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Beast of the Month - September 2002
Enrongate, Titanic Business & Political Scandal
"I yam an anti-Christ..."
John Lydon (aka Johnny Rotten) of The Sex Pistols, "Anarchy in the UK"
George W. Bush, on his sleazy dealings involving Harken Oil, suddenly discovering moral relativism.
WorldCom. Global Crossing. Tyco. Martha Stewart. The level of sleazy corruption surrounding the world of Wall Street has sunk to a low not seen (at least) since the Reagan-Bush years. Nearly every week this summer, a brand new scandal seemed to hit the papers about yet another korporate giant engaging in insider trading, "creative" accounting schemes or some other financial chicanery.
Yet, with all due respect to the other nominees (most notably WorldCom, the largest bankruptcy in US history) the scandal surrounding Enron is the most important of all. For in Enrongate (The Konformist Beast of the Month) the level of the bogus accounting and the payoffs to well-placed politicians combined to a startling new low. The end result is a monolith that used its political connection to commit mass larceny on the largest state in the country, and yet despite its grotesque gouging still managed to go quickly belly up, leaving its workers in a pit of economic oblivion. And like Watergate was about more than a mere second-rate burglary gone awry, Enrongate is a code word for the scandal of using political capital for private profit - a scandal that surrounds the slimy BushMob with a rotten stench.
Enrongate is such a Beastly affair, where does one start in exposing it and giving Beastly credit? Let's go straight to the top of the Houston, Texas company for beginners - though the scandal does reach to even higher echelons of power:
* KENNETH LAY - Chairman and CEO. In 2001, sold nearly 500,000 shares of Enron for over $16.1 million, while giving speeches about the supposed great future of the company.
* LINDA LAY - Kenny Boy's wife. Did an incredible impersonation of Marie Antoinette by feigning victimhood over the whole scandal, then opening a thrift shop called "Jus' Stuff" to sell their luxury items.
* JEFF SKILLING - President and CEO of the company whose resignation in August 2001 previewed Enron's collapse. Managed to unload stock worth over $15.5 million.
* ANDREW FASTOW - Chief Financial Officer. He is the alleged mastermind of the web of off-balance sheet partnerships to hide Enron's losses and launder profits.
* RICHARD CAUSEY - Chief Accounting Officer. In the first of many conflicts of interest, previously was a senior manager of Arthur Andersen in Houston (the accounting firm for Enron) who worked on the Enron account.
* THOMAS WHITE - High-ranking executive who headed Enron Energy Services, the division behind the looting of the California energy market. Became Shrub's Army Secretary on May 31, 2001.
* WENDY GRAMM - As George H. W. Bush's lame-duck chairwoman of the Commodity Futures Trading Commission, she exempted the company's energy-swap operation from government oversight. Soon after, she resigned her post and joined Enron's board of directors, serving (suspiciously enough) on the company's audit committee, which had access to the company's financial dealings.
* PHIL GRAMM - Though not officially a member of Enron, for all practical purposes he might as well have been. Besides the money going to his wife Wendy (see above) he is the second highest recipient of Enron's funds in campaign contributions at $97,350. (The highest was his fellow Texan Kay Bailey Hutchinson at $99,500.) In December 2000, attached a stealth rider to an appropriations bill that exempted energy commodity trading from government regulation and public disclosure.
* ED GILLESPIE - Former Republican National Committee communications director and a top campaign aide for Shrub's losing presidential election campaign. Became a top lobbyist for Enron.
* ROBERT BENNETT - Washington-based insider lawyer for Enron. Previously known for being Slick Willie's lawyer in the Peckergate fiasco.
The first signs of mass kreepiness by the Enron crowd came in late 2000, when the ultimate wet dream of Enron's influence peddling - "deregulation" of the energy market - came into full effect in California. Immediately, contrary to the claims of those who promoted the scheme in the first place, prices for electricity skyrocketed (with costs increasing up to 40 times more than before the market change.) Widespread blackouts also occurred, along with the bankruptcy of PG&E (California's largest utility company) and the decimation of budget planning in the nation's largest state. At the time, while much of the korporate media blamed the crisis on a lack of power plants in California (due to supposed radical environmentalism, according to the most reactionary voices), alternative media outlets (including The Konformist) smelled a rat and saw evidence of collusion and price-fixing to swindle customers. The suspicion has since been proven correct, as in the aftermath of the Enron bankruptcy, a list of clever names have been uncovered for strategies to manipulate California energy markets: Fat Boy, Death Star, Get Shorty, Ricochet and Load Shift.
Of course, they weren't alone in their manipulation (though certainly the largest player going) as it seems nearly every major company involved in the California market was playing scam games for millions. Most notably are five companies with headquarters in Houston right next to Enron, all of which are now facing their own SEC investigations in price collusion and/or weasel accounting:
* CMS ENERGY
* DUKE ENERGY
* EL PASO
* RELIANT ENERGY
The fixation on cute nicknames by Enron didn't begin or end in California: Raptor, JEDI, Chewco and LJM are among the names associated with the various partnerships used to hide profits and losses. Such schemes were known about and vouched for by Arthur Andersen, the giant accounting firm that had its reputation decimated by the entire affair:
* JOSEPH BERARDINO - CEO of the firm through the entire scandalous liaison.
* DAVID DUNCAN - Auditor of the Enron books, plead guilty to shredding documents related to the case.
* NANCY TEMPLE - Andersen attorney who "reminded" the Enron audit team in October 2001 of the policy to destroy all "extraneous" papers and e-mails. Shredding of documents began eleven days later.
The woes of Arthur Andersen have deservedly received a lot of coverage - though in many ways it has helped give Enron and members of the Bush team breathing room. But less has been said of the Wall Street investment banks that have been snared in Enrongate:
* CITIGROUP & JP MORGAN CHASE - The two firms loaned Enron $5.3 billion, then attempted to disguise the loans as commodities transactions and derivative swaps to hide the fact Enron was desperate for cash.
* MERRILL LYNCH - Fresh off of settling a conflict-of-interest lawsuit with the New York Attorney General's office for $100 million (in private emails, shares given a "buy" recommendation were described as a "piece of shit") it was alleged - among other Beastliness - an analyst was ousted from the firm because of skeptical views on Enron. Enron informed Merrill Lynch they lost a $750 million stock offering because of his reports.
If only Enron didn't exist, the following korporate scandals would deserve headlining Beastly status in their own right. Unfortunately, each of these non-Enrongate scandals can merely share honorable mention in this climate. The top ten...
10. XEROX - Had to restate $6.4 billion in revenues and $2 billion in earnings since 1997. Ho hum.
9. KMART - Attention Kmart shoppers! The first major bankruptcy in the post-Enron world, it was a sign that things were much worse than most believed. As their debt was reduced to junk status and their stock value imploded, mass layoffs ensued - but not before an $11.5 million giveaway to the CEO who got them in the mess in the first place.
8. QWEST - Under the reign of CEO Joseph Nacchio, has been saddled in $26 billion of debt and overstated revenue by $1 billion. According to Fortune Magazine, director Phil Anschutz was the greediest executive of them all, having pocketed over $1.5 billion in stock sales.
7. ADELPHIA - John Rigas and family turned Adelphia Communications into a personal piggy bank, bankrupting the company after taking loans worth $3 billion. To placate those who found Shrub's handling of Enrongate so limp-wristed, the elderly Rigas was taken away in handcuffs last month.
6. TYCO - The worldwide conglomerate has had $80 billion in market value wiped out this year. Meanwhile, CEO Dennis Kozlowski (who made $112.5 million in salary and compensation last year and has cashed out at over $258 million) has been indicted for tax evasion charges.
5. GLOBAL CROSSING - The fifth largest bankruptcy ever, Chairman and founder Gary Winnick pocketed $734 million in stock value that suspiciously looks like insider trading while saddling the korp in $12.4 billion in debt. Having invested heavily in George H. W. Bush, Winnick and co. have strangely remained unprosecuted for their deeds.
4. IMCLONE/MARTHA STEWART - ImClone CEO Sam Waksal was indicted on fraud, perjury, obstruction of justice and conspiracy charges after allegedly attempting to sell his company stock the day before the FDA announced it wouldn't approve a cancer drug developed by the firm. Meanwhile, the ever-annoying Stewart did manage to sell hers, which may have been due to a tip-off by her "good friend" Waskal or their shared broker from the fine folks at Merrill Lynch. Bonus points for wondering what kind of interior decoration tips Ms. Stewart will have for her possible future fellow cellmates.
3. WORLDCOM - At any other time, the largest bankruptcy in history would win hands down as the Beastliest of all Korporate scandals, especially as Bernie Ebbers left the company $30 billion in debt while personally "borrowing" over $400 million. Sadly, this only qualifies as number three (and that's while excluding Enron and Arthur Andersen from the list) because of...
2. HALLIBURTON - In these times, the overstatement of "merely" $445 million in profits and the golden parachute to Dresser Industries (a firm hampered with asbestos lawsuits that, coincidentally, first hired George H. W. Bush in 1948 when he started his career in Texas oil) wouldn't seem like a big deal. But when the korp behind it was run by vice "president" Richard "Donkey Dick" Cheney at the time (and gave him a $30 million golden parachute in his own right for his time destroying shareholder value and laying off 10,000 workers in 1999) the hypocrisy of White House finger wagging over korporate wrongdoing seems to reach an unbelievable low. A low, that is, until...
1. HARKEN OIL - True, Harken was relatively a small fry operation, and little things like fraudulently overstating profits or insider trading by board of directors for nearly $850,000 is pretty much expected in the oil industry. But in this case, the board director of this failed company was "president" George W. Bush. The accounting scams pulled by Harken seem like textbook examples handed to Enron and WorldCom, and for his blatantly criminal behavior, Shrub received a pass from the SEC thanks to his daddy being president.
Which leads us naturally back to the BushMob. Ever since the 2000 Votescam, it seems every dirty scandal goes back to this slimy bunch. But the inbreeding between the Bush Team and Enron is too transparent to ignore...
* MARC RACICOT - The GOP Chairman was a lobbyist for Enron.
* ROBERT ZOELLICK - The US Trade Representative was an Enron consultant on the advisory board before joining the Shrub Administration.
* LAWRENCE LINDSEY - The Bush Team's Chief Economic Advisor was a board director at Enron.
* KARL ROVE - Shrub's chief political advisor owned up to $250,000 in Enron stock while he influenced the administration's energy policy, keeping Ken Lay personally updated by phone.
* JOHN ASHCROFT - The Attorney General has received $57,000 in campaign contributions from Enron and its employees. Forced to personally recuse himself from the Enron criminal investigation due to conflict of interest.
* SPENCER ABRAHAM - Energy Secretary also received campaign contributions from Enron, and used Lay as a prominent advisor early in his reign.
* DONALD EVANS - Commerce Secretary received phone calls from Lay in October 2001 of impending Enron doom. Claims he never informed Shrub of this fact, though he was Dubya's campaign manager in 2000.
* PAUL O'NEILL - Treasury Secretary also received two phone calls from Lay as Enron collapsed, yet claims he too told nothing about this to Bush Jr.
* PAT WOOD III - In one of the more swine-line connections, the Federal Energy Regulatory Commission (FERC) Chairman was personally recommended by Lay himself. In his role as FERC head, blocked attempts to stop the California energy crisis and allowed Enron to continue its swindle.
* HARVEY PITT - Not to be outdone in the Conflict-Of-Interest Championship Sweepstakes, the Securities and Exchange Commissioner was the lawyer representing the big five accounting firms, including Arthur Andersen. Pushed for the laissez faire attitude on regulation that aided the accounting scandals to happen in the first place.
* GEORGE HERBERT WALKER BUSH - A power player still lurking in the shadows, Poppy Bush is a longtime friend of Ken Lay, having received campaign contributions and $50 grand for the George Bush Presidential Library Foundation.
* RICHARD "DONKEY DICK" CHENEY - Texas oilman Cheney met with Enron executives four times during the formulation of Energy Policy in 2001. In a kreepy move echoing Tricky Dick's, has thus far refused to release to the General Accounting Office (GAO) documents relating to the White House Energy Task Force, citing "executive privilege."
* GEORGE W. BUSH - Last but not least, the business relationship between Dubya and "Kenny Boy" is so well documented it hardly needs to be brought up. So much for "restoring integrity to the White House."
How will it all end? It depends on what is investigated. For one thing, while most of the focus in the Enron scandal has been on using offshore accounts to hide company losses, less has been made of the secret partnerships to siphon profits. What are the names on the partnerships? Does it go higher than Kenny Boy? It is likely that former Enron Vice Chairman and Chief Strategy Officer Clifford Baxter had an idea what the names were. Unfortunately, Baxter supposedly committed suicide before he could cooperate with any investigators.
Curiously, the last major economic looting of the USA, the S&L Crisis, also had major ties to the Bush family and Texas. As noted by journalist Peter Brewton in The Mafia, CIA and George Bush, the connection between economic swindling and the Bush family was no accident: the entire S&L scandal had such ties to the CIA it appears to have been promoted by the intelligence community. Coincidentally, as noted by Tom Flocco at Rense.com, Enron's top security team included four "former" CIA agents, including Director of Business Analysis David M. Cromley. Altogether, Enron had at least 20 CIA agents on its payroll over the years, who allegedly used "info" gleaned from a satellite project called 'Echelon,'" which is run by the NSA. How they received top secret intelligence can best be explained by the idea that they were there on-loan by the CIA: supposedly, the operatives were allowed to return to CIA payroll before the Enron collapse.
Suddenly, Clifford Baxter is looking a lot like Vince Foster.
But rather than ask how it will end, a better question is how it should end. And that answer appears to be simple: the incarceration of Lay and his cronies should be a given, not to mention the incarceration and impeachment of Donkey Dick and Dubya over their similar crimes at Halliburton and Harken. As was said four years ago during the Peckergate scandal, for the sake of rule of law, justice demands nothing less.
In any case, we salute Enrongate (and all those involved in it) as Beast of the Month. Congratulations, and keep up the great work, dudes!!!
Special thanks to Yahoo Full Coverage:
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