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Page   1 - Duke Energy Employee Advocate

Washington - Page 18

Leader of 9/11 Probe Resigns Suddenly

L. A. Times – by Greg Miller – May 2, 2002

Ex-CIA official was hired to investigate why spy agencies
failed to halt attacks. Some feared he would go easy on ex-employer.

(April 30 2002) - WASHINGTON - A congressional investigation of the intelligence failures surrounding the Sept. 11 terrorist attacks has been thrown off course by the sudden resignation of a former CIA official hired to lead the inquiry but criticized for being too cozy with his former employer.

L. Britt Snider, former inspector general at the CIA, resigned under pressure Friday, less than three months into a high-stakes probe designed to determine why the nation's spy agencies failed to pick up any warning of the attacks on the World Trade Center and Pentagon.

Snider's departure derails the inquiry at a time when investigators are already poring over piles of intelligence agency documents and planning a heavy summer schedule of congressional hearings. Snider's resignation throws that schedule into doubt and could be followed by additional departures, congressional sources said. Ranking members of the House and Senate Intelligence committees declined to comment on Snider's resignation, citing the confidentiality of personnel matters. Snider did not return calls to his Virginia residence. Word of his departure did not circulate through Washington until Monday.

But congressional sources confirmed that Snider, 57, was forced out amid growing concerns with his management of the investigation ranging from the tone of his leadership to his personnel decisions.

Several sources said Snider's resignation was sparked by troubling questions that surfaced in recent weeks about whether one or more of his hires lacked clearances to view classified material.

There were also complaints about Snider's perceived reluctance to cause trouble for his former colleagues at the CIA. One aide cited "concerns over whether or not he had the aggressiveness to get this thing done." Several Republicans had expressed such reservations about Snider before he was hired. But sources said their concern came to be shared more recently by Sen. Bob Graham (D-Fla.), chairman of the Senate Intelligence Committee, who had been Snider's key backer.

Several members expressed hope that disruption caused by Snider's departure would be minimal. "If the rest of the staff stays intact and they get a good leader to take over, it might not slow it down too much," said Sen. Jon Kyl (R-Ariz.). "I'm not particularly concerned that this is going to be a big issue."

For the moment, at least, Snider's top deputy, Rick Cinquegrana, has been tapped to lead the investigation. Cinquegrana is also an agency veteran, having worked under Snider as head of inspections at the CIA's inspector general's office. It was not clear whether Cinquegrana is seen as a potential permanent replacement.

Criticism of Snider was not unanimous, and some committee members voiced disappointment that his services had been lost.

"Britt is a fine man," said Rep. Jane Harman (D-Venice), a member of the House Select Committee on Intelligence. "I have high regard for him and believe he could have directed a very impressive project."

In some ways, Snider's brief tenure underscores the politically treacherous nature of the committee's task. Even among the four ranking members of the House and Senate committees, there is tension over how aggressively to pursue the inquiry.

Members agree the public deserves straight answers about intelligence failures, but are at odds over whether the inquiry should seek to place direct blame at a time when few in Washington are eager to be seen as unpatriotic.

"Members are trying to say, 'We've got to get to the bottom of what happened' while also saying, 'We don't want to make it into a witch hunt,' " said former U.S. diplomat L. Paul Bremmer, who led a previous probe of intelligence agencies after the bombing of U.S. embassies in East Africa. Those conflicting impulses, Bremmer said, "will be an inherent tension irrespective of who is the staff director."

Snider retired last year as CIA inspector general. He was introduced as staff director on Feb. 14 as members of the House and Senate Intelligence committees announced the creation of a joint panel to examine failures surrounding the attacks on the World Trade Center and Pentagon.

He had hired an investigative staff of 30, which has been gathering evidence and lining up interviews with officials at the CIA, FBI and other intelligence and law enforcement agencies.

The report, which members have said they hope to complete by year's end, could help shape the intelligence community for years to come. In fact, many in Washington see the investigation as equivalent to landmark probes launched after the Japanese attacked Pearl Harbor--an event that eventually led to the creation of the CIA itself.

Several GOP members, including Kyl and Sen. Richard C. Shelby (R-Ala.), the ranking Republican on the Senate committee, expressed doubts about Snider because of his close ties to CIA Director George J. Tenet. Snider had served as a special counsel to Tenet at the CIA, and was general counsel to the Senate Intelligence Committee when Tenet was its staff director in the late 1980s and early 1990s.

Energy Lobbying Findings

Associated Press – April 28, 2002

WASHINGTON -- In a memo to Vice President Dick Cheney two weeks before a major policy reversal, lobbyist and former Republican National Committee Chairman Haley Barbour urged the Bush White House to adopt a pro-industry stance on carbon dioxide emissions from coal-burning power plants.

"A moment of truth is arriving," Barbour wrote Cheney on March 1, 2001, in a two-page document on his lobbying firm letterhead that was copied to top White House officials and three Cabinet secretaries.

"The question is whether environmental policy still prevails over energy policy with Bush-Cheney, as it did with Clinton-Gore," Barbour stated. The Commerce Department released a copy of the memo Thursday in a court case brought by the conservative group Judicial Watch, which is suing the Bush administration for records about White House energy policy.

The memo was one of thousands of pages of documents released by the Commerce, Energy and Transportation departments.

Announcing a policy switch two weeks after Barbour's memo, Bush went back on a campaign promise to regulate carbon dioxide emissions.

White House spokesman Jimmy Orr said Bush was not unduly influenced by the energy industry.

In the memo, Barbour said he was "demurring" on the idea of whether regulating carbon dioxide was "eco-extremism."

But "we must ask, do environmental initiatives, which would greatly exacerbate the energy problems, trump good energy policy, which the country has lacked for eight years?" said the former RNC chairman.

Among Barbour's 50 lobbying clients at the time was an industry coalition, the Electric Reliability Coordinating Council.

Give Money, Write Policy

New York Times – by Don Van Natta Jr. – April 28, 2002

WASHINGTON, April 26 — In an e-mail message sent last year while the Bush administration was formulating a national energy policy, a senior Energy Department official posed this question to a lobbyist for a major natural gas interest: "If you were king, or II Duce, what would you include in a national energy policy, especially with respect to natural gas issues?"

The message was sent by Joseph Kelliher, who was a political appointee in the Energy Department. Last spring, Mr. Kelliher was a major contributor to Vice President Dick Cheney's energy task force.

Mr. Kelliher's invitation for input was seized by the lobbyist, Dana Contratto, who responded with an array of pro-industry proposals.

The e-mail exchange was released on Thursday night by the Energy Department in response to Freedom of Information Act lawsuits brought by Judicial Watch and the Natural Resources Defense Council. Both groups had sued the Bush administration for records about White House energy policy.

Jeanne Lopatto, a spokeswoman for the Energy Department, described Mr. Contratto as an expert on natural gas issues.

"He has a fine reputation for independent thinking," Ms. Lopatto said. "The administration had two basic choices on how to develop a national energy policy: it could close its doors and shut its ears and turn off its phones and write a national energy policy in isolation, or it could consult with experts, listen to the public and incorporate the good ideas and reject the bad ideas.

Mr. Contratto, a partner with the law and lobbying firm Crowell & Moring, suggested several new initiatives, including that the administration endorse an increase in the gas transmission operating pressures.

"With higher pressures, more gas moves," Mr. Contratto wrote in the March 22, 2001, message.

"Obviously, some pipelines could not handle such higher pressures, but new pipelines could be built to move more gas at such higher pressures."

Ms. Lopatto said that none of Mr. Contratto's suggestions were incorporated in the national energy report.

The memorandums with the reference to Mr. Kelliher's request for information had been released several weeks ago, but at that time Mr. Kelliher's invitation for suggestions had been whited out.

"Of course, I'm glad that the Energy Department corrected their previous error," said Sharon Buccino, a senior lawyer at the Natural Resources Defense Council. "I wish that they had done it right the first time, in compliance with the judge's order and before the Senate passed its energy bill."

Ms. Lopatto said Mr. Kelliher's e-mail messages "had been inadvertently redacted by the Justice Department."

A federal judge had ordered the Departments of Commerce, Energy and Transportation to release the documents earlier this year. The messages were part of the batch of 400 pages of documents that were released late Thursday by the Energy Department.

Bush Caters to Energy Industry

New York Times – by D. Van Natta, N. Banerjee – April 22, 2002

(4/21/02) - WASHINGTON, April 20 — By voting this week to block drilling in the Arctic National Wildlife Refuge, the Senate dealt a setback to the petroleum industry and to President Bush, who had made oil exploration in the refuge a cornerstone of his national energy policy.

But the defeat was hardly total. The oil and gas industries — indeed, the entire energy industry — have won an abundance of appointments and regulatory decisions made by Mr. Bush and his 15-month-old administration. For example, in the House energy bill passed last year, and the Senate bill still being debated, the energy industry stands to gain billions of dollars of tax credits and subsidies.

The Interior Department's Bureau of Land Management has begun opening public lands for oil and gas exploration. Last year, four million new acres were added for oil, gas and coal mining, up from 2.6 million acres in 2000, agency data shows.

And environmental groups are complaining that the Environmental Protection Agency is considering changing water pollution rules to make it easier for coal companies to mine for coal by removing whole mountaintops. Currently, the earth carved from mountains is defined as waste and cannot be dumped into streams and rivers. The environmental agency is considering changing the definition in a way that would allow coal companies to discard the mountaintop refuse into the water, defining it as allowable "fill."

One day after the release of the White House's national energy report last May, President Bush visited a Pennsylvania hydropower plant and vowed that his administration would quickly carry out the plan.

"I can assure the American people that mine is an administration that's not interested in gathering dust," Mr. Bush said.

That same day, Mr. Bush signed two executive orders that had been recommended by influential trade groups, the American Petroleum Institute and the American Gas Association. The orders were intended to speed the construction of new energy projects. Environmentalists and some Congressional Democrats criticized the president for what they described as allowing the industry to "hold his pen."

An administration official estimated at the time that 85 of the 105 energy proposals in the national energy policy could take effect without Congressional action.

Already, the administration has moved repeatedly to increase oil and gas production and roll back regulations put in place or strengthened during the Clinton administration.

Critics of the administration's energy policies say the White House is rewarding its campaign supporters.

"We cannot dig, drill and destroy our way to true energy independence," said Sharon Buccino, a senior lawyer at the Natural Resources Defense Council. "If the Bush administration truly had the good of us all in mind, they would get serious about fuel economy and efficiency.."

Scott McLellan, deputy White House press secretary, said the administration was determined to keep energy affordable and to protect the environment. "This is the first administration in decades to address the energy needs of every American in a comprehensive way with a comprehensive plan," he said.

Mr. Bush has named at least 30 former energy industry executives, lobbyists and lawyers to influential jobs in his administration. Some of them have helped the government carry out major parts of the energy policy without waiting for Congressional action.

Executives and lobbyists for the nation's energy industry have long argued that the Clinton administration had granted environmental groups far greater access when formulating energy policies. Now, they say, the pendulum has swung the other way, with the Bush administration developing a more balanced position that emphasizes increasing the output of oil, coal and power.

"The people running the United States government are from the energy industry," said Fredrick D. Palmer, executive vice president of external affairs for Peabody Energy, the world's largest coal company. "They understand it and they believe in energy supply."

More than any other part of the energy business, the coal industry seems to have fared best under the Bush administration. The industry provided critical support for Mr. Bush in traditionally Democratic states during the last election, most notably in West Virginia.

More than 50 percent of the nation's electricity is generated by coal-burning plants.

"For eight years, we had an administration that was actively antagonistic to coal and oil," said Rob Long, vice president for governmental affairs for the National Mining Association. "To have an administration that is even agnostic on fossil fuels is an improvement."

The Bush administration and Congressional energy bills plan to give the coal industry $3.37 billion in financing and tax incentives over the next 10 years to develop expensive, experimental technologies to burn coal more cleanly.

Environmentalists argue that clean-coal research is wasteful, citing recent reports by the General Accounting Office, the investigative arm of Congress, that say the existing Clean Coal Technology Program was badly mismanaged.

And regardless of how coal is burned, the industry's critics object to mining practices like mountaintop mining, used mainly in West Virginia. Environmentalists say mountaintop removal has despoiled 1,000 miles of streams.

William B. Raney, president of the West Virginia Coal Association, asserts that the state's water protection laws are the toughest in the country. But local environmentalists say the Bush administration, unlike the Clinton administration, has not rejected state regulations that weaken protection of the water system. Environmental groups are suing the Bush E.P.A. over the question.

The environmentalists say that the Bush E.P.A. is moving to change a rule in the Clean Water Act that would make it easier for coal companies to remove mountaintops. Currently, the earth carved from mountains is defined as waste and cannot be dumped into streams and rivers.

An agency spokesman, Joe Martyak, said no decisions had been made, so it was "premature" to judge the agency's actions.

A clear early victory for the fossil fuel industry came in March 2001, when President Bush decided not to impose new controls on emissions of carbon dioxide, a gas widely believed to cause global warming. He said he feared such limits would endanger economic growth.

The decision reversed his campaign pledge to set mandatory reduction targets for carbon dioxide. Energy lobbyists oppose mandatory regulation of carbon dioxide emissions.

The administration is now pushing ahead with its "Clear Skies" initiative aimed at reducing emissions of nitrogen oxides and sulfur dioxide, which are already regulated as pollutants, as well as mercury, which is not. It will not address carbon dioxide emissions. A bill offered by Senator Jim Jeffords of Vermont, an independent whose defection from the Republican Party handed control of the Senate to the Democrats, would regulate all four pollutants.

"We like the approach that they have proposed on the three-pollutant strategy," Bill Brier, vice president of communications of the Edison Electric Institute, a power industry lobbying group, said of the White House's position on climate change. "We feel this approach would eliminate 75 percent of pollutants people claim lead to health ailments."

With Mr. Bush's roots in the Texas oil patch, many in the oil industry and the environmental community thought the business would thrive under this administration. The oil industry would certainly benefit from the White House's refusal to mandate reductions in carbon dioxide and its efforts to reshape clean air regulations.

But some goals specific to the industry have been thwarted, among them efforts to widen the acreage for natural gas drilling in the eastern Gulf of Mexico, off the coast of Florida, and to have unilateral sanctions against Iran and Libya lifted.

The industry, however, may benefit from a sizable windfall, thanks to a decision by the Bush administration not to reauthorize taxes that feed the Superfund toxic waste cleanup program. Instead, most of the costs would be shifted from industry to taxpayers. The decision not to seek reauthorization has been challenged by Senate Democrats.

A Top EPA Official Resigns

Pension Bill Loopholes

CNN – April 15, 2002

WASHINGTON (CNN) --A leading House Democrat accused Republicans on Saturday of failing to adequately protect workers' pension funds in new legislation.

The Republican-led House passed a bill Thursday legislators said was designed to give workers more control over their employer-sponsored 401(k) accounts.

But U.S. Rep. John Conyers, D-Michigan, said it doesn't go far enough.

"The Republicans just don't get it," he said in the Democrats' weekly radio address Saturday.

"Their pension bill would open up new loopholes that would allow corporate executives to quickly sell off all of their plummeting stock holdings at the expense of hard-working employees who would have had to wait five years."

Conyers said the bill, inspired by the Enron collapse, doesn't sufficiently protect workers' interests or guard against white-collar crime.

Conyers also accused the Bush administration of looking the other way regarding white-collar crime.

"The amendment that the Republicans rejected in Congress this week in a straight party-line vote would have closed the loopholes that exist in current law," he said.

"Most have already figured it out that the reason the president and the Republicans don't want to get tough with white-collar criminals is because they are their friends, they work together and they go to the same country clubs," Conyers said.

Personal Responsibility for the Corporate Elite – by R. Mokhiber, R. Wessman - April 14, 2002

Before the corporate and political elite consign the "corporate accountability" proposal issued by President Bush last week to the dustbin, it is worth highlighting one element: the idea that CEOs sign and personally attest to the accuracy of the financial numbers their companies make public.

Here is what is important about this proposal: No one believes the CEOs are going to actually generate the numbers and track down each and every figure. Rather, the expectation is that making the CEOs personally responsible for the truthfulness of their statements will give them the needed incentive to put in place systems to ensure accuracy.

This is a radical concept.

Don't worry. We haven't lost perspective. We have zero expectation that the Bush administration is interested in applying the concept seriously.

Our point here is to emphasize the power of the concept.

One of the reasons corporations are so powerful is that they are entities structured in complex fashion to shield themselves and their top executives from responsibility for damage they may inflict on others. One of the perquisites of large size is that -- absent an Enron-scale debacle -- top management can always claim that "they didn't know" about the misdeeds committed by the corporation, presumably ordered or overseen by a lower-level official.

The Bush proposal, taken seriously, cuts through the protective layering insulating top executives.

It puts the onus on the CEO, making it the CEO's job to know. Under the Bush proposal, if a CEO attests to the validity of a grossly inaccurate financial statement, he or she would be required to return bonuses, and could be barred from serving as an officer or director of any publicly traded company.

There's no reason this assignment of personal responsibility to CEOs should be limited to financial disclosures.

CEOs should be made personally responsible for ensuring their corporation complies with its specific legal duties, and particularly their obligation to comply with the law.

Leave aside, for now, the issue of corporate executives' obligations to shareholders. Under the "business judgment" rule, executives are largely immune from liability to shareholders for any action undertaken in good faith. Underlying the business judgment rule is the notion that executives need discretion to use their best judgment to make corporate decisions, and that courts should not second-guess those decisions in hindsight. There are problems with the business judgment rule, but it is clear that executives do need some discretion when it comes to running a business.

But that discretion cannot include contravening statutory law and related regulations. Those rules circumscribe permissible corporate behavior. Corporations have a legal duty to respect occupational health and safety rules, environmental laws, workers' labor rights, consumer regulations and criminal codes.

And just the way President Bush was right to propose that CEOs take personal responsibility for ensuring their corporations fulfill their legal duty to issue accurate financial statements, it makes sense to demand that corporations' top officials -- their chief executive officers -- take personal responsibility for ensuring the companies comply with legal duties related to worker safety, worker rights, the environment, consumer protection and avoiding criminal wrongdoing.

The logic here is the same as in the Bush proposal. CEOs of large corporations cannot be expected to know the details of every action undertaken in the corporate name. But by being held personally responsible -- with meaningful penalties in case of company noncompliance -- they can be given the necessary incentive to put in place systems to ensure their company respects the law.

"America is ushering in a responsibility era," President Bush said in issuing his corporate accountability proposal, "a culture regaining a sense of personal responsibility, where each of us understands we're responsible for the decisions we make in life. And this new culture must include a renewed sense of corporate responsibility. If you lead a corporation, you have a responsibility to serve your shareholders, to be honest with your employees. You have a responsibility to obey the law and to tell the truth."

Those are fine principles. Let's give them teeth by holding CEOs personally responsible not just for their corporation's financial statements, but for making sure their corporations comply with the law.

Russell Mokhiber is editor of the Washington, D.C.-based Corporate Crime Reporter. Robert Weissman is editor of the Washington, D.C.-based Multinational Monitor, They are co-authors of Corporate Predators: The Hunt for MegaProfits and the Attack on Democracy (Monroe, Maine: Common Courage Press, 1999;

Stricter Regulations on the Way

L. A. Times – by James Flanigan – April 9, 2002

(4/7/02) - The scope of reforms coming to the U.S. corporate regulatory system could be greater than any seen in the six decades since passage of the first securities laws and the creation of the Securities and Exchange Commission.

That became clear last week when the SEC said it had opened inquiries into the accounting practices of 49 companies, many of them on the Fortune 500 list of the largest firms in the United States.

Regulators suspect a widespread pattern of corporate managements inflating revenues and earnings by adroit and misleading accounting. Enron Corp. was the tip of the iceberg. So laws and regulations on the governance of corporations are being considered by Congress, the SEC, corporate boardrooms and business schools. A few changes almost certain to come in the new era of reform era are:

  • Boards of directors will have more responsibility in the corporation. The "hero" CEOs of recent decades will be subject to instant dismissal, or even prosecution, if anything goes wrong on their watch.

  • Shareholders will gain a greater collective voice, possibly electing or dismissing company directors every year, because individual retirement accounts have become the largest single force in the U.S. equities market. IRA accounts control $2.65 trillion in common stocks, 20% of the value of all stocks. That compares with traditional pension plans at $2 trillion, defined contribution pension plans at $2.5 trillion and insurance company annuities at $1.1 trillion, according to Pension & Investment News, a trade publication.

  • Accounting firms will be forced to stick to auditing and not offer consulting services to corporations they audit. A blue-ribbon supervisory board, appointed by the government but independent, will oversee the accounting industry. A similar board may be created to oversee corporate governance.

  • Companies will be required to disclose off-balance-sheet partnerships and other connections and finances not now included in their published accounts. The SEC, which could grow in staff and authority because of new legislation, will require more complete disclosure in corporate accounts.

Strengthening the Authority of Boards

Corporate regulation is entering a new phase with proposed legislation pending in Congress. A bill sponsored by Republican Rep. Michael Oxley of Ohio calls for oversight of corporate accountability. Another measure sponsored by Democrat Sens. Christopher Dodd of Connecticut and Jon Corzine of New Jersey--a former co-chairman of Goldman Sachs--would establish a public accounting oversight board.

Formal regulation by the SEC and informal pressure from pension investment groups will strengthen the authority of boards of directors over corporate managements, says Ira Millstein, an expert on corporate governance, professor at the Yale School of Management and senior partner in New York law firm Weil Gotshal & Manges.

Audit committees of independent directors will decide what accounting systems a company uses, Millstein says. "They will be able to dismiss a chief executive if misleading accounting is found on his or her watch."

Most of all, say Millstein and other experts on corporate law and governance, the board of directors should be independent of management and able to represent the interests of shareholders. Directors should not have a consulting relationship with the company or with senior management, advises professor Edward Lawler of USC's Marshall School of Business.

A shift in thinking about corporate responsibility is occurring in response to abuses at Enron and other firms in the last decade. Enron issued misleading accounts--that it later had to restate--to keep its stock price higher than it might have been otherwise. But Enron was not alone.

Xerox Corp., once a greatly admired company, has paid a $10-million fine for misleading reports of revenue from leases that made its business look better than it was. Officers of the company may face further SEC charges.

Qwest Communications International Inc., a pioneer of fiber-optic technology, is accused by regulators of recording revenue from sham transactions to boost the value of its business.

Such behavior caused two problems, says Lynn Turner, former SEC chief accountant. One is that "wrong information causes wrong decisions," meaning that the companies made unwise investments based on their own false figures.

The other problem is that investors were misled. When true results became known, the stocks of both companies fell sharply. Both are down more than 80% from their historic highs and have caused material losses for individual investors--that is, voters. That's why Congress is on the warpath.

But will reform really come? Veterans of business and investment markets, who say the debate will result in much talk but little action, can be excused for cynicism.

Yet this time could be different. An example of reform is Cendant Corp., which is pushing the envelope on corporate governance. Cendant, which owns Avis Rent a Car, Century 21 real estate brokers, Days Inn hotels and many other service businesses, was accused of fraud three years ago when false accounts were discovered in a company with which it had merged. Cendant settled a class-action suit and took steps to reinforce its board's independence. (A former Cendant chairman and vice chairman have pleaded not guilty to federal charges of securities fraud and are awaiting trial in Connecticut.)

This year Cendant is proposing that its shareholders vote directly on whether the company should grant stock options to managers and employees. The New York-based company is instituting limitations on the ability of company officers to trade in company stock. And shareholders are asked to vote each year to elect or dismiss any and all directors.

"We expect these initiatives to contribute to building shareholder value," Cendant Chairman Henry Silverman says. So far, the company's stock price, which closed Friday at $18.60 on the New York Stock Exchange, has recovered from the plunge it took a few years ago to less than $8 a share. But Cendant's stock is priced lower than the average for other firms on Standard & Poor's 500 index, possibly because as a conglomerate its accounting is complex. The firm recently had to publicly explain investments in several outside ventures simply because analysts voiced suspicions.

In this new post-Enron atmosphere, companies must be above suspicion or see their stock shunned by investors. This era will create difficulties to be sure. "Many qualified people will hesitate at the risks of serving as directors," says Charles King, who heads recruiting of corporate directors for Korn/Ferry International.

Restoring Credibility to Corporate Finance

But beyond short-term difficulties, another stage in the evolution of the corporation may be underway. In the 1920s, Wall Street investment managers organized pools to run up stock prices, attract small investors and then leave them holding the bag as insiders sold out. The securities laws of the 1930s stopped such practices and restored credibility to corporate finance.

In the 1990s, Wall Street investment bankers and corporate managers manipulated initial public offerings to generate huge gains for insiders but massive losses for an investing public that has now grown to include one of every two Americans.

And so now we are embarking on a new era of reform to restore credibility to corporate finance and to provide some relative protection for retirement savings. Reforms won't eliminate greed or change human nature. But regulating corporate behavior, either by the force of law or through shareholder pressure, is imperative for a healthy economy.

"If reforms aren't made, we'll have more scandals in a few years," Millstein says.

"And if reforms are made, we'll still have future scandals but not so frequently."

The Administration’s Ergonomic Failure

Washington Post – by Caroline E. Mayer – April 7, 2002

(4/6/02) - The Bush administration yesterday announced its long-awaited plan to reduce repetitive-stress injuries in the workplace, which calls for voluntary industry guidelines rather than requiring employers to take corrective actions.

The Clinton administration issued requirements to address the issue in November 2000, but those were repealed by the Republican-controlled Congress in March 2001, shortly after President Bill Clinton left office. The Bush administration then promised a new workplace safety policy to reduce injuries such as carpal-tunnel syndrome, tendinitis and lower-back pain that can result from repeated motions at work.

How the government should deal with such injuries has been the subject of a fierce battle between industry and labor groups for more than a decade, and yesterday the bitterness resurfaced within minutes after the Bush plan was announced.

Labor unions and key Democrats criticized the plan, saying it failed to require employers to make changes in workplaces -- such as buying new equipment, adjusting the height of work surfaces, repositioning tools and providing mechanical lifting equipment -- to reduce repetitive-stress injuries.

Some business groups expressed cautious support, concerned about the administration's promise to step up enforcement of existing labor laws prohibiting workplace hazards. Others said there was no scientific evidence to justify even voluntary guidelines.

John Henshaw, head of the Labor Department's Occupational Safety and Health Administration, said, "We believe these are serious injuries and we are committed to reducing pain and suffering that occurs in the workplace as a result of ergonomic hazards."

In a news conference announcing the plan to develop guidelines, Henshaw said that combined with stepped-up enforcement, training and research, voluntary guidelines are "the best practical approach" to reducing ergonomic injuries immediately. Henshaw said the guidelines could be developed more quickly than a mandatory standard and could be more flexible, depending on the industry and facility.

By the end of the year, he said, OSHA would begin issuing industry-specific guidelines, although Henshaw declined to say which industries might be targeted -- or how many guidelines would be issued. Henshaw also said that although the agency will crack down on "bad actors," OSHA will not take action against employers "who are making good-faith efforts to reduce ergonomic hazards."

Peg Seminario, director of safety and health for the AFL-CIO, called the plan "a sham."

"After a year of inaction, the administration has come up with a meaningless measure that further delays action and provides no real protection to workers against ergonomic hazards which is the nation's biggest workplace hazard," Seminario said. She agreed with the administration that voluntary efforts have helped reduce repetitive-stress injuries overall in the past decade, but, she said, "we still have 1.8 million workers injured each year, so it's an enormous problem" that needs more serious government oversight.

Sen. Edward M. Kennedy (D-Mass.), chairman of the Senate Committee on Health, Education, Labor and Pensions, said the plan "shows that when it comes to protecting America's workers, this administration's goal is to look the other way and help big business get away with it." Kennedy said the primary victims will be women because they are in jobs that cause the most ergonomic injuries. "If corporate CEOs were experiencing these injuries, instead of secretaries and cashiers, we would see a very different policy coming out of this administration," Kennedy said.

Sen. Christopher S. Bond (R-Mo.), ranking minority member of the Senate Committee on Small Business and Entrepreneurship, praised the plan for its "sensible and appropriate approach." He said it was a vast improvement over Clinton's approach, which he described as "a monument to regulatory excess."

Randel Johnson, the U.S. Chamber of Commerce's vice president for labor policy, was more cautious. "Overall we're supportive, but we do have concerns about how this stepped-up enforcement will play out in the real world," he said.

Washington labor lawyer William Kilberg, who represents employers, questioned the premise for establishing even guidelines because, he said, there is no scientific evidence linking specific ergonomic injuries to the workplace.

Divided opinion on the government's role in regulating the workplace to prevent injuries is far from new. The Labor Department has been considering rules on ergonomics since 1990. The National Academy of Science was asked to look into the issue and, in two reports since 1998, linked workplace injuries to heavy lifting and awkward motions. The academy also estimated that businesses lose $50 billion a year from sick leave, decreased productivity and medical-care costs linked to repetitive-stress injuries.

The Clinton administration for four years fought business-backed attempts in Congress to delay an ergonomics program. It finally issued its rules two months before the president left office. Those rules would have covered more than 100 million workers in 6 million workplaces and would have required employers to redesign jobs that involve typing, lifting and other types of work when employees reported work-related injuries. The rules also would have required that disabled workers be paid for their injuries, in some cases more and longer than required by state workers' compensation laws.

The Clinton administration estimated that its rules would have cost businesses $4.5 billion. Business interests estimated costs as high as $100 billion.

After Congress killed the rules, Bush's labor secretary, Elaine L. Chao, promised to come up with a new plan, although she indicated from the start that it would not include a federal mandate that workers be paid for their injuries.

Yesterday, Chao said in a prepared statement that the new plan "is a major improvement over the rejected old rule because it will prevent ergonomics injuries before they occur and reach a much larger number of at-risk workers."

As part of its plan, OSHA will emphasize workplace safety in nursing homes, especially the hazards related to lifting patients. Henshaw said the agency will also focus on helping immigrant workers, many of whom work in industries with high ergonomic-hazard rates.

U.S. Moves to Ease Harm From Enron

New York Times – by D. Barboza, R. Oppel – April 7, 2002

(4/4/02) - The federal government moved on two fronts yesterday to protect the interests of Enron investors and retirement-plan participants, as parties in the company's bankruptcy proceedings maneuvered to lay claim to the company's dwindling assets.

Labor Department officials accused Enron yesterday of backing out of an agreement to pay an independent investment firm to oversee its three employee pension plans, a move that angry officials with the agency described as a "repudiation" of a deal signed less than a month ago.

Enron denied backing out of the deal, but Labor Department officials said the dispute was sure to delay, for at least some time, transfer of control of the pension plans out of the hands of Enron executives who have been criticized for not protecting the interests of employees and retirees as Enron's stock plunged last fall. The Securities and Exchange Commission also said that it would ask today that Judge Arthur J. Gonzalez of United States Bankruptcy Court in New York appoint an independent examiner with expanded powers to investigate Enron's collapse and potential conflicts of interest in the bankruptcy case.

The S.E.C. said that it was supporting a move by a group of creditors, including various pension and retirement funds, because of widespread accusations of conflicts of interest involving companies with longstanding ties to Enron. Among those with possible conflicts are Wall Street banks like Citigroup, Credit Suisse First Boston and J. P. Morgan Chase.

"We support the appointment of an examiner because an independent person with no relation to the transactions could investigate and report back to the court on whether there is money available to pay investors and other estate creditors," said Alistaire Bambach, an enforcement official at the S.E.C.

The government is also stepping in to protect the interests of Enron employees who lost out when the stock tumbled ahead of the company's Chapter 11 bankruptcy filing in December.

Last year, more than 60 percent of the 401(k) assets of Enron employees had been invested in company stock that quickly became worthless as Enron collapsed. In Congressional hearings in February, lawmakers were outraged to learn that one executive who serves as a trustee overseeing the plan knew last summer of warnings about the company's severe accounting problems but did nothing to protect participants in the plan. The trustees were also criticized for other aspects of their handling of the retirement plans.

Under pressure from Congress and Labor Department officials, who had threatened to go to court to oust the trustees, Enron agreed in March to turn over control to the State Street Corporation, which was to be paid up to $2.7 million a year out of Enron's assets. The three retirement plans have combined assets of more than $2 billion, according to government and company officials.

But during a hearing Tuesday afternoon before Judge Gonzalez, lawyers for Enron backed out of the agreement, the Labor Department said, and the judge said he would not approve the payments to State Street out of the company's assets. Enron's creditors also opposed the deal, contending that any payments should come from the assets of the retirement plans, not the company.

But Labor Department officials say that is unacceptable and that Enron should stick to its deal. "The representations made by Enron's attorneys in federal court yesterday were a contradiction and repudiation of the agreement Enron signed with the federal government," Eugene Scalia, the Labor Department solicitor, said in an interview yesterday.

"I called Enron's general counsel at 9 a.m. this morning and made crystal clear to him that we expect them to abide by the agreement they signed, and if I were in Enron's shoes, this isn't the way I'd be dealing with the government right now," Mr. Scalia said.

Labor Department officials declined to say what steps they might take next, but legal experts said they had three choices: to ask the judge to reconsider or agree to have State Street paid on an interim basis; to use the retirement plan assets to pay the fees for a short time while another arrangement is worked out; or to sue Enron.

Daniel Weiss, the spokesman for Representative George Miller of California, the senior Democrat on the House Committee on Education and the Workforce, accused Enron of "hoodwinking" the government and urged the Labor Department to take action. "The same pension administrators are in place who were there during the downfall of Enron, when they said not one word to employees in the retirement plan about the declining financial condition of Enron," he said.

But late yesterday, Enron took issue with the Labor Department's characterization of the company's actions, saying that the company's lawyers had told the judge it "did not oppose" paying State Street's fees out of the estate. But according to an Enron spokesman, the judge then asked whether the payments to State Street might be considered "prepetition" claims, and thus might make them ineligible to be paid from the estate, because the events that prompted the change in pension trustees occurred before Enron sought bankruptcy court protection.

In response to that question, Enron's lawyer told the judge that the change arose "as a result of events before the bankruptcy, not after," said the spokesman, Mark Palmer.

The Securities and Exchange Commission said it had stepped into the Enron bankruptcy case because the agency was interested in ensuring that public investors who lost money in the case were treated fairly. The S.E.C. joined a group of creditors who have long been pushing for an independent trustee to take charge of the bankruptcy case because of all the potential conflicts of interest involving Enron and its major creditors.

Judge Gonzalez asked the creditors and others involved in the case to resolve their dispute, and many have agreed to do that by asking for the appointment of an independent examiner to investigate Enron's collapse, and possibly even determine whether some major creditors are liable for their dealing with Enron.

Some of the largest Enron creditors are thought to have played a role in creating and investing in some of the off-balance-sheet partnerships that helped bring down the company.

Several major law firms in the Enron bankruptcy case also had longstanding ties to Enron and could also be involved in potential conflicts of interest, some creditors say.

"The creditors are led by entities that were aiders and abettors of the fraud," said Andrew Entwistle, a lawyer who represents the Florida state pension fund. "We want an examiner with subpoena power to come in and investigate the special- purpose entities, the accounting fraud, the insiders, the lawyers and the accountants, among others."

The creditors' committee has also agreed to the appointment of an independent examiner, but the group has fought the idea of giving an independent examiner expanded powers, arguing that it would not want the examiner to duplicate its work.

"This is all a tempest in a teapot," said Stephen Blauner, a spokesman for Milbank, Tweed, Hadley & McCloy, the law firm that represents the creditors committee. "The committee has endorsed the concept of an examiner. The only issue is the scope. The committee is desirous of avoiding duplication of efforts. It should be in everyone's interest to avoid excessive expenditure of the estate's precious assets."

Mr. Entwistle said the real issue was who had control. "What they're really saying is we want the creditors' committee to control the process and the examiner to be limited," he said. "But we want an examiner who is only accountable to the court."

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