3. Enron Holds Itself Above the Law?

Today, the California Legislature is recanting its death march toward deregulation. In June, it was seeking to discover whether power-generating companies willfully manipulated electricity supply in order to drive up prices last year. After being subpoenaed, Enron refused to appear or provide information. The Legislature found them in contempt.

This is similar to the way that Chairman Ken Lay declined to show up at the first Congressional investigation of Enron. On 11 and 12 December, the House Financial Services Committee held a Joint Hearing on "The Enron Collapse: Impact on Investors and Financial Markets."

However, the CEO of accountant Arthur Andersen, Joseph Bernadino, did testify on behalf of Enron, a company Andersen both consulted for and audited. His testimony was followed by the AFL-CIO's Richard Trumpka, who accused Andersen, Wall Street, and Enron's management of defrauding consumers, workers, and shareholders. In clear, angry language, Trumpka described "a story of people so shameless and greedy that literally as the bankruptcy papers were being drawn up they were still passing what remained of the firm's cash out to themselves--$55 million on the last working day before they filed for Chapter 11."

According to Trumpka, Andersen was giving important business advice, "including, many believe, advising Enron on the structure of the special purpose vehicles" that were used to hide debt. "The financial statements themselves contain proof that the auditors were aware of each of the transactions that led this company to grief--the self-dealing with the CFO, creating partnerships to trade in the company's own stock, other partnerships whose purpose seemed to be to generate dubious revenues, hide liabilities and otherwise bookable derivatives positions from the investing public."

Part of the problem was Enron's Board of Directors, a body commanded by SEC law to be independent of the company. But according to Trumpka, this board was actually dependent on Enron management through political and investment relationships. "Is it any wonder that when the crisis began and shareholders needed desperately to hear from outside directors, all they got was silence?"

It should be noted that Trumpka is by no means an angel himself, and was a little sullied in a scandal of his own. Accused of laundering cash to aid the reelection campaign of Teamsters President Ron Cary in 1996, Trumpka is a lifelong union bureaucrat and attorney. A brief was filed on 15 September 2000 by the union watchdog National Legal and Policy Center, pleading to have Trumpka disbarred in the State of Pennsylvania.

4. A Free Market in Derivatives, Thanks to the Paid Services of Congress

Enron's investments in Capitol Hill have paid off. In 2000, Congress passed a law that exempted its energy derivatives business from regulation. Today, in 20/20 hindsight, many analysts state that Enron's reliance on unregulated derivatives business is reminiscent of Long Term Capital Management, the high-risk megacapital hedge fund that also almost took the entire economy with it when it went under in 1998.

Analysts report that your proximity to Wall Street often determines whether you will be bailed out. A Goldman Sachs insider recently noted, "With Long Term Capital Management they were so integrated with the Wall Street dealer community and the Fed, that their bailout was quick and concerted. " Compare this to "The demise of Drexel Burnham. As a Street competitor, they were ripped apart. Alan Greenspan did not even return the calls for help of Fred Joseph, their CEO. Similarly with Enron, the Street has kept a distance, not least because of their involvement in funding and/or helping to set up Enron's offshore special purpose vehicles."

5. Enron Air Quality

In Texas, Enron influenced public policy time and again while Bush was Governor, including the infamous "grandfathered plants" deal, which allowed plants to "self-police" their emissions. As a result, Texas has some of the worst air quality in the Union.

As the late Bush biographer Jim Hatfield put it in his last press conference in Chicago, 2 June 2001, "We go to Houston, and my kid can't even breathe."

Enron Workers Respond by Organizing

As the country saw after 11 September, Americans have a great capacity to band together to weather common adversity. In Houston, this took the form of a website for displaced employees, www.enronx.com, which created a message board to air grievances and help Enron workers find a job. Created "in one day, December 5" by Josˇ Lazzo and friends, EnronX quickly had 5,200 members sign up and use the site. Today, it gets 11,000 page views a day.

On EnronX, I met the power generator worker mentioned earlier who preferred to remain anonymous. We'll call him "Clifford." When Enron Management made $600 million cash unloading their shares, who did they sell them to? It couldn't have been the open market, which would have severely depressed the share price even more in a time of scrutiny. Clifford has an explanation about how management pulled their liquidation scam: "Ever wonder who was buying Enron stock in November, as it was tanking and as anyone with a clue knew it was insolvent/worthless? Smart people were selling, of course, but we now know the buyers were the pension funds of government employees in Florida, New York and Texas, states with the Republican governors closest to George Bush. Florida lost $300 million, and Texas and New York $100 million. Can't you just hear the conversation at Fidelity, etc: 'Gotta dump this P.O.S.: find me someone we can screw with it--there's the government fund's managers over there--have the Boss give him a call. Florida, Texas and New York. What a fucking coincidence!"

When Enron was still in business, Clifford had the honor of shaking hands and speaking briefly with the future GOP head Mark Racicot: "He came by my office at Enron and we chatted a bit-what a whore he is." Racicot is the former Montana Governor who also deregulated his own state's energy. Later, in the Missoula Independent, George Ochenski protested that deregulating Montana's electricity had created, "Rather than the promised reduction in cost, electricity price spikes [that] have created a disposable work force of Montanans who may or may not have a job depending on the day-to-day cost of electricity." Racicot is a former Enron lobbyist with Bracewell & Patterson.

Upon probing, Clifford related the full story on meeting Racicot: "Yes, what Enron wanted was the deregulation and (certainly not a bad idea) federal eminent domain for power lines from east to west (what he [Racicot] and I briefly chatted about). Of course, the Mountain-Mormon Republicans then killed that bill, once again begging the question just what the Republican Party ever did for any working man, even those here at Enron below the fiftieth floor. . . . Anyway, the story is the Republican Party--nothing at Enron was ever about anything else. I mean, if Whitewater was a story, then what in the hell is this?"

Good question. Since June, fringe voices on technology and political websites have been saying as much. With the New Year, the Senate has taken up this burning question, first posed by plastic.com, "This event probably would have qualified as a scandal if Clinton's chief strategist had done such a thing, but is that sufficient reason to apply the same unreasonable standard to the Bush administration? Of course it is! Payback's a bitch, ain't it?"

In a similar way, both armchair and professional political experts are speculating about how the President might extricate himself from this growing scandal. Is it possible that his colorful but controversial advisor, Karl Rove, might be turned into a sacrificial lamb? After all, it was Rove who most flagrantly broke the conflict of interest laws, working in the White House on policy that affected Enron while he was an Enron shareholder. In fact, on 4 June 2001, when he finally agreed to sell the entirety of his shares in companies with interests that conflicted with the goal of good government, Rove became $5.6 million richer. In addition to Enron, for his first six months in office Rove held onto stock in Pfizer Inc., General Electric Co., Boeing Co., Cisco Systems Inc., American Express Co., Sallie Mae, Intel Corp., Wells Fargo & Co., and Johnson & Johnson. Rather than follow the law, Rove stated that he'd rather wait to sell as to avoid a capital gains tax. The White House at the time stated that there was no rush, after all, it's common knowledge that Bush owed Rove most of the credit for a (semi) successful Presidential campaign.