Foxes in the Henhouse

Foxes in the Henhouse

Bush “Gets Tough” on Corporate Crime

By Michael I. Niman, ArtVoice 7/25/02

Most aspects of the economic collapse presided over by the current Bush administration, like the Reagan Recession years before it, have been quite predictable. Tax-cut induced deficit spending augmented by a slew of fat new military contracts for Bush campaign contributors have taken a foreseeable toll on the U.S. treasury. Clinton-era free trade agreements allowing American manufactures to “outsource” production, Nike style, to foreign sweatshops with few pollution or worker safety regulations have begun to take a heavy toll on the American workforce, forcing wages down while increasing unemployment. And a continuing reduction in social services and education spending, begun when Papa Doc Bush was Vice President, have assured that those born into poverty would likely remain in poverty, further crippling the nation’s economic health.

Cannibalistic Capitalism

But when it comes to the economy there’s always a twist. What few people could predict was that the main hit to the stock market, and hence, the economy, would be the result of a sort of capitalistic cannibalism. Driven by a relentless greed and shameless lack of ethics that a mere decade ago would have been culturally unacceptable, even among the corporate set, corporations have turned to ripping off their own naïve investors. Welcome to the Bush era.

The Bush administration, far from being the folks able to police this mess, are up to their necks in complicity. George Bush, usually seen as a kind of slow behind the curve sort of fellow, actually turns out to be a pioneer in the field of corporate rip-offs. In 1989, while Bush was a board member, and a member of the financial audit committee, of Harkin Energy Corp, the company pioneered “aggressive bookkeeping,” hiding millions of dollars in losses through the sale of a subsidiary to a group of insiders. The SEC censured Harkin and forced it to amend its books to show the losses. Bush sold his own inflated Harkin stock in for $848,000 in 1990, two months before the company reported further losses forcing its stock value down to a quarter of the value it held when Bush sold it. Though, as an insider, he was required by the SEC to immediately report the sale, he waited for 34 weeks before reporting it. Bush was quietly investigated and censured by the SEC but escaped criminal charges, probably due to the fact that his father was president at the time. Paul Krugman, writing for the New York Times, reports that Bush’s profit from his timely dumping of Harkin stock was “about four times bigger than the sale that has Martha Stewart in hot water.”

Cheney’s Ill-Gotten Millions

Vice President Dick Cheney is also in a bit of luke warm water. It seems that in his former position as CEO of Halliburton, he presided over an Enron style cooking of the corporation’s books. As with the Enron case, this bit of “aggressive accounting” was done to inflate perceived corporate profits, and hence, stock values. Observers estimate that under Cheney, Halliburton overstated profits by a minimum of $100 million. Cheney, who “earned” over $36 million during his last year with Halliburton (2000), cashed out when stocks were overvalued. Today he is facing an investor lawsuit as well as a criminal investigation. Halliburton also received almost $2 billion in federal loans under Cheney’s watch while it’s subsidiaries conducted business with Libya, Iraq and Burma.

The scandals tying the White House to the current crisis of corporate malfeasance seem to have no limits. Recent disclosures show that former Enron Vice Chair and current Bush administration Secretary of the Army, Thomas White Jr. was the likely architect for Enron’s manipulation of the California Energy market. The resultant energy “shortages” left Californians struggling to cope with electric brownouts and exponential increases in the wholesale rate of electricity. White also cashed in his Enron stock before the price dropped from around $90 to a few cents per share. More recently in his new position at the Pentagon, White has been lobbying to privatize energy systems at military bases, a move which would have allowed Enron to do to the military what it did (under White’s leadership) to California.

Saddam Saddam Saddam!

All three scandals involving Bush, Cheney and White came to light earlier this month, just as Adelphia and WorldCom were going down the tubes because of their own shenanigans. After each revelation I’d go out and buy a newspaper, naively expecting some news. Yes, the Bush and Cheney stories were covered, albeit without the more incriminating details – but they were downplayed at the same time. The lead headlines around the country ran from the predictable, albeit Orwellian, “Bush gets tough on corporate crime,” to the even more predictable, “Bush: Saddam Must Go.” The mainstream media has yet to cover the White scandal.

Bush grabbed a few headlines with his rhetorical proposal to increase penalties for corporate criminals, but it’s as toothless as it is hypocritical. Yes, Bush and Cheney seem to have violated the law, but White’s dirty work at Enron, which clearly had the most detrimental effect on ordinary Americans, was not illegal under current law. And given the climate in the White House and Congress, similar corporate scams will continue to be legal for years to come as corporate criminals from the likes of Enron work behind closed doors writing White House energy policies.

Enron’s White House Posse

The crowd squatting in the White House these days is not just corporate-friendly. It’s corporate – period. Take Enron, which is this year’s most notorious corporate criminal. Their connections to the White House seem limitless. First, there’s Bush’s chief advisor, Karl Rove, who owned a quarter million dollars of Enron stock, with nobody knowing for sure when he cashed out. Then there’s Enron advisor Lawrence Lindsey, who 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. Then there’s Bush’s campaign advisor, Edward Gillespie, who took a half-million dollars from Enron as a lobbyist after Bush was elected. There’s Texas Republican Senator Phil Gramm’s wife Wendy, who 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 Commodity Futures Trading Commission, where she fought to eliminate energy futures contracts from governmental oversight. Other Republican homies on the Enron payroll include pundit William 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, turns out to be part of the Enron family. Before taking the job at the SEC, he worked for Enron’s accounting firm, the Arthur Anderson company, which was recently convicted of obstructing justice for destroying evidence in the Enron case (for more info on Enron see 2/7/02 ArtVoice “Getting a Grip”).

The Enron connections are just the tip of the proverbial iceberg at the White House. Many other multinationals are also represented both in the Republican and Democratic parties. This is why there has been no meaningful campaign finance reform other than the recent bill limiting union and public interest contributions. It explains why corporations can now buy “pollution credits” rather than complying with environmental regulations. It explains why global trade agreements open America’s borders to sweatshop goods, and why the minimum wage has stagnated below the living wage. It explains why billionaires just got a tax cut while homelessness is exploding. It explains why Coke and Pepsi have free reign to sell their caffienated sugar water in countless public schools as childhood obesity reaches record levels. It explains why there is an “acceptable” level of arsenic in our drinking water. It explains why prescription drugs are so expensive. And it explains why our democracy is facing an unprecedented threat.

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