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The Enron System Works-Well,For Some People


Hah, say my liberal friends, the Enron disaster proves that the system doesn’t work. Now, the government must step in and regulate the corporations. I’m all for regulating corporations, but my question is: what system doesn’t work and for whom doesn’t it work?

 

The system worked well for Texas Governor Rick Perry (R), who received from Enron more than $200,000 from 1997 through July, 2001. Perry used the money to build his campaign war chest and probably for some lush meals, but when his Democratic gubernatorial challengers said that ethics demand that he donate the tainted money to a fund for laid-off Enron workers, he told his foes to go stuff it. He had worked within the system and this is Texas, USA. The thousands who lost their Enron jobs and the tens of thousands who watched their retirement savings disappear when the company’s stock crashed now understand the American system. It works just fine for Governor Perry, but not so well for them. Who said that our great free enterprise system, which has worked for the wealthy classes through depression and boom, through war (especially) and even peace ought also to be just and fair? Did any of us think we learned that lesson in school? Certainly not in private school!

 

Enron executives understood that the system offered ways to make lots of money if you could convince (buy) politicians to change some laws and persuade (bribe) administrators to rule in your favor. That, by the way, is exactly what the system is about.

 

So, the Enron bosses, freed from regulation and careful scrutiny by the system’s own rules, organized a network of some 2,000 subsidiaries in more than 20 states and 60 foreign countries. Enron owned subsidiaries in offshore tax havens such as the Cayman Islands; others they established under legal loopholes in Brazil and England.

 

But to hide their business (gambling?) losses and then have the stockholders (pensioners) pay the sordid debts of phantom companies they had hidden from public view Enron executives didn’t use only overseas arrangements.

 

They had also made Delaware the home to the 685 Enron subsidiaries. Enron’s accounting hanky panky worked in Delaware. In other words, the system worked  – for the lawyers and other intermediaries whose employment derives from the creation and sustenance of corporate accounting tricks.

 

An Enron exec didn’t even have to go to Delaware to start a corporate entity in say Wilmington, the state’s capital. Just surf the Web or scan a business magazine in the dentist’s waiting room and you’ll see ads for Delaware-registered corporation agents. For less than $100 you can open a business in a place where you’ve never been, without an office, phone number or any personnel. It’s magic. You don’t have to tell anyone how much you’re making or losing, what business you’re actually doing. In fact, you can register your corporation under the name of Alfred E. Newman and literally not have to worry that anyone will get suspicious or even care. What a system! Enron chartered subsidiaries in Delaware and they lost more than $400 million over the past four years. Supposedly, these Delaware entities had invested in foreign power plants.

 

Delaware offers corporate hustlers speed, secrecy and state tax exemptions. The state woos slimy corporate customers by advertising its business-friendly courts. You can find the stolid old conservative Fortune 500 alongside international criminals. They all share a common interest in laundering money, so as not to pay taxes, to hider losses or gains from stockholders and regulators and in general to screw someone in the course of making money.

 

That defines the system. And, boy does the system work for those who have the funds to hire the best lawyers and accountants to do the paperwork The system permits, indeed encourages wealthy scoundrels to circumvent taxes and elementary accountability; the rascals’ lawyers and accountants have learned the system in our top business and law schools so that after they graduate they can help slide their slimy clients through the laws’ narrowest loopholes.

 

But so greedy had the Enron executives becomes, that their own accountants blew warning bugles and so the executives began to dump their Enron stock as it started its downward spiral, while simultaneously urging employees and pensioners to buy the stock they knew had problems. As CEOs sold literally millions of their own shares they concurrently forbade company employees from selling any of their Enron stock.

 

The system also allowed for “accounting errors” of $1 billion in “equity

adjustments” from another Delaware partnership. Delaware has chartered more than half a million businesses that can practice voodoo accounting and still remain on the windy side of the law.

 

The system also works to link politics to wealth in the most direct way. Aside from the uncountable favors and connections that government and elected officials provided for the Houston energy giant, like passing deregulatory laws for energy sales and commerce, Enron managed to place its people into decision-making posts on many levels of government and to get the exclusive ear of the Vice President who named Enron execs as his consultants on a private energy plan.

 

Texas governor Perry named former Enron executive Max Yzaguirre as head of the powerful Public Utilities Commission. In typical subtle Enron style, Kenneth Lay, Enron’s top dog, donated $25,000 to Perry. “‘It’s totally coincidental,’ Mr. Perry declared in December of last year. “Coincidence” or “system working” — what’s the difference?

 

Enron contributed heavily to California Governor Gray Davis’ campaign and California under Davis bought energy from Enron at inflated prices when the state ran short last summer. Another systemic coincidence!

 

The most interesting of all the Enron forays into public policy took them to the Vice President’s office. Aside from his own stock interest, Dick Cheney saw the Enron Corporation as the essence of the system he loved. So, he called upon Enron to formulate the national energy plan, the discussion of which he now claims was “private.”

What a wonderful sense of propriety Dick Cheney possesses. He couldn’t wait to make public the details of Bill Clinton’s White House gropings of Monica, but when it comes to a policy of importance to all Americans, he invokes his privacy protections. That’s how Cheney’s system works.

 

The system has also worked for the media. Stories like the Enron scandal furnish it with the kind of ammunition its bosses love: the press has broken down the outrage into shotgun pellets of information and daily fires them at the public. No wonder people become confused! The personalities behind the scandal and their families appear as “news” that the average citizen can understand.

 

A woman who works with me sympathized with former Enron chief exec, “poor Ken Lay.” She shook her head and told me that “I saw his wife weep on that NBC interview and I felt for her and her family, ” referring to last month’s interview on an NBC magazine show.

 

“Yes, poor Ken Lay,” I thought to myself, “a man worth billions and now down to his last $100 million!” Worse, the President of the United States, the man who nicknamed him “Kenny Boy, has now distanced himself from his former benefactor and calls him “Mr. Lay.” Imagine Kenny Boy’s hurt feelings.

 

Note that NBC did not interview any of the tens of thousands of poor and middle class people who lost their pensions while Ken Lay sold his stock for hundreds of millions – supposedly to pay debts on other of his gambling enterprises. Sure, focus on the filthy rich who have lost part of their fortunes, not on the poor who have lost their pensions.  The poor, presumably, are not worth media attention because they don’t possess large enough fortunes.

 

One positive outcome of the scandal is that we now hear little talk of “privatizing social security.” Suppose the Bushies would have won that battle; even more people would have had their retirement accounts in Enron stocks!

 

The sensationalizing media adore stories about rich people getting into trouble. They’re just like the rest of us, F. Scott Fitzgerald remarked, except they have more money. He also observed in The Great Gatsby that the rich make messes and expect others to clean up after them.

 

In the late 1970s, I read an obit in the New York Times, citing the strange case of Eli Black, former CEO of United Brands (Fruit). Black had committed suicide after suffering a series of business reversals. Nevertheless, experts estimated the value of his estate at some $60 million. “Why,” I asked a business friend, “would a man with that kind of wealth kill himself?”

 

My rich friend looked at me as I understood nothing. “If he had lived,” he replied, “he stood to lose millions more.”

 

Should we put a watch on Ken Lay and the other former Enron execs who stand to lose millions more? Are the decline of his fortune and his wife’s tears evidence of the system working? Or have a small gang of thieves, disguised as business executives in collusion with government officials, pulled a major fast one on the public?

 

Notice that Ashcroft, Cheney and Bush have not suggested that any of the thieves who bilked the public for billions should be sent to Camp X-Ray in Guantanamo! Indeed, these people have behaved like traitors and economic terrorists. Let’s hope that the core of their criminal activities doesn’t get lost in the media and congressional circuses that have just opened. Enron is about a system, one that worked very well for a small group of very sleazy people – right on up to the White House.

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