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identical to the positions Enron advocated," – Rep. Henry Waxman
Bush Asks For Limit on Sept. 11 ProbesCNN.com – February 4, 2002
(1/29/02) - WASHINGTON - President Bush personally asked Senate Majority Leader Tom Daschle Tuesday to limit the congressional investigation into the events of September 11, congressional and White House sources told CNN.
The request was made at a private meeting with congressional leaders Tuesday morning. Sources said Bush initiated the conversation.
He asked that only the House and Senate intelligence committees look into the potential breakdowns among federal agencies that could have allowed the terrorist attacks to occur, rather than a broader inquiry that some lawmakers have proposed, the sources said.
Tuesday's discussion followed a rare call to Daschle from Vice President Dick Cheney last Friday to make the same request.
"The vice president expressed the concern that a review of what happened on September 11 would take resources and personnel away from the effort in the war on terrorism," Daschle told reporters. But, Daschle said, he has not agreed to limit the investigation.
"I acknowledged that concern, and it is for that reason that the Intelligence Committee is going to begin this effort, trying to limit the scope and the overall review of what happened," said Daschle, D-South Dakota.
"But clearly, I think the American people are entitled to know what happened and why," he said.
Cheney met last week in the Capitol with the chairmen of the House and Senate intelligence committees and, according to a spokesman for Senate Intelligence Chairman Bob Graham, D-Florida, "agreed to cooperate with their effort."
The heads of both intelligence committees have been meeting to map out a way to hold a bipartisan House-Senate investigation and hearings.
They were discussing how the inquiry would proceed, including what would be made public, what would remain classified, and how broad the probe would be.
Graham's spokesman said the committees will review intelligence matters only.
"How ill prepared were we and why? We are looking towards the possibility of addressing systemic problems through legislation," said spokesman Paul Anderson.
Some Democrats, such as Sens. Joseph Lieberman of Connecticut and Robert Torricelli of New Jersey, have been calling for a broad inquiry looking at various federal government agencies beyond the intelligence community.
"We do not meet our responsibilities to the American people if we do not take an honest look at the federal government and all of its agencies and let the country know what went wrong," Torricelli said.
"The best assurance that there's not another terrorist attack on the United States is not simply to hire more federal agents or spend more money. It's to take an honest look at what went wrong. Who or what failed? There's an explanation owed to the American people," he said.
Although the president and vice president told Daschle they were worried a wide-reaching inquiry could distract from the government's war on terrorism, privately Democrats questioned why the White House feared a broader investigation to determine possible culpability.
"We will take a look at the allocation of resources. Ten thousand federal agents -- where were they? How many assets were used, and what signals were missed?" a Democratic senator told CNN.
CNN Capitol Hill Producer Dana Bash and CNN Correspondents Jon Karl and John King contributed to this report.
Enron EnablersNew York Times – by Stephen Labaton – February 4, 2002
WASHINGTON -- Here we go again.
In an eerie flashback to the savings and loan scandal a decade ago, it turns out that some of the lawmakers and regulators investigating some of the causes behind the Enron-Arthur Andersen scandal — Democrats and Republicans alike — may need to look no further than a mirror.
Corporate law experts and investor advocates say some of the same people who are now professing moral outrage over Enron’s collapse and the $60 billion-plus loss to investors, and who are groping for legislative and regulatory fixes, actually helped create a legal climate for Enron and Arthur Andersen to push the envelope.
First, in 1995, the group of lawmakers and lawyers pushed successfully for legislation that shielded companies and their accountants from investor lawsuits. Then, five years later, the group succeeded in forcing regulators to dilute proposed restrictions on accountants. The group includes the current chairman of the Securities and Exchange Commission and three House and Senate committee chairmen now involved in the cleanup who have been among the accounting industry's largest campaign recipients. Now, some in the group, like Senator Christopher J. Dodd, Democrat of Connecticut, are having second thoughts about their opposition to the tougher accounting rules. Others, like Harvey L. Pitt, the chairman of the Securities and Exchange Commission, say they are beginning to rethink the wisdom of some provisions of the 1995 law.
The law they helped push through as part of Newt Gingrich's Contract With America, the Private Securities Litigation Reform Act of 1995, may prove to be an obstacle to investors as they try to recover tens of billions of dollars from Enron, which has filed for bankruptcy protection, as well as its auditors, lawyers, bankers, partners and others who may have been involved.
"It was the ultimate in special-interest legislation," said James D. Cox, a professor of corporate law and securities regulation at Duke University.
The law, passed after heavy lobbying from Andersen, the rest of the accounting industry and Silicon Valley, shielded executives from liability for making dubious financial projections. Since its passage, the high-technology bubble has burst and a record number of corporations have restated their earnings, costing investors billions. A study of all earnings restatements — by Andersen, no less — found that the largest number of restatements came from companies in California, followed by Texas, Massachusetts and New York.
The law's supporters justified it as a way to eliminate abusive and frivolous lawsuits, although consumer and investor advocates warned Congress that the measure went too far in insulating companies and their advisers and accountants. The law toughened the procedural rules for investors and gave executives legal immunity for making questionable financial projections. It generally eliminated the "joint and several" liability of accountants, which would make their deeper pockets available to compensate investors, particularly when companies have little or no money to satisfy damage claims.
"There were clearly abuses in litigation," said Barbara Roper, director of investor protection at the Consumer Federation of America. But that rhetoric "covered a much broader effort to protect the accountants in particular from liability." The 1995 law, she said, "made it not only possible but likely that something like Enron would occur."
Ms. Roper, along with other corporate law experts, says the law helped to create a culture that led to the Enron-Andersen scandal, and she has little hope that there will be significant reforms. "The people in Washington who made the Enron scandal happen clearly have a credibility problem as the people who will solve this crisis that they helped create," she said. "Most will not acknowledge the role they played in helping to bring it about."
Sarah Teslik, executive director of the Council of Institutional Investors, which represents many of the nation's largest shareholders like pension funds and labor organizations, agreed. "It is absolutely clear from their record that neither the regulators nor Congress has been looking out for investors," she said.
One central figure in getting the 1995 law adopted — over the objections of the S.E.C. and President Bill Clinton — was Mr. Pitt, the new S.E.C. chairman. As a top lawyer for the accounting industry, Mr. Pitt, in 1991 Senate testimony, laid out what became the first road map for parts of the 1995 law.
His agenda included getting rid of "frivolous litigation," but in the eyes of its critics it also took aim at many meritorious claims. It included tougher burdens of proof for investors, shorter statutes of limitation, limits on pretrial discovery, limits on liability for accountants, and rules forcing the loser to pay legal costs. Many experts say the fee-shifting rule in particular would have the effect of making it impossible for investors to recoup losses.
While he formally appeared at the 1991 hearing on behalf of the accounting industry, Mr. Pitt insisted that his agenda was not meant to benefit any particular clients but reflected "my own personal views."
"What you get from me here is my unvarnished view based on both my experience at the S.E.C. and my experience as a private practitioner," he testified, referring to his role as the agency's general counsel in the 1970's. "I would never compromise my own integrity by giving you a view that I think would benefit any individual client. And I would like the record to be clear on that."
In an interview last week, Mr. Pitt said he could not draw any conclusions about whether the 1995 legislation or other laws and regulations he worked on in the 1990's contributed to the climate that led to the failures at Enron and Andersen. But he said it certainly was now a fair issue to examine. He said the law "made sense when it was enacted" but could now use some re-examination.
"I think, in light of Enron, no issues and no potential solutions are off the table," he said, including the possibility that the law "may need rethinking."
"I for one am sufficiently concerned about the things that have occurred and am desirous of getting some effective solutions that I am not willing to exclude any possibility," Mr. Pitt added
"To me, the important thing is to make sure that if investors have been defrauded or taken advantage of, that they have a method of being compensated for illegal acts," he said. Following many Democratic and Republican predecessors, he said that lawsuits by investors "play a vital role" in augmenting enforcement efforts of the commission.
The accounting industry's strong Congressional supporters who wrote the 1995 law included three lawmakers who have now emerged in central roles in investigating Enron and proposing possible new legislation.
One is Representative Billy Tauzin, the Louisiana Republican who now heads the House Commerce Committee and has excoriated Enron and Andersen. Over the years, Mr. Tauzin has been the largest recipient in Congress of Andersen donations, receiving $57,000 since 1989, and, all told, his campaigns have received more than $289,000 from the accounting industry, according to the Center for Responsive Politics. He declined to comment.
Another is Representative Michael Oxley, the Ohio Republican who heads the House Financial Services Committee and will lead the questioning of Kenneth L. Lay, Enron's former chairman and chief executive, if he fulfills his pledge to appear tomorrow before that committee. Mr. Oxley was also heavily involved in pushing the 1995 act.
Peggy Peterson, a spokeswoman for Mr. Oxley, said the 1995 legislation had achieved its purpose of reducing "frivolous litigation," noting that the number of investor cases has not declined in recent years. But Professor Cox and other experts say that the number of cases filed is an inadequate measure, and one can just as easily conclude that "a lot of meritorious cases that should have gone forward haven't, particularly in light of the speculative bubble and tremendous number of earnings restatements."
Mr. Dodd, chairman of the Senate banking subcommittee on financial institutions, was a chief sponsor of the 1995 measure. Mr. Dodd, perhaps the accounting industry's closest friend in Congress, went so far as to lobby House members personally to approve the legislation over President Clinton's veto. What made his campaign so politically fascinating was that when he broke ranks with the White House, he was chairman of the Democratic National Committee.
Last month, Mr. Dodd was among the first lawmakers to say he would introduce legislation "that would address longstanding problems in the accounting industry."
Mr. Dodd's campaigns have received more than $54,000 from Andersen, second in the Senate to Phil Gramm, the Texas Republican and another supporter of the accounting industry, who has received more than $76,000 from accounting firms.
Mr. Dodd said last week that "as a general proposition" Congress ought to re-examine the 1995 legislation as well as other rules in light of Enron, but that he also thought the 1995 law had done more good than harm.
"If the point is to blame what happened on this law, it is totally misplaced," he said. "The goal of the bill was to deter frivolous lawsuits — not lawsuits, but frivolous lawsuits. And our goal was to not hold one guy totally responsible for something that he may be only marginally responsible for."
He also attributed the sharp increase in corporate restatements and the sharp decline of Silicon Valley stocks to potential conflicts of interest at auditing firms that did accounting and consulting work for the same clients. "These guys are coming in one door with one agenda," he said, "and running into each other in the hallways."
A Scandal's Progeny
The roots of the current law can be found in the thick of the savings and loan scandal a decade ago. Then, a coterie of accounting lobbyists formed an alliance to head off efforts in Congress that would have made it easier for investors to sue what were then the Big Six (now Big Five) accounting firms.
The group was formed shortly after the Supreme Court handed the S.E.C. and the Justice Department a surprise defeat, closing the court door to investors who said they had been the victims of securities fraud by imposing sharp time limits on such suits. The 5-to-4 decision in Lampf v. Gilbertson immediately raised concern among some lawmakers, who feared it would enable savings and loan operators like Charles H. Keating Jr., who operated one of largest failed savings institutions, to get investors' lawsuits against them dismissed.
Investor advocates and plaintiffs' lawyers mounted an effort on Capitol Hill, led by Senator Richard H. Bryan, Democrat of Nevada, to adopt legislation overturning the Lampf decision, but the accounting group managed to water down that effort.
Despite its victory, the accounting industry was hit hard by the fallout from the savings and loan scandal. The Big Six were forced to pay more than $1 billion in damages to the government from 1992 to 1994 for their role in advising corrupt and mismanaged savings associations.
But the small accounting lobbying group grew in size, sophistication and influence and completely overcame the industry's tarnished image. By 1993, according to records at the Federal Election Commission, the industry's main political action committee was helping to finance more than 300 races in Congress. Each of the Big Six also contributed more than $2 million to finance lobbying for more limits on lawsuits.
Its lobbying sophistication is evident from internal records that show the group kept comprehensive reports on most lawmakers, including everything from the mundane to the significant. The reports described the lawmakers' key aides and outside advisers, influential constituents and local news organizations, donations from rival political groups, and political vulnerabilities and pressure points. To assist in the lobbying effort, the group also turned occasionally to the lawmakers' personal accountants to pitch for greater restrictions on investor lawsuits.
By 1995, the group had teamed up with interests from Silicon Valley, which as it grew richer was growing more influential. The group's agenda fit easily into the Gingrich revolution's mission of attacking lawyers and the legal system.
Abuses of the system had made investor lawsuits an easy political target, although critics believe Congress used the abuses as a pretext to shield accountants and companies to an unnecessary degree. Some lawyers, for instance, had filed suits with no evidence of wrongdoing.
"In fairness, this is not a Manichaean story where there is all good on one side or the other," said Joel Seligman, an expert on federal securities law and member of the professional ethics executive committee of the American Association of Certified Public Accountants. Still, Mr. Seligman said the combination of a 1994 Supreme Court decision eliminating liability for accountants and lawyers for "aiding and abetting" securities fraud, along with the 1995 act, provided powerful disincentives for policing potential problems. "Together, what they did for the accounting profession is lower the probability of discovery, raise the probability of not being named a defendant, and increase the probability of the case being dismissed on a pretrial motion," he said.
Others, like Ms. Roper of the Consumer Federation, go further.
"Of course there were abuses in litigation," she said. "But the legislation that was approved was in no way about addressing abuses in litigation, but went much further." She said that if the lawmakers had been genuinely concerned about abuses, Congress could, for instance, have extended, not restricted, the statute of limitations to give lawyers more time to do more thorough investigations before filing lawsuits.
The bill passed the House on March 8, 1995, by a vote of 325 to 99. Only a day earlier, Deloitte & Touche was hit with an $81 million verdict in a shareholder class-action lawsuit that had accused it of malpractice in the audit of Koger Properties, which had collapsed a year earlier.
In the final days of the 1995 session, the Senate also passed the measure, not knowing what the president would do. Mr. Clinton decided at the last minute to veto it, complaining that the standards it set for filling a complaint would be too onerous on investors. But he did little lobbying to prevent an override. On Dec. 22, 1995, Congress voted for the first time to override a Clinton veto.
Changing With the Times?
It is difficult to predict how lawmakers' decisions over the last decade will now affect the thinking on Capitol Hill.
"They are unapologetic," Ms. Roper said, "about their role in writing the Private Securities Litigation Reform Act, unwilling to acknowledge the degree to which they created the environment that made Enron possible, and as a result they are unconvincing reformers."
Arthur Levitt, a former S.E.C. chairman, said "it is appalling" that the clout of the accounting industry may yet keep Congress from adopting meaningful laws.
"The way this may play out is that you will see a wad of bills proposed," he said. "The ones that may have some traction are the ones that don't do much, but allow the members to say they did something." Ms. Teslik, of the investors group, said it was difficult to forget that "this is the same Congress that said no to Arthur Levitt's reforms."
"If you judge them by their past actions, they have not been looking out for investors," she said. She is concerned that Congress "may try to solve profound problems of auditor independence and corporate governance with Band-Aids."
But Ms. Roper said she had hope that Congress could be moved to adopt meaningful change, just as the savings and loan scandal turned Senator John McCain, Republican of Arizona, into a supporter of campaign finance reform after he was reprimanded for pressuring regulators to help a contributor, Mr. Keating.
"The members certainly have something to prove — that the millions of dollars in contributions from the industry hasn't bought them off," she said.
Bush to Dip Into Social Security, MedicareEmployee Advocate – DukeEmployees.com - February 3, 2002
Today the Washington Post reported that President Bush intends to dip into Social Security and Medicare funds. It was only last year that he promised not to do that!
Many, including this site, warned that if the Bush tax cuts were implemented that Social Security and Medicare would suffer. Mr. Bush laughed it off and rammed the legislation through Congress.
What is so bad is that it was not even an across the board tax cut. The benefits were heavily skewed toward the wealthy. Things are shaping up to where the elderly, on pensions, will pay the price for more wealth being lavished upon the already wealthy!
Would Mr. Bush have kept his word about not dipping into these funds if he had said: “Read my lips: No Social Security and Medicare dipping”? Whoops…wrong Bush.
Would he have kept his word if he had said: “Not over my dead body will Social Security and Medicare be dipped into”? Or, does slipping “not” into the statement nullify it?
Americans will also suffer because of cuts in other areas, such as Highway and environmental spending.
When President Bush came into office the budget surplus collapsed faster than Enron!
To read our comments of March 2001, click the link below:
Bush’s Ace in the HoleThe Daily Brew – www.thedailybrew.com - February 3, 2002
(1/31/02) - Enron might be getting all the press, but there is another Congressional investigation revving up that promises to be far more treacherous for the Bush Administration. Over the course of the past several weeks, heads of both the House and Senate intelligence committees have been meeting to plan a bipartisan House-Senate investigation into the events of September 11. While revelations from the Enron probe could be embarrassing to the White House, revelations concerning the terrorist attack could prove to be devastating.
Thanks to the saturation coverage by the corporate media, the public is already well versed in the basic facts likely to be uncovered in the various Enron hearings. Will anyone really be surprised to learn that Enron executives had unprecedented access to White House officials as they formulated their energy plan? Will anyone be shocked if it turns out that the energy plan was heavily tilted towards the interests of corporate energy concerns, or that it favored the unregulated markets that made energy companies rich over the public power that kept the lights on in LA, while blackouts rolled across the rest of California?
The fact is, the Enron cat is already out of the bag. The public already understands that the Bush administration was letting the crooks at Enron write federal energy policy, right up until the time they ran Enron into the ground. The public also understands that when Enron's own criminal conduct eventually caught up to it, the Bush administration realized their good friends had become toxic waste, cut their ties, and let the implosion run its course. Given what is already known, the Enron hearings aren't likely to cause any damage to the Bush administration that hasn't already happened. So why are Bush and Cheney both so eager to fight the lawsuit looming with the GAO, seeking records of their contacts with Enron?
It can't be because they perceive some political benefit. They read the polls. They understand that the American public believes they are hiding something. They know that the longer they fight to keep their records secret, the more guilty they look. They understand that in the long run, the "principle" they are pushing on the Sunday talk shows; that congressional oversight is an unwarranted intrusion into their right to make public policy unfettered by any accountability to the public, isn't going to hold water. So why is the White House so willing to take the slings and arrows for Enron, when the damage from the scandal has already been done?
Perhaps they are simply laying the groundwork for fighting off a larger scandal.
The American public remains blissfully unaware the Bush administration's policies concerning Afghanistan and Osama bin Laden just prior to September 11. Few Americans understand the organizational effort to fight Osama bin Laden and his Al Queda network that was put in place under Clinton, and how changes by the incoming Bush administration impacted that effort. At the same time, a series of very serious allegations concerning changes to these policies have been widely reported in Europe. With a few exceptions, the US corporate media has so far provided very little coverage of these reports. Hearings into these events could change that coverage dramatically.
The reports indicate that, prior to September 11, the Bush administration was eager to do business with the Taliban. Specifically, the Bush administration wanted to see an oil pipeline built across Afghanistan, unlocking the vast oil and gas reserves surrounding the Caspian Sea. In their zeal to open these reserves, reports indicate that the Bush administration impeded the ongoing FBI manhunt for Osama bin Laden, who the US had been aggressively targeting in the wake of the attacks on the USS Cole. The reports further indicate that just prior to the attacks, the Taliban were given an ultimatum; the US was either going to give them a "carpet of gold, or a carpet of bombs." Shortly thereafter, the talks are said to have broken down, and the events of September 11 unfolded.
If these allegations are aired in Congressional hearings on CSPAN, the Bush administration will have a much bigger scandal on its hands than Enron. If these allegations are proven to be true, the Bush energy policy was much more than crony capitalism and a massive payback to the multi-national corporations that paid for Bush's ascension to the White House. If true, these allegations would show that Bush's energy policy led directly and predictably to the most devastating terrorist attack in history, an attack that caused billions in property damage and cost thousands of innocent Americans their lives.
So when President Bush personally asked Senate Majority Leader Tom Daschle Tuesday to limit the congressional investigation into the events of September 11, there was a lot more at stake than a corrupt company that ripped off its employees. And when Senator Robert Torricelli of New Jersey called for a broad and far reaching investigation, saying "We do not meet our responsibilities to the American people if we do not take an honest look at the federal government and all of its agencies and let the country know what went wrong. The best assurance that there's not another terrorist attack on the United States is not simply to hire more federal agents or spend more money. It's to take an honest look at what went wrong. Who or what failed? There's an explanation owed to the American people;" the stakes became astronomical.
In the end, the Bush administration's decision to fight the GAO ensures that the limits of Congress' power to investigate both the Enron debacle, and the events leading up to September 11, will be decided by the Supreme Court. At a minimum, this will buy the Bush administration time. It also means that the ultimate arbiters of what information, if any, the Bush administration must make public will be decided by the same five jurists who put Bush in the White House, holding that the very act of counting American ballots would have caused Bush "irreparable harm." Perhaps this Court, the Bush administration's ace in the hole, is what makes them think the fight is worth it.
Employee Advocate note: This story is unfolding slowly. For a earlier reports, click the links below:
Answer the Question, CheneyThe Charlotte Observer – February 2, 2002
(2/1/02) - Vice President Dick Cheney has been adamant on the talk shows: The Bush administration won't tell congressional investigators who met with an energy policy task force he chaired or what advice they gave. It's a constitutional matter, he says -- a question of preserving the processes of the executive branch against meddling by Congress. "We (the executive branch) are weaker today as an institution because of the unwise compromises that have been made over the last 30 to 35 years," he said in a television interview. The General Accounting Office has been trying for nine months to get the information. The GAO is the investigative division of Congress, and is charged with monitoring the costs and procedures of the executive branch.
Investigators want to know what influence campaign contributors and energy lobbyists may have had on the administration's energy policy. The question has acquired new focus with the collapse of Enron Corp., the Houston-based energy trader with political and financial ties to the administration.
Administration stonewalling has produced an impasse that appears to be headed to court. The GAO announced Wednesday that it will sue the White House. The vice president has not so far changed his earlier declaration that the White House is willing to let the matter "be resolved in court."
The administration's posture is odd. The vice president argues, in effect, that the executive branch means to preserve its independence by inviting the judicial branch to define its prerogatives.
He skates past another major question: Why should the public not be permitted to know the identity of energy advisors or the nature of their advice? And he appears untroubled by the fact that the administration's behavior in this matter inescapably suggests it has something to hide.
In fact, according to one national poll, 67 percent of Americans believe the administration is lying or hiding something about its relationship with Enron. This is not good for the administration, and it's not good for the country. Vice President Cheney is managing to make the Bush White House look venal and dim-witted all at the same time.
The solution? Abide by first principles. The important issue here is the integrity of the White House's relationship with the people of the United States, not turf warfare between the administration and Congress. Mr. Cheney and the president should long ago have done the right thing by releasing the disputed information to the public. They could still do so and maintain the posture, if it really matters terribly, of not having knuckled under to congressional investigators.
Fairly or unfairly, their professional backgrounds are heavy baggage when Mr. Bush and Mr. Cheney come to energy issues in public policy. The appearances they're giving here are very bad.
Full disclosure is the appropriate remedy.
Bush's Enron Cuff LinksThe Progressive – by Matthew Rothschild – January 31, 2002
Pity George W.
His Enron cuff links are getting tighter and tighter on his wrist, and he can't get them off.
If he thought a pretzel was life-threatening, just wait for the constriction to come.
So far, Bush's attempts to slip out have not done him any good.
First, he tried to hide behind his mama's skirts, saying the last time he saw Ken Lay was at a fundraiser that Barbara had held.
Then he disingenuously said that Enron supported Ann Richards for governor against him, when, in fact, Enron had given more to Bush than to her.
Pretty soon, he's going to be tempted to say, "Who's Ken Lay? Never heard of the guy."
But that dog won't hunt. Enron and its chairman, Ken Lay, were Bush's biggest Presidential campaign contributors and spent lavishly on his inauguration. And cutesy letters from Bush to "Kenny Boy" have already surfaced.
The scandal is tightening around a number of other Bush Administration officials, as well, including Vice President Dick Cheney, who personally met with Lay while producing the energy policy for the Administration. Lay's staff met at least five other times with Cheney's energy panel, which just so happened to favor Enron in its final report.
"Numerous policies in the White House energy plan are virtually identical to the positions Enron advocated," said Representative Henry Waxman, Democrat of California, in a report that is available on his web site, which you can find by going to www.house.gov. "In total, there are at least seventeen policies in the white House energy plan that were advocated by Enron or that benefited Enron financially."
Karl Rove, Bush's Svengali, had more than $100,000 in Enron stock when he came to the White House. Thomas White, Secretary of the Army, is a former Enron Vice President, who owned more than $50 million in Enron stock, according to the Wall Street Journal.
Lawrence Lindsey, White House economic adviser, was a paid Enron consultant.
And Robert Zoellick, U.S. Trade Representative, was an Enron advisory board member.
Attorney General John Ashcroft had to recuse himself from the Justice Department's investigation of Enron because he received massive campaign contributions from that company.
Enron had the White House wired as no company before it, with the possible exception of United Fruit in Eisenhower's day.
Democrats also have Enron's imprints on them. Joe Lieberman, who is investigating Enron, enjoyed the company's largesse when it contributed to one of his groups, and his leading campaign contributor, Citigroup, is one of Enron's chief creditors.
Speaking of Citigroup, Robert Rubin, one of the heads of the company and a former Treasury Secretary under Bill Clinton, tried to throw his weight around by calling the Treasury Department to urge a bailout for Enron.
Let's not forget Republican Phil Gramm, either, who has hauled in $97,000 in campaign contributions from Enron since 1989, and whose wife, Wendy, is an Enron board member.
Couldn't have happened to a nicer bunch.
Now if Bush had more than garbanzo beans for brains, he might come to the rational conclusion that the Enron scandal proves we need more regulation of corporations. It was, after all, deregulation that let Enron hide a lot of its losses in shadowy companies, part of the alleged fraud it perpetrated on investors. (Enron had more than 700 subsidiaries in the Cayman islands.)
But no, Bush is still sticking to the old Republican script.
There he was in Springfield, Missouri, on January 14 saying, "The role of government is to create an environment in which people are willing to take risks, in which the entrepreneur is willing to expand through capital investment."
Note Bush's parched view of government--nothing there about establishing justice, ensuring domestic tranquility, promoting the general welfare, or securing the blessings of liberty. All government should do, according to Bush, other than fight the evil ones, is be a front man for Bush's favorite human being, the entrepreneur.
But also note the absurdity of the comment in the context of the Enron scandal. The government created an environment in which Ken Lay was willing to take risks, and look what happened.
On January 22, Bush mumbled about the need for government to do something to prevent future Enron debacles, but in the next breath he once again said the government should "not overregulate those who are trying to create work."
It takes a certain detachment to champion an ideology that is blowing up in your face.
Enron PollNew York Times – by R. Berke, J. Elder – January 27, 2002
Americans perceive Republicans as far more entangled in the Enron debacle than Democrats, and their suspicions are growing that the Bush administration is hiding something or lying about its own dealings with the Enron Corporation before the company filed for bankruptcy protection, the latest New York Times/CBS News Poll shows.
Even among Republicans, a majority said they believed that the administration had not been forthcoming about its dealings with Enron. That perception could pose a threat to Republican candidates in the midterm elections this year, and undermine the White House drive to portray the Enron collapse as affecting Republicans and Democrats equally.
In a demonstration of how the public's concerns have shifted in recent weeks, the economy has now supplanted battling terrorism — albeit by a slight margin — as the issue people want their elected officials to make a top priority. They fear that the budget deficit is too much of a burden for the nation, and 6 in 10 favor postponing the Bush tax cut rather than incurring a deficit.
President Bush's impressive approval rating of 82 percent has not diminished since the terrorist attacks. As Mr. Bush prepares to deliver his first State of the Union address on Tuesday, neither party is seen as having an edge on keeping the country prosperous, improving education, balancing the federal budget or making the proper decisions about how to spend taxpayers' money.
Still, while Mr. Bush on Tuesday hopes to galvanize the public behind his economic prescriptions and his stewardship of the war, it is unmistakable from the survey that he must also contend with the twin political predicaments posed by Enron and the economy.
The White House has sought to portray the collapse of Enron as affecting business but not having political ramifications because the company was generous to Democrats as well as Republicans. But this poll shows, for the first time, that Americans associate Enron much more closely with Republicans.
In fact, Republican Congressional candidates begin this midterm election year with the albatross of being considered far more tied to Enron than their Democratic rivals. The poll's respondents were nearly five times as likely to say Enron executives had closer ties to Republicans than to Democrats.
Republicans were nearly twice as likely to say their own party's ties were closer to Enron than the Democratic Party's ties.
The nationwide telephone survey of 1,034 adults was taken Monday through Thursday. Most of the interviews were conducted before the Congressional hearings into Enron began on Thursday. About half of the respondents had been interviewed when Mr. Bush, in a sharp change in tone, expressed his outrage over Enron's conduct. The poll has a margin of sampling error of plus or minus three percentage points. In the last week alone, the portion of people who say they are paying attention to the Enron collapse has risen to three-fourths from two- thirds — and more people view it as a Republican problem. While a majority of Americans say the Bush administration is either hiding something or lying about Enron, people who have been paying very close attention to the corporation's unfolding collapse were even more likely to hold those views.
"In terms of campaign financing, Enron had closer ties to the Republicans," Charles Sarver, 29, a Republican who is a collections company manager in Lexington, Ky., said in a follow-up interview. "I don't feel, as far as we know now, that any political favors were given out."
But Mr. Sarver added: "There's always a chance in influencing which way a tax bill might go, for instance. It's, `Look, I'm going to make sure I take care of you, when it gets time for this bill, and you take care of me.' "
Roy Marshall, 58, an air-conditioning sales representative in Albany who is an independent, said: "I think the Bush administration knows more than they're telling, but I think all politicians do that. Are they lying flat out? I don't think so."
Americans said that big business wielded too much influence, not just with the Bush White House but also with members of Congress of both parties.
The accounting and other practices that contributed to Enron's fall were seen by respondents as not surprising in the business world. Seven in 10 said such practices were widespread in other large corporations; only 1 in 10 said Enron was an isolated case…
GAO Demands Cheney’s Secret DataAssociated Press – by Pete Yost - January 27, 2002
WASHINGTON -- Citing the Enron controversy, two lawmakers urged the chief of Congress' investigative arm Friday to take the Bush administration to court for refusing to reveal its contacts with the energy industry.
Comptroller General David Walker said he will decide next week whether to file suit in the 9-month-old dispute with Vice President Dick Cheney's task force that formulated a pro-industry national energy policy last May.
Such a lawsuit would be unprecedented for the General Accounting Office. Walker, the GAO's current head, said, "The principle involved here is transparency and accountability in government."
White House officials have said they might explore releasing the information to a legislative committee or lawmakers instead of the GAO. On Friday, spokeswoman Claire Buchan said: "We have always understood that this may well end up in court, and we're prepared to stand on an important constitutional principle."
Congressional Democrats John Dingell of Michigan and Henry Waxman of California have been demanding identities of business leaders and lobbyists who met with Cheney's task force as it developed the energy plan. In a letter to the GAO's Walker, they wrote: "The need to obtain the information we requested has only increased over time, particularly with recent questions concerning the influence of Enron."
"This is the first time with any administration that we have been totally denied access to information dealing with a task force of this type," Walker said.
"We're concerned about the use of this type of mechanism on a recurring basis as an attempt to avoid congressional oversight or GAO review."
The Cheney task force has told the GAO that the panel met nine times, and staffers also met with many others to gather data. Earlier this month, the White House said Enron representatives met six times on energy issues last year with Cheney or his aides.
Four senators, including Joseph Lieberman of Connecticut and Carl Levin of Michigan, who are spearheading a Senate probe of Enron, said this week that the GAO should press its long-standing requests for administration energy contacts.
White House spokesman Ari Fleischer said this week: "I've always indicated the administration will always work with Congress and continue to do so in a vein that is cooperative." But Fleischer said people "have a right to have a meeting where anything they say is not turned into a news release."
The Cheney panel announced a plan May 17 for expanding oil and gas drilling on public land and rejuvenating the nuclear power system.
There's No Positive SpinBusiness Week – by Howard Gleckman – January 26, 2002
Even after three decades in Washington, I occasionally hear something so stunningly wrongheaded that it takes my breath away. That's what happened on Jan. 6, when chief White House economic adviser Lawrence B. Lindsey called the Enron Corp. collapse a "tribute to American capitalism." And all this time I thought the demise of what was once the seventh-biggest company in the nation was a massive failure of our modern market economy.
For Lindsey, the great achievement of Enron's fall was that the government let it happen, despite the company's political connections. That's true as far as it goes. And it is nice to know that the U.S. isn't, say, Argentina, where a severe case of crony capitalism helped bring down the economy.
But Enron fell so far so fast that there was nothing its political patrons could do. Once it became clear that the company had repeatedly misstated earnings and, most important, that its employees' 401(k) investments had evaporated, Enron became radioactive. By the time Chairman Kenneth L. Lay called top Administration officials in October, their response was preordained. The man President George W. Bush used to call "Kenny Boy" wasn't going to get any help, despite years of heavy campaign contributions.
Lindsey may find it praiseworthy that Washington didn't throw together a last-minute bailout of Enron, but he ignores all that happened before Lay made his phone calls.
You can start in the '90s. That's when the Commodity Futures Trading Commission decided to let Enron and a handful of other companies run largely unregulated energy-trading businesses. Then, two years ago, Enron used its political clout to get Congress to exempt it from both CFTC and Securities & Exchange Commission regulation of what had become, in essence, a publicly traded hedge fund making its own highly speculative investments.
And, of course, there were the company's internal dealings. For at least four years, Enron misrepresented its earnings by $400 million or more. Top managers were selling chunks of company stock even as its employees were barred from doing so. And Enron's outside directors, the people charged with the responsibility to protect shareholders from the mistakes or avarice of management, seemed to have missed it all.
Capitalism works only when it is played on a level field. The essence of efficient markets, as Lindsey knows better than I, is transparency--the ability of every shareholder to know, more or less, what every other shareholder knows.
But modern American capitalism failed the owners of Enron. Not because the company failed--a basic tenet of capitalism is the freedom to succeed or flop. Rather, it failed because Enron management and its auditor, Arthur Andersen, didn't play by the rules that define a market economy. And they were allowed to get away with it for years.
The great tragedy is that if the system had worked as it should have, Enron would still be in business. Oh, it never would have seen its share price run up to $90. But neither would it have collapsed.
Had Andersen blown the whistle on shaky financial transactions early on, Enron would have been forced to keep its debt from spiraling out of control. Had its outside directors actually represented shareholders and demanded that management stop playing games with its books, Enron would be viable today. Had the government regulated Enron in the same way as other commodity exchanges, it would never have run up the liabilities it did.
In short, Enron would be a thriving--though retrenched--energy trading company instead of a carcass left to be picked over by government investigators and tort lawyers. Thousands of employees would still have their jobs. Their 401(k) plans would still have considerable value. And millions of investors would happily own a solid, if unspectacular, stock.
No one would ever have noticed if the auditors, outside directors, and regulators had done the right thing. It all would just have worked the way it was supposed to--and that would have been the real tribute to capitalism.