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Legal     1 - Duke Energy Employee Advocate

Legal - Page 8

“American businessmen don't make large political contributions because they love
their country. Rather they are investments, on which they want a return.” – John W. Dean

Toll Collector Takes Toll

New York Law Journal – by John Caher – March 9, 2002

A New York State Thruway toll collector who beat up a motorist because she apparently shortchanged the state on a nominal fee was acting within the scope of his employment at the time of the assault, a New York Court of Claims judge has held.

Judge Edgar C. Nemoyer of Buffalo said the state bears respondent superior liability for the conduct of an employee who was attempting to do his job -- collect the toll -- even though his approach was unconventional and illegal.

The court said in Seifert v. State, 100063, that the fact that the toll collector was performing his function, regardless that he was doing so in an obviously improper manner, exposes the state to full liability.

The toll booth case arose on April 2, 1998, when Niki Lynn Seifert drove two exits further on the New York State Thruway than she normally would.

Seifert, an athletic trainer assigned to a suburban Buffalo high school, usually got off the Thruway at the Hamburg exit after leaving work. The toll from her workplace to that exit was 15 cents. However, on April 2, 1998, Seifert went a little further on the Thruway, to the Eden/Angola exit. Seifert handed over the usual 15 cents and began to drive off when she heard the toll collector hollering at her and realized she had neglected to pay the full toll.

Seifert backed up to pay the toll and apologize, but was confronted by the toll collector, John R. LaBelle. LaBelle left the toll booth and repeatedly punched Seifert in the face. Another patron called the police, and LaBelle was arrested. Seifert suffered soft tissue injuries and multiple abrasions.


The sole issue before Judge Nemoyer was whether LaBelle was acting within the scope of his employment.

Judge Nemoyer relied on the New York Court of Appeals' 1979 holding in Riviello v. Waldron, 47 NY2d 297. In Riviello, the Court of Appeals said, according to Judge Nemoyer, that "an employer was no longer necessarily excused because an employee, while acting in furtherance of his/her interests, displayed human failings and performed negligently, or otherwise in an unauthorized manner."

Here, it was LaBelle's job to collect the proper toll from Thruway patrons, and that is what he was attempting to do when he attacked Seifert, Judge Nemoyer said.

"Obviously, the [state] did not authorize LaBelle's assaultive behavior, which was certainly irregular and in disregard of instructions," Judge Nemoyer said. "Nevertheless, it appears to the court that LaBelle was acting in furtherance of his employer's business, and performing his assigned duties. Consequently, the court finds LaBelle was acting within the scope of his employment when he assaulted claimant."

Judge Nemoyer awarded damages of $12,459. Gerald P. Gorman of Hamburg, N.Y., appeared for Seifert. Assistant Attorney General Gregory Miller defended the state.

MCI Comeuppance

The Recorder – by Dennis J. Opatrny – March 9, 2002

(3/8/02) - San Francisco Superior Court Judge Alfred Chiantelli on Thursday approved a settlement that enjoins MCI WorldCom Communications Inc. from changing a customer's long-distance provider without permission.

"This is a pretty good settlement," Chiantelli said.

The lawsuit, filed by the California Department of Justice and the state Public Utilities Commission, accused MCI of unfair business practices and false advertising.

Under terms of the settlement, MCI will pay the state $8.5 million to reimburse it for the investigation costs that led to the litigation.

It also prohibits MCI from "slamming" -- changing a long-distance provider without permission -- and from "cramming," or billing for unauthorized add-on services.

"Under this judgment, MCI will have to stop the deceptive practices that resulted in thousands of complaints from California consumers," said PUC President Loretta Lynn.

PUC spokeswoman Monique Steele said the lawsuit only dealt with the telecommunication firm's business practices and not with customer overcharges. She said pending class action litigation may address those claims.

California Attorney General Bill Lockyer, whose office was prepared to take the case to trial, said the settlement will protect customers from unscrupulous companies who use deceptive marketing means.

"We expect this judgment will serve as an industry model and a wake-up call to other long-distance providers that we will not tolerate slamming, cramming or other underhanded business practices," Lockyer said.

The settlement allows the state to monitor MCI for compliance purposes and to ensure it changes its advertising practices.

MCI also agreed to quickly resolve customer billing complaints and bars the company from attempting to collect bills still in dispute.

The phone company must also disclose in a clear manner its restrictions on rates for certain services, its mandatory monthly minimum fee, directory assistance charges, and restrictions on such marketing techniques as frequent flier mileage.

To ensure that all its workers understand the terms of the settlement, MCI must train its customer representatives so they can answer quickly and clearly questions from the public.

Chiantelli said the case was set for trial on Feb. 25, but litigants asked for more time.

"I postponed it a week," the judge said. "You just keep the pressure on."

Class Action Cash Award

Employee Advocate – – February 28, 2002

Employees of some companies have calculated that the have lost hundreds of thousands of dollars due to cash balance pension conversions. Some feel that they could possibly lose even more due to retirement health coverage curtailments.

Those who have faced heavy benefit losses, no doubt, feel bypassed when they read of employment class action settlements of millions of dollars.

More people now have a chance to participate in a class action suit settlement. This suit is not employment related though. It involves Food Lion.

A class action lawsuit on behalf of MVP card holders from 1995 to 1998 has been won!

Don’t quit you job just yet; the settlements will be for 28 cents per affected customer.

A Food Lion flyer indicated that the settlements would be mailed (a 28 cent Food Lion coupon). An Associated Press article stated that the settlement coupons would come in a flyer to be sent out in July.

Whether by mail or by flyer, a settlement coupon may be on the way to you. (You always knew that the big settlements do not come in coupons.)

It was not revealed if the attorneys would be paid in coupons.

GAO Files Suit for Cheney Energy Papers

New York Times – by Don Van Natta Jr. – February 24, 2002

WASHINGTON, Feb. 22 — The General Accounting Office, an arm of Congress, sued Vice President Dick Cheney today to try to force the White House to reveal the identities of energy industry executives who helped the administration develop a national energy policy last year.

It was the first time in the accounting office's 80-year history that the agency had filed suit against a member of the executive branch for failing to turn over records to Congress.

The suit sets up a showdown between the accounting office, the investigative arm of Congress, and the White House over access to records of the national energy task force, of which Mr. Cheney was chairman. Congressional investigators are trying to determine whether executives from corporations that had contributed to President Bush's 2000 campaign, including the Enron Corporation, helped shape the administration's national energy policy.

"We take this step reluctantly," David M. Walker, the comptroller general of the United States and director of the accounting office, said in a statement. "Nevertheless, given G.A.O.'s responsibility to Congress and the American people, we have no other choice."

The Congressional accounting office is seeking lists of people present at each meeting last year of the energy task force. It also seeks lists of people that each member of the task force met with, including the date, subject and location of each meeting. Mr. Walker has described it as "who met with whom, when and about what."

The lawsuit, filed in Federal District Court here, names only Mr. Cheney as a defendant, both in his capacity as vice president and as chairman of the energy task force.

In an interview on Thursday, Mr. Cheney said he believed strongly that the disclosure of the records would hamper the executive branch's ability to solicit the advice of outside experts.

"If you're a student of politics and the presidency, it's a very important issue," he said. "It ought to be resolved in a court, unless you're willing to compromise on a basic fundamental principle, which we're not."

Today, senior administration officials said that they welcomed the lawsuit and expressed confidence that the White House would prevail.

"There is an important principle here," Alberto Gonzales, the White House counsel, said in an interview.

"We view this as a matter of statutory construction: Does the G.A.O. have the authority under the governing statutes to conduct this kind of investigation of the vice president and his advisers? We do not believe the statute provides that kind of authority."

The White House officials will be represented in court by Solicitor General Theodore B. Olson, who supervises government appellate work, and by Associate Attorney General Robert D. McCallum Jr., who is in charge of the Justice Department's civil division.

The accounting office has retained the Washington law firm of Sidley Austin Brown & Wood to handle its case.

Since last May, top administration officials have repeatedly refused to turn over the documents. After Enron filed for bankruptcy protection on Dec. 2, the issue became politically perilous, and even some Republicans on Capitol Hill urged the White House to yield. But Mr. Bush and Mr. Cheney refused, saying that the confidentiality of executive branch discussions was worth fighting for.

The nine-month dispute over access to the documents has made it much more difficult for the White House to distance itself from the collapse of Enron, the largest political benefactor of Mr. Bush. Enron executives met with Mr. Cheney and other task force members six times last year.

From February to May last year, Mr. Cheney and the task force staff held a series of meetings with as many as 400 people from 150 corporations, trade associations, labor unions and environmental groups, to devise a new energy policy for the nation.

Congressional Democrats and environmental groups complained at the time that the environmental groups were largely shut out of the process. The task force report recommended additional oil and gas drilling and made note of the nation's need to build 1,300 to 1,900 electric plants to meet the projected demand over the next 20 years.

In today's suit, the accounting office's lawyers wrote that for decades the executive branch "has complied with countless G.A.O. requests for information," even after disputes about the scope of some requests. "However," the lawsuit states, "until the instant dispute, accommodations and compromises have generally been reached, and G.A.O. has never been forced to file suit to obtain access to records."

The lawsuit says that Mr. Walker has repeatedly sought to strike a compromise with the administration, but that he has been rebuffed at every turn.

"Despite its efforts to reach a reasonable accommodation, G.A.O. has been denied access to information it has a statutory right to obtain," the lawsuit says.

A settlement of the lawsuit is highly unlikely, a senior administration official said today.

At issue is the law that gives the comptroller general the powers to "investigate all matters related to the receipt, disbursement and use of public money."

Last summer, the administration gave the accounting office a total of 77 pages of documents relating to the costs of the task force. But the documents did not provide the identities of the executives who had given advice.

"It was virtually impossible to analyze," an agency official said. "Some pages have a few numbers on them in haphazard places with no indication of the purpose associated with the amount. Believe it or not, other pages have drawings of cellphones and desk phones on them."

Another issue is the accounting office's argument that Mr. Cheney, as the leader of an interagency task force, is not protected by the normal constitutional powers of the vice president. But White House officials said the agency was not entitled to the records because Mr. Cheney was acting in his capacity as vice president, not head of a task force.

Administration officials, including Mr. Cheney earlier this week, have said that the agency is seeking notes, minutes and other records from the energy task force. Originally, in July, the agency had sought that information, but it scaled back the request to the identities of people in the meetings and the subject and cost of each meeting.

Earlier this month, the Justice Department directed the White House to preserve records of contacts between government officials and Enron executives over the last three years. The Justice Department has also directed the White House to retain records related to the energy task force in response to a court order arising from a lawsuit filed by Judicial Watch, a legal watchdog group here.

The documents were first sought last April by Representative Henry A. Waxman, Democrat of California, and Representative John D. Dingell, Democrat of Michigan.

Today, both congressmen applauded the filing of the lawsuit.

"It is unfortunate that the vice president doesn't believe the American people or Congress has a right to know who's influencing public policy," Mr. Dingell said. "Thankfully, the G.A.O. is not afraid to stand by its principles and fight to ensure the American public knows the truth."

Mr. Waxman said it was "remarkable and sad" that the accounting office was forced to go to court to get access to the information.

"Everyone in our government — even the vice president — should be accountable to the American people, and I hope the White House will reconsider their unjustified insistence on secrecy," Mr. Waxman said. "Revealing the names of lobbyists and campaign contributors may be unpleasant to the vice president, but, as previous administrations have learned, avoiding embarrassment isn't a constitutional protection."

Employees vs. Enron

USA Today – by Christine Dugas – February 23, 2002

(2/21/02) - NEW YORK — Enron employees scored a victory Wednesday when a bankruptcy court judge in New York lifted a stay and allowed the 401(k) lawsuits to proceed despite the company's bankruptcy filing. Federal Bankruptcy Court Judge Arthur Gonzalez ruled that the Enron 401(k) lawsuits can proceed starting June 21. He also said that as soon as lead lawyers for the 401(k) lawsuits are appointed, Enron must give them copies of all documents provided to government panels investigating the energy giant's collapse.

"Now the case won't be held up while the bankruptcy process is completed," says Eli Gottesdiener, one of the lawyers who filed the motion on behalf of Enron workers.

The retirement savings of many Enron workers were wiped out because their 401(k) assets were heavily concentrated in company stock. At the beginning of 2001, Enron stock was trading at about $83. Today it's worth about 22 cents.

Nearly a dozen lawsuits have been filed alleging, among other things, that Enron violated federal pension law by selling employees its stock knowing that the price was artificially inflated. The lawsuits were filed in U.S. District Court in Houston.

A bankruptcy filing normally halts all lawsuits against a company so it can focus on reorganizing and preserving assets. Michael Fagone, a bankruptcy lawyer with Bernstein Shur Sawyer & Nelson in Portland, Maine, says that sometimes, however, a bankruptcy court allows a lawsuit to proceed because it wants to know how large a judgment could result from a pending claim.

But allowing the 401(k) lawsuits to proceed doesn't mean that workers can seize company assets if they win a judgment. "We'd still have to go back to bankruptcy court to recover any damages," says Robin Harrison, a Houston lawyer who represents Enron workers.

There is one source of funds that lawyers hope to access if they win in court. Next week Gottesdiener will ask Judge Gonzalez for permission to tap an $85 million insurance policy Enron maintained to protect against pension-liability claims.

Any amounts not covered by the policy would become another unsecured claim to be handled by the bankruptcy court.

Enron Criminal Charges Sought

Associated Press – February 18, 2002

Concealing Evidence and Conspiracy

SACRAMENTO, Calif. (AP) - A California Senate committee, convinced that bankrupt energy trader Enron Corp. has destroyed financial documents under legislative subpoena, voted to seek criminal charges against the company for concealing evidence and conspiracy.

Committee members also voted Tuesday to ask the full state Senate to find Enron in contempt of two legislative subpoenas - one issued in June seeking documents related to California's energy market and the other for testimony about destruction of documents.

The committee voted 5-0 to ask the district attorney from either Sacramento or Orange County to investigate whether Enron intentionally withheld documents from investigators or destroyed any relevant papers.

Lawmakers investigating California's power crisis asked Enron for thousands of documents in June, but the company's destruction of documents and shredding done by its accountants may have violated that order, said Sen. Joe Dunn, a Democrat from Santa Ana.

Last month, Enron officials ignored a committee request to testify about which documents may have been destroyed.

Enron officials didn't attend Tuesday's hearing of the Senate Select Committee to Investigate Price Manipulation in the Wholesale Energy Market. Calls for comment were not immediately returned.

Last week, Enron Vice President Richard B. Sanders wrote Dunn to say there was no reason for company officials to testify because Enron wasn't ``aware of anyone from Enron who made inquiries to Arthur Andersen regarding what documents were destroyed.''

Andersen was the major accounting firm that audited Enron's books. Andersen officials have said their accountants shredded some Enron-related documents.

Larry Drivon, an attorney for the committee, recommended that prosecutors also investigate whether company employees conspired to withhold or destroy documents, which would elevate the crime from a misdemeanor to a felony.

Enron has invited investigators to search the company's document repositories in Portland, Ore. and Houston, Texas, for trading and policy documents they subpoenaed last year, Dunn said. The committee also is preparing subpoenas for testimony from Andersen regarding destruction of some Enron documents.

The committee has subpoenaed documents from a half-dozen energy companies as part of the investigation into the state's power crisis last year, when energy prices soared.

Employees Regain Insurance

Kiplinger Tax Letter – February 6, 2002

(2/1/02) - A blow for companies that want to reduce retiree benefits. An employer offered life insurance to longtime employees upon retirement. The plan documents appeared to promise the benefit to retirees for life.

The employer didn't initially reserve the right to amend the plan to reduce or cancel the insurance. It added that provision years later, after many employees had begun working there under plan's original terms. The firm eventually terminated the benefit. Angry retirees went to court.

Promised benefits cannot be trimmed, an Appeals Court decides. Full benefits are protected for retirees who started working for the firm before right to end benefits was added. Change in coverage is effective only for workers hired thereafter (Devlin v. Empire Blue Cross, 2nd Cir.).

Supreme Court review is likely. Another Appeals Court disagrees with the decision...would allow benefits to be eliminated retroactively. For now, the pro-retiree rule applies in three states...Conn., N.Y., Vt.

Did Enron Buy Influence?

FindLaw – by John W. Dean - February 4, 2002

Part One of Mr. Dean on Enron

(1/18/02) - 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…

Scroll on down for part two

GAO Versus Cheney

FindLaw – by John W. Dean - February 4, 2002

Part Two of Mr. Dean on Enron

(2/1/02) - 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 factor 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, 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 resolving the case against GAO (and the Congress) and in favor of the Vice President would diminish the role of Congress as drastically as a reversal 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.

Employee Advocate note: For a refresher on the Bush v. Gore ruling, click the link below:

The "Gore Exception"

Enron Bought Its Own Laws

WFAA-TV News, Dallas-Fort Worth – by Gary Reaves - February 3, 2002

Sonia Garcia used to design graphics for Enron. Now, she pours her art skills into protest signs.

"If there are people out there who are guilty ... God knows, I'd like to see them pay somehow," Garcia said. Making Enron pay may be more difficult, however, due to changes in state laws backed by the company's political might and money.

In 1995, Texans for Lawsuit Reform and Enron convinced the Texas Legislature that our law was too tough on people who operated with reckless disregard for the rights of other people.

Former Texas Trial Lawyers' Association president Hartley Hampton campaigned against the new laws. They eliminated multi million dollar judgements against crooked companies. They limited punitive damages to double actual losses, and capped those damages at $750,000. For a multi-billion-dollar company, Hampton says, that's not much of a deterrent.

"You could be compensated out of petty cash," Hampton said.

At Texans for Lawsuit Reform, they say the law they got passed does not limit the number of times a company can be sued.

"There could be 10,000 at $750,000," TLR's Ken Hoagland said. "So, there is a huge liability for Enron, or companies that behave as Enron has."

There's another problem for people who try to sue Enron, though. By the time the lawsuits are all wrapped up, the company may have no money left for them to get.

Under the old law, if a jury found Enron 70% responsible, and their accountants and lawyers 15% each, and Enron was broke, the lawyers and accountants would have to pay the entire judgement. Under the new law, they'd only pay their 15%.

"That seems pretty fair," Hoagland said. "You pay for what you are responsible for."

But, Hampton says, when the accountants and lawyers know their losses will be limited, they may be less likely to stop a client's questionable practices.

Enron and TLR have spent millions supporting lawmakers and lobbyists who push to limit lawsuits. They say it's saved businesses billions of dollars. But, jobless Enron employees say the cost is too high.

"I think its rotten," former Enron employee Connie Castillo said. "Its disgusting (that) you can buy influence."

And now, as the Enron cases head for court, the workers can only wonder if lawsuit reform will cost them even more.

Legal - Page 7