Capitalism Run Amok!
DOES ANYBODY CARE WHAT THE HELL IS GOING ON IN THIS COUNTRY ?
Baxter's 'Suicide' Death Looks A Lot Like Vince Foster's By Reed Irvine
Enron for Dummies by Michael I. Niman High Times Online Feb 13th 2002
ENRONITIS – A COMMUNICABLE DISEASE/Medium Rare by Jim Rarey
Enron VP tells Congress she feared for her life But media remains silent on Baxter "suicide"
THE ANDERSEN DIVERSION by Jim Rarey
Baxter's 'Suicide' Death Looks A Lot Like Vince Foster's
By Reed Irvine NewsMax.com 2-8-2
The death of J. Cliff Baxter, the former vice chairman of Enron, looks a lot like that of former White House Deputy Counsel Vincent W. Foster Jr. Foster's death was pronounced a suicide by the U.S. Park Police when they found a gun in his hand. The media accepted the word of the police, who had made no investigation worthy of the name.
The day after Baxter's death, the New York Times reported that the Sugar Land police had "ruled out foul play but a justice of the peace ordered an autopsy as a precaution." Like the U.S. Park Police in the Foster case, they ignored the rule that an unattended violent death must be investigated as a homicide until they have enough evidence to rule that out. Dr. Joye Carter, the Harris County medical examiner, pronounced it a suicide without even knowing if the gun found in Baxter's car belonged to him.
The police requested a trace on the gun, confirming information from a source close to the family that no one identified it as Baxter's. That was also the case with the gun found in Foster's hand. Finally the FBI agents working on that case got Foster's widow to say that the 1913 black revolver resembled the modern silver revolver that she brought to Washington from Arkansas.
That was accepted as positive identification by Special Prosecutor Robert Fiske and Independent Counsel Kenneth Starr. Their reports concealed the fact that the two guns were different colors and ages.
The autopsy found that Baxter was killed by a contact shot to his temple, not by a conventional .38 bullet, but by rat-shot, small pellets used to kill rats. If the police found any .38 rat-shot ammunition in Baxter's home, they aren't talking about it. Nor have they revealed if Baxter's fingerprints and blood were found on the gun. In Foster's case, his fingerprints and blood were not found on the gun in his hand.
The claim that Foster killed himself came as a shock to his family, close friends and co-workers. Close friend Webster Hubbell told a partner at the Rose Law Firm not to believe the stories that Foster committed suicide. Mrs. Foster accepted the suicide finding, but Vincent Jr., the oldest son, told classmates that his father did not kill himself.
The New York Times reported that a former business associate of Cliff Baxter called Baxter the day before his death, congratulating him for having criticized Enron's practices before resigning. Someone had suggested that Baxter hire a bodyguard, and Baxter told the caller, "I'm a businessman. Why do I need a bodyguard?" The Baxter family, according to close friends, all believe he was murdered.
The police have a suicide note, but they refuse to say where it was found, who found it, if it was in Baxter's handwriting and if his fingerprints were on it. They won't disclose what it says. A reliable source says it doesn't mention his wife and children and is not really a suicide note.
The note in the Foster case that was allegedly found in his briefcase did not mention his family or suicide. It was in 17 pieces. Foster's fingerprints were not found on any of them. The contents were released, but copies of the handwritten note were withheld for over two years. Then three independent experts examined it and said it was a forgery.
The medical examiners in both cases have records of deference to police and prosecutors in performing autopsies. Dr. James Beyer, who did the Foster autopsy, had ruled two cases to be suicides that second autopsies found to be homicides.
Dr. Beyer concealed or destroyed an X-ray he had taken of Foster's head. He lied to explain its absence. The X-ray no doubt confirmed an FBI report that the police found no exit wound in Foster's head and that the fatal bullet was a small caliber and was not fired by the .38 found in his hand.
Dr. Joye Carter was accused of falsifying an autopsy report when she was the chief medical examiner in Washington, D.C. In Harris County, an employee charged that Dr. Carter fired her because she reported the suppression of evidence favorable to a murder defendant and two cases of destruction of evidence. The employee sued. The county paid $325,000 plus her legal costs, to settle.
The media are calling Baxter's death a suicide. Earnest Taylor, Sugar Land's police chief, says nothing to discourage that. The Foster case shows that if he stalls long enough the cover-up will succeed.
Reed Irvine is chairman of Accuracy in Media.
http://www.newsmax.com/commentmax/print.shtml?a=2002/2/6/155646
*****
http://www.hightimes.com/News/2002_02/enron.html
by Michael I. Niman High Times Online Feb 13th 2002
During the last year Enron played a pivotal role in writing the Bush administration's new energy policy a policy that deregulated energy industries while removing government oversight. They were also the largest corporate player responsible for California s recent energy crisis. Ostensibly in the business of buying and selling energy on the new open market, they also regularly purchased political clout on the electoral auction block by bankrolling political campaigns on both the local and national levels, buying the affection of politicians like drunken sailors at a bordello. All the while, however, they enjoyed relative obscurity flying below the radar of the national consciousness and its media sculptors.
Like all good parties, Enron's soirée ran its course, crashing and burning with the fury of the Hindenburg, channeling the flames of hell directly into the Bush White House where they re now burning out of control, threatening to consume the dogma of free market economics while exposing a level of influence peddling and corruption shocking even to seasoned Whitehouse observers. Suddenly a bleary-eyed America is waking from its stupor, mumbling, En-what? What or Who is Enron?
Enron emerged from the high flying 90s as a star among new economy corporations. Like Nike and Tommy Hillfiger, factory-less companies that contract out for products they subsequently brand, Enron essentially produces nothing. Nike buys and sells sneakers. Enron trades energy. Originally an oil pipeline company, they shed most of their bulky physical assets during the high flying 90s, transforming themselves into the ultimate weightless corporation, buying and selling anything and everything ranging from energy futures to internet bandwidth, while essentially producing almost nothing. On paper they were worth more than GM, but in reality the company held few assets other than a handful of generating plants. Enron was a paper tiger.
Their product was also nonexistent. They didn't t invest, for example, in building a new energy grid or significant new generating stations. To the contrary, they invested in the concept of an energy shortage. They bought energy, eventually taking control of approximately 25% of the nation s wholesale electricity supply. They then reaped astronomical profits last summer selling this electricity to brownout-plagued Californians, with prices shooting up into the stratosphere. The irony is that California s electricity continued to flow from the same generating plants it always came from, into the same homes where it was always consumed. Enron didn't t build new generators or power lines. No. They simply inserted themselves, on paper, between the generators and the consumers in what historians will no doubt record as a brilliant and sinister paper shuffle. Electric flow stayed the same. All that changed was the concept of what electricity was and who could own and trade it. In the end Enron became the central player in a gargantuan rip-off dwarfed only by the S&L crisis of the 1980s.
California s soaring electric rates sent its economy, the fifth largest in the world, into a tailspin. Power starved manufacturers laid off thousands of workers. Scores of small businesses, unable to keep up with their electric bills, filed for bankruptcy. And working Californians were forced to choose between food and electricity. Many chose food and conservation, in effect boycotting overpriced power a move that added to Enron s financial woes as electric demand and prices dropped.
Despite the personal pain and economic mayhem, Enron s California fiasco violated no laws. Years earlier, California, seduced by false promises of cheap electricity, adopted a Republican energy deregulation plan that opened the door for Enron and its imitators to seize control of California s power. When the good ship Enron came crashing down, they were in the process of trying to do to the nation what they did to California. Key to their plan was a corporate accrual of political power unprecedented in American history. A quick look at George W. Bush s White House illuminates both Enron s power and their plans.
Enron s Boyz in DC
Enron and Enron CEO Ken Lay together donated $113,800 to the recent Bush presidential campaign, and another $888,265 to the Republican National Committee, while hedging their bets by showering the Democratic Party with spare change. In all, according to Vermont Congressperson Bernie Sanders, they donated nearly $6 million to both the Republicans and Democrats during the past year. Enron s accounting company, Arthur Anderson, showered another $5 million on the two parties while at the same time looking the other way as Enron overstated its profits and defrauded its investors.
Enron s political investments paid off in spades. Enron advisor Lawrence Lindsey became George W. Bush s economic advisor, taking an Enron energy policy proposal and incorporating it into Bush s election platform along the way. Another former Enron Advisor, Robert Zoellick, became Bush s Federal Trade Representative. Bush's secretary of the Army, Thomas White Jr., is a former Vice Chair of Enron, who in recent months cashed out his $50 million plus worth of Enron stock before the share price dropped from $90 to 29 cents. At the Pentagon, White argued for privatizing energy systems at military bases. Then there s Bush s Wacko Treasury Secretary Paul O Neill, the former CEO of Alcoa Aluminum. His lobbying company, Vinson and Elkins, was the third largest contributor to Bush s presidential campaign, hence the honcho position at the Treasury Department. Enron was one of Vinson and Elkins largest clients.
The list goes on. Bush s chief advisor, Karl Rove, owned a quarter million dollars of Enron stock, with nobody knowing for sure when he cashed out. Bush s campaign advisor, Edward Gillespie, took a half- million dollars from Enron as a lobbyist after Bush was elected. Texas Republican Senator Phil Gramm s wife Wendy was on Enron s board of Directors, compensated to the tune of about $1 million for her service to the corporation. Immediately before joining Enron s board in 1993, she worked as chair of President Bush Senior s (the Bush who was elected) Commodity Futures Trading Commission, where she fought to eliminate energy futures contracts from governmental oversight. Other Republican homies on the Enron payroll include pundit William Kristol, public opinion pollster Frank Luntz and speechwriter/talking head Peggy Noonan. Even Harvey Pitt, the head of the Securities and Exchange Commission, the federal agency in charge of policing stock transactions such as the Enron insiders sell-off, turns out to be part of the Enron family. Before taking of the SEC, he worked for Enron s accounting firm, the Arthur Anderson company. That s the same company responsible both for Enron s aggressive accounting practices, and for shredding documents associated with these practices.
Enron s Boy in the White House
It gets thicker. Even the president himself seems to have the Enron mark branded on his butt. According to Rodolfo Terragno, an Argentine Cabinet minister during the Reagan years, then Vice President and former CIA director George Bush s son, George Junior, contacted him on behalf of, yep, you guessed it - Enron. It seems young George was aggressively using his family s clout and his position as the Vice Presidential son, to close a pipeline construction deal for Enron. Today Enron executives deny ever having employed George W. Bush in any capacity, either as an employee or as a consultant. With your average crackhead now having more credibility than Enron s top brass, however, such denials must be taken with a grain of salt.
President Bush is also, by all accounts but his own, quite cozy with Enron s former CEO, Ken Lay, the corporate captain who cashed out and bailed just as the ship was going down. Though Bush had previously identified Lay as a close friend, referring to him as Kenny Boy, after the Enron crash he claimed to only be a passing acquaintance, arguing that Lay supported his opponent, Ann Richards, during his 1994 gubernatorial race. In reality, Lay and Enron s political PAC donated $12,500 to Richards campaign, while showering the Bush campaign with $146,500. So much for presidential credibility. Bush is Enron s boy.
So what did Enron get for all their investments? Well for starters, the Bush economic stimulus plan, if passed, would have the feds cut a check to Enron for $254 million dollars this despite the fact that they used over 600 offshore subsidiaries in a successful scheme to avoid paying any federal taxes for four out of the last five years, a period when their profits soared. But Enron wasn't content to simply raid the public till. More importantly, they used their influence to shape federal energy policy, opening the door for Enron to take their Californian scam to a national level. Vice President Dick Cheney, an oil man himself, met with Enron officials at least six times while drafting the Bush administration s national energy policy. The Bush administration also sat out last summer s California energy debacle while Enron savaged the nation s most populous state, costing California s ratepayers billion s of dollars while Enron s stocks soared.
Good Riddance!
Now Enron is down for the count in bankruptcy court. The lies piled higher and higher upon each other, eventually smothering the paper giant as execs looted the palace and the whole house of cards came tumbling down. It s the largest bankruptcy in American history. Enron is dead. But make no mistakes about it this is a good thing. I spit on their proverbial grave and wish good riddance to them. Enron was the ultimate parasite. They were in the process of doing to the nation what they did to California. For America to live and prosper, they had to die. No one should lament this loss. Especially not Californians, who just saw their wholesale electric rates drop by well over 20% in the wake of the Enron collapse.
As for the so-called poor Enron employees who lost their retirement savings as Enron s Potemkin empire came crashing down I have no sympathy for them either. Enron was not a widget maker they were the ultimate racketeers. Enron s employees more than anyone else knew what Enron was about. They saw their pension funds magically shoot up like bottle rockets as countless Californians lost their jobs, their businesses, and, in some cases, their life savings. Yet they happily stayed vested during these golden days. Ultimately they were victims of their own greed. It might sound cold, but to hell with them. Not only did they choose to work for Enron, possibly an unavoidable decision in some cases, but they chose to invest in Enron as well. Their investments were hurting people. Their work for Enron was hurting people. Their company tried to suck the wealth from society while producing nothing. In the end they re left with nothing. No money, and from me, no sympathy.
Unfortunately, institutional investors such as pension plans and mutual funds owned 64% of Enron s stocks. Again, however, the issue of personal responsibility arises. Investors need to research their mutual funds to make sure their own money isn't undermining their interests and moral beliefs. People also need to get more involved with their own pension plan management and loudly voice their beliefs and concerns. It s Eleven o clock do you know where your money is?
As much as those in power would like us to forget about Enron, the energy giant s collapse will go down as a watershed in American history. There is no magic in an unregulated free market it s just a mugger s paradise. Corporations might be running the government, but their own investors have lost both their confidence and their trust in them. Most importantly, with Enron crashing down with an apocalyptic thud, possibly louder than that of the World Trade Center, corporate misbehavior and greed is finally on the national radar. Hopefully not even a war can distract us from this debacle.
Dr. Michael I. Niman's articles are archived at http://mediastudy.com/articles
" As a result of the war, corporations have now been enthroned and an era of corruption in high places will follow and the money-power of the country will endeavor to prolong its reign by working upon the prejudices of the people until the wealth is aggregated in a few hands and the Republic is destroyed." -Abraham Lincoln (Nov. 21, 1864 in a letter to Col. William F. Elkins) [Shaw, Archer H./ The Lincoln Encyclopedia/New York: Macmillan, 1950]
MEDIUM RARE
By Jim Rarey
February 27, 2002
ENRONITIS – A COMMUNICABLE DISEASE
What at first was thought to be just the outrageous illegal excesses of one company (Enron) is now found to be an outbreak threatening to become an epidemic. In the Enron case, over $80 billion in value has disappeared from investment portfolios including pension funds, private 401K’s, IRA’s and other institutional and private investors. And that’s just the stock effect. Still to come are disclosures of the impact of loans from investment banks and bonds issued by Enron subsidiaries and "partnerships" which will be in the billions of dollars.
Before tracing the contagion of the "Enron Syndrome" we should try to clarify just exactly what Enron was doing. About the only consistent explanation in most of the media is that the company was hiding its true debt on the balance sheets of the partnerships. It was doing much more than that.
Enron set up more than 3,000 private "partnerships" with the aid of investment bankers who rounded up the investors to give the appearance of independent companies. With the connivance of the bankers, bond rating services and Wall Street analysts, bonds were then issued by the partnerships. The bonds were backed, not by the (nonexistent) assets of the partnerships, but by Enron stock. Enron stock at that time was the darling of Wall Street trading in $60-$80 dollar range. Given investment grade ratings by the ratings services and buy recommendations from Wall Street analysts, the bankers had no problem touting the investments to unsuspecting investors. Of course Enron is now a penny stock and the bonds have virtually no backing.
This stratagem worked so well the bankers began to recommend the structure to other clients. Chief among the investment houses were CitiGroup, Credit Suisse First Boston and Deutche Bank Alex Brown according to a 2/14/02 New York Times article. The practice became so lucrative that some of the banks began buying the bonds themselves and then peddled them to investors.
Two of the companies named in the Times article as adopting the Enron model are the Williams Companies and the El Paso Corporation. Both are also big players in the energy (oil and gas) markets. The major selling point of the model was that it would shield the bond liabilities from. investors’ view by keeping them on the partnerships’ balance sheets.
J.P Morgan Chase also had a "arrangement" with Enron where large sums of money were prepaid to Enron supposedly for future delivery of oil and gas commodities. These transactions were run through one of the partnerships and an entity called Mahonia Ltd., a subsidiary of Morgan Chase set up in Jersey in the (English) Channel Islands.
No commodities were ever delivered and the prepayment was returned to Morgan Chase plus about 3.4% of the contract. The transactions are being investigated, as they appear to be nothing but private loans to Enron outside of normal reporting requirements.
Morgan Chase required Enron to obtain performance bonds from insurance companies for the transactions with themselves as the beneficiary. Since the bankrupt Enron now cannot make good on the repayments, Morgan Chase has claimed payment from the insurance companies. The insurance companies are refusing to pay saying the transactions were misrepresented as commodity trades.
Morgan Chase has sued and, according to Standard & Poors, stands to lose over $5 billion if unsuccessful. One of the companies involved is Travelers Insurance, a subsidiary of CitiGroup. Ironically, and perhaps even poetically, this has the effect of the Rockerfellers suing themselves since they control both Morgan Chase and CitiGroup.
Are all these goings on legal? Where were the accountants and lawyers while this was happening? There is some confusion as to whether the partnership scheme was the brainchild of Enron management or of the consulting arm of Enron’s auditors, Arthur Anderson. It may be irrelevant since both embraced the concept wholeheartedly. Arthur Anderson is said to have passed the model on to some of its other big clients of which Global Crossings is one of the more notable.
Global Crossings, of course, is much in the new as it tries to sell its core business (a strategic fiber optic network) to a company with close ties to the government of Communist China. It also has gained notoriety for its chairman’s reaping of over $700 million in stock sales before the company went into Chapter 11 bankruptcy. (This dwarfs Enron CEO Ken Lay’s sales of $100 million.) Also Democratic National Committee chair Terry McAuliffe, who had a close relationship with the company, realized an $18 million profit from a $100,000 investment in Global Crossings.
Enron’s law firm, Vinson & Elkins evidently had no reservations about Enron securities earning fees in 1999 for advising on $3.4 billion in Enron offerings. The firm is also said to have given Enron (unknown) advice on document shredding by Enron and Arthur Anderson.
Arthur Anderson is no stranger to controversial accounting methods. It has lost several large class action civil law suits over its actions (or lack thereof) and at least two multimillion dollar fines for criminal complicity.
However, accountants, lawyers, investment bankers and Wall Street analysts have been emboldened by congressional legislation effectively giving them a "safe harbor" in relying on the statements of clients. In 1995, the Private Securities Litigation Reform Act (H.R. 1058) forbid private class action suits against such "professionals" in federal courts.
The bill was bitterly opposed by trial lawyers and severely conflicted the Democrat Party. It was essentially a confrontation between the lawyers on one hand and the investment community on the other. The bill was passed and sent to President Clinton who promptly vetoed it. Some say this was merely a symbolic gesture on his part since he must have known the votes were there to override his veto, which happened in short order. The vote to override was 319 to 100 in the House and 68 to 30 in the Senate. Thus the confrontation between the two special interest groups turned out to be strictly no contest with the bankers and their allies winning hands down.
But the bill left some loopholes. Trial lawyers shifted their private class action suits to state courts where the "safe harbor" provisions did not apply. Consequently, in 1998, the congress moved to remedy that oversight. Senator Phil Gramm, Chair of the Senate Banking Committee (whose wife sits on the Enron Board of Directors Audit Committee) introduced S.1260 "to limit the conduct of securities class actions under State law." While affirming the right for such lawsuits to be filed in state courts, it contained a provision for transferring such suits to federal court for dismissal. It also severely limited the amount of information that plaintiffs could obtain in the discovery process.
The bill passed by even larger margins than the 1995 bill with a 319 to 82 vote in the House and 79 to 21 in the Senate In the face of such overwhelming votes, Clinton meekly signed the bill into law. In the house the lone dissenting Republican vote was cast by Rep. Ron Paul of Texas (not one of Enron’s favorite congressmen). Paul was not in the congress during the 1995 vote.
In 1996 Enron had lobbied vigorously, but unsuccessfully, to get an exemption for its projects put into an update of the 1940 Investment Company Act. Failing that, its next step was to approach the Securities and Exchange Commission (SEC) for an exemption. Congress, in its wisdom, had given the SEC the power to exempt individuals and/or companies from the requirements of the 1940 Investment Company Act. This supposedly was to relieve small businesses from onerous reporting requirements.
As reported by Insight Magazine, Enron lobbyist Joel Goldberg approached Barry Barbash, SEC head of the Investment Management Division about getting an exemption. In March of 1997 Barbash authorized the exemption writing, "It is ordered that the requested exemption from all provisions of the act is hereby granted."
According to Insight, Goldberg had been Barbash’s boss when both worked at the SEC in the 1980’s. The two are now partners in the Washington office of the Shearman and Sterling law firm.
Clinton appointed head of the SEC Arthur Levitt told the New York Times he has no recollection of the Enron exemption. However, Barbash told Insight he sent memos to Levitt and the commissioners and that the exemption was, "one of the most wellvetted things in Washington in its day."
With the exemption in hand and the accountants, lawyers and bankers protected from private class action lawsuits, it was full steam ahead with the results we see today.
Without the exemption, Enron officials could not legally have been on the boards of the partnerships. Also the reporting requirements would have made it difficult if not impossible to keep the liabilities off of Enron’s balance sheet.
However, the "safe harbor" may not be as safe as some thought. It does not protect against criminal activity or willful fraud if it can be proved. Although the Fifth Amendment protects the players from giving evidence against themselves, investigators seem to be turning up enough for a number of criminal convictions.
The ultimate effect on the stock market and the county’s financial structure is yet to be determined. If the Enron practices are as widespread in other companies, as some believe, we may be seeing a domino effect with Enron and Global Crossing only the beginning. There may never be a full accounting as to how much money Enron and others raised through these practices.
One aspect of the problem the media is avoiding like the plague is the possibility of money laundering for nefarious purposes other that personal enrichment. The labyrinth of several thousand companies scattered around the globe is a money launderer’s dream and a law enforcement nightmare.
Permission is granted to reproduce this article in its entirety.
The author is a free lance writer based in Romulus, Michigan. He is a former newspaper editor and investigative reporter, a retired customs administrator and accountant, and a student of history and the U.S. Constitution.
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Enron VP tells Congress she feared for her life But media remains silent on Baxter "suicide"
By Patrick Martin 22 February 2002
Enron Vice President Sherron Watkins, who warned top company officials last August that the energy trading giant might "implode in a wave of accounting scandals," said she feared for her own life during the crisis that culminated in Enron's filing for bankruptcy.
Testifying under oath before the House Energy and Commerce Committee February 14, Watkins, who still holds a high position at Enron, spoke at some length about the atmosphere of intimidation that existed inside the company during the months before its collapse.
But none of the congressmen participating in the hearing, Democratic or Republican, made any connection between Watkins' concern, not only for her job, but for her physical safety, and the mysterious death last month of J. Clifford Baxter, Enron's former vice chairman.
Baxter had been identified in the media as an internal critic of Enron's accounting scams and was slated to testify before a congressional committee probing the Enron collapse when he was found dead in his car on January 25. He died of a gunshot wound to the head.
Officials of Sugar Land, Texas, the wealthy Houston suburb where Baxter lived and where he was found dead, immediately declared his death a suicide. No serious investigation has yet been conducted and police refuse to release the alleged suicide note or answer questions about the case.
Within a few days of Baxter's death, reports on his demise and the police investigation virtually disappeared from the television news and the major daily newspapers, in sharp contrast to their treatment of such events as the suicide of Vincent Foster, the lawyer in the Clinton White House who killed himself in 1993.
Baxter's death was clearly on Watkins' mind when she testified three weeks later. At one point the transcript shows the following interchange with Iowa Republican Congressman Greg Ganske, who asked her about the August 15 memorandum she wrote to Enron CEO Kenneth Lay, warning him of massive financial irregularities in the company's accounts.
GANSKE: Did you keep a copy for your own personal files?
WATKINS: Yes, I did. Yes, I did.
GANSKE: And where did you keep those files? At home?
WATKINS: No.
GANSKE: At work?
WATKINS: No, in a lockbox.
GANSKE: In a lockbox. So you were enough concerned about this that you wanted to put this somewhere where it couldn't be destroyed.
WATKINS: Yes.
GANSKE: Were you worried about your own personal safety?
WATKINS: At times, I mean, just because the company was a little bit radiosilent back to me, so I didn't know how they were taking my memos or the investigation.
GANSKE: Why would you be worried about your personal safety?
WATKINS: Because it was the seventhlargest company in America.
GANSKE: And you were dealing with a really powerful person—
WATKINS: Yes.
GANSKE: —and a really powerful company.
This extraordinary exchange projects a picture of modern America which has more in common with John Grisham's The Firm —and far more truth—than the standard media depiction of America as a land of "democracy" and "freedom."
"Why would you be worried about your personal safety?" the congressman asks. "Because it was the seventh largest company in America," she replies. Both witness and questioner take it for granted that those in possession of so much power and wealth would not hesitate to resort to violence.
Yet no such understanding informs the media coverage of Baxter's death. There has been no voicing, in the daily newspapers or television networks, of the entirely justified suspicion that Baxter may have been killed because he knew too much and was discussing with his lawyer an agreement to cooperate with congressional investigators.
The media silence is not so much a matter of protecting Enron—now bankrupt and under new management—as of protecting the Bush administration, which had the closest ties with the company and numbers at least a dozen highranking officials who were either Enron executives, highly paid consultants or significant stockholders.
Other portions of Watkins' testimony suggest that Baxter, who resigned as vice chairman last May after becoming increasingly critical of the company's financial arrangements, had continued to press his views on other Enron executives, and thus potentially made himself a target for retaliation.
She related conversations with Baxter, as recently as January 15, 10 days before his death, in which he was highly critical of former CEO Jeffrey Skilling and other top executives. In this conversation Baxter told her that he had repeatedly met with Skilling to express his views on the private partnerships controlled by Chief Financial Officer Andrew Fastow, used to shift huge debts off Enron's books.
Watkins also described a conversation between Baxter and Skilling last March, which she learned of secondhand, in which Baxter told Skilling, "We are headed for a train wreck, and it is your job to get out in front of the train and try to stop it." Skilling, who was Enron Chairman Kenneth Lay's protégé and chosen successor, ultimately resigned in August, after which Lay resumed the position of CEO.
In her testimony, Watkins sought to place the blame for the Enron collapse on Skilling and Fastow, rather than on Lay. She described Skilling and Fastow as "highly intimidating, very smart individuals, and I think they intimidated a number of people into accepting some structures that were not truly acceptable." She claimed that the financial dealings devised by Fastow were so complex that Lay could not fully comprehend them. "I do believe that Mr. Skilling and Mr. Fastow did dupe Ken Lay and the board," she said.
But this attempt to whitewash Lay is contradicted by Watkins' overall testimony, which describes a company in which many toplevel employees were aware of and troubled by the deals Fastow effectively contracted with himself. He was both Enron CFO and principal organizer of the private partnerships. Watkins said she feared that speaking out about these transactions would be a "jobterminating move," and only sent her memo to Lay after Skilling abruptly quit the company and a shakeup was clearly in the works.
At an earlier session of the House committee, Enron board member William Powers, dean of the University of Texas Law School, revealed that Baxter had given "a couple of hours" of interviews to the investigative committee set up by the board in the aftermath of the financial collapse. Powers refused to turn over notes or recordings of those interviews without permission from Enron.
Watkins' account is quite different from the version told by Skilling under oath at a congressional hearing a week earlier, in which he described himself as only vaguely aware of the financial operations carried out by Fastow. Watkins said of Skilling, "He is a very much intense, handson manager. He was involved in Mr. Fastow's endeavors. I find it very hard to believe that he was not fully aware of transactions with Mr. Fastow's partnerships."
While she refused to discuss Baxter's death, claiming to be overcome by emotion, Watkins' description of Baxter implicitly refutes Skilling's portrait of a despairing man. Skilling, who described Baxter as "my closest friend," said he had a long discussion with him only a week before his death, in which the former vice chairman was visibly distraught and felt his reputation had been ruined by the Enron collapse.
Baxter's Houston lawyer, J.C. Nickens, who spoke with him frequently in the weeks before his death, has denied that Baxter was troubled either by the prospect of testifying before Congress or the danger of being held criminally liable in the Enron collapse. Baxter, according to his lawyer, feared neither eventuality because of his record of having criticized the practices that destroyed the company's financial standing.
In a press interview February 9, Nickens described Baxter as agitated over harassment. "Cliff expressed to me his belief that people were going through his mail, that they were going through his garbage, that people were showing up at his home late at night, and making phone calls that were unwelcome."
Nickens was not clear as to the source of this harassment—whether the press, prosecutors, or other Enron executives. But he did say that he had no sense that Baxter would take his own life. In the hours before Baxter's death, Nickens had begun negotiating with congressional investigators on the conditions under which his client would appear in Washington to testify about the Enron collapse.
Conflicting reports have emerged about the circumstances of Baxter's death. The official story is that Baxter was already dead when he was discovered slumped over in his car. But by one account—county Constable Hal Werlein—Baxter was still alive, though mortally wounded, when he was found by a deputy constable, who then summoned emergency medical assistance.
Local police in Sugar Land—the home town of a powerful Republican congressman, Majority Whip Tom DeLay—immediately concluded that Baxter had died a suicide, and ordered his body taken to a mortuary without an autopsy. Only the intervention of Baxter's family, who contacted a local judge, resulted in an order to take the body to the county morgue for an official autopsy.
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MEDIUM RARE
By Jim Rarey
July 8, 2002
Magicians are not the only ones who have mastered the art of prestidigitation (sleight of hand). Anyone who has watched the con man at a carnival work the shell game (a pea or marble under one of three shells) knows it is almost impossible to watch both hands at the same time. The trick is to get attention on the hand that is not manipulating the shells while the other hand does the dirty work.
The "prosecution" of Arthur Andersen was a shell game to divert our attention from Enron. While prosecutors and the congress concentrated on the one-count indictment for paper shredding, Enron faded into the background.
The worst case scenario for Arthur Andersen, upon conviction, was a maximum fine of $500,000 with no one going to jail. (You can’t put a corporation in jail.) The fine would be inconsequential in the overall monetary exposure of the company. The only other consequence of a conviction would be that the SEC would bar the company from certifying financial statements for companies listed on the stock exchange. That was not a concern either because it was plain that Arthur Andersen was finished as a viable company. All the perpetrators have to do is get a job with another firm and they are back in business.
There is plenty of evidence to prosecute not only Andersen, but a number of its clients, involved investment banks, brokerage firms, stock analysts and rating services under the RICO statute as continuing criminal enterprises. That possibility has never been raised by the media, Justice Department or anyone in Congress and there is probably a good reason (from their interest) that they haven’t.
To understand the huge ramifications of the Enron debacle, it is necessary to clarify what the company did and who facilitated it. The media would have us believe Enron created a number of "independent" partnerships (over 3,000) to hide debt. The debt aspect is a red herring.
In order to set up the partnerships, Enron had three hurdles to overcome. The first was SEC reporting and restrictions on companies involved in securities transactions. This was accomplished when an Enron lobbyist obtained a waiver from all the requirements of the 1940 Investment Company Act from the SEC headed by Clinton appointee Arthur Levitt (now a senior analyst at the Carlyle Group). The existence of the waiver was first reported by Insight Magazine and discussed in this writer’s article, "Enronitis a Communicable Disease."
The second hurdle was an accounting rule that an unrelated person or company must own at least a laughable 3% of the "independent" partnership. It was the task of the investment bankers to round up those investors. Some of the banks put up the money themselves.
The accounting rules, usually described as Generally Accepted Accounting Principles (GAAP), are promulgated by the Financial Accounting Standards Board (FASB), a private organization.
In February of this year, the FASB finally got around to tightening up some of the rules on the partnerships officially known as "Special Purpose Entities." The FASB has been chaired by Edmund L. Jenkins for the last five years up to his resignation at the end of his five-year term in June of this year. Jenkins, prior to becoming chairman of the FASB had 38 years of experience with an accounting firm including as the Managing Partner for its Professional Standards Group. That firm was Arthur Andersen.
The third hurdle was an Enron policy that prohibited an Enron officer from participating in the independent partnerships (which also would have been prohibited by SEC rules had the waiver not been obtained). The Enron Board of Directors waived its own conflict of interest rules to allow Enron’s Chief Financial Officer (CFO) manage the partnerships.
The partnerships then proceeded to flood the securities market with stock and bond offerings. Billions of dollars worth of securities were sold but where the proceeds (money) went is still a mystery.
One of the first things an honest auditor will do is perform a cash reconciliation. This is not just verifying bank reconciliations. It involves analyzing all operations generating cash and expenses draining cash to determine how much cash should be on hand. Obviously, this is not possible if the auditor doesn’t see all the pieces of the company. It still is not clear if Arthur Andersen had access to the books of the partnerships. That may be academic now that Enron has sold its major (securities) trading operations to UBS in Switzerland along with the records. Incredibly, at last report, investigators and Congress have not even requested (much less subpoenaed) bank records.
Could those billions of dollars have been laundered to other entities or individuals? Who knows? But even those huge amounts may pale in comparison to another possibility.
Catherine Austin Fitts, in her stint as a sub-cabinet level officer in the Department of Housing and Urban Development (HUD), saw enough (before she was drummed out for saving money) to suspect that billions of dollars may be laundered out of HUD to unknown destinations. Fitts makes the point that over $3 trillion is missing from just the Department of Defense (DOD) and HUD over the last three years. Government auditors have thrown up their hands in disgust saying the books of those agencies are unauditable. Both agencies use the private auditing and consulting firm, Arthur Andersen.
Few have mentioned the possibility of such a huge embezzlement assuming there is no mechanism that could accomplish that without detection. That is not necessarily true. Although it would take the collusion of several highly placed individuals in government, banks and other financial institutions, there is one organization where that amount of money would be almost indistinguishable in the daily volume handled, particularly if spread of a period of time. That organization is SWIFT.
SWIFT is the acronym for a private organization set up by international bankers, owned by the bankers and operated for the benefit of bankers. The original name when it was first incorporated in Belgium in 1973 was the "Society for Worldwide Interbank Funds Transfers." At some point in time the name was changed to "Society for Worldwide Interbank Financial Telecommunication." Evidently the original name was too descriptive of its major function, wire transfers of money. On its website (www.swift.com) in its "History" of the organization, it falsely claims that the current name was its original name.
In 1976-77, as it began its international expansion, SWIFT contracted with Burroughs Corporation, then headquartered in Detroit, to furnish computer hardware and software for the network. Banking applications was one of Burroughs’ strong product lines.
Without any advance indication, the Board of Directors abruptly fired the CEO and Chairman of the Board and replaced him with C. Michael Blumenthal. Blumenthal, a member of the Council on Foreign Relations and the Trilateral Commission had recently resigned as Jimmy Carter’s Secretary of the Treasury. Blumenthal was also a leader in the Council of the Americas established by David Rockefeller in 1965.
The Council was and is the major non-governmental force pushing for the Free Trade Area of the Americas (FTAA) usually described as an expansion of NAFTA to encompass all of North and South America. Blumenthal regularly used Burroughs’ corporate jet to attend the council meetings.
SWIFT now has a total of over 7,000 members and "sub-members." Eligible members must buy a share of SWIFT and be a bank, securities broker-dealer or a regulated investment management institution. Sub-members must be at least 50% owned by and under the management control of a member. Almost any company involved in financial transactions can use the SWIFT network for a fee if they are not a member or sub-member.
SWIFT claims to be a responsible organization as it is subject to oversight by a commission comprising representatives from the central banks of the G-10 countries, which are also members of SWIFT.
SWIFT tries to represent itself as just a telecommunications company servicing the financial community. The words money and wire transfer are no longer used. Money transfers are now called "messages. "
While SWIFT does not publish the dollar volume of traffic on its network, it boasts its daily "message" traffic reached 8,683,922 on June 28, 2002. If the average money transfer were only $1,000, that would translate into over $8 trillion moved on that day. However, the figure is probably much lower, perhaps $1 trillion since some of the "messages" may have really been only messages and not money transfers.
At any rate, that missing $3 trillion would fit nicely into one week of SWIFT transactions. That is not to say it happened, but it is a possibility.
Financial transactions can be traced for the most part unless they disappear into the arcane banking world of the Middle East. That was proved when tracking "terrorist" money merely by threatening banks with loss of the privilege of doing business in the U.S. If that same threat were to be used to follow the Enron money, we might learn something.
However, don’t hold your breath. When the entire U.S. Attorney’s office in Houston recused themselves because of potential conflicts of interest, the Justice Department appointed Leslie Caldwell to head a task force to investigate (and prosecute?) the Enron case.
Caldwell comes out of the U.S. Attorney office in San Francisco, as did current FBI Director Robert Meuller. Meuller had served a previous stint in the Department of Justice where he was instrumental in containing the BCCI investigation.
Caldwell was involved early on in the Arthur Andersen case. He had negotiated a deal with Andersen that would have dismissed the indictment if Andersen demonstrated it had learned its lesson from its previous "sins" on Sunbeam, Waste Management and Enron and would mend its ways. The deal fell through when former Andersen partner David Duncan made a deal with prosecutors.
It is frustrating to the serious investigators of these corporate scandals to know the right questions, which are not being asked by the government including the Congress. It appears all we will see is partisan finger pointing and sham regulatory improvements.
Permission is granted to reproduce this article in its entirety.
The author is a free lance writer based in Romulus, Michigan. He is a former newspaper editor and investigative reporter, a retired customs administrator and accountant, and a student of history and the U.S. Constitution.
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