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Jan., Feb.


Pre-1999 - Duke Energy Employee Advocate

News - Page 1 - 2002

"You have a carpet of gold, meaning an oil deal, or a carpet of bombs." - CNN

Corporate Candy Store

New York Times – by Gretchen Morgenson – April 5, 2002

(3/31/02) - Out-of-control stock option grants at companies across America are at last prompting action among shareholders.

In the last decade, options have grown from 5 percent of shares outstanding at major companies to 15 percent. Companies love them because they need not account for the grants as employee costs and because companies reap big cash flows and tax deductions as workers exercise their options.

Martin A. Sullivan, economic correspondent at Tax Notes, recently found that because of stock options, United States companies cut their tax bills by an estimated $56.4 billion in 2000. Two years earlier, options reduced corporations' taxes by $27.6 billion.

While companies enjoy the many benefits of options, shareholders are wising up to the fact that these grants dilute their stakes, sometimes significantly. Yet, in a shocking corporate governance loophole, companies can set up broad-based option programs without asking for shareholder approval.

The New York Stock Exchange has agreed to require companies it lists to put such options programs to a shareholder vote, but only if officials at the Nasdaq market do the same for the companies it lists. Nasdaq is reviewing the issue, so the loophole remains.

Thankfully, officials at TIAA-CREF, the big institutional investor, have taken up the fight. After perusing options programs at large companies, TIAA-CREF identified 13 companies with programs it considered significantly dilutive to shareholders, if all authorized shares are granted. It has asked them to put their options programs to shareholder votes in the future.

Peter C. Clapman, chief counsel at TIAA-CREF, said that four companies had agreed to its request and that five more might do so. But four companies declined to put their options plans to a vote by shareholders. They are Adobe Systems, where the plan could dilute existing owners' stakes by 16.7 percent; Autodesk, by 15.7 percent; Cadence Design, by 25 percent; and Synopsis, by almost 40 percent.

Cadence said it could not attract talented workers without options. Cheryl K. House, corporate securities counsel at Adobe, says its plans are an ordinary part of its business and, as such, may be excluded from its proxy statement.

But Mr. Clapman countered: "The recent movement by some companies to deny shareholders their proper role in approving such plans is a substantial blow to shareholder rights."

A second blow to these rights has come from, of all places, the Securities and Exchange Commission, which backed Adobe in its shareholder brush-off. In a Feb. 1 letter, the S.E.C.'s division of corporation finance told the company that it concurred with Adobe's conclusion that option plans were compensation matters requiring no shareholder approval and said it would not recommend enforcement action if Adobe failed to put its option plan to a shareholder vote.

TIAA-CREF will appeal the decision.

It is perhaps not a shock that some companies are slow to see how times have changed, so that being responsive to shareholders is job No. 1.

What is unfortunate, however, is that the S.E.C. would pass on an essentially anti-shareholder move. If investors have learned anything from watching the Enron saga it is that corporate executives don't always act in the interests of their owners.

The idea that owners should not be able to stop options programs that significantly dilute their stakes is just bull-market bunk. Let's jettison it, once and for all.

NC DMV Corruption Probe

The Charlotte Observer – by Jim Morrill – April 5, 2002

(3/30/02) - Embarrassing personal revelations about a former officer of the N.C. Division of Motor Vehicles have opened the window into a widespread corruption probe of the agency.

The revelations are in a report by the State Bureau of Investigation into claims of DMV corruption in Western North Carolina. Portions of the report were leaked to the media last month just before the former DMV officer, Pete Bradley, was fired as police chief in the town of Woodfin, just north of Asheville.

Investigators decline to discuss the investigation, now in the hands of the Special Prosecutions section of the Department of Justice.

"The DMV investigation is serious and important ... (but) this is an ongoing investigation and that precludes public comment," Justice Department spokesman John Bason said.

This month, SBI investigators contacted prosecutors in Davie County about a similar allegation of DMV impropriety.

Last week, the 4,000-member N.C. Police Benevolent Association asked Attorney General Roy Cooper to expand the investigation still further.

"The problems ... are not just isolated to the Asheville area," wrote President Jeffrey Fluck, "but are examples of what we believe is a systemic problem, statewide, from the mountains to the coast."

Interviews, court documents and news reports show the allegations against DMV include:

  • Coerced political contributions. Bradley, a DMV enforcement officer from 1996 to 1999, said supervisors pressured him to make contributions to then-Democratic Gov. Jim Hunt and other candidates.

    "It was common knowledge," he said. "You want to get promoted, you want good assignments, you want to be a team player ... you want to play, you've got to pay."

    Bradley said he had to give Hunt's campaign more than $2,000 in 1996 "to get my (job) application processed." Records show he and his wife gave Hunt, former Lt. Gov. Dennis Wicker, Senate Leader Marc Basnight and others $6,600 over the next two years. Bradley said he gave the money through supervisors, and gave more in unreported cash donations.

    DMV Capt. Gary Ramsey, Bradley's supervisor, declined to discuss the allegations. "It would be nice if the state would let me, but they won't," he said.

  • Bribery. Bradley told the SBI two years ago about what he said was bribery and extortion by DMV officers at weigh stations in Buncombe and Henderson counties in western North Carolina. District Attorney Charles Hipps of neighboring Haywood County told the (Asheville) Citizen-Times this month that he tipped SBI investigators about what he thought was ticket-fixing by DMV officers in 1999.

  • Soliciting contractors. In a Haywood County lawsuit filed last fall, former enforcement officer David Brookshire claimed a supervisor asked him to ask a paving contractor for $500 toward a golf outing for DMV and Transportation Department officials.

    "The solicitation of such cash contributions from paving and other contractors for such purposes was standard practice within the Enforcement Section of DMV," Brookshire said in the complaint. He also said it was "standard practice" for enforcement officials to accept football tickets and other gifts from contractors.

    Brookshire's supervisor, Ramsey, denied the allegations in a motion to dismiss the suit.

  • Retribution. Brookshire, who worked with Bradley, said superiors retaliated when he began talking to SBI investigators. He lost his job last October after 21 years at DMV.

Transportation Department spokesman Sherri Creech Johnson said the department is "waiting for the SBI findings and recommendations." Col. D.C. Richards, director of DMV's enforcement division, said he has seen no evidence of wrongdoing.

"Following policy and procedure is something we do in a paramilitary organization," he said. "And you don't operate outside of it."

Similar to past claims

The current probe involves claims that echo previous criticism of DMV. The most publicized was in 1997. A former enforcement officer named Algie Toomer testified before a state House committee that then-DMV commissioner Alexander Killens pressured him into donating to Hunt's 1996 campaign. The panel was investigating a $100,000 settlement Toomer received on leaving DMV.

DMV officials denied having coerced a donation. A Hunt spokesman said the governor had ordered his campaign not to accept money from rank-and-file state employees.

But in 1997. a coalition of groups, including the conservative John Locke Foundation and the more liberal N.C. Alliance for Democracy, asked the state auditor to do a comprehensive review of political patronage at the Transportation Department, which includes the DMV. One of the groups, Democracy South, found that DOT employees and their families had given more than $100,000 to Hunt's 1996 campaign.

"What emerges is a pattern of widespread abuse within DOT that involves political money linked to jobs, promotions, board appointments, highway contracts and the location of roads," they wrote state Auditor Ralph Campbell.

Campbell's audit forced changes at DOT but didn't directly address contributions by state employees. Other current allegations also recall earlier ones.

The Citizen-Times said a confidential 1986 memo by a DMV official "alleges officers at weigh stations in Buncombe and Henderson counties accepted payoffs and gifts, campaigned for political favorites while on the job and failed to cite `grossly overweight' trucks owned by influential construction and paving companies." Weights are monitored for tax purposes and to comply with safety guidelines.

Gary Bradshaw, a former DMV enforcement officer from Kinston, said he was forced out of his job in 1993 after telling state investigators that certain trucking companies were allowed to elude regulations and making other allegations of misconduct. Bradshaw said nothing came of his complaints. Recent news stories prompted him to ask the attorney general to investigate his dismissal.

"It sounded like the same kind of thing was still happening to people," said Bradshaw, now a Baptist minister.

Letter called blackmail

Pete Bradley always wanted to be a cop.

As a kid, he dressed up in a police uniform and "directed" bicycle traffic in his Asheville neighborhood. After leaving the DMV in 1999, he opened a law enforcement supply business. The next year, he said, he tried and failed to get his DMV job back.

"They wanted more money to come back. That's when I went to the SBI," he said.

He said he was asked to give Democratic candidates $5,000 to get his job back. "That's when I blew up and said, `I'm sick of this crap,' " he said. That's also when he went to federal and state investigators.

Just before he did, he got what he described as an anonymous blackmail letter. It alluded to parties he attended with men who wore diapers and snapped pictures of one another.

"No threats here," the letter said, "but I would suggest leaving well enough alone to preserve YOUR privacy or people may need to know the deal. The repercussions could be bad for any careers, yours and others. Let it go man."

Bradley later acknowledged participating in the consensual gatherings, which he called his personal business. On his attorney's advice, he gave SBI investigators the letter only after being assured it would remain confidential.

This January, the 42-year-old Bradley was hired as Woodfin's police chief. He sparred with Mayor Homer Honeycutt, whom Bradley said he once confronted and accused of corruption.

Last November, a Woodfin patrolman said, he taped Honeycutt bragging about fixing tickets. "I fix more tickets than you probably write," Honeycutt boasted on the tape obtained and reported by the Citizen-Times. "You write 'em, I fix 'em." Honeycutt did not return calls.

In February, the portion of the SBI report involving the diaper parties was leaked to the Asheville media and published in at least two newspapers. Fliers containing it were distributed at a town meeting. The town board fired Bradley shortly afterward.

The source of the leak is unclear, though District Attorney Ron Moore said he gave portions of the report to a law enforcement agency he won't identify. Until recently, Honeycutt worked for the Buncombe County Sheriff's Office.

Moore and two other western prosecutors turned the full SBI report over to the state Justice Department prosecutors months ago. Henderson County District Attorney Jeff Hunt said they realized the scope of the allegations went beyond the 13 counties the three represent.

Bradley, who said leaks about his participation in diaper parties caused him "significant emotional distress," said he plans to sue the state of North Carolina and other parties involved. He flew to Miami on Thursday to retain a law firm.

"Somebody's going to be accountable for that," he said. "A bunch of people are going to be accountable."

Andersen CEO Jumps Ship

Employee Advocate – - March 29, 2002

The New York Times reports that the CEO of Arthur Andersen is resigning. It certainly took him a long time to get the message.

At first he thought that any damage could be denied and otherwise “spun away.” Statements were issued that the company would not lose significant business due to the Enron shredding scandal. The company attempted to deny and bluster their way through the situation.

The typical defense of a large corporation caught red-handed is to deny everything, and then stonewall the legal proceedings for as long as possible. The problem was that no one was buying the denial. The company lost so much business that they waived pre-trial motions and asked for a trial a soon as possible.

Reality evidently further sunk in, prompting the CEO’s departure. A company once thought too big to fail, now struggles to survive.

But one thing that never stops is the attempt to put a positive spin on everything. The CEO is hailing himself as a hero for quitting!

Mr. Berardino said: "Over the last week I have watched our people have rallies, basically crying for their dignity, and I just wanted to help. I just felt the best signal I could give to our people was to sacrifice the only thing I have left to give: my job."

He may have a point. The best way he can help the employees may be to get the heck out of Dodge. Many other CEO’s and directors could best help their employees by following the same course of action.

N.C. DMV Corruption Investigation

Associated Press – March 12, 2002

ASHEVILLE - State officials are investigating allegations of corruption among officers in Western North Carolina's DMV enforcement branch, an Asheville newspaper reported Sunday.

Some allegations examined by the State Bureau of Investigations surfaced in a 1986 probe, according to the article in the Asheville Citizen-Times.

A March 16, 1986, confidential memo by a top official at the Division of Motor Vehicles official alleges officers at weigh stations in Buncombe and Henderson counties accepted payoffs and gifts, campaigned for political favorites and failed to cite "grossly overweight" trucks owned by influential construction and paving companies.

Interviews, court filings and the DMV documents point to a possible pattern of corruption that spans decades, with wrongdoing that could date to at least the 1960s.

The findings of the latest probe, begun in 2000, are in a report that was turned in to the state attorney general's office about eight months ago.

Even though portions of that report were leaked, it has not been released publicly. The SBI denied the newspaper's request for the full report.

"The DMV in Western North Carolina is a total mess," said Don Carrington, vice president of the Raleigh-based John Locke Foundation, a conservative think-tank. "The integrity of our public-safety system in North Carolina is certainly in question."

While the SBI won't reveal the results of its investigation, indications of what may be contained in it are detailed in an October lawsuit filed by a former DMV enforcement officer.

David Ricky Brookshire, a 21-year DMV veteran, sued the agency and a former supervisor for wrongful termination. He said he was fired for being a whistle-blower.

In his complaint, Brookshire admitted to accepting football tickets from paving companies. He said he solicited $500 from a paving contractor to help pay for a golf outing for top DMV and N.C. Department of Transportation brass.

Brookshire said he solicited the money at his supervisor's request, and that it was commonplace to accept gifts. The DMV counters that Brookshire was fired because he used a state vehicle for personal business, didn't come to work one day properly dressed and equipped, accepted gifts and voided a citation.

Brookshire's allegations appear virtually identical to those made in the 1986 memo summarizing the findings of an internal DMV investigation.

The memo was written by Clyde Cook Jr., who was then the assistant director of the DMV's Enforcement Section. The memo was sent to then-DMV Commissioner William Hiatt.

In his memo, Cook details four areas of possible misconduct by DMV officers at weigh stations in Buncombe and Henderson counties.

Haywood County District Attorney Charles Hipps asked the SBI to investigate DMV's enforcement arm after he became suspicious of how it handled a speeding citation issued to unsuccessful congressional candidate James Ferguson, a Democrat.

Some legislators are asking questions about the agency and the latest investigation. Rep. Wilma Sherrill, R-Buncombe, is a former DMV commissioner who wants to know where the probe will lead.

"We're spending a lot of money on investigations, and there never seems to be any outcome," Sherrill said.

Cheney Guards In Bar Fight

Associated Press – March 2, 2002

Alleged Incident Occurred While Cheney In Town Visiting Marines

ENCINITAS, Calif. -- Authorities are investigating a fight outside a nightclub involving two Secret Service agents protecting Vice President Dick Cheney during his visit to Marine Corps Air Station Miramar last month.

An agency spokesman said that the two agents were attacked by a group of men as they left a bar.

Meanwhile, San Diego County sheriff's detectives are investigating a fight outside the Daley Double Saloon in Encinatas, but would not confirm if the agents were involved.

A doorman at the tavern said he saw a group of seven or eight men fighting in the street shortly after the bar closed.

He said he saw one man lying on the ground bleeding from the mouth, and another had the tip of his right ear bitten off.

Enron CFO

Saint Paul Pioneer Press – by Eric Torbenson – February 18, 2002

(2/14/02) - Enter Andrew Fastow, the beset former Enron CFO, architect of several off-balance-sheet partnerships that hid debt and inflated profits at the now-bankrupt energy company. He's blamed for Enron's house-of-cards collapse, and immediately the Street has adopted a wary eye to those executives with the green eyeshades.

What began with Fastow has spread quickly. On Monday, Nortel Communication's CFO lost his job over alleged improper stock trades from his 401(k) account. Closer to home, the former CFO of New York Mills-based Lund Boats settled a lawsuit where he admitted to using millions of the company's money to finance a lifestyle of luxury…

Surveys by BusinessWeek at its CFO conference showed that 55 percent of those who responded said they had been asked to misrepresent company earnings. A similar survey by CFO Magazine in October 1998 said 45 percent of CFOs had been asked to misrepresent results, and that 38 percent had done so…

Back in California, UCLA's Klein has a different outlook on the accounting scandals. "I happen to think that this is the trend of the month right now and that investors are overly discounting companies with aggressive accounting," said Klein, who added that he's purchased shares of Tyco and Irish drug maker Elan, both companies that lost considerable stock value after disclosing accounting practices that spooked investors.

Still, the risk to investors -- as well as the stress on CFOs -- has never been higher in terms of accounting worries. "With Elan, half its market capitalization was gone in six hours," Klein said.

China Mental Hospitals for the Outspoken

New York Times – by Elisabeth Rosenthal – February 17, 2002

BEIJING, Feb. 15 — No one would dispute that Huang Shurong is stubborn and outspoken. She is also smart, confident and articulate, attributes that would seem to leave her poised for success. But not in rural China.

Instead, for her tenacity in protesting a land dispute with her local government in rural Suileng County of Heilongjiang Province in the northeast, officials have had her forcibly committed to a series of psychiatric hospitals, five times in the last three years.

Ms. Huang, who is 42 and divorced, has spent a total of 210 days under lock and key, at times subjected to powerful drugs and electroshock therapy, although friends and family, experts in Beijing and even some of the psychiatrists who have hospitalized her say she is perfectly sane.

"I would agree that I'm strong- willed and very determined, perhaps too determined," she said recently, shortly being released for the fifth time, after 52 days, by doctors who concluded that they could not justify keeping her.

"I'm not mentally ill," she said. "I know that. And anyone who knows me will say that as well."

Fearing that she would be recommitted if she remained in her hometown, she recently fled with her two teenage children to Beijing, where she survives by selling discarded trash.

Ms. Huang's case is far from isolated.

Although Beijing's two-and-a-half- year crackdown on the banned Falun Gong spiritual movement has stirred fresh concern over the political misuse of psychiatry, there is little evidence to suggest that the Chinese government routinely uses psychiatric hospitals to imprison political dissidents, as was common in the Soviet Union.

But far more common are cases in which local governments try to employ psychiatric commitment as a convenient way to silence troublemakers and pests.

This includes people like Ms. Huang who aggressively press the government to address their grievances with petitions and protests. Ms. Huang said that during one hospitalization she had shared a ward with five other frequent petitioners.

"The police wouldn't take me in, since I'd done nothing illegal, so they sent me to a psychiatric ward where they had some connections to shut me up and humiliate me," she said over tea at a restaurant in Beijing. There, she said, she was initially given pills and injections that reduced her to stupor and received electroshock therapy as well.

"I was so angry and afraid inside, I just wanted to get out," Ms. Huang recalled of her first hospitalization, in 1998, after she was picked up in front of her children. "I used my own blood, from a nosebleed, to write a letter. I was worried to death — my kids were young and living alone, and I was worried they might drown in the fishpond."

In recent months there have been several reports in the Chinese press of people who have been unjustly committed, including a frequent petitioner named Yang Wenming, who spent two months in a psychiatric ward in Hubei Province in central China before escaping.

A subsequent psychiatric exam found him totally sane, and he is now suing for 1.2 million yuan — nearly $150,000 — in compensation.

Falun Gong says 1,000 of its members have been forcibly committed.

Officially, Chinese psychiatrists adhere to the same commitment standards as doctors in the West: that people can be hospitalized against their will only if they present a danger to others or themselves.

But in China that standard is not combined with legal time limits on how long a person can he held while the assessment is made.

Also, especially outside big cities, doctors in the relatively young field of psychiatry are poorly equipped to conduct evaluations and may lack the confidence to defy officials who regard any behavior that deviates from the norm as a sign of mental illness.

While some have mental illnesses that justify forcible commitment, Chinese psychiatrists say, a large number do not.

To their credit, Chinese psychiatrists repeatedly released Ms. Huang despite pressure from county officials to keep her locked up. But it took them between four and 72 days each time to reach the conclusion that she should be freed.

Ms. Huang's problems began in 1998 when local officials redistributed farmland in the village of Baoyou, claiming some of the best land for themselves, villagers said. Ms. Huang was informed that a portion of her best cornfield now belonged to someone else.

Five villagers, including Ms. Huang, made a trip to the Suileng County petitions and appeals office to complain, prompting an investigation and the subsequent dismissal of the village head and the village Communist Party secretary. But the land problem was not resolved.

So Ms. Huang continued to complain to the office and sought out the county's party secretary. Impatient, she then traveled first to the provincial appeals office in Harbin and later to Beijing, lodging complaints with China's cabinet and Agriculture Ministry. The cabinet ordered the province to "appropriately deal with" her complaints.

That was when the real trouble began.

In early June 1998, while she was walking home from yet another visit to the county appeals office, an unmarked car carrying police officers and officials pulled up beside her, she said. Without explanation, they bundled her into the car, bound her hands and sped off, leaving her two young children alone at the roadside.

Amid tears, screams and protests, she was driven four hours to a psychiatric hospital — the Harbin Specialist No. 1 Hospital — where she said she was admitted, without examination, to a locked ward. Her children were not informed where their mother had been taken.

When she begged doctors to release her, they said they would "need to discuss the case with county officials," she recalled. Finally she was sent back to her family after 47 days.

To bolster her land case and clear her name, she traveled to Beijing for an extensive psychiatric evaluation at the prestigious Beijing Medical Sciences University. In their December 1998 report, psychiatrists described her as "clear-minded" and "talking to the point," with "good self-awareness and no signs of mental illness."

But that paper has not helped her plight. The last three years of Ms. Huang's life have been a vicious cycle of continued protests, forced hospitalizations at the behest of county officials and subsequent release by doctors.

She acknowledges that her protests have become increasingly loud and extreme, a product of her frustration.

At one point, for example, she threatened suicide, and she later decided to "take back the land" with a sit-in of sorts, lying in protest on the disputed plot.

When hospitalized at the private Chaoyang Hospital near Harbin, she went on a hunger strike and was eventually released when psychiatrists feared that she was "so weak and physically ill" that they could not care for her, said a former staff member, who spoke on condition of anonymity.

That small psychiatric hospital was not licensed to diagnose patients' ailments, only to treat those who had already received a diagnosis. "A lot of her problems were political," the staff member said. "I had sympathy for her, though she is extremely stubborn."

The last time she was hospitalized, at a large psychiatric hospital in Harbin, the local officials who dropped her off told the psychiatrists on duty that she was a madwoman who screamed and cursed at officials. The officials paid up front for six months of treatment — about 10,000 yuan, or about $1,200 — and said she had been categorized as paranoid before.

"They claimed she was a nuisance and a troublemaker and said they were bringing her in for her own protection," said a medical worker at the hospital, who spoke on condition of anonymity. "She didn't even have shoes on when she arrived. We had to buy some. You could tell they didn't care for her."

The worker added that many doctors had quickly become convinced that there was nothing wrong: "They brought her here claiming she was mentally ill, but after we tested here and investigated her background, we determined that she wasn't sick at all.

"I mean, if you've lost your land and you have a dispute, it's normal to get angry and maybe even curse or lash out. That doesn't mean you have mental illness."

When the appeals office failed to provide past records or other proof of Ms. Huang's history of mental illness, doctors from the hospital were forced to turn detective, traveling to Ms. Huang's distant village to interview neighbors.

"The facts seemed to fit her version of events and not those portrayed by the officials," said the health worker, adding, "The villagers all said: `If Huang Shurong is mentally ill, then we are all loonies.' "

Employee Advocate note: Click the link below to see how the “Employee Assistance Programs” at some companies use similar tactics:

Company Owned ‘Shrinks’

A Strange Suicide

Associated Press – February 11, 2002

STARKE, Fla., Feb. 9 (AP) — In this rural town, where the biggest employer is the state prison system, three guards are on trial, accused of stomping a convicted killer to death in his cell to keep him from exposing brutality behind bars.

The dead man was Frank Valdes, 36, who was pulled from his cell at the Florida State Prison at Starke in July 1999 with broken ribs and fractures of his sternum, nose and jaw and many internal injuries. Boot prints were on his face, neck, abdomen and back.

The guards, Capt. Timothy A. Thornton, 36; Sgt. Charles A. Brown, 28; and Sgt. Jason P. Griffis, 28, could be sentenced to life in prison if convicted. All have been fired. Five others will be tried later, four on murder charges. The prosecution rested on Thursday; the defense is expected to open its case on Monday. Bradford County and neighboring Union County are something of a Corrections Department company town, with five state prisons that house about 6,500 inmates and employ 2,900 guards. The prison in Starke, population 5,600, houses Florida's electric chair.

The Valdes case got under way in mid-October with 600 potential jurors summoned to the Bradford County Fairgrounds because the courthouse could not handle the crowd. Many were excused from duty because they knew someone who worked for one of the prisons.

By the time a jury of five men and one woman was seated in January, more than 3,000 prospective jurors — almost a third of the county's 10,000 licensed drivers — had been questioned. The jury includes one former prison guard but no current employees of the Corrections Department.

Prosecutors say the guards killed Mr. Valdes, who was handcuffed and shackled, to keep him from telling the news media about beatings and other abuse of inmates at the prison.

Defense lawyers have contended that Mr. Valdes, who had been sentenced to death for murdering a prison guard in 1997, killed himself by flinging his body against the concrete floor and his bunk.

A pathologist, Ronald Wright, disputed that in testimony in State Circuit Court last month. Startling jurors and spectators, he leaped up and down in the courtroom to demonstrate how Mr. Valdes died. "You jump up in the air and you come down with your feet on somebody," Dr. Wright said.

The muck stops here

New York Times – by Paul Krugman – January 26, 2002

A bizarre thing happened to me over the past week: Conservative newspapers and columnists made a concerted effort to portray me as a guilty party in the Enron scandal. Why? Because in 1999, before coming to The New York Times, I was briefly paid to serve on an Enron advisory board.

Never mind that, scrupulously following the Times conflict of interest rules, I resigned from that board as soon as I agreed to write for this newspaper — making me much more fastidious than, say, William Kristol, who served on that same board while editing The Weekly Standard. Never mind that I disclosed that past connection a year ago, the first time I wrote about Enron in this column — and also disclosed it the one time I mentioned Enron before, in a Fortune column. Never mind that the compensation I received per day was actually somewhat less than other companies were paying me at the time for speeches on world economic issues.

And never mind that when I started writing in this column about issues of concern to Enron — in particular, criticizing the role that market manipulation by energy companies played in the California power crisis — my position was not at all what the company wanted to hear. (Compare this with the board member Lawrence Kudlow, a commentator for National Review and CNBC. He wrote vehemently in favor of the Cheney energy plan — and has called this the "Clinton-Levitt recession," blaming Arthur Levitt, the former Securities and Exchange Commission chairman, who tried to fight the accounting laxity that made Enron possible.)

Yet reading those attacks, you would think that I was a major- league white-collar criminal.

It's tempting to take this vendetta as a personal compliment: Some people are so worried about the effect of my writing that they will try anything to get me off this page. But actually it was part of a broader effort by conservatives to sling Enron muck toward their left, hoping that some of it would stick.

A few days ago Tim Noah published a very funny piece in Slate about this effort, titled "Blaming liberalism for Enron." (Full disclosure: I used to write a column for Slate — and Slate is owned by Microsoft. So I guess that makes me a Bill Gates crony. I even shook his hand once.) It describes the strategies conservative pundits have used to shift the blame for the Enron scandal onto the other side of the political spectrum.

Among the ploys: Enron was in favor of the Kyoto treaty, because it thought it could make money trading emission permits; see, environmentalism is the villain. Or how about this: Enron made money by exploiting the quirks of electricity markets that had been only partly deregulated; see, regulation is the villain.

And, of course — you knew this was coming — it's all a reflection of Clinton-era moral decline.

Traditionally, as we all know, Texas businessmen and politicians were models of probity; they never cooked their books or engaged in mutual back- scratching.

One doubts that the people putting out this stuff really expect to convince anyone. But they do hope to muddy the waters. If they can get a little bit of Enron dirt on everyone — the Clinton administration, environmentalists, liberal columnists — the stain on people and ideas they support will be less noticeable. Why is Enron a problem for conservatives? Even if the Bush administration turns out to be squeaky clean, which we'll never know unless it starts to be more forthcoming, the scandal threatens perceptions that the right has spent decades creating.

After all that effort to discredit concerns about the gap between haves and have-nots as obsolete "class warfare," along comes a real-life story that reads like a leftist morality play: wealthy executives make off with millions while ordinary workers lose their jobs and their life savings. After all that effort to convince people that the private sector can police itself, the most admired company in America turns out to have been a giant Ponzi scheme — and the most respected accounting firm turns out to have been an accomplice. You might think that the shock of the Enron scandal — and it is shocking, even to us hardened cynics — would make some conservatives reconsider their beliefs. But the die- hards prefer to sling muck at liberals, hoping it will stick.

Sorry, guys; I'm clean. The muck stops here.

Big Steel Begs

New York Times – by Leslie Wayne – January 22, 2002

As one industry after another troops to Washington to ask for handouts, Thomas J. Usher, the chief executive of the U.S. Steel Corporation, has an offer he feels the Bush administration cannot refuse. He wants $12 billion in government aid to pay for employee retirement benefits that are now the obligation of the steel industry. After that, he wants antitrust clearance to allow U.S. Steel to acquire a raft of steel makers, for practically no cash, giving his company a near monopoly among old-line steel makers. There's more. He wants the government to impose tariffs on imported steel of up to 40 percent, to protect U.S. Steel and others — tariffs that could raise the price of every refrigerator and automobile sold in America and that could threaten thousands of jobs in steel-using companies.

Finally, he wants it done soon — in the next few months, he says — to prevent the domestic steel industry from collapsing.

"Although my proposal is ugly," said Mr. Usher, who has been rallying the industry and its unions behind his plan, "it's not as ugly as liquidating some of these steel companies and putting 20,000 or 60,000 steelworkers and their families on the street without health care or pension plans."

With some, but not all, of the domestic steel industry reeling, Mr. Usher and platoons of steel executives and union officials have been meeting with the White House to press their case. Aspects of his proposal are so audacious that even some within his industry — mainly the Nucor Corporation, a mini-mill steel maker — have taken out newspaper advertisements denouncing some elements as "corporate welfare." Still, Mr. Usher has been given an open door at the highest levels of the Bush administration, which has been surprisingly sympathetic to the pleas of Big Steel.

"Inside the administration, this issue has gotten more high-level attention from the cabinet than any other on the economic front," said Grant D. Aldonas, under secretary of commerce for international trade. "There's lots of intense review of the numbers the industry has put forward, and we are trying to get a bottom-line number on what the cost to the taxpayer would be…"

Pension Funds to Apply Reform Pressure

The Wall Street Journal – by Mitchel Benson – January 17, 2002

SACRAMENTO, Calif. -- Two of the nation's largest pension funds could adopt tougher corporate-governance policies to protect company employees and their retirement plans from future debacles such as Enron's, under changes proposed Tuesday by state Controller Kathleen Connell.

Ms. Connell made her proposal Tuesday in letters to the lead counsels of the California Public Employees Retirement and California State Teachers Retirement funds. Ms. Connell is a member of each of the funds' governing boards. Calpers is the nation's largest pension fund, and the teacher's fund is the nation's third-largest.

Calpers spokeswoman Patricia Macht says the board "is obviously concerned about this issue," and that Ms. Connell's recommendations "will be taken under advisement and will be discussed when the full board meets next on this issue."

In her letter to pension fund officials, Ms. Connell recommended four specific changes to each fund's corporate-governance policy. As proposed, they would apply to any publicly traded company in which Calpers or the teachers fund "holds a significant equity stake," and require those companies to "adhere to higher standards of protection for employees' defined contribution plans." Ms. Connell didn't quantify what would constitute a "significant" equity stake. The changes are:

Employees would not be required to invest in their company's defined contribution retirement savings program.

For those employees who choose to do so, and where the company matches a percentage of employee contributions, the employees would have the option to receive the match in a form other than the company's stock.

Again, for employees who choose to participate in their company's defined contribution retirement savings program, no more than 10% of the employee's savings may be invested in the company's stock.

Within the bounds of federal rules and regulations, employees who choose to invest in company stock through a defined contribution program will always have the ability to liquidate that stock.

Ms. Connell and Ms. Macht were unaware of any pension funds with such a corporate-governance policy today.

But, Ms. Connell points out, the two California-based funds represent combined assets of more than $280 billion. "Surely," she said, "with that kind of clout, we are clearly the elephant in the closet here. If we do it, I think we can get pension plans across this country to do it."

In her letter, Ms. Connell asked the lead counsels of the two pension funds -- general counsel Kayla Gillan at Calpers and chief counsel Christopher Waddell at the teacher's fund -- to survey their respective top 20 publicly traded stock holdings and report which companies, if any, currently adhere to her four proposed policy changes.

"Enron is only the tip of the iceberg here," says Ms. Connell.

"What's happening with Enron is not specific to Enron, with respect to investing in these defined contribution plans. I'm concerned with a domino effect if other major Fortune 500 companies begin to have a devaluation of their assets in a falling economy."

Fred Main, senior vice president and general counsel of the California Chamber of Commerce, says "it's certainly appropriate for" the pension funds to have such concerns, but he said a quick review of Ms. Connell's recommendations makes him think "they may want to be tweaked a little bit." For example, limiting an employee's retirement-investment savings to 10% of the company's stock "may be a little low as an arbitrary number," Mr. Main said. "You may not want 100%, but 10% is a fairly modest amount."

Mr. Main said he believes "there will be sympathy for" Ms. Connell's proposal among the pension fund boards, but that it's too soon to say whether they'll adopt them. Also, the state chamber's president, Allan Zaremberg, suggests that the state pension funds might want to wait until the federal government addresses these questions "on a national basis, so we can have uniform rules throughout the country."

Buying Access

Employee Advocate – – January 13, 2002

There certainly was a lot of whining in the article “Easley backers: Where's our guy?” (The Charlotte Observer). It appears that some who made campaign contributions to North Carolina Governor Easley looked upon it as an “investment,” and are looking to make a return on it.

Governor Easley has been accused of being “aloof and unresponsive.”

Doesn’t he know that when a big contributor calls that he should fall all over himself, and give them anything that they want? Kenneth Lay would never have gotten out of Texas if those he gave money to were aloof and unresponsive!

Governor Easley had been accused of not returning phone calls to acknowledge past support while helping ensure it in the future.

“And, while you are on the line, governor, I do need a little favor (to ensure support in the future).”

"There are many Democrats across the state who are disappointed with the governor's lack of attention to the people who were responsible for him being where he is."

Excuse us, but we thought that it was the voters who were responsible for getting Governor Easley where he is! If all the credit goes to the palm greasers, we can dispense with the election process.

"The people feel cheated by Mike Easley. He got their money and then he left. He stopped being with the people."

Cheated? Did Governor Easley sign a contract to give contributors specific remuneration if he was elected?

Got the money and left? Were these contributors supposed to own the governor if he won the election? Was he not free to “go.”

Some are whining because the governor is not at their beck and call. Some bluntly say that they want access.

Is not seeing the supported candidate getting elected reward enough?

That was what the contribution was for, wasn’t it?

Of course, if the contributions were solely to gain political access, and possible appointments, that is another matter.

The Enron debacle all started with political favors garnered from the governor of Texas. There also appears to be some high expectations in North Carolina.

Easley backers: Where's our guy?

The Charlotte Observer – by Jim Morrill – January 13, 2002

As he begins his second year as North Carolina's governor, Democrat Mike Easley faces big challenges from a declining economy and looming budget deficit.

He also faces political challenges, and not just with Republicans.

Some Democratic supporters in Mecklenburg County and elsewhere say they've found Easley aloof and unresponsive. They complain that he often fails to make simple gestures, such as returning a phone call, that acknowledge past support while helping ensure it in the future.

"There are many Democrats across the state who are disappointed with the governor's lack of attention to the people who were responsible for him being where he is," says Gary Shipman, chairman of the New Hanover County Democratic Party, who has known Easley for 20 years.

Some are more blunt.

"The people feel cheated by Mike Easley," says former Mecklenburg party chairman Cameron Harris, a top Easley fund-raiser. "He got their money and then he left. He stopped being with the people."

Easley was unavailable for comment. Spokesman Fred Hartman downplayed the criticism.

"I haven't heard any of these complaints," Hartman says. "I haven't heard anything but praise for the governor's efforts."

Any loss of favor among Democratic activists could not only dampen enthusiasm for a possible 2004 re-election bid but cost Easley political capital he needs to push programs and shape policy. In his first year, he found himself confronted by a huge fiscal crisis. Budget woes that kept the General Assembly in town for more than 10 months also tied Easley down.

"All of us spent a good bit more time working on issues all year long than we did mending fences back home," says House Speaker Jim Black, D-Mecklenburg. "He's been attentive to the issues the state has had to deal with."

Among some Democrats, Easley suffers in comparison with four-term Gov. Jim Hunt, who famously enjoyed the job's political side.

"What we're dealing with is a governor whose style is dramatically different from what we've been used to for 16 of the last 24 years," says Charlotte Democrat Jim Babb. "Jim was a very responsive guy. A lot of us are going to have to make that adjustment."

The criticism isn't new. In 2000, Democratic critics complained that Easley, then attorney general, wasn't a team player. Much of the party establishment, including African American leaders and the state teachers association, sided with his rival, Lt. Gov. Dennis Wicker.

But Easley, an energetic and gifted campaigner, won the party primary easily and went on to defeat Republican Richard Vinroot. Despite last year's budget problems and billion-dollar tax hike, he appears to remain popular with voters. One statewide poll last October showed him with a 3-to-1 approval rating.

But there are cracks.

Charlotte City Council member Patrick Cannon was an early Easley supporter, bucking other black leaders who backed Wicker. He says he invited Easley to a church dedication last spring and the governor agreed to attend. Without notifying Cannon, Easley tried to send a stand-in.

Cannon said he called Easley to complain. The governor has never called back.

"I as one will not be on the same bandwagon" in 2004, says Cannon, now mayor pro tem.

Council member James Mitchell, another early supporter, says he's heard virtually nothing from Easley since his election.

"Folks work for you in the trenches, you reward them at a minimum with a phone call and letter with two famous words: `Thank you,'" Mitchell says. "And that has not happened."

Judy Harrison Barry, a Charlotte activist and longtime Easley fund-raiser, describes him as "basically an invisible governor."

"He's more controlled by a segment of his donors and less attentive to his grassroots supporters, who literally got out the vote for him and got him elected," she says. Dampened support in Mecklenburg could hurt Easley. In the 2000 election he took 48 percent of the county's vote against Vinroot, a former Charlotte mayor who is expected to run again in 2004.

Easley has named more than 40 Mecklenburg residents to state boards. Some complaints could be ascribed to bruised egos or sour grapes from people who didn't get appointments they may have expected. But some Democrats say there's more to it.

"I don't think it's sour grapes," says Shipman, the New Hanover chairman. "It's just genuine concern that the citizens of this state have access to the highest elected official in North Carolina because what he does matters to us.

"And what we like to feel is, what we do matters to him."

Mark Johnson contributed to this article.

Deals With Taliban? – Transcripts – January 13, 2002


Explosive New Book Published in France Alleges that U.S. Was in Negotiations to Do a Deal with Taliban

Aired January 8, 2002 - 07:34 ET

PAULA ZAHN, CNN ANCHOR: Time to check in with ambassador-in-residence, Richard Butler, this morning. An explosive new book published in France alleges that the United States was in negotiations to do a deal with the Taliban for an oil pipeline in Afghanistan.

Joining us right now is Richard Butler to shed some light on this new book. He is the former chief U.N. weapons inspector. He is now on the Council on Foreign Relations and our own ambassador-in- residence -- good morning.


ZAHN: Boy, if any of these charges are true...


ZAHN: ... this...


ZAHN: ... is really big news.

BUTLER: I agree.

ZAHN: Start off with what your understanding is of what is in this book -- the most explosive charge.

BUTLER: The most explosive charge, Paula, is that the Bush administration -- the present one, just shortly after assuming office slowed down FBI investigations of al Qaeda and terrorism in Afghanistan in order to do a deal with the Taliban on oil -- an oil pipeline across Afghanistan.

ZAHN: And this book points out that the FBI's deputy director, John O'Neill, actually resigned because he felt the U.S. administration was obstructing...

BUTLER: A proper...

ZAHN: ... the prosecution of terrorism.

BUTLER: Yes, yes, a proper intelligence investigation of terrorism. Now, you said if, and I affirmed that in responding to you. We have to be careful here. These are allegations. They're worth airing and talking about, because of their gravity. We don't know if they are correct. But I believe they should be investigated, because Central Asian oil, as we were discussing yesterday, is potentially so important. And all prior attempts to have a pipeline had to be done through Russia. It had to be negotiated with Russia.

Now, if there is to be a pipeline through Afghanistan, obviating the need to deal with Russia, it would also cost less than half of what a pipeline through Russia would cost. So financially and politically, there's a big prize to be had. A pipeline through Afghanistan down to the Pakistan coast would bring out that Central Asian oil easier and more cheaply.

ZAHN: (UNINTELLIGIBLE) as you spoke about this yesterday, we almost immediately got a call from "The New York Times."

BUTLER: Right.

ZAHN: They want you to write an op-ed piece on this over the weekend.

BUTLER: Right, and which I will do.

ZAHN: But let's come back to this whole issue of what John O'Neill, this FBI agent...

BUTLER: Right.

ZAHN: ... apparently told the authors of this book. He is alleging that -- what -- the U.S. government was trying to protect U.S. oil interests? And at the same time, shut off the investigation of terrorism to allow for that to happen?

BUTLER: That's the allegation that instead of prosecuting properly an investigation of terrorism, which has its home in Afghanistan as we now know, or one of its main homes, that was shut down or slowed down in order to pursue oil interests with the Taliban. The people who we have now bombed out of existence, and this not many months ago. The book says that the negotiators said to the Taliban, you have a choice. You have a carpet of gold, meaning an oil deal, or a carpet of bombs. That's what the book alleges.

ZAHN: Well, I know you're going to be doing your own independent homework on this...


ZAHN: ... to see if you can confirm any of this. Let's move on to the whole issue of Iraq. The deputy defense secretary, Paul Wolfowitz, at one time was considered one of those voices within the administration...


ZAHN: ... that was pushing for moving beyond Afghanistan. He seemed to back off a little from that yesterday.


ZAHN: What do you read through the tea leaves here?

BUTLER: A very interesting report that the administration will focus on the Philippines, Yemen, Somalia as places where there are al Qaeda cells. But the word Iraq wasn't used by the man who was the chief hawk -- used as a, you know, as a future target. So what I interpret from that is this: That very likely our allies have been saying to us, this is too hard. This is really serious. Be careful. Saddam is essentially contained at the moment. Don't start, you know, a bigger problem either in the Arab world or in the coalition by going after him. And Wolfowitz, it seems, has probably accepted that.

ZAHN: A quick thought on the Israelis intercepting this latest armed shipment? What that means? You've got to do it in about 15 seconds.

BUTLER: It's extraordinarily serious, because it seems to have been tied to Yasser Arafat himself. It needs to be further investigated, but you know, Paula, the potentiality that this could once again prove an impediment to resume peace negotiations is really quite serious.

ZAHN: Thank you as usual for covering so much territory. Richard Butler, see you same time, same place tomorrow morning.


ZAHN: We appreciate your insights.


Taleban in Texas

BBC News – January 13, 2002

Note: This BBC article, published Thursday, December 4, 1997, lends plausibility to the above story.

A senior delegation from the Taleban movement in Afghanistan is in the United States for talks with an international energy company that wants to construct a gas pipeline from Turkmenistan across Afghanistan to Pakistan.

A spokesman for the company, Unocal, said the Taleban were expected to spend several days at the company's headquarters in Sugarland, Texas.

Unocal says it has agreements both with Turkmenistan to sell its gas and with Pakistan to buy it.

But, despite the civil war in Afghanistan, Unocal has been in competition with an Argentinian firm, Bridas, to actually construct the pipeline.

Last month, the Argentinian firm, Bridas, announced that it was close to signing a two-billion dollar deal to build the pipeline, which would carry gas 1,300 kilometres from Turkmenistan to Pakistan, across Afghanistan.

In May, Taleban-controlled radio in Kabul said a visiting delegation from an Argentinian company had announced that pipeline construction would start "soon".

The radio has reported several visits to Kabul by Unocal and Bridas company officials over the past few months.

A BBC regional correspondent says the proposal to build a pipeline across Afghanistan is part of an international scramble to profit from developing the rich energy resources of the Caspian Sea. With the various Afghan factions still at war, the project has looked from the outside distinctly unpromising.

Last month the Taleban Minister of Information and Culture, Amir Khan Muttaqi, said the Taleban had held talks with both American and Argentine-led consortia over transit rights but that no final agreement had yet been reached. He said an official team from Afghanistan, Pakistan and Turkmenistan should meet to ensure each country benefited from any deal.

However, Unocal clearly believes it is still in with a chance - to the extent that it has already begun training potential staff.

It has commissioned the University of Nebraska to teach Afghan men the technical skills needed for pipeline construction. Nearly 140 people were enrolled last month in Kandahar and Unocal also plans to hold training courses for women in administrative skills.

Although the Taleban authorities only allow women to work in the health sector, organisers of the training say they haven't so far raised any objections.

The BBC regional correspondent says the Afghan economy has been devastated by 20 years of civil war. A deal to go ahead with the pipeline project could give it a desperately-needed boost.

But peace must be established first -- and that for the moment still seems a distant prospect.

News - December 2001