The Enron/Bush Connection
As I write this it is 'Election Day 2002'. Unfortunately, because
our press deadline is imminent, The Review is unable to offer any analysis
of the election results until our November 21st edition. However, this
does not prohibit us from offering a few insights & perspectives on
significant factors & issues framing this election year that the
'mainstream' media have opted to either neglect or downplay in their
reporting.
The first topic to come to mind is the anticipation surrounding this first
major election cycle since G.W. Bush became President by virtue of five
conservative Supreme Court justices, and without having the backing of a
majority of Americans behind him.
Will people remember the debacle of two years ago and will they remember
how radically things have changed in America over the past two years?
The number of people unemployed since Bush 'took' office has risen by 35
percent. We had a federal surplus of $281 billion back when Bush was
inaugurated; today we have a deficit of $157 billion.
In terms of the economy, two million jobs have been eliminated since Bush
began his occupation of the Oval Office and the stock market is down 34
percent since January of 2001.
In terms of health care, another 1.4 million people now have no health
insurance, making it a total of over 41 million Americans who can't afford
to get sick, and only 13 corporate crooks out of hundreds have been
indicted (none of them close personal friends of Mr. Bush).
Indeed, the specter of the Enron and Worldcom scandals is being
conspicuously downplayed in this election year cycle, but the tale of how
these companies came to swindle shareholders and strip workers of their
pension plans is rarely articulated in the media.
In the mid-90's, the business community launched a major lobbying campaign
for a law to limit shareholder litigation against corporations. This
resulted in the Private Securities Litigation Reform Act (PSLRA), which
then President Clinton vetoed. However, Congress overrode this veto for the
first time in Clinton's Presidency.
Under the old law, the attorneys for shareholders could issue subpoenas and
take depositions as soon as a lawsuit was filed.
Under the new law the plaintiff first has to persuade a judge to reject a
defendant's motion to dismiss the case, meaning that defendant's such as
Enron executives did not need to devote much of their time, money, or
reputations defending an action until months have a lawsuit was filed,
affording them ample time to cook books and shred evidence.
Attorney Bill Lerach eventually filed a complaint against Enron that was
nearly 500 pages long and listed 80 defendants. They included Kenneth Lay,
the former chairman; Andrew Fastow, the former chief financial officer; two
law firms that advised the company, Kirkland & Ellis and Vinson & Elkins,
the accounting firm of Arthur Andersen, which was later convicted of
obstruction of justice in connection with the Enron case; and nine
investment banks that made deals with Enron, including among them Citigroup
and JP Morgan Chase.
One of the key challenges in forging a successful suit for accountability
against the malfeasance of Enron executives is the fact that it is now up
to private attorneys to press the case for public accountability that at
one time was placed under the jurisdiction of the Securities & Exchange
Commission.
Traditionally, the SEC has been the arm of government charged with
protecting investors, but under President Reagan and the first President
Bush, deregulation ruled at the SEC and it grew weaker. Moreover, the
Republican Congress did much to undermine Arthur Levitt, who ran the agency
under Clinton.
The second President Bush named Harvey Pitt, one of the accountant's
lobbyists, to lead the agency. Though Pitt has changed his tone recently,
he appears to have little use for any enforcement activity - whether by the
SEC itself or through shareholder class actions.
It was only months after the Enron scandal broke and the stock market
started tumbling in an election year that in a rare moment of
bipartisanship, Congress passed and signed the Sarbanes-Oxley bill; a new
law that lengthens prison sentences for white-collar criminals, requires
CEO's to vouch for their companies' reports, and tightens the supervision
of accountants.
How this law will affect the restitution of those ravaged financially in
the Enron case remains to be seen. But the implications to each of us
economically are still being felt.
Many people have lamented dramatic increases in home and auto insurance
this year, with insurance companies claiming increases are due to the
amount of claims filed and rising costs. Rarely do they admit nor address
the fact that many of these major insurers invested their portfolios into
Enron stock; so again, the public pays for the way G.W. Bush looks after
his well-heeled insurance buddies.
Indeed, in a Special Investigations Division report by the Committee on
Governmental Reform in the U.S. House of Representatives, the Committee
found that Enron Corporation was President G.W. Bush's number-one career
patron. Since 1993, Enron and its employees gave the President $736,800 in
political & related contributions. The committee also found that prior to
the collapse of Enron in December 2001, the company appeared to have wide
access to officials in the White House and federal agencies.
Questions have been raised about the number of contacts the company had
with the Bush Administration. To date, however, the Bush Administration has
refused to provide a comprehensive accounting of its contacts with Enron.
In January, the Bush Administration wrote Rep. Henry A. Waxman to disclose
six contacts between Enron and White House officials on energy policy.
Four months later, the Administration wrote Senator Lieberman to disclose
at least 18 additional contacts on energy policy. But the letter failed to
disclose significant Enron contacts with the White House, such as Enron
Chairman Ken Lay's conversation in October 2001 with OMB Director Mitch
Daniels about the repeal of the alternative minimum income tax.
Regardless of the outcome on Election Day, this is something all citizens
should think long and hard about in the weeks and months ahead.