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The Enron Scandal
F or many people familiar with Enron’s meteoric rise and subsequent downfall four years ago, the high-flying energy company and its crooked “E” logo has come to represent corporate greed, corruption, and excess at its worst. Enron was the first in a long list of corporate scandals involving the Bush administration and numerous members of Congress.
In August 2001, two months before Enron imploded in a wave of accounting scandals in which thousands of employees lost their jobs and their pensions and which wiped out $60 billion in shareholder value, an Enron lobbyist tipped off the Bush administration about the company’s financial problems.
A former Enron executive, who was then under congressional investigation, explained how CEO Jeffrey Skilling’s abrupt resignation raised red flags and worried insiders. “It was very well known that Enron faced a financial meltdown,” the former executive said at the time. When interviewed again for this story the executive repeated those remarks: “The day that Jeff resigned, our stock plummeted. We knew it wouldn’t rally. What we didn’t know was how the financial problems at Enron would impact the energy markets in the U.S.”
Enron’s ties to Washington lawmakers were stronger than disgraced
lobbyist Jack Abramoff’s. There was a time when Ken Lay—
known as “Kenny Boy” to Bush— could pick up the phone
and speak with the president, vice president, or any number of senior
The two months prior to Enron’s downfall was one of those times. On August 15, 2001, one day after Skilling resigned from the company, Lay sent Enron lobbyist Pat Shortridge to meet with White House economic advisor Robert McNally. Shortridge warned Mc- Nally that Skilling’s resignation could lead to a fiscal crisis that could cripple the country’s energy markets.
The White House acknowledged that the meeting between Short- ridge and McNally took place in documents released to reporters and Senator Joe Lieberman (D-CT), chair of the Senate Governmental Affairs Committee, which in 2002 investigated the fall of Enron. The documents noted, “Mr. McNally met with Mr. Shortridge and another individual who was not from Enron.” When asked whether Enron’s future had been discussed, White House spokesperson Anne Womack said at the time, “If the meeting was about that, I would assume there wouldn’t be anyone else there besides Mr. McNally and Mr. Shortridge.”
What’s troubling about the meeting between Shortridge and Mc- Nally is that the White House was tipped off to Enron’s financial troubles months before it acknowledged them and well in advance of the warning letter former Enron executive Sherron Watkins delivered to Lay, in which she said that the firm’s Byzantine partnerships could destroy the company.
One question that is still unanswered in the Enron debacle is, “What did President Bush know and when did he know it?” In May 2002 the White House complied with a subpoena and turned over more than 2,000 pages of documents pertaining to Bush administration contacts with Enron to various Senate and Congressional committees investigating Enron’s demise. The documents revealed the close relationship between Enron and the White House and how the company was able to influence President Bush’s political agenda by recommending people to various posts within the Administration.
Buried deep within the documents was a letter Lay sent January 8, 2001 to Bush’s personnel director, Clay Johnson, recommending seven candidates to the Federal Energy Regulatory Commission. Two of the candidates Lay recommended, Pat Wood and Nora Brownell, were appointed to FERC by Bush; Wood was appointed chairperson.
Another document revealed that Lay called the White House incessantly for help. Lay called Treasury Secretary Paul O’Neill on October 28, 2001 to advise him that Enron was heading toward bankruptcy. The next day Lay asked Commerce Secretary Don Evans for help in keeping a major Wall Street ratings agency from downgrading Enron’s credit rating, which would push the company into bankruptcy. A week later, Enron president Greg Whalley called Treasury Under Secretary Peter Fisher six to eight times, seeking help in getting banks to lend more money to Enron.
Following these revelations, the White House was forced to admit in January 2002 that it had asked Lawrence B. Lindsey, former head of Bush’s National Economic Council, to conduct a review in October 2001—before Lay called O’Neill and Evans—to see whether an Enron collapse could have a strong impact on the U.S. economy. Critics were in an uproar following the admission because President Bush and his senior aides had vehemently denied having any prior knowledge of Enron’s financial status or impending troubles.
Jennifer Palmieri, a spokesperson for the Democratic National Committee, said at the time, “It shows once again that the Administration did a lot of thinking about the fact that the company was going to collapse, but they did absolutely nothing to make sure that 50,000 Enron employees would not lose their life savings.”
The intimate relationship between Enron and the Bush administration is also clearly shown by these documents. Lindsey had been a paid consultant for Enron, receiving $50,000 in 2000. He is just one of the top White House and Republican Party officials with close Enron ties, including Robert Zoel- lick, the United States trade representative who sat on an Enron advisory board in 2000; Karl Rove, senior White House political strategist, who held more than 1,000 Enron shares before selling them in June 2001; and Marc Racicot, chair of the Republican National Committee (RNC), who worked as an Enron lobbyist the year before his RNC appointment in 2002.
P erhaps the most egregious crime is how President Bush and Vice President Cheney allowed Enron to rip off California. On May 29, 2001, when the California energy crisis reached its peak—resulting in nearly a week of rolling blackouts, bankruptcies, and several deaths—Governor Gray Davis met with Bush and pleaded with him to enact price controls on electricity sold in the state, which had skyrocketed to more than $200 per megawatt- hour.
Davis asked Bush for federal assistance, such as imposing federally mandated price caps, to rein in soaring energy prices. But Bush refused, saying California legislators had designed an electricity market that left too many regulatory restrictions in place, which then caused electricity prices in the state to skyrocket.
It was up to the governor to fix the problem, Bush said, adding that the crisis had nothing to do with energy companies manipulating the market. Bush’s response, in hindsight, appeared to be part of a coordinated effort launched by Lay to have Davis shoulder the blame for the crisis, which ultimately led to an unprecedented recall of the governor and Republican-funded attack ads on Davis’s handling of the energy crisis.
A couple of weeks before the Davis and Bush meeting, the PBS news program “Frontline” interviewed Cheney and asked him whether energy companies were acting like a cartel and using manipulative tactics to cause electricity prices to spike in California. “No,” Cheney said. “The problem you had in California was caused by a combination of things—an unwise regulatory scheme, because they didn’t really deregulate. Now they’re trapped from unwise regulatory schemes plus not having addressed the supply side of the issue. They’ve obviously created major problems for themselves and bankrupted PG&E in the process.”
In April 2001, a month before the “Frontline” interview and Bush’s meeting with Davis, Cheney, who chaired Bush’s energy task force, met with Lay to discuss Bush’s National Energy Policy. Lay recommended some energy policy initiatives that would financially benefit his company and gave Cheney a memo that included eight recommendations for the energy policy. Of the eight, seven were included in the energy policy’s final draft. The energy policy was released in late May 2001, after the meeting between Bush and Davis and Cheney’s “Frontline” interview.
What many people have failed to realize is that Davis was right in his assessment that energy companies, including Enron, were manipulating the state’s wholesale power market. To this day, neither Cheney nor Bush has acknow- ledged that their inaction helped fuel the California energy crisis.
It appears that Lay and Skilling will not be held responsible for the scams Enron’s traders pulled on California either. The federal court judge presiding over the criminal case against Lay and Skilling ruled in January that the smoking gun transcripts and audiotapes showing how Enron traders caused shortages and blackouts in California could not be introduced by the prosecution as evidence during the trial because it would prejudice the jury.
One of the more infamous audio tapes captured an Enron trader admitting that his manipulative trading tactics in California helped him rip off “Grandma Millie” to the tune of $1 million a day.
Jason Leopold is a freelance writer covering Washington politics.
Z Magazine Archive
AnnouncementsLABOR - May 1 is May Day. Workers of the world will celebrate the 124th anniversary of International Worker’s Day. Born out of a call for an 8-hour workday in the United States, this day is an opportunity for all workers to show their solidarity with one another, as well as to renew the call for labor rights.
FARM CONFERENCE - The Farm Conference on Community and Sustainability will be held May 24-26 in Summertown, TN, in partnership with the Fellowship of Intentional Communities. Tour green homes, see sustainable food production, learn about solar installations, alternative education, midwifery, and more.
Contact: Douglas@thefarmcommunity.com; http://www.thefarmcommunity.com/.
PALESTINE - The Conference of the Palestinian Shatat in North American will be held June 3-5 in Vancouver. The conference will examine the future of the Palestinian liberation movement.
Contact: email@example.com; http://www.palestinianconference.org/.
LABOR - The Pacific Northwest Labor History Association’s 45th annual conference will be held May 3-5, in Portland, OR. This year’s theme is Labor Under Attack: Learning from the Past and Preparing for the Future. A call for presentations, workshops and papers is currently underway.
Contact: PNLHA, 27920 68th Ave. East, Graham, WA 98338; 206-406-2604; PNLHA1@aol.com; http://www3.telus.net.
MARIJUANA - On the first Saturday of May marijuana legalization activists will hold informational and educational events, rallies and marches in over 300 cities around the world.
ECONOMICS - The Union For Radical Political Economics will hold its 39th annual conference May 9-11 in New York City.
RECLAIM THE DREAM - The 2013 Poor People’s Campaign & March from Baltimore to Washington D.C. will be May 11. Communities, schools and unions interested in participating are encouraged to contact the Baltimore People’s Assembly.
Contact: 410-500-2168; 410-218-4835; BaltimorePeoplesAssembly@gmail.com; Southern Christian Leadership Conference of Baltimore and the Baltimore Peoples Power Assembly, 2011 N. Charles St., Baltimore, MD 21218.
MOTHER’S DAY - The 17th Annual Mother’s Day Walk For Peace will be May 12th, in Dorchester, MA. The walk began in 1996 for families who had lost children to violence. The day has become a way for thousands of people to financially support the work of the Louis Brown Peace Institute.
Contact: http://www.ldbpeaceinstitute.org/; http://mothersdaywalk4peace.org/.
NATO 5 - An International Week of Solidarity with the NATO 5 has been called for May 16-21. Supports call on supporters to raise awareness of the NATO 5 and support funds for the defendants on the one-year anniversary of their preemptive arrests.
Contact: firstname.lastname@example.org; https://nato5support.wordpress.com.
MOUNTAINTOP - The 2013 Mountain Justice Summer Activist Training Camp will be held May 19-27 in Damascus, VA. It will be a week of workshops, field trips to view Mountain Top Removal coal mines, direct actions, and service project.
FEMINIST SCI-FI - The feminist science fiction convention WisCon 37 is scheduled for May 24-27 in Madison, WI.
Contact: WisCon, ? SF3, PO Box 1624, Madison, WI 53701; email@example.com; http://www.wiscon.info/.
ANARCHY FEST - A month-long Festival of Anarchy is scheduled for May in Montreal. The festival includes The Montreal Anarchist Bookfair (May 19-20).
Contact: http://www.anarchistbookfair.ca/; http://www.radicalmontreal.com/.
LABOR - The International Labor Rights Forum will present: Down the Supply Chain, Driving Corporate Accountability, on May 22 in Washington, DC. The Labor Rights Awards Ceremony and Reception will honor pioneers in supply chain worker organizing, working solidarity and international labor rights policy.
MULTICULTURE - The 26th annual National Conference on Race & Ethnicity in American Higher Education (NCORE) will take place May 28-June 1, in New Orleans.
Contact: SWCHRS, 3200 Marshall Avenue, Suite 290, Norman, OK 73072; 405-325-3694; firstname.lastname@example.org; www.ncore.ou.edu.
MEDIA - The 2013 Alliance for Community Media Annual Conference will be held May 29-31, in San Francisco, CA. Participants will include educators, community leaders, media professionals, journalists, nonprofit leaders, policymakers and students.
RADIO - The 38th Annual Community Radio Conference is schedule for May 29-June 1, in San Francisco, CA, with discussions and workshops.
Contact: 1101 Pennsylvania Ave. NW, Suite 600, Washington, DC 20004; 202-756-2268; email@example.com; http://www.nfcb.org/.
BRADLEY MANNING - On June 1, a rally will be held at Fort Meade in support of Bradley Manning.
BIKES - Bikes Not Bombs is holding its 24th annual Bike-A-Thon and Green Roots Festival in Boston, MA on June 3, with several bike rides scheduled, music, exhibitors and more.
Contact: Bikes Not Bombs, 284 Amory St., Jamaica Plain, MA 02130; 617-522-0222; firstname.lastname@example.org; www.bikesnotbombs.org.
LEFT FORUM - The 2013 Left Forum will be held June 7-9, at Pace University in New York City.
Contact: 365 Fifth Avenue, CUNY Graduated Center, ? Sociology Dept., New York, NY 10016; http://www.leftforum.org/.
VEGAN FEST - Mad City Vegan Fest will be held in Madison, WI, June 8. The annual event features food, speakers, and exhibitors.
Contact: 122 State Street, Suite 405 B, Madison, WI 53701; email@example.com; http://veganfest.org/.
ADC CONFERENCE - The American-Arab Anti-Discrimination Committee (ADC) holds its annual conference June 13-16, in Washington, DC, with panel discussions and workshops on civil rights, media and other topics.
Contact: 1990 M Street, Suite 610, Washington, DC, 20036; 202-244-2990; firstname.lastname@example.org http://convention.adc.org/.
CUBA/SOCIALISM - A Cuban-North American Dialog on Socialist Renewal and Global Capitalist Crisis will be held in Havana, Cuba, June 16-30. There will be a 5 day Seminar at University of Havana, plus visits to a cooperative, urban garden, community development project, social research centers, and educational & medical institutions.
Contact: email@example.com; http://www.globaljusticecenter.org/.
NETROOTS - The 8th Annual Netroots Nation conference will take place June 20-23 in San Jose, CA. The event features panels, trainings, networking, screenings, and keynotes.
Contact: 164 Robles Way, #276, Vallejo, CA 94591; firstname.lastname@example.org; http://www.netrootsnation.org/.
MEDIA - The 15th annual Allied Media Conference will be held June 20-23, in Detroit.
Contact: 4126 Third Street, Detroit, MI 48201; http://alliedmedia.org/.
GRASSROOTS - The United We Stand Festival will be hosted by Free & Equal, June 22 in Little Rock, Arkansas. The festival aims to reform the electoral process throughout the U.S.
SOCIALISM - The Socialism 2013 Conference is scheduled for June 27-30 in Chicago, featuring talks and panel discussions.
Contact: email@example.com; http://www.socialismconference.org.
LITERACY - The National Association for Media Literacy Education (NAMLE) will hold its conference July 12-13 in Los Angeles under the heading, Intersections: Teaching and Learning Across Media.
Contact: 10 Laurel Hill Drive, Cherry Hill, NJ 08003; http://namle.net/conference/.
IWW - The North American Work People’s College will take place July 12-16 at Mesaba Co-op Park in northern Minnesota. The event will bring together Wobblies from branches across the continent to learn new skills and build One Big Union.
PEACESTOCK - On July 13th, the 11th Annual Peacestock: A Gathering for Peace, will take place at Windbeam Farm in Hager City, WI. The event is a mixture of music, speakers and community for peace. Sponsored by Veterans for Peace.
Contact: Bill Habedank, 1913 Grandview Ave., Red Wing, MN 55066; 651-388-7733; firstname.lastname@example.org; http://www.peacestockvfp.org.
CHILDREN’S DEFENSE - July 15-19, join clergy, seminarians, Christian educators, young adult leaders and other faith-based advocates for children at CDF Haley Farm in Clinton, Tennessee, for five days of spiritual renewal, networking, movement building workshops, and continuing education about the urgent needs of children at the 19th annual Proctor Institute for Child Advocacy Ministry.
Contact: email@example.com; http://www.childrensdefense.org.
ACTIVIST CAMP - Youth Empowered Action (YEA) Camp will have sessions in July and August in Ben Lomond, CA; Portland, OR; Charlton, MA. YEA Camp is designed for activists 12-17 years old who want to make a difference in the world.
Contact: firstname.lastname@example.org; http://yeacamp.org/.
LA RAZA - The annual National Council of La Raza (NCLR) Conference is scheduled for July 18-19 in New Orleans, with workshops, presentations and panel discussions.
Contact: NCLR Headquarters Office, Raul Yzaguirre Building, 1126 16th Street, NW, Washington, DC 20036; 202-785-1670; www.nclr.org.
LABOR - The Eastern Conference For Workplace Democracy: Growing Our Cooperatives, Growing Our Communities, will be held at Drexel University in Philadelphia, PA, July 26-28.
Contact: email@example.com; http://east.usworker.coop/.
WOMEN/LYNNE STEWART- Radical Women is asking for support letters and cards to be sent to Lynne Stewart. Stewart is a civil rights attorney and political prisoner who is currently in jail. She has breast cancer and authorities have denied her request for transfer from her Texas prison to the New York City hospital where she received medical attention during a prior bout of breast cancer. Send messages and cards to: Lynne Stewart 53504-054, Federal Medical Center Carswell, P.O. Box 27137, Fort Worth, TX 76127.
Contact: 747 Polk Street, San Francisco, CA 94109; 415-864-1278; RadicalWomenUS@gmail.com; http://lynnestewart.org/; http://www.radicalwomen.org/.
HAITI/WOMEN - Haiti’s government is considering a legal reform measure that would prohibit and punish all sexual assault, including marital rape. MADRE and the International Campaign to Stop Rape & Gender Violence in Conflict are launching a petition to raise international support for this push to address violence against women in Haiti.
Contact: 121 West 27th Street, #301, New York, NY 10001; 212-627-0444; firstname.lastname@example.org; http://www.madre.org.
SYRIA/MIDDLE EAST - The Middle East Children’s Alliance (MECA) is currently seeking funds to assist more than 200,000 refugees fleeing violence in Syria.
FOLK FESTIVAL - The Falcon Ridge Folk Festival will be held August 2-4, in the Berkshires, NY.
Contact: http://www.falconridgefolk.com/; email@example.com.
WAR RESISTERS - The War Resisters League will hold its 90th anniversary conference, Revolutionary Nonviolence: Building Bridges Across Generations and Communities, August 1-4, at Georgetown University. The event will focus on the U.S.’ long history of antimilitarism.
Contact: 339 Lafayette Street, New York, NY 10012; 212-228-0450; firstname.lastname@example.org; http://www.warresisters.org.
POPULAR ECONOMICS - The Center for Popular Economics is holding its 2013 Summer Institute August 4-9 at Hampshire College in Amherst, MA. No background in economics is needed for this intensive training. This year’s theme is, The Care Economy: Building a Just Economy with a Heart.
Contact: Center for Popular Economics, PO Box 785 Amherst, MA 01004; 413-545-0743; email@example.com; www.populareconomics.org.
VETERANS - Veterans for Peace is holding the 28th annual convention August 6-11 in Madison, WI. This year’s theme is, Power To The Peaceful.
DEMOCRACY - The Democracy Convention will take place August 7-11 in Madison, WI. The convention brings together nine conferences including topics such as media, education, defense, race, environment and others.
MEN - The 38th National Conference on Men & Masculinity: Forging Justice: Creating Safe, Equal and Accountable Communities, presented in partnership with HAVEN, will be held in Detroit, MI, August 8-10.
Contact: firstname.lastname@example.org; http://www.nomas.org/.
OCCUPY - An Occupy National Gathering will be held in Kalamazoo, MI, August 21-25.
Contact: email@example.com; http://occupynationalgathering.net/.
COMMUNITIES - The Communities Conference is a networking and learning opportunity for co-operative or communal lifestyles, with workshops, events and entertainment; scheduled for August 30-September 2 at the Twin Oaks Community in Louisa, Virginia.
LABOR DAY - The 29th annual Bread and Roses Festival, a celebration of the ethnic diversity and labor history of Lawrence, MA, will be held September 2, in honor of the 1912 Bread and Roses Strike. There will be music, dance, poetry, drama, ethnic food, historical demonstrations, walking & trolley tours.
Contact: PO Box 1137, Lawrence, MA 01842; 978-794-1655; http://www.breadandrosesheritage.org/.
OCCUPY WALL STREET - September 17 is the two-year anniversary of the Occupy Wall Street movement. Events are planned in New York City and worldwide.
TEACHERS - The 13th Annual Conference, “Teaching for Social Justice: The Politics of Pedagogy,” will be held October 12 in San Francisco, CA. The free event features workshops, resources, and free childcare.
Contact: 415-676-7844; firstname.lastname@example.org; http://www.t4sj.org/.
HAITI - International Action, which brings clean water and chlorinators to Haiti, seeks office space capable of housing up to six people and their office equipment.
Contact: Zach Bremer, Zbrehmer@haitiwater.org; 202-488-0735; http://www.haitiwater.org/.
MEDIA - The Union for Democratic Communications and Project Censored are sponsoring a joint conference on media democracy, media activism and social justice to be held November 1-3 at the University of San Francisco. Proposals for presentations, workshops and panels from activists and critical scholars are invited.