. Enron was, until the past few weeks, the sort of case study used to justify the creation of investment banks with big balance sheets. By being prepared to make hefty loans to Enron, Citigroup and JP Morgan beat less well endowed competitors in last year's race to advise it on restructuring and refinancing options. They worked hard - unsuccessfully - to persuade the credit rating agencies not to downgrade Enron. That they are able to do both investment banking and commercial banking is a consequence of the repeal of the Glass-Steagall Act that had separated the two since the 1930s. It was meant to stop conflicts of interest that had contributed to the Great Crash of 1929 but proved increasingly unworkable as commercial banking, investment banking and the insurance industry converged. The Gramm-Leach-Bliley Act that repealed the old legislation in 1999 did nothing to rationalise financial regulation, however. The old regulators continued to do their work - the SEC as securities industry watchdog, the Federal Reserve on banking and the Commodity Futures Trading Commission on derivatives. The result is that no single regulator has an overall view of large financial conglomerates, leaving them free to organise their businesses in ways that have consequences for clients as well as investors. The weaknesses of this approach will have to be dealt with when the dust has settled around Enron."

Check out Citigroup's board of directors From : http://www.responsiblelending.org/citidir.htm Citigroup, Inc. Board of Directors C. Michael Armstrong, Chairman and CEO, AT&T AT&T, 32 Avenue of the Americas, New York, NY 10013 tel 212-387-5400 Alain J. P. Belda, President and CEO, Alcoa Alcoa, 201 Isabella Street, Pittsburgh, PA 15212 tel 412-553-4545 Kenneth J. Bialkin, Partner, Skadden Arps Slate Meagher & Flom Skadden Arps Slate Meagher & Flom, Four Times Square, New York, NY 10036 tel 212-735-2130 fax 212-735-2000 kbialkin@skadden.com Kenneth T. Derr, Chairman and CEO (retired), Chevron Chevron, 575 Market Street, San Francisco, CA 94105 John M. Deutch, Professor, M.I.T.; former Director of CIA M.I.T. Dept. of Chemistry, Room 6-208, 77 Massachusetts Ave., Cambridge, MA 02139, tel. 617-253-1479 fax 617-258-5700 jmd@mit.edu Ann Dibble Jordan, Consultant 2940 Benton Place, Washington, DC 20008 Robert I. Lipp, Citigroup Citigroup Inc., 399 Park Avenue, New York, NY 10043 tel 212-559-1000 Reuben Mark, Chairman and CEO, Colgate-Palmolive Colgate-Palmolive, 300 Park Avenue, New York, NY 10022 tel 212-310- 2000 Michael T. Masin, President and Vice Chairman, Verizon Communications Verizon Communications, 1095 Avenue of the Americas, New York, NY 10036 tel 212-395-2121 Dudley C. Mecum, Managing Director, Capricorn Holdings 33 Khakum Wood Road, Greenwich, CT 06831 Richard D. Parsons, President, Time Warner Time Warner, 75 Rockefeller Plaza, New York, NY 10019 tel 212-484-8000 Andrall E. Pearson, Chairman and CEO, Tricon Global Restaurants Tricon Global Restaurants, 1441 Gardiner Lane, Louisville, KY 40213 Tel. 502-874-8300 Robert E. Rubin, Chairman of Executive Committee, Citigroup Citigroup Inc., 399 Park Avenue, New York, NY 10043 tel 212-559-1000 Franklin A. Thomas, former President, Ford Foundation TFF Study Group, 595 Madison Avenue, 33rd Floor, New York, NY 10022 tel: 212-753-3200, fax: 212-753-6703, email f.thomas@tffsg.org Sanford I. Weill, Chairman and CEO, Citigroup Citigroup Inc., 399 Park Avenue, New York, NY 10043 tel 212-559-1000 Arthur Zankel, General Partner, Zankel Capital Advisors 20 E. 68th Street, New York, NY 10021 212-734-4173 Gerald R. Ford, former President of United States P.O. Box 927, Rancho Mirage, CA 92270

*****

BusinessWeek.com 1-18-2

Enron's Hero - With A Smoking-Gun Letter By Wendy Zellner, with Stephanie Forest Anderson, in Dallas and with Laura Cohn in Washington

http://www.businessweek.com

Sherron Watkins' memo to CEO Ken Lay spoke volumes about the company's behavior. So did the higher-ups' tepid response

At last, someone in the sordid Enron scandal seems to have done the right thing. Thanks to whistle-blower Sherron S. Watkins, a no- nonsense Enron vice-president, the scope and audacity of the accounting mess is becoming all too clear. Her blunt Aug. 15 letter to Enron CEO Kenneth L. Lay warns that the company might "implode in a wave of accounting scandals." And now that her worst fears have been realized, it is also clear that Watkins' letter went far beyond highlighting a few accounting problems in a handful of off-balance- sheet partnerships. Watkins' letter lays bare for all to see the underbelly of Enron's get-rich-quick culture.

Watkins, 42, a former Arthur Andersen accountant who remains Enron's vice-president for corporate development, put her finger on the rot: top execs who, at best, appeared to close their eyes to questionable accounting maneuvers, a leadership that had lost sight of ordinary investors and the basic principles of accounting, and watchdogs -- the outside auditors and lawyers whose own involvement may have left them too conflicted to query the nature of the deals. Perhaps the question shouldn't be how Enron collapsed so quickly -- but why it didn't implode sooner.

A REVEALING REPLY

Lay's response to Watkins' complaints is nearly as damning as her letter itself. Yes, he talked to her for an hour. And, yes, he ordered an outside investigation. But contrary to Watkins' advice, he appointed the company's longtime Houston law firm, Vinson & Elkins, despite the obvious conflict: V&E had worked on some of the partnerships. And Enron and V&E agreed there would be no "second- guessing" of Andersen's accounting and no "detailed analysis" of each and every transaction, according to V&E's Oct. 15 report. The inquiry was to consider only if there was new factual information that warranted a broader investigation. V&E declined comment.

Surprise: V&E concluded that a widespread investigation wasn't warranted. It simply warned that there was a "serious risk of adverse publicity and litigation." And Watkins' letter reveals the inadequacy of Lay's response in the months following CEO Jeffrey K. Skilling's sudden Aug. 14 resignation for "personal reasons." His departure triggered the letter.

Lay never fully disclosed the partnerships or explained their impact to investors, even as he vowed there were no accounting issues and "no other shoe to fall." Even after Enron revealed on Oct. 16 a $1.2 billion hit to shareholder equity related to the partnerships, Lay continued to express ignorance about details of these deals and support for Chief Financial Officer Andrew S. Fastow, who managed and had stakes in certain partnerships. On Oct. 24, Fastow was removed from his job and promptly left the company.

TENACIOUS AND COMPETENT

Watkins, an eight-year Enron veteran, is not some disgruntled naysayer who is easy to dismiss. Her lawyer, Philip H. Hilder, says she became familiar with some of the partnership dealings when she worked in June and July in Fastow's finance group. Her position allowed her to review the valuation of certain assets being sold into the partnerships, and that's when she saw "computations that just didn't jibe," says Hilder.

Former executives say the Tomball (Tex.) native was tenacious and competent. "She wasn't really an alarmist," says one former Enron employee. Her mother, Shirley Klein Harrington, a former high school accounting teacher, calls her daughter "a very independent, outspoken, good Christian girl, who's going to stand up for principle whenever she can." Watkins had previously worked at Andersen in Houston and New York and then for Germany's Metallgesellschaft.

At those companies, she befriended Jeffrey McMahon, whom she helped recruit. Now the CFO at Enron, McMahon "complained mightily" about the Fastow partnerships to Skilling, Watkins told Lay in the letter. "Employees question our accounting propriety consistently and constantly," she claimed. McMahon didn't return calls. Skilling has denied getting any warnings about accounting.

RED FLAGS

Watkins didn't stop there. Five days after she wrote to Lay, Watkins took her concerns directly to an Andersen audit partner, according to congressional investigators. He in turn relayed her questions to senior Andersen management on the Enron account. It's not known what, if any, action they took.

Of course, Skilling and Andersen execs shouldn't have needed a letter and a phone call from Watkins to figure out something was seriously amiss. Red flags abounded. And Watkins, for one, had no trouble putting her finger on questionable accounting practices. She wondered if Enron was hiding losses in off- balance-sheet entities while booking large profits from the deals.

At the same time, the outside partnerships were backed with Enron stock -- a tactic sure to backfire when it was falling -- and no outsiders seemed to have any capital at risk. Was Enron creating income essentially by doing deals with itself? "It sure looks to the layman on the street that we are hiding losses in a related company and will compensate that company with Enron stock in the future," she wrote.

In the end, Watkins grasped one thing that Enron's too-clever- by- half dealmakers didn't: Enron's maneuvering didn't pass the smell test. Even if Enron and its high-priced auditors and lawyers can ultimately show that they followed the letter of the law, it matters little. As Watkins herself wrote, if Enron collapses, "the business world will consider the past successes as nothing but an elaborate accounting hoax." And that seems destined to become Enron's epitaph.

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TomPaine.com

Recuse Me! Conflicts Of Interest In Congress John Moyers is the editor and publisher of TomPaine.com. Editor's Note: Laura Ephraim provided research for this article.

Congress will take a look at crooked Enron. The Washington Post reports that three House and seven Senate committees intend to hold hearings on the scandal -- better late than never.

The White House isn't happy about the hearings. On January 17, Press Secretary Ari Fleischer had the temerity to suggest that congressional curiosity is uncalled for. An incredulous reporter replied, "We should just trust you on that?"

The incident affirms the obvious -- the White House is wired to Enron. But it's not the only place in Washington that is. The company shared its fleeting wealth with some 250 friends on Capitol Hill. Many of them sit on committees now launching investigations.

You don't have to be Ralph Nader to ask: Who in Congress should recuse themselves from the investigations?

In fact, on January 20, The New York Times called for Senator Phil Gramm to disqualify himself. He sits on two important committees, Finance and Banking, that will look into the scandal; on the latter he is the ranking Republican. He's taken $97,350 from Enron, and his wife has a long association with the company, including service as a paid director.

If Gramm should recuse himself, then why not Senator Kay Bailey Hutchinson, Enron's biggest friend in the Senate, who sits on Commerce. She has received $99,500 -- Gramm is ranked second. How about Senator Jeff Bingaman, chairman of the Energy and Natural Resource Committee? He's seventh in the top ten at $14,124, a relatively cheap investment for Enron, but a nice boost to anyone's political career.

When it comes to recusal, the question is not: How much money does it take to buy a politician? A better question is: How much does it take to undermine public confidence that a politician is acting in the public interest? That's a question citizens must answer for themselves, but a little number crunching adds some helpful perspective. Compare committee assignments against the handy nonpartisan contribution data at OpenSecrets.org and the result is eye-opening.

Enron's reach goes far and deep. The company's top 10 friends in the Senate benefited from contributions ranging in size from Pete Domenici's $12,000 to Hutchinson's $99,500. Each of the top 10 sits on at least one of the investigating committees, and seven out of 10 sit on two or more.

Take another look at Senator Bingaman. Besides his chairmanship, Bingaman sits on two other committees -- Finance; and Health, Education, Labor and Pensions. Former Enron employees whose retirement accounts were dashed when the company's stock crashed might reasonably ask if Bingaman should recuse himself from hearings in the latter committee.

Now look at Bingaman's Energy and Natural Resources Committee. It's packed with Enron's friends -- Conrad Burns ($23,200), Chuck Schumer ($21,933), and Gordon Smith ($18,000) among them. If Enron's top 10 Senate friends disqualified themselves, the committee would lose six of its 23 members; if Enron's top 20 Senate friends recused, the committee would lose 10 of its 23 members. If a $1,000 Enron contribution warranted recusal, no Republicans and just four Democrats would remain on Bingaman's panel. And we haven't even mentioned contributions from Enron's sidekick in this calamity, Arthur Andersen, which is nearly as big a donor as Enron.

All but two of the Banking Committee's 21 members would be eliminated if a $1,000 contribution from either Enron or Arthur Andersen triggered recusal -- senators Thomas Carper and Daniel Akaka would have the hearing room to themselves. Looked at another way, eight members of the committee are among the top 20 recipients of Enron or Anderson contributions, and six are among the top 10.

The conflict of interest is clear -- both Enron and Andersen have invested heavily in the political careers of many members of Congress who will now investigate them. Are we supposed to have confidence that there's enough independence left in the capital to protect the public interest? Washington is wired -- our public servants are privately funded by the people they're meant to oversee. They promise to get to the bottom of this mess, but an ordinary American might reasonably wonder: We should just trust them on that?

When he was a senator running for re-election in 2000, John Ashcroft took $57,000 from Enron. Now as U.S. Attorney General, he's recused himself from looking into the mess.

Who among his former congressional colleagues should follow suit? The real question is: Who shouldn't?

Published: Jan 22 2002

*****

The Loyal Opposition: The Enron Affair The Scandalous Attitude Of The Bush Administration

By David Corn

With most scandals in Washington come the naysayers -- those quick to declare the matter no big deal, dismiss it as a partisan witchhunt, or assert it is nothing but the concoction of headline-hungry reporters. The Enron case is no exception.

"I'm still trying," columnist Andrew Sullivan says, "to figure out what this Enron thing is all about." He calls the Enron affair "less of a deal" than Whitewater, noting, "I haven't seen any argument yet that takes us beyond the line that many in the Bush administration were close to Enron, that Enron helped bankroll Bush's campaigns, and that therefore there is some sort of guilt by association." Similarly, National Review's Byron York comments there is "scant evidence that Enron equals Whitewater," as if that is now the standard measurement of scandal, and he attributes all the hurly- burly media attention to the knee-jerk, follow-the-pack tendencies of the media. New York Times columnist William Safire opines, "the scandal I see in this corporate debacle is non-political; it's professional." That is, the culprits worth bashing are Enron's accountants at Arthur Andersen who awarded their good housekeeping seal of approval to the company's sleight-of-hand finances and then destroyed documents.

Safire and Company are not wrong to point out that the cliched smoking-gun -- a piece of incontrovertible evidence hog-tying George W. Bush or one of his aides to Enron fraud or coverup -- has yet to be discovered in the massive pile of bad paper and shredded documents that federal and congressional investigators will be poking through for years to come. (The scandal is still young.) And the Bush White House and its defenders vehemently maintain administration officials did not rush to the rescue of Enron chairman-in-distress Kenneth Lay, Bush's most generous contributor, after Lay called his pals in government to say Enron was in deep doo-doo. But none of this means the scandal is politics-free.

There are Bush critics who grouse that by doing nothing the Bush administration was a silent accomplice to the screwing of Enron employees, who were forced by the company to keep their retirement plans loaded with plummeting Enron stock while Lay and other top execs had dumped over a $1 billion in personal Enron securities before the bubble burst. (Lay pocketed $30 million in his oh-so prescient sell-off; another Enron honcho skated away with $353 million.) But it is hard to make a federal case over the absence of Bush intervention. Perhaps the Bush administration should have moved to assist the company in some fashion out of concern for the workers but did not because it feared such an act would be blasted as blatant favoritism. More importantly, the Enron failure illuminates the problems and dangers of the Bush administration's we're-all-buds approach toward the corporate community. It stirs up significant questions -- political questions -- about the predilections and judgments of the Bush Gang.

Consider this: when the Bush administration decided to cook up a comprehensive energy policy, Enron executives were invited several times to meet with Vice President Dick Cheney's energy task force. In these sessions, Enron had the opportunity to sell the White House on proposals that would be good for Enron. Many environmental groups, alternative energy experts, energy conservation specialists, and consumer advocates were not that fortunate. Why did Enron get a special place at the table? How could they not, is a better way to put it. Lay and his comrades had poured hundreds of thousands of dollars into Bush's various campaigns. Lawrence Lindsey, Bush's top economic adviser, was paid $50,000 in 2000 for serving on a do- nothing Enron advisory board. (But he did earn that money by passing along Lay ideas to the Bush presidential campaign.) Enron Field, a baseball stadium, was built by Halliburton, the construction company Dick Cheney headed before becoming Bush's sidekick. Dozens of Bush officials had held Enron stocks; several others had worked for Enron or received campaign contributions from the firm.

Remove from the equation all these connections -- forget reality, for a moment -- and then ask, why should the Bush White House have sought advice from Enron? The company was more a paper tiger than an energy policy pioneer. It made its phony billions by recording as revenue the total value of the goods it traded -- say, electricity, gas and other energy commodities -- not by calculating the profit or loss from each transaction. Sell $10 million worth of natural gas? Who cares if it cost $10.1 million? You have $10 million in revenue. Enron was like Catch 22's Milo Minderbinder, whose M&M enterprises bought eggs for 7 cents a piece, sold them for 5 cents a piece, and claimed a profit. The reason for letting Enron in the door at 1600 Penn was corporate-political camaraderie that was greased by Enron's past contributions and payments to assorted Bushies. Rather than being granted audiences with Cheney's energy team, Enron should have been hauled in before the Securities and Exchange Commission -- and the IRS. The firm paid no income taxes in four of the past five years, via the use of hundreds of overseas tax havens and other trickery.

It's not just that the Bush crowd was duped by Lay and his partners- in-fraud. The Bush White House deliberately created a friendly climate for such scoundrels. Prior to the fall on Enron, SEC chairman Harvey Pitt, a Bush appointee, had refused to take on the accounting industry, claiming that in recent years the SEC had been too adversarial toward accounting firms. He told Barron's "there is nothing rotten with the accounting profession" and called for better self-regulation, not tighter government oversight. (Surprise! Pitt used to be a lawyer for the American Institute of Certified Public Accountants. And two other Bush SEC nominees hail from big accounting firms.) After the Enron mess hit the front pages, Pitt chastised the industry for not moving fast enough to deal with the sort of iffy bookkeeping practices exploited by Enron, and he unveiled the sketchy details of a reform plan. But the centerpiece of his proposal was a new over sight board that would be funded by -- guess who? -- the industry. Here he was sticking with the Bush Doctrine: let corporations regulate themselves.

Whether Bush and his aides pulled a favor for Enron is only one issue. Zoom out, and the broader landscape shows a Bush administration all-too sympathetic and open to corporate bamboozlers. Washington Post reporter Paul Farhi pooh-poohs the Enron affair as "another Incomprehensible Washington Scandal." He explained: "By definition, an IWS is so convoluted that it is understood only by participants, partisans, lawyers and a few very nerdy journalists -- all of whom are paid to pay attention anyway." (Other examples: Iran- contra, the S&L scandal, Travelgate.) But the big brush strokes -- the Bush administration's far too hospitable disposition toward Enron and Arthur Andersen -- are not hard to discern or to fathom. The search for that smoking gun -- which can be a mind-numbing, detail- dominated process -- ought not to distract from the wider view. (And, yes, the Clinton administration was also in the hayloft with Lay and Enron. The company gave the Democrats hundreds of thousands of dollars and won much-coveted seats on overseas trade missions headed by Ron Brown and Mickey Kantor, Clinton's secretaries of commerce.)

In noting that Enron's collapse was not unusual business, Treasury Secretary Paul O'Neill remarks, "Companies come and go. Part of the genius of capitalism is people get to make good decisions or bad decisions, and they get to pay the consequences or enjoy the fruits of their decisions." In other words, the government doesn't have to fret about employees who get nothing while execs -- the people who made the bad decisions -- skip off with millions of dollars earned through sleazy transactions. The market rules. As does campaign contributions and personal connections. What's scandalous (so far) is not the Bush administration's actions (or lack thereof), but its attitude. Published: Jan 18 2002 David Corn is the Washington editor of The Nation. His first novel, Deep Background, a political thriller, was published recently by St. Martin's Press.

*****

Enron-omics At A Glance A Primer On What Really Happened Before The Fall

Theresa Amato is president of Citizen Works, a non-profit, non- partisan organization working to strengthens citizen participation in power.

Editor's Note: Katie Selenski contributed to this article.

The following is excerpted from introductory remarks Theresa Amato gave at a press conference on January 21, 2002. To read the statements given by other participants at the press conference, visit the Citizen Works Web site.

Dr. Martin Luther King, Jr, whose memory and life work we celebrated this week, said that, "Injustice anywhere is a threat to justice everywhere."

As the Enron/Arthur Andersen scandals unfold and the resulting injustices to the employees, pension holders, shareholders, and community become clear, we are putting forth a set of citizen proposals for reform.

Before we turn to our distinguished citizen advocates who are going to address proposed component parts of this Citizens Agenda for Reform, let's do a quick recap of Enron-omics as we know it thus far.

Enron-omics At A Glance

In 2001, Enron, a 15 year-old energy-trading corporation, was ranked number seven of the Fortune 500. In December 2001, Enron laid off 4,000 employees and filed for bankruptcy, the largest such filing ever. Many employees lost 70 to 90 percent of their retirement savings as they were forced to hold their shares from October 16 to November 13 while Enron's value plummeted to pennies per share.

As late as September 2001, Enron employees and other shareholders were consistently reassured by top management that the stock was stable -- "a bargain" -- and that future prospects were good, while executives sold off $1.1 billion in company shares and amassed personal fortunes. Enron accumulated more than $1 billion in debt since 1997, debt that top executives hid off the books. Arthur Andersen doubled as an auditor and as a management advisory services firm for Enron, making more than $50 million in fees in a single year.

When criticism began to surface about its accounting practices, Enron management ordered its law firm to run a limited investigation, not to include "second-guessing," which resulted in an October report finding no wrong doing at Enron or Andersen. Andersen stood by its reports until shortly before Enron failed, when Enron decided that four years of earnings had to be restated and $600 million - or 20% -- of reported profits had to be erased. Andersen shredded thousands of paper and email documents pertaining to Enron audits. Of the securities analysts following Enron, only one put a sell recommendation on the stock prior to the date of bankruptcy; Enron had 3500 subsidiaries and partnerships, and paid no income taxes in four of the past five years because it was able to transfer assets among 881 subsidiaries that were set up abroad in tax- sheltered countries.

According to Public Citizen, from 1989 to 2002, Enron and its employees gave $5.95 million in individual, political action committee and soft money contributions to federal candidates and parties, 74 percent to Republicans and 26 percent to Democrats. Enron employees were the single largest funding source of George W. Bush's presidential campaign, and gave $623,000 directly to President Bush throughout his career. According to the Center for Responsive Politics, Arthur Andersen ranked 5th on President Bush campaign's list of corporate donors. Since 1989, Andersen has contributed nearly $5 million in soft money, PAC and individual contributions to federal candidates and parties. Enron officials were invited to participate in six meetings of Vice- President Cheney's energy task force, which endorsed many Enron proposals. Enron chairman Kenneth Lay made calls throughout the fall to the Treasury Department, the Federal Reserve, and the White House "providing information" about the company's situation to top officials at each, though reportedly no assistance was granted.

Published: Jan 21 2002

Robert Sterling Editor,

The Konformist http://www.konformist.com

"Precinct 4 Justice of the Peace Jim Richard of Fort Bend County (Robalini's Note: Justice of the Peace is not a coroner) ruled Baxter's death a suicide mid-morning today... Richard initially decided the death was an obvious suicide and there was no need for an autopsy and the body was taken to a nearby funeral home."

HoustonChronicle.com

http://www.HoustonChronicle.com | Section: Enron Jan. 25, 2002, 5:02PM

A former Enron Corp. executive who challenged the company's questionable financial practices and resigned last May was found shot to death in a car in Sugar Land today in what was ruled a suicide, authorities said.

Enron officials confirmed the death this morning of J. Clifford Baxter, 43, former vice chairman of the embattled Houston company.

His body was found at 2:23 a.m. today inside his black Mercedes Benz S500 sedan, parked between two medians in the 5200 block of Palm Royal, near his home in an upscale residential area in Sugar Land.

He was in the driver's seat of the vehicle and a police officer stopped to check on him after noticing the parked car. Police broke out the rear window to get inside.

Police said a note was found at another location, but did not provide details.

The officer discovered what appeared to be a self-inflicted gunshot wound in Baxter's head. Police did not reveal the contents or nature of the note and said there appeared to be no foul play.

Precinct 4 Justice of the Peace Jim Richard of Fort Bend County ruled Baxter's death a suicide mid-morning today. Richard said the car was locked and Sugar Land police had to break a window to get in. He said Baxter's body was in the driver's seat with a pistol in his hand.

Richard initially decided the death was an obvious suicide and there was no need for an autopsy and the body was taken to a nearby funeral home. About noon, however, he indicated there would be an autopsy.

"We don't have any other indication other than it being suicide," said Sugar Land police Capt. David Marcaurele.

Baxter was vice chairman of Enron when he resigned in May 2001, several months before the energy company's collapse.

"We are deeply saddened by the tragic loss of our friend and colleague, Cliff Baxter," said an official company statement today. "Our thoughts and prayers go out to his family and friends."

Enron spokesman Mark Palmer had no additional comment.

Baxter was identified by name in the explosive warning that Enron executive Sherron Watkins wrote last August to company chairman Ken Lay.

Watkins identified Baxter in a section of her letter stating there is "a veil of secrecy around LJM and Raptor," another entity involved in the partnerships.

Watkins' letter to Lay stated that "we will implode in a wave of accounting scandals" unless the company halted practices that eventually sent it into bankruptcy.

Baxter's complaints targeted the LJM and LJM2 investment partnerships managed by then-Chief Financial Officer Andrew Fastow, who earned $30 million for that work in addition to his Enron salary.

Fastow declined to comment through a representative. A Skilling spokeswoman said he "was devastated by the loss of very dear friend." He would have no other comment, she said.

Congressional investigators had sought to interview Baxter last week while they were in Houston talking to others about Enron, congressional committee source told Reuters today.

Baxter's name was mentioned repeatedly in discussions between investigators and those interviewed in recent weeks, the sources said.

It said Baxter had sold 577,436 shares for $35.2 million.

His role at Enron, people familiar with his career there say, was primarily in mergers and acquisitions. He helped engineer the purchases to build up Enron's failed water venture, Azurix Corp., and of Oregon utility Portland General Electric in 1997.

According to the May 2001 press release, Baxter was to have continued working for the company as a consultant.

Baxter was born Sept. 27, 1958 in Amityville, N.Y., received a bachelor's of science from New York University in 1980 and an MBA from Columbia University seven years later. He was a captain in the U.S. Air Force, 1980-85.

Baxter resigned from Enron months before the company imploded amid revelations of questionable financing and overstated earnings.

Enron's downfall began in mid-October with the release of a $618 million third-quarter loss and a $1.2 billion writedown of shareholder equity. Subsequent revelations of partnerships that allowed Enron to keep half a billion dollars in debt off its books and elimination of millions in profits with restated earnings since 1997 fueled the company's descent into the largest bankruptcy in history on Dec. 2.

In the May 2001 resignation announcement, Skilling said, "Over the past 10 years, Cliff has made a tremendous contribution to Enron's evolution, particularly as a member of the team that built Enron's wholesale business.

"His creativity, intelligence, sense of humor and straightforward manner have been assets to the company throughout his career. While we will miss him, we are happy that his primary reason for resigning is to spend additional time with his family, and we wish him the very best." Reuters News Service and The Associated Press contributed to this report.

*****

"Mr Lay will remain on the board of directors but will retire with a lifetime pension of $475,000 (£334,000) a year, according to Enron's 2001 proxy statement."

http://www.guardian.co.uk

Enron chief quits Mark Tran Thursday January 24, 2002 The Guardian

Kenneth Lay has announced his resignation as chairman and chief executive of Enron, the company he ran since its creation in 1986.

Mr Lay said criminal, congressional and US regulatory investigations into Enron's financial meltdown were taking up much of his time and making it difficult for him to "concentrate fully on what is most important to Enron's stakeholders".

The investigation of the giant US energy firm moves up a notch today as Congress holds public hearings into the collapse of what was once America's seventh largest company.

Mr Lay will remain on the board of directors but will retire with a lifetime pension of $475,000 (£334,000) a year, according to Enron's 2001 proxy statement.

His resignation late yesterday comes less than two months after Enron filed for bankruptcy, the biggest in US history. His position has become increasingly untenable amid an avalanche of damaging revelations in recent weeks.

There is mounting evidence that Mr Lay, 59, knew of Enron's precarious financial position even as he was telling the public that all was well and advising employees to buy Enron stock.

Enron's board of directors and the bankruptcy creditors committee said they favoured replacing Mr Lay with an acting chief executive to steer the company out of bankruptcy. The decision was mutual, Mr Lay added.

"I want to see Enron survive, and for that to happen we need someone at the helm who can focus 100% of his efforts on reorganising the company and preserving value for our creditors and hard-working employees," Mr Lay said in a statement.

Congress held hearings on Enron immediately after its bankruptcy filing on December 2, but the latest round promises to be more explosive after recent disclosures.

Congressional panels are expected to focus on the destruction of thousands of documents - as recently as last week, according to some Enron employees.

But a key witness, David Duncan, the auditor at Arthur Andersen who handled the Enron account, is expected to claim his fifth amendment right to remain silent to avoid self-incrimination at today's hearing of the House energy and commerce investigations subcommittee. Mr Duncan was fired by Andersen for destroying Enron-related documents at the accountancy firm.

Meanwhile, the Senate governmental affairs committee planned to question former regulators and other experts on possible government failure to exercise proper oversight of Enron.

Guardian Unlimited © Guardian Newspapers Limited 2002

*****

White House refuses to release energy meeting records

Jan. 24, 2002 | WASHINGTON (AP) -- The Bush administration rejected an environmental group's request for lists of who helped Vice President Dick Cheney develop the Bush administration's national energy plan last year.

The Natural Resources Defense Council last month filed suit in federal court to try to force the Department of Energy to produce the documents.

The administration argues that the Cheney task force is not a federal agency and therefore is not subject to Freedom of Information Act requests. That prompted the NRDC to sue the Energy Department, which has many of the documents.

In its lawsuit, the NRDC said it was entitled to the records and that the department has violated the Freedom of Information Act.

The department's six-page response, dated Wednesday, gave a one-word answer to those contentions: "Denied."

The conservative watchdog organization Judicial Watch has also sued for the records. The General Accounting Office, the investigative arm of Congress, is considering a similar lawsuit

San Francisco Chronicle www.sfgate.com

THE ENRON COLLAPSE Memo details Cheney--Enron links Company's suggestions resembled elements of the administration's energy policy

David Lazarus, Chronicle Staff Writer Wednesday, January 30, 2002

While the White House insists that details of its talks with Enron officials remain secret, a memo outlining those discussions reveals the extent to which the Houston energy giant lobbied to influence government policy. The memo, a copy of which was obtained by The Chronicle, was handed by former Enron Chairman Ken Lay to Vice President Dick Cheney last April when the two met to discuss the administration's response to California's energy crisis. The White House acknowledged last night that aspects of the memo resembled elements of Cheney's energy plan, but it refused to say whether the document was included in notes that Cheney now refuses to divulge to congressional investigators. The General Accounting Office is threatening to sue the administration if it doesn't disclose details of its talks with Enron officials. The three-page document contains eight points spelling out Enron's case for why federal authorities should refrain from imposing price caps or other measures sought by California officials to stabilize runaway electricity prices. A number of the positions in the memo subsequently made it into Cheney's energy plan or were reflected in comments by senior administration officials. "Events in California and in other parts of the country demonstrated that the benefits of competition have yet to be realized and have not yet reached consumers," the memo argues. "The following actions need to be taken," it continues, outlining positions on a series of matters. Some of the topics, such as equal access to transmission grids and interconnection of power networks, are largely technical in nature.

ENRON FROWNED ON PRICE CAPS

The key point as far as California was concerned was whether soaring wholesale power prices should be limited or whether such prices were merely a reflection of normal supply-and-demand dynamics. "The administration should reject any attempt to re-regulate wholesale power markets by adopting price caps or returning to archaic methods of determining the cost-base of wholesale power," the memo says. It adds that even temporary price restrictions "will be detrimental to power markets and will discourage private investment." The memo blames California officials for having made only "limited progress" in tackling the state's power woes. It says that if the administration were to follow all of Enron's recommendations, the measures "would mitigate this crisis." An Enron spokesman confirmed that the memo had been given by Lay to Cheney during their one-on-one talks. Mary Matalin, an adviser to the vice president, said Cheney's energy plan included input from many sources. "Just because some of the things (in the memo) are included in the plan doesn't mean they were from the talks" between Cheney and Lay, she said.

LIMITS CALLED 'A MISTAKE'

Still, as far as price caps go, the administration was quick to fall into lockstep with Enron's opposition to any federal regulatory moves. "We think that's a mistake," Cheney said just weeks after his meeting with Lay. Nevertheless, federal regulators finally imposed price limits in June based on the cost of the least-efficient, and thus most expensive, generating plant. Democrats in Washington had threatened to act on their own if the regulators did not come up with a remedy for California's troubles. Cheney also echoed Enron's position on the culpability of California's leaders in exacerbating the state's energy problems. "When the problem became obvious last year, over a year ago, they didn't respond," he said in May. Noting that California had experienced rolling blackouts and the bankruptcy of its biggest utility, he also said, "I don't think that's a sterling record of leadership, I would guess, on their part."

SHARED FAITH IN DEREGULATION

To be sure, Cheney, Lay and President Bush, as well as other industry players, shared a belief in deregulation well before the lights went out in California. But the memo underscores the broad kinship between Enron and the administration in drafting official policy. Steve Maviglio, a spokesman for Gov. Gray Davis, said it came as no surprise that Enron had substantial clout in formation of the Bush administration's stance on California's difficulties. "What the federal government did during the energy crisis was pretend that the problem didn't exist and say that the markets can solve everything, and that's the same thing Ken Lay told the governor," Maviglio said. He added that "the administration was espousing what Enron was espousing -- that the markets should fix themselves." Whatever else, it's extraordinary for a private company, particularly one accused by California officials of having gouged the state with wildly inflated energy prices, to have played such a prominent role in the White House's response to the crisis.

'CONSUMERS SHOULD BE OUTRAGED'

"If the administration was allowing Enron to guide its policy during the California energy crisis, consumers should be outraged," said Janee Briesemeister, senior policy analyst at Consumers Union in Austin, Texas. "It's not unusual for a company to hand policymakers their ideas for what should be done," she added. "Things break down when policymakers refuse to admit that they used what was brought to them by industry." Cheney's argument, as he told an interviewer Sunday, is that revealing details of his talks with Enron would undermine "the ability of the president and the vice president to solicit advice from anybody they want in confidence." Bush echoed this sentiment a day later, saying that confidential talks are necessary to "get good, sound opinions." He reiterated that stance yesterday in a meeting with congressional leaders. Craig McDonald, director of Texans for Public Justice, a watchdog group, called it laughable for the administration to cast its secrecy as a defense of high-minded principle. "All they're fighting for is to keep the wraps on how much clout Enron had over Dick Cheney's energy plan," he said.

From: Human Rights Watch <hrwatchnyc@igc.org>

Enron: History of Human Rights Abuse in India

(New York, January 23, 2002) -- The human rights abuses that plagued the Enron Corporation's Dabhol power plant in India from 1992 to 1998 demonstrate the need for U.S. government agencies to scrutinize such controversial projects more closely, Human Rights Watch said today.

In 1999, Human Rights Watch charged in a 166-page report, "The Enron Corporation: Corporate Complicity in Human Rights Violations," that Enron subsidiaries paid local law enforcement to suppress opposition to its power plant south of Bombay.

===================

"The Enron Corporation: Corporate Complicity in Human Rights Violations" is available online at: http://www.hrw.org/reports/1999/enron/

=====================

"Enron is now being widely accused of arrogance and lack of transparency, but the people of Dabhol have known that all along," said Arvind Ganesan, director of the Business and Human Rights Program at Human Rights Watch. "Enron was complicit in human rights abuse in India for several years."

Local opposition to the Enron project began in 1992 over concerns about corruption and the hasty negotiations over the terms of Enron's investment. Farmers complained that the power plant had unfairly acquired their land and had diverted scarce water for its needs. Local activists raised concerns over potential environmental damage.

The U.S. government bears special responsibility for the human rights consequences of Enron's investment because of its aggressive lobbying on behalf of the three U.S.-based companies developing the project, Ganesan said. Although the Indian press widely reported the human rights troubles around the power plant, U.S. officials failed to investigate the matter.

The World Bank repeatedly refused to finance the project because it was "not economically viable," but the U.S. government extended between $290 million and $300 million in loan guarantees to Enron for its investment in Dabhol.

The Export-Import Bank requires an analysis of the human rights implications of its loans. But the State Department's entire human rights assessment for one Export-Import Bank loan for the Dabhol project read, "The State Department has no objection to this case on political grounds or on the basis of human rights issues."

"U.S. taxpayers funded corporate complicity in human rights abuse," said Ganesan. "Congress should make sure that never happens again." Ganesan urged the U.S. Congress to establish a human rights assessment office at the U.S. Export-Import Bank to report to Congress.

A provision was introduced in the U.S. Congress during 2001 to strengthen the Export-Import Bank's human rights oversight. But the Bush Administration, the head of the Export-Import Bank itself, and many members of the U.S. business community opposed the provision, which was "killed" by a committee of the House of Representatives in November 2001.

The 1999 Human Rights Watch report documents how contractors for the Dabhol Power Corporation harassed and attacked individuals opposed to the power plant. Police refused to investigate complaints, and in several cases, actually arrested the victims on trumped-up charges. The Dabhol Power Corporation, under provisions of law, reimbursed the abusive state forces for the security they provided to the company. These forces, located adjacent to the project site, were stationed there largely for the purpose of dealing with protests. While they reported to local police, their expenses were paid by the company, a subsidiary of Enron.

In one instance in June 1997, Maharashtra police raided a fishing village where many residents opposed the power plant. They arbitrarily beat and arrested dozens of villagers, including Sadhana Bhalekar, the wife of a well-known protester against the plant. They broke down the door and window of Bhalekar's bathroom and dragged her naked out into the street, beating her with batons. Bhalekar was three months pregnant at the time. In another instance in May 1997, police beat and arrested nearly 180 protesters who were demonstrating peacefully outside the company gates. The protests had largely ended by 1998.

Since the project's inception in 1992, Enron and the government of Maharashtra state, where the power plant is located, repeatedly ignored public complaints. "Dabhol Power Corporation would not tolerate any human rights abuses by its employees and sub-contractors," the company said in a 1997 statement. "If you have concerns about police actions, we suggest that you take it up with the police or government body that is responsible for their operations." In 2000, Enron began to take steps to address future violations, but those efforts ended when the company collapsed.

Because of the plant's high cost of power, the Maharashtra state government announced in June 2001 that it was terminating its agreement with the Dabhol Power Corporation (DPC). Shortly after, DPC ceased operations and insisted that the government repay its debts. The dispute continued, but was further complicated when Enron declared bankruptcy on December 2, 2001. On January 17, 2001, Enron reportedly filed an approximately $200 million claim with the U.S. government's Overseas Private Investment Corporation in an attempt to recoup losses from the Dabhol Power Corporation. The project is up for sale to other investors.

George W. In The Garden Of Gethsemane

An Open Letter to George W. Bush From Michael Moore 2-1-2

Dear George,

When it's all over in a couple months, and you're packing up your pretzels and Spot and heading back to Texas, what will be your biggest regret? Not getting out more often and seeing the sights around Rock Creek Park? Never once visiting the newly-renovated IKEA in Woodbridge, Virginia? Or buying your way to the White House with money from a company that committed the biggest corporate swindle in American history? I got a feeling you didn't miss much by not spending an entire Saturday afternoon assembling a Swedish bookcase -- but you should have known that there was no way you would ever finish your term by hopping into bed with Kenneth Lay.

It's kind of sad when you think about it. Here you were -- the most popular president ever! -- the recipient of so much good will from your fellow Americans after September 11, and then you had to go and blow it. You just couldn't stay away from your old cowpoke friend from Texas, Kenneth Lay.

Kenny has always been there for you. You needed a way to fly around to all the primaries and campaign stops in the 2000 election -- so Kenny gave you his corporate jet. Did you tell the voters when you arrived in each city that the bird you flew in on was from a billionaire who was secretly conspiring to give the bird to all his employees and investors? He flew you around America on the Enron company jet, and for that favor you touched down on tarmac after tarmac to tell your fellow citizens that you were "going to restore dignity to the White House, the people's house." You said this standing in front of an Enron jet!

Man, you loved Lay so much, you not only affectionately referred to him as "Kenny Boy," you interrupted an important campaign trip in April, 2000, to fly back to Houston for the Astro's opening day at the new Enron Field -- just so you could watch Kenny Boy Lay throw out the first pitch. How sentimental!

I mean, you loved this man so intensely that, when you were awarded a set of keys the Supreme Court had made for you so you could live in the White House, you invited Kenny Boy to set up shop -- at 1600 Pennsylvania Avenue! He interviewed those who would hold high-level Energy Department positions in your administration.

You not only let Kenny Boy decide who would head the regulatory agency that oversaw Enron, you let him hand-pick the new chairman of the Securities and Exchange Commission, Harvey Pitt -- a former lawyer for his accountant, Arthur Andersen! Kenny and the boys at Andersen also worked to make sure that accounting firms would be exempt from numerous regulations and would not be held liable for any "funny bookkeeping" (don't you wish you were this forward- thinking?).

The rest of Kenny Boy's time was spent next door with his old buddy, Dick Cheney (Enron and Halliburton, as you'll recall, got the big contracts from your dad to "rebuild" Kuwait after the Gulf War). Lay and Dick formed an "energy task force" (Operation Enduring Graft) which put together the county's new "energy policy." This policy then went on to shut down every light bulb and juicer in the state of California. And guess who made out like bandits while "trading" the energy California was in desperate need of? Kenny Boy and Enron! No wonder Big Dick doesn't want to turn over the files about those special meetings with Lay!

The only thing that surprises me more than all the Enron henchmen who ended up in your cabinet and administration is how our lazy media just rolled over and didn't report it. The list of Enron people on your payroll is impressive. Lawrence Lindsey, your chief economic advisor? A former advisor at Enron! Treasury Secretary Paul O'Neill? Former CEO of Alcoa, whose lobbying firm, Vinson and Elkins, was the #3 contributor to the your campaign! Who is Vinson and Elkins? The law firm representing Enron! Who is Alcoa? The top polluter in Texas. Timothy White, the Secretary of the Army? A former vice-chair of Enron Energy! Robert Zoellick, your Federal Trade Representative? A former advisor at Enron! Karl Rove, your main man at the White House? He owned a quarter-million dollars of Enron stock.

Then there's the Enron lawyer you have nominated to be a federal judge in Texas, the Enron lobbyist who is your chair of the Republican Party, the two Enron officials who now work for House Majority Leader Tom DeLay, and the wife of Texas Senator Phil Gramm who sits on Enron's board. And there's the aforementioned Mr. Pitt, the former Arthur Andersen attorney whose job it is now as SEC head to oversee the stock markets. George, it never stops!

My fingers are getting tired typing all this up -- and there's lots more.

Don't get me wrong, George -- I do not think you're an evil man. You don't need any crap from people like me -- heck, you got mother-in- law problems! Now, I have a very good relationship with my mother-in- law, but then, I never told her to put $8,000 of her money into a company my administration knew was going belly-up.

You say you didn't know? Your bag man -- Don Evans, the man who squeezed all that money for you from Enron as your campaign finance chairman (and is now collecting his reward as your Commerce Secretary) -- has admitted that he got calls from Enron begging for help last year because they were going under. Didn't he tell you this?

Then Paul O'Neill, your Treasury Secretary, admitted that Enron and Kenny Boy called him, too, for some special favors to save Enron. Didn't he mention this to you? They claim to have called your chief of staff, Andrew Card, and he said he didn't bother to inform you. What does your mother-in-law think about these boys her daughter's husband consorts with?

I love watching the O'Neill and Evans show. What a couple of cut-ups! They're, like, all proud of themselves for "not doing Enron any favors." Actually, I think it's more like they didn't do your MOTHER- IN-LAW any favors. Enron got LOTS of favors. And why not? Kenny Boy has been your number one financial backer since you ran for governor. No other American or Saudi has given you more money than Kenny Boy and his gang at Enron. O'Neill, Evans, Cheney, Energy Secretary Spencer Abraham -- ALL of them gave Lay and Enron special favors from day one. The New York Times last May was so concerned about how Kenny had the run of the place (1600 Pennsylvania Ave.), they referred to Lay as the "shadow advisor to the president."

And what advice! Who was it that wanted you to deregulate the energy industry further? Kenny Boy! Who was it that convinced you to explore the sick idea of PRIVATIZING our water supply and then allow private corporations to "trade" it in the future? Kenny Boy! Who was it that wanted Social Security to be tied to the stock market? Yup, Kenny Boy! (Imagine, if you will, what would have happened to our precious Social Security funds had they been invested in Enron stocks as you, George, suggested be done during your campaign as yuppies everywhere clucked along in agreement over that genius idea.)

O'Neill's and Evans's admission that they "did nothing" when Enron told them of the company's shell game and impending collapse is reason enough for you and yours to hit the Beltway and never return to that sacred trust we call Our American Government. They are proud of "doing nothing?" By doing nothing, millions of Americans have been swindled. Tens of thousands have lost their jobs. Thousands more have lost their savings and their retirement. Yet your cabinet secretaries gloat over what a "good job" you and they did by "doing nothing."

Let me ask you this: If someone was setting a house on fire, and they called you to help them set it on fire, and you said no you wouldn't help them -- BUT then you also DIDN'T call 911 and inform the police that someone was going to burn down a house, do you think you would have committed a crime?

Of course you would have! You had prior knowledge and then you knowingly and purposefully HID this information from the authorities and the people living in the house! You only admitted that you knew a house was going to be torched when you were confronted by the police. Are you complicit? Yes! Are you an accessory? Yes! Who would even think of going around boasting, "Hey, look what a great guy I am -- a friend of mine told me he was going to commit an act of arson, and then I decided NOT to tell ANYONE about it!!

WHOO-HOO!!"

Enron and Kenny Boy bought your silence and the silence of your cabinet members. You yourself didn't have to actually raid the 401(k) accounts of those poor people in Houston (many of whom probably voted for you every time your name was on a ballot). All you had to do was remain silent, change the government regulations that let them get away with it, and install their hand-picked cronies to sit on the "oversight" boards which were supposed to be keeping an eye on them.

While doing all this, you told the American people that these rich friends of yours were not getting any special breaks -- when, in fact, Enron had already scammed their way out of paying NO taxes in four out of the last five years. Your economic "stimulus" bill that you got the House to pass after 9-11 had a section that would give Enron a gift of $250 million of our tax money. You were pushing this bill in November and December, long after your administration knew that Enron was raiding the vault and screwing its workers and investors.

You and your Republican friends are quick to point out that Enron had their claws into the Democrats as well. Yes, they did, and thank you for making the case why we not only need an alternative to the current make-up of the Democratic Party, we need private money removed from our electoral process ASAP.

But, George, let's be real -- the Democrats only got a pittance from Enron compared to the millions you and the Republicans received. Democrats just don't have the killer instinct to do anything right, and they certainly don't know much about making money the old- fashioned way, one off-shore tax shelter at a time. I would expect nothing less from a Party that couldn't even put their candidate in the White House after he had already won the election.

The Democrats are like a Yugo -- you know it won't last long or work well, but it will occasionally get the job done. Fat cats know they can buy the Democrats at discount prices, and so they do. Anyone who tries to deflect this scandal away from you, George, or away from the Republicans, or away from the whole dirty way we elect our leaders, is someone who is desperately trying to cling to what's left of a very crooked system that has to go and go now.

The saddest part of this whole affair was the day the scandal was revealed -- and you denied that you even knew your good friend, Kenneth Lay. "Ken who?" you said. Oh, he's just some businessman from Texas. "Heck, he backed my opponent for governor, Ann Richards!" was your way of trying to deflect the truth that was hitting you like a Mack truck. You knew that he, in fact, endorsed YOU and gave you THREE times the money Ann Richards ever saw from him.

I hardly ever talk to the guy, you said. You were like Peter outside the walls of Herod after they grabbed J.C. from the Garden of Gethsemane. Three times he denied he knew Jesus, and three times the cock crowed. But Peter, unlike you, felt shame and wept, and then ran away.

What shame do you feel tonight, George, for the lies you have told? What shame do you feel using the dead of 9-11 as a cover for your actions, hoping that our sorrow for those lost souls and our fear of being killed by terrorists would distract us from what your boys and Kenny Boy were up to during those horrific weeks in September and October?

It was during those very days, while the rest of us were in shock and sadness, that the executives at Enron were selling off their stock and shifting assets to their 900 phony partnerships overseas. Did they notice the remains of the dead being pulled from the rubble while they were downloading their millions, or were their eyes glued only to the bottom third of the TV screen as the stock ticker with the rigged Enron price crawled across the images of firemen desperate, in tears, to find their fallen brothers?

The country was behind you when you said you were fighting the evildoers who did this. In fact, all the while, the real fight your friends at Enron were conducting was the fight against the clock, to see how fast they could transfer all the loot to their personal accounts and run away. Those were the evildoers, George, and you knew it. And because you, by design or negligence, allowed this to happen, it is time for you to resign. The cock has crowed for the last time.

At the very least, your mother-in-law deserves better.

Yours,

Michael Moore American Son-in-Law Owner of 7th LARGEST COMPANY IN AMERICA! (revised ranking) http://www.michaelmoore.com

World Socialist Web Site

www.wsws.org

WSWS : News & Analysis : North America

The strange and convenient death of J. Clifford Baxter—Enron executive found shot to death By Patrick Martin 28 January 2002

Without anything that can be called a serious investigation, local authorities in a wealthy Houston suburb have whitewashed the death of former Enron vice chairman J. Clifford Baxter, calling it a suicide. Baxter, 43, was found shot to death in his Mercedes Benz in the early hours of Friday morning, January 25, near his home in Sugar Land.

Baxter's body was discovered inside his Mercedes Benz, which was parked in a turnaround on a street near his home. Officials in Sugar Land moved swiftly to label Baxter's death a suicide. Local Justice of the Peace Jim Richard initially declared that Baxter died of a self-inflicted gunshot wound and no further inquiry was required. But within hours he reversed himself, citing the intense public interest in the death, and ordered an autopsy.

Harris County Medical Examiner Joye Carter conducted the autopsy and found the cause of death to be suicide by a "penetrating gunshot to the head." The weapon was a .38 caliber revolver which was found in Baxter's car, next to his body.

Neither the perfunctory official probe nor the media coverage has addressed the obvious suspicions aroused by the death of a critically important witness in the investigation into the criminal activities at Enron, the biggest corporate fraud in American history. Baxter quit as vice chairman of the company last May, after reportedly come into conflict with other top executives over the phony accounting gimmicks used to plunder billions of dollars.

The most disturbing account of Baxter's last days comes from a former business associate who spoke to the New York Times but was not identified by the newspaper. This person spoke with the former Enron vice chairman two days before his death and congratulated him "for being named among those people who complained about Enron."

According to the Times account, the unnamed associate added that Baxter "was talking about perhaps needing a bodyguard, though I'm not sure where that idea came from."

That a man only two days away from suicide would be considering hiring a bodyguard defies belief. But neither the Times nor any other media outlet has raised the possibility that Baxter felt his life to be in danger because of what he knew and could divulge about the internal affairs of Enron. Men have been killed for much less.

Baxter was named in a memorandum submitted by Enron Vice President Sheron Watkins last August to Chairman and CEO Kenneth Lay. Watkins warned Lay that dubious off-the-books transactions with private partnerships set up by top Enron officials might cause the company to "collapse in a welter of accounting scandals." She cited Baxter's opposition to one of these partnerships, set up by then-CEO Jeffrey Skilling, writing, "Cliff Baxter complained mightily to Skilling and all who would listen about the inappropriateness of our transactions with LJM."

Baxter received a subpoena from the Senate Government Affairs Subcommittee on Permanent Oversight and Investigation, along with 48 other people linked to Enron and Andersen. Investigators from the House Energy and Commerce Committee had told Baxter's lawyer that they wished to interview him, but had not yet issued a subpoena.

Representative James C. Greenwood, Republican of Pennsylvania and chairman of the committee's Oversight and Investigations Subcommittee, said, "It seemed to us that he was a pretty highly placed insider at Enron who had understood exactly what was wrong there."

Both Enron and its accountant and business adviser, Andersen, have been engaged in massive, illegal shredding of documents and deletion of computer files. Billions of dollars are at stake in the collapse. The highest levels of the Bush administration are implicated in the corruption of the financial and political system that Enron exemplified.

Under such conditions, the sudden death of a crucial witness inevitably raises the suspicion that it is not just pieces of paper and computer data that are being destroyed to protect the corporate and political gangsters at the top, but human lives as well.

Given the organized shredding operation, a systematic effort to destroy incriminating documents, Baxter's evidence would be all the more critical, since he could testify, from the perspective of the highest levels of the company, what information Enron and Andersen were so afraid of. How can one not assume that Baxter, too, was "shredded" to prevent him from taking the witness stand?

A potential whistle-blower dies less than two weeks after his name first comes to public attention. What message does that send to others who might be considering testifying against Enron? And on top of that, the local police immediately declare his death a suicide. If there was foul play, those responsible have carried it out with impunity.

It is, of course, possible that Baxter actually took his own life. But no confidence can be placed in such a finding without a thorough investigation, and no such investigation can be expected from the local authorities in Houston, a metropolitan area where Enron was by far the most influential corporate power. (As one indication of its dominance, all the federal prosecutors in the US Attorney's office in Houston have had to recuse themselves from the Enron investigation because of financial or family ties to Enron.)

The circumstances of Baxter's life cast doubt on the verdict of suicide. He is not known to have been suffering from depression or any other mental health problem. He was a multimillionaire, having netted $30 million from the sale of his stock in the company before and after his departure from Enron last May. His family life was apparently happy, and he leaves a wife and two children, a 16-year- old son and 11-year-old daughter.

Far from being the target of media vilification, Baxter's name had been linked to the Enron affair in a way that was largely favorable. His first appearance in the coverage of Enron came when the Watkins memo was made public, presenting him as an opponent of corporate fraud.

Friends and business associates interviewed by the press expressed shock and surprise at his reported suicide, although there were conflicting accounts of his state of mind after the bankruptcy of Enron.

An executive of Portland Gas & Electric, a subsidiary which Enron acquired in a takeover organized by Baxter, told the New York Times: "My impression of Cliff Baxter was that this was an enormously confident guy who came up here to get the thing done, and he did. The image I had of him at the time is totally at odds with the tragedy today. I mean, he was self assured, he was very friendly. This was practically the last person in the world you'd ever expect to commit suicide."

Enron president Jeffrey McMahon (second from right) prepares to testify before a House subcommittee on Thursday, where he defended the company's $55 million bonus spree.

By Jake Tapper

Feb. 8, 2002 | WASHINGTON -- Just days before Enron Corp. declared bankruptcy on Dec. 2, announcing that it would not abide by severance payment promises to laid-off employees, the company gave executives "retention" bonuses totaling more than $55 million, according to an 11-page list obtained by Salon.

While the bonuses have been the subject of rumor and angry comment in and out of the company for some time, Salon is the first news organization to obtain the detailed list. The generous executive payouts, many of which were handed out on Nov. 30, have led some former Enron officials to conclude that the company has yet to abandon its greedy ways. The bonuses were approved by an Enron management team largely still running the company -- Jeff McMahon, then Enron's chief financial officer and now the president, and Ray Bowen, then-treasurer and now CFO. And they were approved after the departure of the "bad guys" who have been hauled before Congress, such as former president and chief executive Jeff Skilling and former chief financial officer Andrew Fastow. McMahon himself received a bonus of $1.5 million and Bowen got $750,000.

Some former managers expressed dismay about the company handsomely rewarding its executives just days before reneging on its employee severance commitment. They also raised questions about the circumstances in which many of the executives received their lavish bonuses. Congressional investigators share these concerns.

During Thursday's House Energy and Commerce Committee hearing on the Enron collapse, Rep. Henry Waxman, D-Calif., asked the chairman of the committee's oversight arm, Rep. Jim Greenwood, D-Pa., to consider subpoenaing Enron for the list of retention bonuses, supposedly used to secure the services of well-performing employees. Combined with an earlier disbursement of $50 million in bonuses to 75 executives who worked on the company's doomed merger with Dynegy Inc., the bonuses are further evidence that Enron was eager to reward those near the top at the expense of the entire company.

"It adds insult to injury," said Sen. Joseph Lieberman, D-Conn., who chairs the Senate Governmental Affairs Committee, earlier in the week. "Enron is still a functioning company. Why they can't find a way to pay the severance really pains me, especially in light of the retention bonuses."

Many of the generous retention bonuses were given to executives who played a role in the fall of Enron's house of cards. At least one of the recipients was faulted in Enron's internal investigation of its collapse, the so-called "Powers Report," named for the chairman of the committee, University of Texas Law School dean William Powers.

The official Enron severance rules state that each eligible ex- employee is entitled to one week of pay for every $10,000 of salary, plus one week of pay for each year or partial year of employment, up to 26 weeks. But the reality has proved to be quite different. Enron employees laid off before Dec. 2 have been told they have no funds coming to them. U.S. Bankruptcy Judge Arthur Gonzalez ruled that the 4,500 Enron employees laid off since bankruptcy were entitled to each receive a $4,500 severance check.

According to one former senior executive, Enron's original severance package -- subsequently scrapped -- cost $120 million and would have provided each employee approximately $30,000 in severance on average. That plan was reduced, then discarded. Instead, at least $105 million was distributed in executive bonuses. "What I'd like to know is why the creditors' committee is letting them get away with this," the former executive asks. "What about this new CEO, Stephen Douglas, doesn't he need that money to operate? This is outright fraud and theft." Another Enron source reports that word inside the company is that members of the creditors' committee received a copy of the executive bonus list earlier in the week "and they are furious."

Two of the Enron executives who testified before Greenwood's subcommittee on Thursday are among those who received the generous gifts -- McMahon, who received $1.5 million, and vice president and general counsel for corporate development Jordan Mintz, who received $200,000.

Enron spokesman Mark Palmer has defended the bonuses as standard operating procedure when a company is trying to retain its talent. The documents show that Palmer's own bonus was $200,000. He did not return a Friday call from Salon.

Relying on an in-house e-mail that broadly described the bonuses, the Houston Chronicle reported in December that 11 Enron executives received one-quarter of the retention bonuses. The e-mail listed McMahon; president and chief executive of Enron Americas John Lavorato, slated for $5 million; chief operating officer of Enron Americas Louise Kitchen, who received $2 million; and president and chief executive of Enron Broadband Services Jim Fallon, who like McMahon received $1.5 million. Approximately 500 employees were included on the bonus list and their rewards ranged from $2,000 to $5 million apiece.

If the company's strategy was indeed to retain these employees, it often failed to achieve its objective. Those who received bonuses agreed to stay with Enron only until the end of February 2002. One former Enron executive reported that "a lot of these people who took the money and signed the contracts have either already left the company -- keeping the money -- or have done nothing but look for and secure their next job when their contract runs out. A number of them have been traveling on Enron's expense accounts negotiating their next job."

John Nowlan, who received a $500,000 retention bonus, has already negotiated a deal to take his crude/products trading team to Transammonia, Inc. Gary Hickerson, who received $600,000 for his "retention," has, according to sources, been working on developing his own private equity fund. Neither Nowlan nor Hickerson returned calls for comment. Based on a conversation with Nowlan's assistant, it wasn't clear that Nowlan still worked at Enron.

Nor did the $5 million bonus that Enron lavished on John Lavorato or the $2 million awarded Louise Kitchen secure their services. Lavorato and Kitchen are following Enron's energy-trading component, Enron Americas, to its new corporate owner, UBS Warburg. Some Enron insiders argue that since Enron Americas was a valuable commodity it could sell, thus helping the firm to stay alive, it was important to keep Lavorato and Kitchen during the transition. But the size of their bonuses has raised eyebrows.

On Thursday McMahon defended the bonuses. "The notion behind the retention payments," he said, "was one that if we were to go into bankruptcy, that these key individuals would remain in the company to protect the businesses' and assets' value for the creditors."

But their performance during Enron's meltdown casts doubt on some of these executives' managerial worth. Mark Haedicke, an attorney with Enron North America, is described in the Powers Report as sitting back and doing nothing when alarms were sounded about the controversial shell partnerships blamed for the company's implosion.

Haedicke and ENA's other senior attorney were warned about the problem in a memo written by employee Stuart Zisman, who stated: "We have discovered that a majority of the investments being introduced into the Raptor Structure are bad ones. This is disconcerting [because] ... it might lead one to believe that the financial books at Enron are being 'cooked' in order to eliminate a drag on earnings that would otherwise occur under fair value accounting."

Zisman then met with Haedicke and the other senior attorney to discuss his concerns. But the two "believed the assertion in Zisman's memo to be untrue, so they did not take any further action," according to the Powers Report. Despite this nonchalance, Haedicke was compensated with $750,000 in bonuses last November. Haedicke is also about to leave Enron to work for UBS.

The Powers Report condemns the breakdown in the company's internal controls, evidenced by the fact that those responsible for making sure executives adhered to ethical standards -- in-house Enron attorneys, Enron's law firm Vinson & Elkins, auditor Arthur Andersen LLP -- obviously did not do so. Things were so bad that attorney Jordan Mintz even went outside the firm to secretly hire outside counsel to take an unbiased look at the shell partnerships, as first reported by Salon.com. In any case, Rex Rogers, the company's deputy general counsel, received a bonus of $375,000. Rogers was the in- house attorney responsible for preparing the disclosure documents for the Securities and Exchange Commission. Enron's SEC documents are one area in particular that has brought harsh criticism from Congress. The documents -- Rogers' work, presumably, though he worked with others at Enron and Vinson & Elkins -- have been slammed for being purposely obfuscating and for not fully disclosing all relevant information.

Another group of lucky bonus recipients raising eyebrows among current and former Enron employees is the team that ran Enron Broadband Services. EBS was one of the biggest money losers for the company and has been criticized as being one of the phoniest of Enron's ventures. It officially died after poor second quarter 2001 reports. This did not stop Enron from awarding EBS's former president and chief executive, Jim Fallon, a $1.5 million bonus. Other former senior executives with EBS were also handsomely rewarded with retention bonuses: Rich Dimichele snagged $800,000; Paul Racicot got $400,000; Stewart Seeligson was handed $350,000, general counsel W. Lance Schuler received $300,000; and Rajeev Thapar was gifted with $250,000.

"People are really upset" about all the money EBS executives were given, said an Enron source.

Reached by phone on Friday, Seeligson wouldn't answer questions about his bonus or even respond when asked what his title was when he was with EBS.

As Salon reported on Jan. 29, Enron attorney Julia Murray cried when she heard that her friend, ex-vice president Kristina Mordaunt, turned a $5,800 investment in one of the shell partnerships into $1 million just a few weeks later. Perhaps some of the sting was taken out for Murray when she received her $200,000 retention bonus.

In Thursday's hearing, Rep. Ed Markey, D-Mass., asked McMahon -- who was chief financial officer at the time -- about the flurry of November retention bonuses and merger bonuses. "As CFO, you would have known that the $100 million was about to be paid out," Markey said. "Did you also know about the imminent bankruptcy at that time?"

McMahon replied that "the retention payments were something that was recommended and approved by the board." McMahon was vague about whether he and other officials knew the company would declare bankruptcy in a matter of hours. "We knew certainly that the bankruptcy was one of several options that could occur," he blandly remarked. - - - - - - - - - - - - About the writer Jake Tapper is Salon's Washington correspondent and the author of "Down and Dirty: The Plot to Steal the Presidency."

SOME QUESTIONS ABOUT ENRON'S CAMPAIGN CONTRIBUTIONS: Did Enron Successfully Buy Influence With The Money It Spent?

By JOHN W. DEAN

http://writ.findlaw.com/dean/20020201.html

Friday, Jan. 18, 2002

This is Part One of a two-part series by Mr. Dean on Enron. Part Two will appear on this site on February 1. - Ed.

Enron spent big money in Washington. According to available records, Enron lavished near $5.8 million in political contributions on various candidates (Congresspersons, Senators, the President and Vice President) over the last decade, with almost seventy-five percent of it going to Republicans. Indeed, according to one report, Enron and its officials spent $2 million on George W. Bush's political career alone, starting with his first (unsuccessful) run for Congress.

What, I have been wondering, did spreading all that money around Washington accomplish? Notwithstanding protestations to the contrary, American businessmen don't make large political contributions because they love their country. Rather they are investments, on which they want a return. But what did Enron get for its money? As discussed below, I have concluded it received quite a lot.

The mere fact that Enron's contributions did not buy off investigations into the largest bankruptcy in history means little - it would have been hard not to investigate given the dramatic allegations now being made. And prior to the eleventh hour, Enron's contributions seem to have purchased quite a bit of influence, as they were no doubt meant to do.

Highly Questionable Accounting May Disguise Quid Pro Quos

To begin with it, it is worth noting that any quid pro quo relating to Enron may be especially hard to track; indeed, Enron may have contributed much more than the $5.8 million of which we are currently aware. We may never know, for Enron's reporting and record-keeping are not very good, as everyone is learning.

Apparently typical is Enron's auditing firm, Arthur Andersen, which not only destroyed records, but also apparently failed to make itself privy to all of Enron's 2,832 subsidiaries' operations - the losses of which seems to have been kept off the balance sheet, while their assets and income were included. That's a neat bookkeeping trick; they didn't teach that one in my five years of studying accounting.

Much of this subsidiary activity was not only off the balance sheets, but also offshore. About a third of these partnerships are registered in the Cayman Islands or other secrecy havens, which may make it impossible to unravel the worst corporate collapse in American history. Any quid pro quos, too, may be hard to root out.

Buying Washington Influence: The Typical Goal of Big Contributors

Having been involved in fund raising, I have few illusions about what is involved - particularly with the heavy hitters. There are many contributors - indeed, by far the greatest number - who give what they can afford to the candidate in whom they believe, hoping he or she will win. But these are typically the small contributors. Big money comes from wealthy persons and organizations who want something - in most cases, something that will add more to their wealth.

First, the big hitters want access. They usually have business dealings with the federal government and they want to be able to plead their case directly to decisionmakers, should they need to do so.

Others want special favors, everything from an ambassadorship to favorable legislation or regulation of their business. Heavy contributors are usually well schooled in how to make their contribution and stay within the law. When they are not, the smart politician returns their money, and advises them on how to make the contribution legal, and the contribution, in the end, gets made just the same.

Enron, like many businesses who want something from Washington officials, spread its money broadly. According to The Center for Responsive Politics, which tracks political contributions, Enron gave $530,493 to seventy-one senators since 1989, and $603,488 to 187 House members. Mostly Republicans were recipients, although important Democrats who could affect Enron's business were not overlooked.

Enron's Investment In Politicians: A Better Return than Commentators Think

On January 15, Time magazine ran a story entitled "For Enron, Washington May Have Been a Bad Investment." The story concludes that Kenneth Lay & Company did not get much for their money, other than "[a] seat at the table for Dick Cheney's energy-policy formulations - OK, six seats - and the grace of the Enron-friendly energy policy that resulted. Possibly veto power over the head of the Federal Energy Regulatory Commission - former chief Curtis Hebert Jr. says Bush replaced him not long after Hebert declined Lay's demand for a friendlier stance toward energy deregulation. And a very big black book. And that's about it."

Granted, Enron's political largesse obviously did not buy survival insurance. Today, Enron stands as the nation's largest bankruptcy ever. Nor has it bought off investigations into the reasons for its failure.

At present, there is a Justice Department task force investigation into Enron - although Attorney General Ashcroft had to recuse himself, for he received an Enron contribution during his unsuccessful Senate race, and the entire U.S. Attorney's Office in Houston also had to step aside because of conflicts.

The Securities and Exchange Commission is also investigating. Furthermore, at least six (one report has it at ten) Congressional committees are investigating. In addition, forty-seven class action lawsuits have been filed - so far. And last but not least, the California legislature is investigating Enron's role in its electricity crisis.

And granted, Secretary of the Treasury Paul O'Neill, Secretary of Commerce Don Evans, and Federal Reserve Chairman Alan Greenspan apparently did nothing to help Enron from failing. Accordingly, Time 's correspondent feels that Enron's investment in Washington was not very helpful. But Time's analysis focuses only on the final days of Enron, and the apparent lack of action by high officials to save what was already a desperately troubled company. It ignores the larger picture of how Enron's contributions may have help slow detection of its troubles, and helped the company fly under the radar for as long as was possible given what now appear to be some egregious accounting and business practices.

Enron insiders did quite nicely on their investment in Washington officials, thank you. Washington officials gave them the ability to trade futures contracts generating billions of dollars in revenues, unregulated. No prying eyes looking over their shoulders.

Indeed, Enron's investment in Washington radically changed the regulatory laws that permitted them to grow from an insignificant gas pipeline company into the seventh largest company in the United States, with a meteoric growth in revenues of 1,750 percent in a single decade.

Moreover, when Enron hit the wall, the Bush Administration remained mute, even knowing Enron was disintegrating. Certainly the former governor of Texas had some idea of what this would mean to his beloved state. For one thing, twenty thousand employees of Enron would be out of work, with their 401(k) plan worthless. Surely a man with a Harvard MBA could envision the devastation this business failure (of a company he had once promoted) would have on countless thousands of Enron stock and bond holders, not to mention major lending institutions who had provided Enron working capital.

In all these ways - through favorable regulatory changes, lack of government oversight, and administration silence until the very end - Enron's investment in Washington paid handsome returns for a few insiders, who personally made millions (but obviously wanted billions) from Enron. Sometimes buying influence can simply mean buying silence - not buying specific actions or intervention.

Federal Investigations of Enron, Andersen, and the Administration

The Congressional inquiry will be wide ranging, an effort to find out why one of the country's largest companies could all but disappear overnight. Based on reports in The Washington Post, and statements by members of Congress, it appears at this time that the Congress plans to investigate five basic questions relating to the Bush Administration's connections with Enron. The questions can be summarized as follows:

(1) What did the administration do, or not do, in the weeks immediately before Enron entered bankruptcy; and why?

(2) What influence did Enron have on the administration's energy policy, since Enron officials met not less than six times with Vice President Cheney as he was developing that policy, and at least seventeen provisions (according to one study) of that stated policy benefited Enron?

(3) What role did Enron have in developing last fall's economic stimulus legislation, which contained a tax break sought by Enron?

(4) Was Enron involved in promoting the appointment of officials favorable to its activities by the Bush White House? (This inquiry is not limited to the ousting of the chairman of the Federal Energy Regulatory Commission, who was hostile to Enron's free-wheeling style.)

(5) Did the administration arrange for Enron to receive benefits from the Overseas Private Investment Corporation and the Export-Import Bank of the United States?

Paralleling the Congressional inquires will be the Justice Department task force investigation looking for criminal misbehavior, both at Enron and relating to Enron during the past five years (the typical cut off date for the statute of limitations on most federal crimes).

These investigations will involve not only Enron officers, employees and directors, but also any state or federal officials alleged to have violated federal laws, as well agents and contractors of Enron, like Arthur Andersen.

A Wide Range of Possible Charges, and Quid Pro Quo Allegations

Violations, if any, may well relate to securities and bankruptcy laws, mail and wire fraud, campaign law violations, Hobbs Act (extortion) violations, obstruction of justice, and the conspiracy statutes. At present, it is only possible to speculate at potential violations, which is a worthless exercise. But it should surprise no one if it is soon reported that the criminal defense bar in Washington has had a sudden influx of business from the Enron fallout.

No area will be sifted through more closely than Enron's political contributions. Indeed, the Congressional inquires appear to be looking for "quid" - as in "quid pro quo." Even if the quid cannot be found, or is less than clear, but the campaign contribution reeks with influence-buying, prosecutors have been very successful using the federal law prohibiting gratuities.

My discussion of this topic will continue in my next column, to appear in two weeks on this site, for answers to some of these questions are only beginning to be puzzled out.

http://writ.findlaw.com/dean/20020201.html

GAO V. CHENEY IS BIG-TIME STALLING: The Vice President Can Win Only If We Have Another Bush v. Gore -like Ruling

By JOHN W. DEAN

Friday, Feb. 01, 2002

This is Part Two of a two-part series by Mr. Dean on Enron. Part One is archived on this site. - Ed.

Vice President Dick Cheney has thrown down the gauntlet. He has refused to give the General Accounting Office the very limited information they have requested about the work of his energy task force. (GAO, created in 1921 during the Harding Administration, has from its inception been an independent and nonpartisan agency of the Congress, charged with studying the programs and expenditures of the federal government.)

Cheney says he is refusing to provide information to the Congress as a matter of principle. He told the Today Show that he wants to "protect the ability of the president and the vice president to get unvarnished advice from any source we want." That sounds all too familiar to me. I worked for Richard Nixon.

In fact, not since Richard Nixon stiffed the Congress during Watergate has a White House so openly, and arrogantly, defied Congress's investigative authority. Nor has any activity by the Bush Administration more strongly suggested they are hiding the incriminating information about their relationship with the now- moribund Enron, or other heavy-hitting campaign contributors from the energy business.

After nine months of shilly-shallying, the Vice President and his operatives have failed to bluff the General Account Office. The issues are being ratcheted up a few quantum notches. On January 30, 2002, GAO informed Congress, the President, and the Vice President that it was going to court. GAO noted that this will be the first time it "has filed suit to enforce our access rights against a federal official" in its fourscore history.

To quote Mr. Cheney (from another context) - this is a "big time" lawsuit.

GAO's Historic Lawsuit

The first important thing to understand about the GAO suit is that it is not a political lawsuit. GAO's current Comptroller General, David Walker, is not from the ranks of Bush-Cheney bashers. In fact, he was a member of the Reagan Administration and the first Bush Administration. And when he was appointed in 1998 to his fifteen-year term by President Clinton, it was at the urging of top Republicans. Filing this historic lawsuit will not be pleasant for Walker.

But the Comptroller has no choice; Cheney and the White House have forced the issue. Litigation is necessary, unless Cheney reneges. Cheney has not claimed "Executive Privilege," for the Vice President has no such power. Rather, Cheney has claimed - and Bush has backed up his claim - that GAO (and therefore the Congress, too) has no authority to seek the information they have requested. Thus, for the Comptroller not to go to court would be tantamount to a declaration of Congressional impotence, not to mention a concession impairing GAO's basic mission.

Indeed, if the Vice President's position should prevail, it will change the very nature of our government's system of checks and balances. If GAO is held to be as restricted at Cheney would have it, such a ruling will create a black hole in the Federal firmament - a no man's land where only the President and Vice President can go, unobserved by their Constitutional co-equals on Capitol Hill.

Background Of the GAO Lawsuit

For those who've not followed this evolving turmoil, a brief recap of the background of the GAO lawsuit is in order.

On January 29, 2001, President Bush established the National Energy Policy Development Group ("Energy Group"), which was chaired by Vice President Dick Cheney. Cheney's Energy Group consisted of six cabinet officers (Treasury, Interior, Agriculture, Commerce, Transportation and Energy), plus other government officials he was authorized to include. (For example, he could include the Secretary of State, if international issues were involved.) The staff was made up of full time government employees.

Clearly, the Energy Group was constituted to avoid the Federal Advisory Committee Act (FACA). That 1972 law applies if any group of two or more persons utilized by a president for advice includes a non- government employee or official. If this occurs, FACA requires that the group must make all of its proceedings open to the public, keep records of the proceedings, and accommodate a broad spectrum of views.

Cheney's Energy Group sought to avoid the FACA requirements by including only government employees, and no outside persons, and it appears they did so successfully. But we don't really know, because the Vice President refuses to provide the information necessary to make a determination. For all we know, non-government persons, perhaps from industry, may effectively have become part of the Energy Group in that they became involved in the advice given to the President.

By April 19, 2001, the buzz in Washington had it that Cheney's Energy Group was meeting with Bush's big contributors in the energy business, and that the heavy hitters from the oil patches and gas fields were looking for a return on their investment in Bush's campaign. The bottom line: energy was going to win; environmentalism would lose.

Congressman Henry Waxman (D. CA), the ranking member on the Committee On Government Reform, and John Dingell (D. MI), the ranking member on the Energy and Commerce Committee, were sufficiently concerned about this prospect to write to both the Energy Group and the Comptroller General requesting information about the composition of the Group, and its activities. But all their inquiries have been to no avail.

The Vice President's Stonewalling

Counsel to the Vice President David Addington responded to the Congressional request. He explained that the Energy Group was not subject to the Federal Advisory Committee Act, but as a matter of comity - a more accurate word might be "comedy," given his response -- he would provide some answers about the Energy Group's members, staff and activities. Unfortunately, these "answers" were extremely vague. As for the General Accounting Office, Addington told them (nicely) to get lost.

Addington declared that GAO was seeking "to intrude into the heart of Executive deliberations, including deliberations among the President, the Vice President, members of the President's Cabinet, and the President's immediate assistants, which the law protects to ensure the candor in Executive deliberation necessary to effective government." While this was a gross overstatement - the answers GAO was seeking were much more modest, and did not really intrude into the "heart" of executive deliberations - GAO persuasively argued that even assuming this claim was accurate, it still had the authority to make the requests it had made.

GAO's General Counsel, Anthony Gamboa, advised Addington that, as a matter of law, GAO had full authority to "intrude into the heart of Executive deliberations." Gamboa cited the GAO law, chapter and verse, setting forth its legislative history which addresses this very point by making clear that: "[The] mere fact that materials sought are subject to ... [deliberative process] and therefore exempt from public disclosure does not justify withholding them from the Comptroller General."

More to the point, GAO stated that it was "not inquiring into the deliberative process but are focused on gathering factual information regarding the process of developing President Bush's National Energy Policy." Thus, to the extent that Addington's letter had misinterpreted what was being sought, the GAO corrected any misinterpretation, and made clear that there was no longer any good reason for Cheney not to respond.

But Vice President Cheney did - and still does - not want to be troubled with what GAO is actually seeking. Accordingly, he has continued to claim in almost all his public statements that GAO is seeking to intrude into the deliberate process, when GAO itself has made clear that is not the case.

On January 30, 2002, the Controller, in announcing his contemplated lawsuit once again made clear what he was and was not seeking: "[C] ontrary to recent assertions," he stressed, "we are not seeking the minutes of [the Energy Group's] meetings or related notes of the Vice President's staff."

Cheney is hoping that if you repeat a lie enough, people will believe it. If the public knew how little GAO is seeking, it would be difficult for the Vice President to make his case publicly that GAO is being unreasonable. In fact, GAO seeks only "certain narrowly defined, factual information concerning the development of the National Energy Policy [which was publicly announced on May 18, 2001]."

More precisely, GAO seeks to answer one question: "What process did [the Cheney Energy Group] use to develop the National Energy Policy?" To answer that question they have asked who was present at the Group's meetings, what are the names of the professional staff, from whom did the Group members or staff gather information (dates, subjects, and locations), and what direct and indirect costs were incurred in developing the National Energy Policy. That is it. This information could be embarrassing - and could even cause the group to lose FACA protection if there was too much industry influence (such as an industry representative who became a de facto member). But it does not intrude into executive deliberations.

Still, Speaker Dennis Hastert, emerging from a meeting at the White House, told reporters that he does not believe it is right and fair that GAO should have access to private conversations of the President or Vice President, nor the deliberative processes of the White House. The Speaker has either been misled or has joined the effort at disinformation about what is being requested. That is simply not the information GAO is actually seeking.

While the public duplicity about what is and is not at issue is shameful, the how-dare-you-ask-me refusal of the Vice President to give GAO anything is bold, if nothing else. It's caused me to dust off my copy of The Imperial Presidency, Arthur Schlesinger, Jr.'s seminal work on Executive hubris.

The Vice President Contests GAO's Authority

It was during Watergate that I first became aware of GAO's authority. I received a call from then White House Chief of Staff H.R. "Bob" Haldeman. He said that GAO wanted to examine the White House books and records. Haldeman said the President did not want them sniffing and snorting around the White House. How could we stop them?

The short answer was they couldn't be stopped, only delayed. While I was not sure what concerned Haldeman and the President, based on my own earlier experiences with GAO's professionalism, I convinced Haldeman that these auditors were not partisans looking for dirt. He relented when I told him that it was unheard of to litigate their authority, and it would generate a lot of unwanted negative publicity to force them to sue. Nothing untoward came from the GAO audit of the Nixon White House. To the contrary, all was found in order.

Cheney has spent enough years on Capitol Hill, and in the Executive Branch, to know that GAO auditors and examiners play it straight. Indeed, that must be what concerns him.

It is difficult for anyone familiar with GAO's history, which has long included investigations of both Republican and Democratic administrations, to look upon Cheney's challenge as anything but a stalling tactic. Given the fact the President has not also invoked executive privilege, I cannot but wonder if the stall strategy is this: First, the Administration will fight the lawsuit over GAO's authority; second, when the Administration loses that suit (as it likely will), the Administration will mount another fight over executive privilege. That should get them past the 2004 presidential election.

Much of the Watergate cover-up actually involved stalling - delaying everything until the last minute, and then looking for a way to delay further. The goal was to push the potential problems past the elections, which we did. Everyone who is familiar with the ways of Washington scandals will understand the stalling strategy. Among its other virtues, delay creates an opportunity for an intervening event to change the dynamic of an unfolding scandal.

The tragedy of September 11th is a perfect example. It caused GAO to pull back from pursuing its lawsuit at an earlier date, not wishing to distract the White House. Now another terrorist strike could similarly dwarf even the Enron debacle, and certainly the GAO suit, in the headlines, and create even more momentum for even unreasonable assertions of executive power like this one.

Bush-Cheney Versus GAO

The Cheney position that GAO cannot pursue an investigation of the Energy Group is based upon three basic fallacious arguments. First, Cheney claims that GAO's authorizing statute (found at 31 U.S.C. sections 712, 716 and 717) limits it to reviewing only financial matters and end results, not the underlying government activities.

Second, Cheney claims that under the same statute, GAO has no authority to examine Executive activities undertaken by reason of Constitutional, rather than statutory power, and the Energy Group was acting pursuant to the Constitutional powers of the President and Vice President.

Third, and finally, Cheney claims that, again under the authorizing statute, GAO has no power to undertake an investigation based on requests of ranking minority members of a committee (such as Representatives Waxman and Dingell); rather, such an investigation can only be initiated at the request of a full committee, and no such request has been made.

GAO has addressed and thoroughly refuted each point - in letters of June 22, 2002, and August 17, 2001.

What is fascinating about Cheney's position is that it appears to be exactly the kind of argument that Enron officials made, internally and with their Arthur Andersen auditor, to keep the offshore partnerships off the balance sheet. The Vice President wants the GAO auditors to keep out of his "off the books" Energy Group's dealings with industry contributors, too - even though, as with the Enron offshore partnerships, these dealings may be the most relevant information of all to those reviewing the work of this Group.

Raising Smoke And Throwing Sand

Those readers who are attorneys will immediately recognize what the Vice President and his counsel are doing. They don't care if their arguments are baseless; they are simply trying to cloud the air with smoke to obscure what would otherwise be a clear-cut legal answer: GAO has the legal right to information it seeks, period, full stop. They have already succeeded in clouding the picture, and tossing sand in the gears slows down the process.

As someone who knows a White House cover-up from first-hand experience, I must say that if the Vice President forces the Comptroller to file his lawsuit, it will certainly appear that a cover-up is in the works. Whether the cover-up relates to Enron, or to his Energy Group's relationship with Halliburton (the energy company he ran before running for his present office), or to a dubious relationship with some other contributor that has received some benefit, or all of the above, I cannot say. But something is amiss.

Cheney's contentions about GAO are meritless, and he should give them up. Having worked both ends of Pennsylvania Avenue, I appreciate that it is difficult to govern in a fishbowl. Yet I also know that the genius of our system is that the White House is responsible not only to the people, but to their representatives on Capitol Hill. Congressional oversight of the executive is as important as, maybe more so than, lawmaking.

Dick Cheney, like Dick Nixon, is too smart and shrewd to take a stand on a makeshift principle for no reason. There is a reason Cheney has decided to take the heat and political fallout from resisting GAO's request; the reason is that the alternative, of giving GAO access to the information it wants, would, from Cheney's perspective, be worse. As fine and dedicated a public servant as he is - he is stonewalling. This is how a cover-up begins.

What If The GAO Lawsuit Reaches the Supreme Court?

But maybe there is another explanation. It has occurred to me that Cheney may know something about the Supreme Court that the rest of don't. Ultimately, the issues of the GAO lawsuit will have to be resolved by the Supreme Court - although the suit will begin in the lower federal courts and take time to work its way up (thus playing into the stalling strategy that could push all of this past the 2004 election).

For the Vice President to prevail would only require the support of the same five conservative justices who put the Vice President in his current job with their ruling in Bush v. Gore. But should these justices decide to hold in favor of Cheney in the GAO lawsuit, and thus neuter the Congress's authority to investigate the Executive Branch, the ramifications will be much more serious and far-reaching than the results of their aberrant holding in Bush v. Gore - which they themselves limited even as they handed it down.

Osama bin Laden himself could not concoct a more hurtful blow to our democracy. For the Court to resolve the case against GAO (and the Congress) and in favor of the Vice President would diminish the role of Congress as drastically as a reveral of Marbury v. Madison would diminish the judiciary's role.

If Vice President Cheney were to prevail in such a suit, the high Court will have decided that Congressional oversight of the Executive Branch is limited to only what the President and Vice President are willing to permit. This would be an awesome realignment of power in Washington.

Before Bush v. Gore, I would have said such a ruling would be impossible. Today, all I can say is it is a time for vigilance. This lawsuit, should it proceed, calls for close watching. ---------------------------------------------------------------------- ----------

John Dean, a FindLaw columnist, is a former Counsel to the President of the United States.

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