Enron for Dummies

  by Michael I. Niman, ArtVoice, 2/7/02,  HighTimes OnLine, 2/13/02

  During the last year Enron played a pivotal role in writing the Bush administration’s new energy policy – a policy that deregulated energy industries while removing government oversight. They were also the largest corporate player responsible for California’s recent “energy crisis.”  Ostensibly in the business of buying and selling energy on the new open market, they also regularly purchased political clout on the electoral auction block by bankrolling political campaigns on both the local and national levels, buying the affection of politicians like drunken sailors at a bordello.  All the while, however, they enjoyed relative obscurity flying below the radar of the national consciousness and its media sculptors.

Like all good parties, Enron’s soirée ran its course, crashing and burning with the fury of the Hindenburg, channeling the flames of hell directly into the Bush White House where they’re now burning out of control, threatening to consume the dogma of free market economics while exposing a level of influence peddling and corruption shocking even to seasoned Whitehouse observers.   Suddenly a bleary-eyed America is waking from its stupor, mumbling, “En-what?”

What or Who is Enron?

  Enron emerged from the high flying ‘90s as a star among new economy corporations.  Like Nike and Tommy Hillfiger, factory-less companies that contract out for products they subsequently brand, Enron essentially produces nothing.  Nike buys and sells sneakers.  Enron trades energy. Originally an oil pipeline company, they shed most of their bulky physical assets during the high flying 90s, transforming themselves into the ultimate weightless corporation, buying and selling anything and everything ranging from energy futures to internet bandwidth, while essentially producing almost nothing.  On paper they were worth more than GM, but in reality the company held few assets other than a handful of generating plants.  Enron was a paper tiger.

Their product was also nonexistent.  They didn’t invest, for example, in building a new energy grid or significant new generating stations.  To the contrary, they invested in the concept of an energy shortage.  They bought energy, eventually taking control of approximately 25% of the nation’s wholesale electricity supply.  They then reaped astronomical profits last summer selling this electricity to brownout-plagued Californians, with prices shooting up into the stratosphere.  The irony is that California’s electricity continued to flow from the same generating plants it always came from, into the same homes where it was always consumed.  Enron didn’t build new generators or power lines.  No.  They simply inserted themselves, on paper, between the generators and the consumers in what historians will no doubt record as a brilliant and sinister paper shuffle.  Electric flow stayed the same.  All that changed was the concept of what electricity was and who could own and trade it.  In the end Enron became the central player in a gargantuan rip-off – dwarfed only by the S&L crisis of the 1980s.

  California’s soaring electric rates sent its economy, the fifth largest in the world, into a tailspin.  Power starved manufacturers laid off thousands of workers.  Scores of small businesses, unable to keep up with their electric bills, filed for bankruptcy.  And working Californians were forced to choose between food and electricity.  Many chose food and conservation, in effect boycotting overpriced power – a move that added to Enron’s financial woes as electric demand and prices dropped.

Despite the personal pain and economic mayhem, Enron’s California fiasco violated no laws.  Years earlier, California, seduced by false promises of cheap electricity, adopted a Republican energy deregulation plan that opened the door for Enron and its imitators to seize control of California’s power.  When the good ship Enron came crashing down, they were in the process of trying to do to the nation what they did to California.  Key to their plan was a corporate accrual of political power unprecedented in American history.  A quick look at George W. Bush’s White House illuminates both Enron’s power and their plans.

Enron’s Boyz in DC

  Enron and Enron CEO Ken Lay together donated $113,800 to the recent Bush presidential campaign, and another $888,265 to the Republican National Committee, while hedging their bets by showering the Democratic Party with spare change.  In all, according to Vermont Congressperson Bernie Sanders, they donated nearly $6 million to both the Republicans and Democrats during the past year.  Enron’s accounting company, Arthur Anderson, showered another $5 million on the two parties while at the same time looking the other way as Enron overstated its profits and defrauded its investors.  

  Enron’s political investments paid off in spades.  Enron advisor Lawrence Lindsey became George W. Bush’s economic advisor, taking an Enron energy policy proposal and incorporating it into Bush’s election platform along the way.  Another former Enron Advisor, Robert Zoellick, became Bush’s Federal Trade Representative.  Bush's secretary of the Army, Thomas White Jr., is a former Vice Chair of Enron, who in recent months cashed out his $50 million plus worth of Enron stock before the share price dropped from $90 to 29 cents.  At the Pentagon, White argued for privatizing energy systems at military bases.  Then there’s Bush’s Wacko Treasury Secretary Paul O’Neill, the former CEO of Alcoa Aluminum.  His lobbying company, Vinson and Elkins, was the third largest contributor to Bush’s presidential campaign, hence the honcho position at the Treasury Department.  Enron was one of Vinson and Elkins’ largest clients. 

The list goes on.  Bush’s chief advisor, Karl Rove, owned a quarter million dollars of Enron stock, with nobody knowing for sure when he cashed out.  Bush’s campaign advisor, Edward Gillespie, took a half-million dollars from Enron as a lobbyist after Bush was elected.  Texas Republican Senator Phil Gramm’s wife Wendy was on Enron’s board of Directors, compensated to the tune of about $1 million for her service to the corporation.  Immediately before joining Enron’s board in 1993, she worked as chair of President Bush Senior’s (the Bush who was elected) Commodity Futures Trading Commission, where she fought to eliminate energy futures contracts from governmental oversight.  Other Republican homies on the Enron payroll include pundit Wiliam Kristol, public opinion pollster Frank Luntz and speechwriter/talking head Peggy Noonan.  Even Harvey Pitt, the head of the Securities and Exchange Commission, the federal agency in charge of policing stock transactions such as the Enron insiders’ sell-off, turns out to be part of the Enron family.  Before taking of the SEC, he worked for Enron’s accounting firm, the Arthur Anderson company.  That’s the same company responsible both for Enron’s “aggressive accounting practices,” and for shredding documents associated with these practices. 

Enron’s Boy in the White House

  It gets thicker.  Even the president himself seems to have the Enron mark branded on his butt.  According to Rodolfo Terragno, an Argentine Cabinet minister during the Reagan years, then Vice President and former CIA director George Bush’s son, George Junior, contacted him on behalf of, yep, you guessed it - Enron.  It seems young George was aggressively using his family’s clout and his position as the Vice Presidential son, to close a pipeline construction deal for Enron.  Today Enron executives deny ever having employed George W. Bush in any capacity, either as an employee or as a consultant.  With your average crackhead now having more credibility than Enron’s top brass, however, such denials must be taken with a grain of salt. 

  President Bush is also, by all accounts but his own, quite cozy with Enron’s former CEO, Ken Lay, the corporate captain who cashed out and bailed just as the ship was going down.  Though Bush had previously identified Lay as a close friend, referring to him as “Kenny Boy,” after the Enron crash he claimed to only be a passing acquaintance, arguing that Lay supported his opponent, Ann Richards, during his 1994 gubernatorial race.  In reality, Lay and Enron’s political PAC donated $12,500 to Richards’ campaign, while showering the Bush campaign with $146,500.  So much for presidential credibility.  Bush is Enron’s boy. 

So what did Enron get for all their investments?  Well for starters, the Bush “economic stimulus” plan, if passed, would have the feds cut a check to Enron for $254 million dollars – this despite the fact that they used over 600 offshore subsidiaries in a successful scheme to avoid paying any federal taxes for four out of the last five years, a period when their profits soared.  But Enron wasn’t content to simply raid the public till.  More importantly, they used their influence to shape federal energy policy, opening the door for Enron to take their Californian scam to a national level.  Vice President Dick Cheney, an oil man himself, met with Enron officials at least six times while drafting the Bush administration’s national energy policy.  The Bush administration also sat out last summer’s California energy debacle while Enron savaged  the nation’s most populous state, costing California’s ratepayers billion’s of dollars while Enron’s stocks soared. 

Good Riddance!

  Now Enron is down for the count in bankruptcy court.  The lies piled higher and higher upon each other, eventually smothering the paper giant as execs looted the palace – and the whole house of cards came tumbling down.  It’s the largest bankruptcy in American history.  Enron is dead.  But make no mistakes about it – this is a good thing.  I spit on their proverbial grave and wish good riddance to them.  Enron was the ultimate parasite.  They were in the process of doing to the nation what they did to California.  For America to live and prosper, they had to die.  No one should lament this loss.  Especially not Californians, who just saw their wholesale electric rates drop by well over 20% in the wake of the Enron collapse. 

  As for the so-called “poor” Enron employees who lost their retirement savings as Enron’s Potemkin empire came crashing down – I have no sympathy for them either.  Enron was not a widget maker – they were the ultimate racketeers.  Enron’s employees more than anyone else knew what Enron was about.  They saw their pension funds magically shoot up like bottle rockets as countless Californians lost their jobs, their businesses, and, in some cases, their life savings.  Yet they happily stayed vested during these golden days.  Ultimately they were victims of their own greed.  It might sound cold, but to hell with them.  Not only did they choose to work for Enron, possibly an unavoidable decision in some cases, but they chose to invest in Enron as well.  Their investments were hurting people.  Their work for Enron was hurting people.  Their company tried to suck the wealth from society while producing nothing.  In the end they’re left with nothing.  No money, and from me, no sympathy. 

  Unfortunately, institutional investors such as pension plans and mutual funds owned 64% of Enron’s stocks.  Again, however, the issue of personal responsibility arises.  Investors need to research their mutual funds to make sure their own money isn’t undermining their interests and moral beliefs. People also need to get more involved with their own pension plan management and loudly voice their beliefs and concerns.  It’s Eleven o’clock – do you know where your money is?

  As much as those in power would like us to forget about Enron, the energy giant’s collapse will go down as a watershed in American history.  There is no magic in an unregulated free market – it’s just a mugger’s paradise.  Corporations might be running the government, but their own investors have lost both their confidence and their trust in them.  Most importantly, with Enron crashing down with an apocalyptic thud, possibly louder than that of the World Trade Center, corporate misbehavior and greed is finally on the national radar.   Hopefully not even a war can distract us from this debacle.

  Dr. Michael I. Niman’s articles are archived at http://mediastudy.com/articles

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