DukeEmployees.com - Duke Energy Employee Advocate
Washington - Page 27
himself emperor of America." - U.S. Representative Jim McDermott - Seattle Times
Group Spends $1 Million to Stop WellstoneStar Tribune – by Patricia Lopez – October 26, 2002
(10/23/02) - Americans for Job Security, a Virginia-based interest group that opposes the reelection of Democratic U.S. Sen. Paul Wellstone, has made an unprecedented $1 million ad buy that will fill the airwaves in the last two weeks before the election, according to Wellstone campaign officials.
Campaign manager Jeff Blodgett said the buy is so large that it may equal what Wellstone and Republican rival Norm Coleman and the two state parties each are expected to spend on media in the closing weeks.
Blodgett said his biggest concern is that no one knows who funds the mysterious group, which has found a legal loophole that apparently allows it to keep its donors secret.
"In a state with a reputation for clean, transparent campaigns, this is an outrage, that a group can come in and spend this kind of money and no one knows who their donors are," Blodgett said at a Tuesday morning news conference. "We demand to know. We ask Norm Coleman to join us in this."
Michael Dubke, president of Americans for Job Security, would neither confirm nor deny the amount of the ad buy "because I don't want to play their game," but said that "we're up [on TV] in Minneapolis, Duluth, Rochester, Fargo and statewide with radio and let's just say Minnesota's not an inexpensive state."
He said the group would have a "significant presence" on radio and TV over the next two weeks. Dubke said he has made similar-size buys in South Dakota and Missouri -- the two other states that are top targets in President Bush's attempt to put Republicans in control of the U.S. Senate.
Dubke is unapologetic about the group's refusal to disclose its donors, saying the decision is legal and is common among issue advocacy groups.
Coleman campaign manager Ben Whitney said Tuesday that Coleman would not be contacting Dubke's group or asking it to disclose its donors.
Wellstone, he said, had benefited for months from ads run by liberal interest groups. "He's getting money from radical groups like Council for a Livable World -- and we don't know who its donors are -- and then he demands that we ask someone else not to advertise in Minnesota because he doesn't like what they're saying," Whitney said.
He noted that Coleman, at the beginning of the race, had offered Wellstone a joint agreement to keep third-party money out of the race and that Wellstone refused. "It's brazen hypocrisy and it leaves me kind of breathless," Whitney said.
Kathleen Hall Jamieson, of the University of Pennsylvania's Annenberg School of Communications, said the group's tactic is "the reason issue advocacy is so problematic. You can disguise the nature of the group through a lovely sounding name."
Jamieson, a national expert on political ads, said the sheer magnitude of such an ad buy could change the course of the election.
"Large amounts of money from a third-party group late in a tight race can, in fact, shift votes, unless the message is off-strategy," she said.
The high-buck, high-profile race has been one of the tightest in the country, drawing celebrities and political luminaries from across the nation, along with a raft of outside interest groups.
Americans for Job Security has been a player in the race since June, when it began a round of radio ads that labeled Wellstone a "money-grubber" for his opposition to a permanent repeal of the estate tax, which it calls the "death tax."
A new TV ad criticizes Wellstone for taking special-interest money and for breaking a promise not to run for a third term.
Blodgett said Tuesday that he was less concerned about the content of the ads than the sheer magnitude of the buy, which he said might be the largest ever by an outside group in a Minnesota race.
Little is known about Americans for Job Security, which is based in Alexandria, Va., just outside Washington, D.C. It was founded in 1997 with a $1 million contribution from the American Insurance Association, which Dubke says is no longer associated with Americans for Job Security.
The Annenberg Public Policy Center Web site, which analyzes issue ads, describes the group as a "tax-exempt, conservative, business-backed, pro-Republican organization" that was an offshoot of a coalition of business leaders who came together in 1996 to advocate against issues promoted by the AFL-CIO.
Americans for Job Security has taken several unconventional tacks in this race -- it flew a banner over the State Fair this summer asking Wellstone to "stop taxing the dead." Its latest radio ad features a couple speaking in English and Norwegian.
In the ad, Lloyd tells Ruth in Norwegian that Wellstone is a money-grubber and should stop taxing the dead. "If he doesn't get it in English," Lloyd says, "maybe he'll get it in Norwegian."
Dubke said the group is trying to "cut through the clutter."
"Our whole goal since June has been to energize the debate," he said. "I think in American politics we don't have enough debate on public policy issues. If we let [candidates] do what they wanted, we'd get a bunch of ads telling us how much their mothers love them."
Ed McGuire Challenges Sue MyrickThe Charlotte Observer – by Sharon E. White - October 24, 2002
(10/23/02) - In an era when candidates can win or lose elections via the airwaves, Democrat Ed McGuire, who's trying to unseat Republican U.S. Rep. Sue Myrick for the second time in as many years, still does things the old-fashioned way:
He visits shopping centers, goes to barbecues and knocks on doors looking for votes.
"I have no other choice," said McGuire, 69, a retired college professor, who admits to an uphill quest to fill the U.S. House District 9 seat Myrick's held since 1994.
He has no billboards or posters to compete with Myrick's bold, red-and-white ones and won't be able to match her planned TV and radio ads.
So far, he hasn't raised or spent enough money -- minimum $5,000 -- to require him to file a campaign expense form with the Federal Election Commission. Myrick's most recent campaign finance reports show she has raised more than $720,000 and spent at least $590,000 as of Sept. 30.
Another of McGuire's hurdles has to do with the district's political makeup. Republicans make up 45 percent of the district's registered voters; 35 percent are Democrats. Two years ago 61 percent of the district's voters favored Republican Richard Vinroot in his unsuccessful run for governor -- a higher margin than any other congressional district.
Both candidates tout jobs and homeland security as high priorities for the newly drawn 9th District, composed of significant portions of Mecklenburg, Gaston and Union counties.
District voters said war, jobs and the economy are priorities.
"I do not think we should go to war," said Evelyn Polson, a 51-year-old Gastonia widow raising an 11-year-old son.
And as Gaston continues to shed manufacturing jobs -- 855 textile jobs lost this year and another textile plant slated to close by year's end -- several voters called for relief.
Myrick, 61, is a member of the textile caucus, a bipartisan group of lawmakers interested in textile issues. She said the group has held the administration accountable for enforcing trade agreements and ensured the industry "a seat at the table and a fair playing field" in future agreements.
Still, McGuire blames Myrick for the textile job losses, pointing to her support that granted President Bush fast-track authority on trade negotiations.
Myrick defends that vote, saying, "We got a lot of concessions for the textile industry," including new Customs agents to spot illegally imported textiles.
Some voters said they hope the Washington, D.C.-area sniper attacks don't prompt Congress to rush tougher gun control laws.
"That's what I always look at when I vote for somebody," said Clay Snead, 24-year-old auto mechanic from Mount Holly.
Both candidates said they support current gun control laws.
Libertarian Christopher Cole, who also ran two years ago, said his campaign is emphasizing the elimination of personal income tax by rolling federal spending back to 1987 levels.
More Rules to Protect 401(k) PlansNew York Times – October 21, 2002
WASHINGTON, Oct. 19 — President Bush said today that "more steps are needed" to protect employee retirement packages from corporate wrongdoing, as he took credit for putting rules in effect under legislation passed by Congress.
His message was timed to coincide with the quarterly statements being received by employees who save part of their wages in tax-advantaged 401(k) plans, often investing the money in the stock market or their own company shares. Because of the market's tumble in the third quarter, many people are seeing declines in these accounts.
"Today's workers own more than $1.5 trillion in assets through their 401(k)'s," Mr. Bush said in his weekly Saturday morning radio address. "Younger workers have an average of about $10,000 in their accounts, while workers near retirement hold closer to $100,000 in their 401(k)'s. This is real money for real workers, and we must do all we can to help make sure it's there for them when they retire."
The radio address is one of several steps the administration is taking to deal with economic policy questions before the election on Nov. 5.
Out of five legislative proposals on retirement savings that the administration offered after the Enron bankruptcy, Congress passed two. One gives workers 30 days' notice before a "blackout period" on selling company stock in these plans — as might occur when changes are made in the management of a retirement account. The other prevents executives from buying and selling during blackout periods shares that they are awarded under stock option plans.
The other three proposals passed the Republican-led House but are still waiting for action by the Senate.
Mr. Bush, who has sought to counter Democratic criticism of his economic policies by arguing that the Senate has been blocking his initiatives, asked it to complete action on the other proposals.
"For the sake of American workers who are concerned about their retirement security, I urge the Senate to pass the rest of my proposals into law," Mr. Bush said. "People who work hard and save for the future deserve every protection we can give them."
The other three proposals, which Mr. Bush called "common sense," would let workers sell company stock from their retirement plans after three years, give investors more information on the performance of their accounts and provide workers with more access to professional investment advice "so they can make more informed decisions about their savings," Mr. Bush said.
The president, who has not spoken about the economy in his weekly address since mid-August, also discussed the plans of the Securities and Exchange Commission for new regulation of corporate executives. The rules would prevent executives from selling their own holdings of company stock while workers could not.
"Corporate executives will no longer be able to sell off their company's declining stock while employees are left holding the bag," Mr. Bush said. These rules will take effect early next year and "give workers greater protections against corporate fraud or abuse," the president said.
Cash Balance Pension RaidsEmployee Advocate – DukeEmployees.com – October 16, 2002
Representative Bernard Sanders is circulating the letter below in Congress. Please ask your congressman to co-sign this letter to the IRS. Many people will be jobless in the near future. They should at least get the pensions that they were promised for years.
Update: Congressman Sanders already has the signatures and has mailed the letter to the IRS.
Senate Blasts SEC on Enron RegulationWall Street Journal - October 14, 2002
(10/7/02) - Washington -- A Senate investigation found "systemic and catastrophic failure" by the Securities and Exchange Commission in its regulation of Enron Corp.
In a far-reaching staff report and sharply worded letter yesterday to the SEC chairman, Harvey Pitt, the Senate Governmental Affairs Committee detailed how Enron's years of deceptions escaped any detection by securities regulators, rating agencies and investment-bank analysts.
"Investors were left defenseless," said the letter, which was signed by the committee chairman, Joseph Lieberman (D., Conn.), and its ranking Republican, Fred Thompson. The study found, for example, that the SEC failed to review any of Enron's post-1997 annual reports, missing its best chance of finding red flags in Enron's misleading descriptions of partnerships controlled by its chief financial officer and used to hide its debt.
"If the SEC had pressed Enron about those and other troubling disclosures when they first appeared in Enron's 1999 annual report, some of the enormous losses suffered by workers and investors might have been prevented," the senators wrote.
The report offers the most comprehensive evaluation to date of the failure to detect the Houston energy trader's schemes both by public- and private-sector watchdogs. It covers the shortcomings of credit-reporting agencies and Wall Street analysts that have been widely reported in recent weeks. But it is the SEC that comes in for the most blistering criticism, and the report takes a grim view of today's system of market regulation.
With Enron, and the many corporate collapses that have followed, "we have witnessed a fundamental breakdown in this system," the 127-page report said. The SEC cannot simply rely on company auditors and boards of directors to assume most of the responsibility for ensuring honest public disclosure, it said.
"Although our investigation found no willful malfeasance by the Commission with respect to Enron, Committee staff has concluded that the Commission's largely hands-off approach to the company -- combined with the failure of the auditors and board of directors to do their jobs -- allowed inaccurate and incomplete information to flood the market." Throughout the 1990s, "the SEC had reason to question whether auditors and corporate boards were playing their appointed roles . . . yet the Commission did little to adjust its own role to fill the gap."
In a prepared statement yesterday, Mr. Pitt said he had not yet had a chance to read the full report. He said the commission would carefully consider its conclusions and is taking steps to improve corporate disclosures. "I appreciate that the committee staff recognizes our need for more resources -- both people and technology," Mr. Pitt said. "Working together with the Congress and other governmental representatives, we are well under way toward taking and completing the tasks necessary to restore investor confidence."
The report chronicles how the commission as far back as 1992 granted Enron permission to use easily manipulated "mark-to-market" accounting to record the values of its energy contracts, even in instances where no public markets existed from which to obtain data about such contracts' fair market values. But the SEC never followed up to ensure that Enron was applying the method appropriately. According to former employees interviewed by the Senate investigators, Enron routinely abused the accounting technique, which allows companies to record estimates of future profit as current earnings.
The report criticizes the SEC for failing to act, even to this day, on an April 2000 application by Enron requesting exemption from regulations covering public utilities. In the absence of SEC action on the request, Enron, which has been operating under bankruptcy-court protection since December, has been permitted to claim the exemption anyway. The report concludes that Enron has been able to take advantage of the SEC's delay in acting on the application -- and lack of coordination between the SEC and the Federal Energy Regulatory Commission -- to get regulatory benefits to which it may not have been entitled.
Nor did SEC staff members regularly review the publicly available financial reports Enron filed with the commission. At the time of Enron's bankruptcy-court filing in December 2001, the SEC had undertaken no review of any of the financial statements that Enron had filed after its 1997 annual report. And by the time the commission finally did begin investigating Enron in August 2001, following press reports about its opaque financial statements and the abrupt resignation of Jeffrey Skilling as chief executive, Enron's demise was all but inevitable, the report concluded.
To be sure, in the months since Enron's collapse late last year, the SEC has significantly stepped up enforcement and is working on its own, or with the Justice Department, on scores of high-profile investigations. The SEC also struggled for years with paltry financial and technological resources, as the report notes.
The report doesn't mention, however, the role Congress itself played in limiting the SEC's financial resources during the 1990s, in response to lobbying from corporate interests and the accounting profession. In addition to a lack of sufficient staff and money, SEC officials over the years have noted that its staff was so consumed with reviewing prospectuses of companies conducting initial public offerings of stock during the 1990s that it didn't have enough time to more thoroughly review financial statements.
Nor are the Senate committee's members without fault for the corporate collapses. In many instances, including at Enron, top executives made tens or hundreds of millions of dollars through exercises of stock options that likely wouldn't have been granted in such great volumes had accounting rules required them to be treated as an expense. Mr. Lieberman, has been the Senate's leading opponent of proposals to treat stock-option compensation as an expense on corporate income statements, even threatening to close the Financial Accounting Standards Board, based in his own home state, during the mid-1990s when it proposed such a measure.
"It's amazing that the very people who blocked the efforts of the SEC and FASB to improve financial reporting for investors are the ones who are now acting much like the executives of Enron and trying to blame everyone but themselves," said Lynn Turner, who was the SEC's chief accountant from July 1998 through August 2001.
In the letter to Mr. Pitt, Sens. Lieberman and Thompson wrote that the SEC must find better ways to detect fraud and reduce its historical reliance on others to spot it first. "Whatever the reason for the SEC's failure to review filings with sufficient regularity or to use the right criteria for selection . . . the investing public expects and deserves more meaningful protection from the ultimate market watchdog."
Moles at WorkNew York Times – by Paul Krugman – October 11, 2002
So here's my theory: Michael Oxley, Harvey Pitt and George W. Bush are all Communist moles who have worked their way into the center of the capitalist system in order to destroy it. How else can you make sense of their actions?
It's true that in July they grudgingly agreed to a corporate reform bill, which briefly calmed the growing investor panic. That was because it's essential for them to control Congress — they need maximum leeway to wreck the U.S. economy. But then they found a better answer. Saber-rattling over Iraq does double duty. It distracts the media: on Wednesday the Dow fell 215 points, hitting a nearly five-year low, while consumer confidence fell to levels not seen since 1996, yet neither story was treated as front-page news. And war talk itself helps depress stocks and consumer confidence, and further undermines the economy.
The master stroke came last week. Even as evidence mounted that the wheels are coming off our so-called recovery, the conspirators carefully destroyed the credibility of July's corporate reforms. The Financial Times reports that it wasn't just Congressional Republicans and the accounting industry that blocked the appointment of John Biggs to head a crucial new accounting oversight board; the White House was "concerned at labor union backing for Mr. Biggs."
Now that the best candidate has been humiliated and betrayed, nobody of stature will take the post. That means corporate reform is dead in the water. And if the conspirators hold the House and regain the Senate, they can proceed with their wrecking program — driving the budget even deeper into long-term deficit, scaring small investors and blocking any actions that might pull the economy out of its deepening funk.
O.K., I'm not quite sure about this theory. There is another theory that might explain what these guys are doing. They may simply be constitutionally incapable (actually, given the presence of John Ashcroft, make that unconstitutionally incapable) of doing what has to be done.
What we've learned over the past year is the extent to which the modern business game is rigged in favor of insiders. Self-dealing has become pervasive: incredibly generous executive compensation, sweet-deal loans and preferential access to I.P.O.'s were standard practice in many companies that have not yet become targets of S.E.C. investigation.
And deceptive accounting, which lured the public into buying stock even as insiders were bailing out, must have been very widespread indeed. In the last three years of the bubble reported corporate profits soared, but the overall measure of profits calculated by the U.S. Commerce Department, which is unaffected by the maneuvers companies use to cook their books, hardly grew at all.
In short, the fix was in. If we're to have a real recovery, it's urgent that ordinary investors be reassured that those days are over. Yet it may be hard for our current leaders to understand that urgency: all their lives, the fix has been in on their behalf.
Wednesday's Wall Street Journal reported another piece of the Harken Energy story, one that provides even more evidence of how family connections smoothed Mr. Bush's business career. The key defense against charges that his sale of his Harken stock amounted to insider trading has always been the fact that while that stock's price plunged soon after he sold his shares, it then recovered, albeit temporarily.
Now we know why it recovered. It wasn't just the mysterious invitation to drill for oil off Bahrain. Harken also pulled a trick that would be emulated on a larger scale by Enron: In effect it borrowed money to pay its bills, while using loopholes in accounting rules to conceal the resulting debt.
What made the trick possible was Harken's guardian angel, a powerful institution controlled by an oil man, Robert Stone, who was a strong political supporter of Mr. Bush's father. This institution acquired a large stake in Harken as soon as Mr. Bush became a board member, and subsequently showed itself willing to do whatever it took to keep the hapless company afloat. This included taking much of the company's debt off its books in return for assets of doubtful value, and giving Harken a share in their partnership almost twice as large as its contribution to the partnership's capital.
The name of the guardian angel? The Harvard University endowment. Don't be surprised; professors don't run the university's money.
Harken Implicated in Enron-like DealsThe Daily Enron – October 10, 2002
(10/9/02) - No wonder SEC Chairman, Harvey Pitt, has stubbornly refused to reopen his agency's 1991 Harken Energy investigation. It seems there are bodies buried there.
This morning we learn - thanks not to the SEC but to old-fashioned investigative work by WSJ reporter Glenn Simpson - that years before Enron discovered it could hide its mounting debt from investors and boost its stock price with phony deals, Harken was already doing so.
While President George W. Bush now condemns such practices, back in 1990 when he served as a Harken board member and $100,000 a year consultant, he personally authorized just this type of deals.
Earlier this year speculation began to bubble around a strangely cozy relationship between Harken Energy and the multi-billion-investment arm of Harvard University, Harvard Management Co. The relationship developed shortly after Harken acquired Bush's failing oil company, Spectrum 7, in 1986. Harvard Management was run at the time by a political supporter of W. Bush's father, and began making substantial investments in Harken stock.
That much was already known. With some digging - digging that apparently was not encouraged at the SEC back in 1991 - Simpson discovered off-balance sheet deals between Harvard Management and Harken that, in structure and purpose, are nearly indistinguishable from deals that federal prosecutors are now probing at Enron.
Like Enron's off-balance sheet transactions, the Harken/Harvard deals were apparently designed to accomplish three things: hide crushing debt from investors, raise money, and bolster the value of the company's stock. This was accomplished by a complex financial shell game in which debt, equity, and cash are hidden under off-balance sheet partnerships that were then moved around between the players in ways that created the illusion that everyone involved just won.
And, at least on paper, everyone did win. For Harken the deals meant a new lease on life. And, because the illusion created by the deals that Harken had reduced its debt and was making money again, Harvard Management was able to sell its Harken stock for a profit - before it crashed again.
But the biggest winner may have been George W. Bush who got to become President of the United States.
At the time the deals went down Bush was backing out of the company. As a member of the company's audit committee he knew even before other board members that Harken was heading for hard times, maybe even bankruptcy. Bush needed a way to leave a company that at least appeared to be doing well and that would continue appearing so long enough for him to disclaim any responsibility if the company failed later.
In short, the Harvard Management deals were a way for W. Bush to preserve the fiction that he was a successful, self-made millionaire.
By the time the off-balance sheet deal was under discussion between Harvard Management and Harken, the company was already in default of its line of credit at Bank of Boston. If the bank declared the loans in default it would crash the company's stock. That in turn would screw up the complex asset fiction the deal depended upon. Time to call Poppy, again.
"First City Bancorp, agreed to take over Bank of Boston loans. At the time, Robert Abboud, another supporter of the senior Mr. Bush who attended a White House event 10 days before that bailout's approval, controlled First City. In an interview, Mr. Abboud said Harvard's backing was a key factor in First City's decision to approve the Harken bailout and that it wasn't influenced by his relationship with the then-president." Glenn Simpson, Wall Street Journal
Once again, rescued by a web of good ol 'boy guardian angles. George W. Bush's business entire business career - without exception - would serve as a case study in crony capitalism.
Your Move, Harvey
Today's Wall Street Journal story certainly raises the stakes for the already embattled SEC Chairman, Harvey Pitt. What's he going to do with this little bombshell? Pitt has consistently refused to reopen the 1991 investigation of Bush's sudden sale of Harken stock, even though there is substantial evidence that the matter was swept under the White House rug at the time. (The probe was conducted when the deputy SEC Chairman had been W. Bush's personal attorney back in Texas. Nothing suspicious there.)
The 1991 "investigation" centered largely around whether W. Bush had dumped his Harken stock on insider information. Now, thanks to this new information the Harken saga begins to look a lot more interesting.
Let's stop right here and pretend for a moment that we are not talking about the President. Instead, let's apply what I call "The Martha Standard" As yourself this: If Martha Stewart had pulled a series of stunts like that, what would the SEC be doing about it now?
President Bush likes to say that in America, no one is above the law. Well, now a good time to walk that walk. The allegations that Harken may have pioneered the very off-balance sheet, special purpose entity, voodoo transactions the SEC is now investigating Enron and other companies for begs the question; is the SEC going to investigate the Harken/Harvard Management deals too?
And, if not, why not?
Does a Mole Head the SEC?The Daily Enron – October 8, 2002
During the Cold War moles were a preoccupation for the intelligence community and juicy fodder for spy thriller authors. Just how high in the intelligence apparatus had the Soviets placed moles? It was only after the fall of the Soviet Union that we discovered some of the answers. Remember Aldrich Ames?
Well, here's a new piece of paranoia to chew on. Have corporate evildoers placed a mole at the head of the SEC?
Silly, isn't it? I mean really now. Too silly to be taken seriously. Right?
Well, here is what we know. We know that, during the last decade a domestic axis of evil formed and flourished. This axis of evil was comprised of public companies, accounting firms, and Wall Street investment banks. The axis formed at a point where their mutual interests, convenience, opportunity, and greed, converged.
For the next eight years or so they raped and pillaged the US economy with impunity. The damage to date: an estimated $7 trillion, much of it snatched right out of the savings and retirement accounts of small investors.
Then came Enron, WorldCom, Global Crossing, etc, etc...and the gig was up. The pressure was on for federal watchdogs like the SEC and the DOJ to do something about this. Close down axis of evil's bases, punish the evildoers and pass laws that assure nothing like it ever happens again.
Mole Rule 1: Hire Other Moles
Enter Harvey Pitt - appointed by W. Bush to head the SEC. Pitt had spent his previous years as one of the accounting profession's top consiglieres. When some enterprising SEC employee discovered accounting "irregularities," it was often Pitt the accounting companies sent to the SEC for a sit down to smooth matters over.
Suddenly, faced with its biggest crisis since an angry public demanded heads roll in the wake of the 1929 market crash, who ends up as Chairman of the SEC but the accounting industry's own, Harvey Pitt.
Knee-jerk paranoids immediately began foaming at the mouth. Surely this could be no coincidence, they whined. Surely, Pitt had been put there as a mole for the accounting profession and their Wall Street accomplishes. Surely this must be so, they alleged.
But, in the months that followed Enron's collapse, Pitt made a lot of the right kinds of noises. He was going to go after the evildoers and make them pay - and pay big. He promised he was going to put safeguards in place - including hiring junkyard-dog-tough regulators to make sure nothing like this happens again.
So, while still suspicious of the fellow, some breathed a bit easier. "Give the guy a chance," his supporters begged.
So, for the last couple of months the heat has been off Pitt, partly because he was being given some time to prove himself, and partly because everyone in Washington has been consumed with talk of war.
Then last week, as the war drums pounded louder than ever, Pitt began to act. Not as he promised earlier, but in the exact opposite direction.
Last week Pitt's actions gave new life to the old saying, "even paranoids can have real enemies."
First there was the Biggs matter. When a new oversight board was created to oversee the accounting profession Pitt gained a good deal of credibility by his choice to head it. He suggested respected pension-fund executive John H. Biggs. The choice of Biggs had a lot of folks rethinking their feelings about Pitt. Biggs, after all, was known for his tough, no nonsense approach to accounting reforms. And, the accounting profession opposed him.
But, as the October 28 deadline approached to formally name someone to that post, Pitt suddenly reversed himself. He met with Biggs last week and warned him that he was probably going to withdraw his support. Instead, Pitt will try to place accounting industry-friendly Donald J. Kirk in the post.
Kirk has held leadership positions in the accounting field and is described by colleagues as a strong advocate for the accounting industry.
"Kirk 'was very loyal to the profession and maybe was a little reluctant to meet the profession head on,' said former insurance executive Robert F. Froehlke, who served with Kirk..."He always was a defender of the profession," said Melvin R. Laird, a former secretary of defense who also served on the board." Washington Post
"The accounting profession is still engaged in sort of a rear-guard action to see if they can try to weaken the ultimate oversight board that's appointed...including derailing Biggs's nomination," a congressional source told the Washington Post.
Mole Rule 2: Infiltrate Investigations
The second of Pitt's revealing moves came last week in response to the frontal assault on the securities industry by New York Attorney General Elliot Spitzer. Spitzer has come to be viewed by Wall Street firms as a cross between Rambo and a loose canon as he rains subpoenas down on them, carts off incriminating documents, makes them public and then proceeds to charge them, sue them and - gasp - win.
Of course this is what the SEC was supposed to be doing, but wasn't. And Spitzer was not too shy to say so. He blasted Harvey Pitt's inaction every time he, Spitzer, scored another direct hit on a big-name Wall Street player.
Wall Street and Pitt tried to cut Spitzer off at the knees by claiming he was playing out of his league - that this was the federal government's territory and he had no right operating on the SEC's turf. They even alleged that he was not doing this out of any sense of moral outrage but rather to further his own political ambitions. Anyway, they said, no one on Wall Street had done anything all that wrong and the fact that the SEC had not charged anyone proved it.
Spitzer responded by making public hundreds of Merrill Lynch internal memos that left little doubt that the company had participated in one of the biggest pump and dump stock scams in history.
Merrill settled with Spitzer for a cool $100 million. Suddenly the SEC was looking bad. Pitt accused Spitzer of showboating. But, all he could do was hope that the Merrill settlement would satisfy Spitzer and he'd just go away.
Last week Spitzer was back in front of the TV cameras again, this time announcing he was suing several corporate executives for the return of $28 million in profits they made selling IPO shares awarded by Salomon Smith Barney Inc.
Clearly, Spitzer was going to continue to bring - and win - cases that the SEC should of raised and hadn't. Since Spitzer was an elected New York State official, Pitt had no leverage on him. It was all very annoying and, for Harvey Pitt, dangerous. After all, people were beginning to ask questions. If a state attorney general, with a staff of just ten lawyers and budget a fraction of that of the SEC could bring and win these cases, why can't the SEC? Or, maybe more to the point, why hadn't the SEC acted?
So, last week Pitt suddenly did an about face. He announced that all was forgiven. He now liked Elliot Spitzer so much he wanted to work with him. Pitt announced that the SEC would begin working directly with Spitzer on future actions.
What could Spitzer say? After months of accusing the SEC of inaction now that Pitt was offering to act, he had little choice but to accept the offer. But the announcement of the new agreement came in bland, and decidedly unenthusiastic press releases. And, Spitzer and Pitt did not appear together in public.
Spitzer clearly has his doubts about Pitt's motives. Asked afterwards if his feelings about Pitt had changed, Spitzer said no, and that he would not take back anything he had said about Pitt in the past. He still believed that federal regulators should have and could have acted faster.
So, what have we here in Harvey Pitt if not a mole for the accounting profession and Wall Street investment banks? First he yanks the Biggs nomination to the new accounting oversight board solely because Biggs would be a tough cop prepared to drop the hammer on offending firms. Then, when an outsider starts his own Wall Street cleanup, Pitt tries to vilify him. When that fails he suddenly "joins him," in what many suspect is an attempt to exercise at least some moderating influence from the inside of Spitzer's operation.
If Harvey Pitt is not a mole at the top of the SEC for the accounting and investment banking professions, he is sure doing a good imitation of one.
Emperor of America?Seattle Times – by David Postman – October 8, 2002
(10/7/02) - After holding a town-hall meeting on Beacon Hill, U.S. Rep. Jim McDermott arrives yesterday at Westlake Plaza with anti-war marchers protesting against President Bush's request to Congress for permission to attack Iraq.
U.S. Rep. Jim McDermott broadened his attack on George W. Bush's war plans yesterday, saying the president is threatening military action in Iraq as part of a plot to crown himself emperor of America.
Criticized for saying on a trip to Iraq early last week that Bush would mislead the American public, McDermott, a Seattle Democrat, was back in his district yesterday telling cheering supporters that Bush is planning a war to distract voters' attention from domestic problems.
He said Bush is trying to "submarine" efforts to restart weapons inspections in Iraq to give him a pretext for starting a war — a war McDermott said is being planned in part to bolster U.S. oil interests.
"And what we are dealing with right now in this country is whether we are having a kind of bloodless, silent coup or not," McDermott said at a town-hall meeting at the Jefferson Park Community Center on Beacon Hill. The event was sponsored by local Democrats and other groups in his congressional district.
At the heart of the debate, McDermott said, is whether Congress or the president has the power to declare war.
"This president is trying to bring to himself all the power to become an emperor — to create Empire America," he said.
And he warned his supporters, "If you go along like sheep that is what will happen."
State Republican Party Chairman Chris Vance said McDermott's comments about a coup "were the most irresponsible thing I've ever heard an American politician say."
"Sometimes politicians, like everyone else, will blurt out things they don't mean," Vance said. "But it sounds like he has thought about this carefully and really believes that."
The resolution Congress will vote on next week was negotiated between the White House and Congressional leaders of both parties.
"The president is not trying to bypass Congress," Vance said. "He's taking his case to Congress."
"If President Bush is engaged in a coup then his co-conspirators are Richard Gephardt and Joseph Lieberman," he said, referring to Democratic leaders.
About 200 people showed up for McDermott's meeting in the Beacon Hill Community Center. Nearly all were supporters.
Outside, four or five protesters carried signs objecting to McDermott's recent trip to Iraq and his comments about Bush and Saddam Hussein.
"Saddam Good — Bush Bad. This is Baghdad Jim's Mind On Drugs," said a sign carried by Brandon Swalley of Lakewood.
"I think he should be thrown out," she said.
When McDermott arrived, he was escorted into the hall by Seattle police and followed by a few protesters, one of whom shouted after him, "Our president is not a liar. If you want to say it, say it here but don't go to foreign lands to say it."
Inside the crowd was heavily in favor of McDermott's view. When opponents took a microphone to talk, they were shouted at and told to get to their question. Supporters, though, were able to talk uninterrupted and give anti-war speeches.
Pattern of deception
Late last week McDermott said that he may have overstated his case against Bush while in Iraq. But yesterday it was clear he believes there's a pattern of deception within the Bush administration to justify a war.
He said that Bush is using the memory of the Sept. 11 terrorist attacks to fuel a war with Iraq.
"One of the dilemmas we've had since 9/11 is that this country has been continuously terrorized by the government," McDermott said. "Every week they announce a new threat. 'Today is a code orange.' 'Today is a code red.'
"Granted it was an awful day. It was a heinous act. Nobody has anything but horror over what happened that day.
"But the message to draw from that day is not that we should suddenly go to war with the whole world, which is what the president is saying."
McDermott is convinced that Bush is bent on war with Iraq to distract voters' attention from a collapsing stock market and other problems at home.
"It is the oldest game in the book," he said. "They found this war very convenient to obscure people's views about what is happening domestically."
McDermott said he and two other Democratic members of Congress went to Iraq to see firsthand the effect of economic sanctions on the country, as well as to tell Iraqi leaders that if they didn't agree to weapons inspections there would be a war.
He said the demand for inspections was delivered to 15 or 20 government officials, but not to Saddam, who they did not ask to see.
"We knew there was no point in getting into a situation where we're shaking hands and smiling with somebody we don't really think is doing the right thing by the country or the world, and we knew that message would get to him."
Connecting the dots
McDermott's comments went much further than his television interviews from Iraq, in which he said Bush would mislead Americans in order to build support for a war.
When someone asked him if the war was meant to bolster U.S. oil interests, McDermott talked about what oil companies could gain from a war and said, "I'm not going to connect the dots exactly, but I think a dotted line certainly seems within the realm of possibility. ...
"Oil is certainly a part of it but I don't think it's the underlying issue." The underlying issue, he said repeatedly, is a fight over the Constitutional power to declare war.
"People that I trust say if we don't derail this coup that is going on, we are going to wind up with a government run by the president of the United States and all the rest of us will be standing around just watching it happen."
Another Bush Energy Co. Contributor in TroubleThe Daily Enron – October 8, 2002
(9/30/02) - Executives at troubled El Paso Corp. have good reason to wonder if once-bought politicians will stay bought. Company executives and employees gave over $2 million to the Republican Party and President Bush over the past 2 1/2 years.
Now, along with most other large Texas energy companies, El Paso finds itself under federal and state scrutiny as auditors, lawyers and shareholders try to figure out not if, but how crooked they have been.
While Enron gets all the press it might have gone unnoticed, but last week, a federal regulatory judge ruled that El Paso (which is the country's biggest natural-gas pipeline owner), illegally manipulated the California energy market during that state's energy crisis in 2000 and 2001. El Paso, the judge said, drove up natural gas prices by withholding supplies, costing California more than $3 billion.
El Paso's troubles threaten to further tarnish the Bush administration. The company gave more than half a million dollars to Bush during the time he was Texas governor and was running for president in 2000. On top of that, the company's employees contributed a total of $1.5 million to the GOP and GOP candidates in this midterm election, to be held on November 5.
Oh, and among those getting El Paso money, the President's brother, Jeb Bush, who is in a tight race for reelection as Florida governor.
"It is a political largess that has made El Paso, with 58,000 miles of natural gas pipelines and 14,000 employees, America's biggest oil-and-gas political donor in the election cycle that began in January 2001, state FEC documents...Since January 2001, the company has contributed $1.4 million, the overwhelming majority of it going to the Republican National Committee, its Senate and House fund-raising subcommittees and key congressional candidates, according to FEC documents and company filings with the SEC. El Paso's largest individual recipient during the last three years was Bush himself, FEC records show." (Los Angeles Times, Sept. 30)
If a company ever needed friends in high places, it's El Paso. A federal grand jury investigation is reportedly underway into possible illegal energy trading. The probe is being conducted by the Houston US attorney's office, which answers to Attorney General John Ashcroft. And, El Paso donated $2,000 to Ashcroft's unsuccessful 2000 Senate reelection campaign.
Then there's the SEC investigation of El Paso's bookkeeping, which is being conducted by another Bush appointee, SEC Chairman, Harvey Pitt. Finally the Federal Energy Regulatory Commission (FERC) is investigating El Paso as well. That agency is headed by yet another Bush appointee.
There is yet more person threatened by El Paso's troubles - Vice President Dick Cheney. For over a year a half the administration has refused to release documents from Cheney's Energy Task Force meetings. The administration, claiming executive privilege, says what companies and individuals it consulted to form its national energy policies is no one's business. It is known though, that energy companies dominated the task force.
The GAO and public interest groups have sued the administration for release of the documents, and so far court rulings have gone against the administration. When those appeals run out, most legal experts believe the courts will force release of the documents. That's where El Paso's troubles could come back to haunt the administration. Its national energy policy stresses the increasing exploitation of natural resources including drilling in national parks.
It just may turn out that most of the advice the administration relied on to formulate its national energy policy came from companies that were at that very time cooking their books, mugging consumers and screwing their shareholders, and, well, you get the picture...