Enron’s Global Game (12/01)

Until it imploded last October, Enron — long known as End-Run by its critics — was often described as just another aggressive corporation eager to expand its portfolio and open routes into new markets, albeit sometimes with "strong arm" tactics. The implication in most press reports was that, so long as consumers and shareholders came out on top, how it operated was a matter of little public concern.

But Enron was never just another company. It was a major architect and proponent of utility deregulation, with close friends in both the Clinton and two Bush Administrations. Headquartered in Houston, TX, it was also the largest contributor to George W. Bush’s presidential campaign, giving at least $550,000 to Bush himself and an estimated $1.8 million to the Republican Party during the 2000 elections. Since then, however, it has also emerged as one of the biggest corporate rip offs in history. Early evidence indicates that its executives hid at least half a billion in debt while enriching themselves through insider trading and financial gimmicks. In the end, they ran the company into the ground. Citgroup, J.P. Morgan and other banking houses were either hoodwinked or accomplices. In either case, they lured in shareholders with empty promises.

Before Enron’s share price plummeted from $80 to less than a buck, its executives cashed out more than $1 billion in stock, while simultaneously barring lower-level employees from doing the same with their retirement accounts. Meanwhile, the company’s accounting firm, Arthur Andersen, was shredding financial documents, even after Enron-related files were subpoenaed in November. When the roof caved in, employees lost both their jobs and most of their savings. California consumers and businesses were also victims. As energy bills skyrocketed and the state dealt with blackouts, the firm profited greatly, while leveraging even more debt.

Now that the press is paying attention, most of these alleged crimes will be investigated. The Labor Department and Securities and Exchange Commission are conducting civil probes, while the Justice Dept. has opened a criminal investigation. The White House has so far admitted that Enron representatives, including CEO Kenneth Lay, met with Vice President Cheney repeatedly, including shortly before the public disclosures began. Administration officials, including cabinet members Don Evans and Paul O’Neill, talked with Enron at least 15 times, as the company sought help to obtain last-minute bank loans. Attorney General John Ashcroft was forced to step aside due to contributions received for his failed 2000 Senate re-election bid. The entire US Attorney’s office in Houston also recused itself. The President himself also had contact with Lay, a friend and ally, during the run up to the crash. In the end, this could well turn into Enron-gate.

Yet still invisible, even now, is the predatory nature of Enron’s operations worldwide. Long a suspect in human rights violations, it often used bribery and threats to get its way. It also profited over the years from working relationships with the CIA, Pentagon, and State Department, the latter of which proved over-eager to pressure other countries into accepting Enron deals. And, as if that isn’t enough, until recently the US-based energy trader had a strong presence in Afghanistan through its involvement in a pipeline project from Turkmenistan to Turkey by way of Azerbaijan and Georgia.

Not-So-Covert Operations

One of Enron’s many overseas moves was the 1992 takeover of a power plant in Subic Bay, the largest US military base in the Pacific. Helping with that Philippines purchase was Frank Wisner, then US ambassador. From there Wisner moved on to India, using his ambassador status to help close Enron’s Dhabol plant deal. According to one former staffer, Wisner, who held the number three spot at the Pentagon prior to his ambassadorial postings, opened doors for Enron to CIA information about risks and competitors. Another former ambassador claims that CIA services for select US businesses abroad has been official policy for years.

Lay, Enron’s founder and longtime CEO, launched the company shortly after quitting the now-defunct Federal Power Commission. During the Vietnam War, he  worked for the Pentagon. A well-connected Texan and major Republican contributor, he was a close friend of the first President Bush, and used his association with three of Bush’s sons to win contracts. According to journalist Seymour Hersh, Neil and Marvin Bush tried to influence Kuwaiti officials to accept Enron’s bid to rebuild a power plant destroyed during their dad’s Gulf War. Although that deal fell through, in 1988 George W. Bush successfully pressured Argentinean officials into awarding Enron a contract to build a pipeline to Chile.

Lay was also instrumental in pumping money into the Bush II campaign. The new administration returned the favor by letting Enron pick federal regulators and occupy a favored seat at the table for Vice President Dick Cheney’s low-profile energy task force.

Bush I’s Secretary of State James Baker and Commerce Secretary Robert Mosbacker, as well as Thomas Kelly, who directed Pentagon operations during Gulf War I, all subsequently went on the Enron payroll. But the most helpful member of the Bush team may have been Wendy Gramm, wife of Texas GOP Senator Phil Gramm. In 1992, Mrs. Gramm, then chair of the Commodity Futures Trading Commission, responded to an Enron request to help rewrite laws on energy futures, exempting these financial instruments from government oversight and fraud laws. Another deregulation movement was underway. Within weeks of that breakthrough, she joined Enron’s board of directors. The futures market became a major source of company income.

Clinton’s first Treasury Secretary, Lloyd Bentson, yet another Texan, was a major recipient of Enron largesse — $14,000 for just one of his Senate campaigns — before his appointment. He was replaced in 1994 by Robert Rubin, whose relationship to the company dated to his work as an investment banker. When Rubin first joined the Clinton administration, he wrote to his former client, saying that he "looked forward to continuing to work with you in my new capacity."

Cultivating such relationships apparently paid off. Clinton officials publicly helped Enron win contracts in India and Indonesia, and cleared the way for government subsidies to help build power plants in China, the Philippines, and Turkey. Enron officials accompanied US diplomats on trips to Pakistan and Russia, returning from both with additional deals.

Still, perhaps the most controversial intervention during the Clinton era involved Mozambique. According to John Kachamila, that nation’s natural resources minister, while he was negotiating a 1995 agreement with Enron to build a gas pipeline to South Africa, US Administration pressure included outright threats to withhold development funds "if we didn’t sign, and sign soon." The Houston Chronicle reported at the time that Clinton’s National Security Advisor Anthony Lake, along with USAID and the US Embassy, were involved in high-powered, commercial-driven diplomacy.

"Their diplomats, especially Mike McKinley [deputy chief of the US Embassy], pressured me to sign a deal that was not good for Mozambique," said Kackamila. "He was not a neutral diplomat. It was as if he was working for Enron."

Beyond the Hype

Before dawn on June 3, 1997, police stormed the homes of several women in western India who had led a massive protest against Enron’s new natural-gas plant near their fishing village. According to Amnesty International, the women were dragged from their homes and beaten by officers paid by Enron. Predictably, the company denied any knowledge of the incident. But India isn’t the only place where Enron was accused of wrongdoing. Charges of influence peddling, corruption, and environmental damage followed it around the world.

In Brazil, where Enron was a major stakeholder in a 2000-mile pipeline to Bolivia, the plan was to open up pristine Amazon forests to unsustainable development. The livelihoods of indigenous communities in both countries hung in the balance. In India, villagers protested that the Dhabol power plant, approved without an environmental impact statement, would pollute local waters, destroy the fishing economy, and threaten delicate plantations of mango and other fruits. That India deal also threatened to inflate electricity prices, while the company stood to make a 32 percent after-tax rate of return, three times the US average. Nevertheless, in exchange for $20 million in "educational gifts" — basically bribes — the details were initially kept secret.

Although Enron’s ads stressed that its natural gas was "invisible so the rest of nature never will be," it was, after all, 90 percent methane. And pure methane may be 20 times more damaging to the global climate than carbon dioxide, since it traps heat in the atmosphere. The effects of drilling are almost as damaging as going for oil; each well produces tons of toxic liquid containing arsenic, lead, and radium. So, Enron was really just conning the public with its hype about "clean energy."

Over the years, pieces of the puzzle surfaced in the New York Times, Houston Chronicle, New Yorker, Nation, Counterpunch, and The Enron Story, a book focusing on the company’s $3 billion, 2000 megawatt plant in India. Putting them together, what emerges is a portrait of ongoing government-industry collusion at the expense of fair play, real competition, and the environment. With the approval and aid of intelligence agencies, the State Department, and at least two presidential administrations, Enron strong-armed its way into control of critical energy sources and distribution systems worldwide, while simultaneously promoting domestic deregulation. Nine years after it succeeded in shielding energy futures from oversight and fraud laws, we finally understand some of the reasons why.

Going for It

Apparently, Enron hoped that the election of another Bush would protect and extend its special and very private relationship with the government. And despite Enron’s collapse, some details — particularly the full extent of Bush family involvement — still remain under wraps. Yet, at least we can see the outline: Acting as a private extension of US foreign policy for more than a decade, this rogue energy company bribed and bullied its way into control of crucial energy production and distribution facilities in Asia, Africa, the Middle East, and South America.

By the mid-90s, in order to protect fossil fuel and nuclear investment, it also worked with other energy companies and aerospace firms to control future development of alternative energy. In fact, the first commercially competitive solar projects — in China and India — involved Enron and Amoco in long-term deals to manufacture solar cells and purchase power. As Bob Kelly, co-chair of Amoco/Enron Solar, put it, "We think there is a big market out there and we are going for it."

In the end, it was a temporary triumph of image over reality. Deregulation, combined with Internet trading, allowed Enron’s corporate cowboys to make outrageous and unwise deals to raise capital. Credit-rating agencies, bankers, regulators, politicians — everyone went along, seduced by its worldwide reach and free market fairy tales.

Now, the fantasy is over, and, for the Bush administration, the nightmare may just be starting. At least 15 high-ranking Bush officials, including Defense Secretary Donald Rumsfeld, owned Enron stock, and two — economic advisor Lawrence Lindsey and Trade Representative Robert Zoellick — had professional ties to the company. In an attempt to "get out in front" of the emerging debacle, senior Bush adviser Karl Rove and Army Secretary Thomas White, have already admitted that they ditched their stock before the collapse. White was Enron’s vice chairman before moving to the Pentagon.

In a subtle acknowledgment of the dangers that lie ahead, Enron has hired Robert Bennett, the legal maestro who helped Casper Weinberger obtain a pardon from George Bush in the waning days of Iran-Contra. He also represented Bill Clinton during his scandals. Calling in Bennett, a master of both public relations and underdog legal defense, is a sure sign that Enron — if not also the administration — believes things will heat up further before this story concludes. Soon, we may again be asking: What did the President — and his men — know, and when did they know it?

Greg Guma is the editor of Toward Freedom.