August 26, 2002: If you need a lead story for a supermarket tabloid, how about this one: the ex-wife of a director of the El Paso natural gas company -- the outfit that held back supply and drove up gas prices at the same time that Enron and others were driving up electricity prices -- has sued both her ex and El Paso, alleging (1) that the company influenced the judge in her divorce, to stop her from getting her share of "deferred" stock payments the company made to her husband, and (2) the company then offered her a $120,000 payment in exchange for her silence on the many embarrassing things she knows about the people running it. She was broke enough, she says, to accept the offer, but then they withdrew it. The El Pasoids are saying the allegations are entirely without merit, and sneering that she's just bitter about "losing" the divorce, etc.
Did I mention that the director/ex being sued, Malcolm Wallop, is a former congressman (R-WY), and a personal friend of Dick Cheney?
Speaking of Cheney and those halcyon days of spiraling electricity prices, congresswoman Anna Eshoo (D-CA) reminisced about a meeting she had with Cheney during the late days of the crisis: after she raised the issue of market manipulation by energy companies (which had already been revealed by whistleblowers), "He attacked me for raising the issue." She says he snarled "I don't need any lecturing from any of you about economics." She further says "He kept looking at his watch that day." This was after California representatives and senators had been practically begging for months to get any time with the President and others in charge on the issue. Enron, meanwhile, had dozens of meetings with the same group.
The current prosecutorial effort against Enron has gotten its first guilty plea, and its first start on Getting The Money Back: Michael Kopper, who reported to Enron's CFO Andrew Fastow, has agreed to return $12,000,000 of personal profits. His testimony implicates Fastow, of course. By all indications, Fastow was the central nexus of the web of crime. Kopper's statements imply that Enron's book-cooking may have been more primarily motivated by executives skimming profits for themselves than by the overall effort to hide Enron's debts and keep its stock high. Kopper fronted for Fastow in some cases where Fastow didn't want to have his own involvement on the public record. The government recently made official charges that Fastow and others made off with at least $35,000,000 -- the actual amount is no doubt much larger. The prosecutors detailed one deal from 1997 in which they bought a wind power company named Zond. (I am told by a former employee that Zond a.k.a. Enron Wind is still a solid and decent company, hopefully with a good future now that the weight of Enron is off of it.) They used a shell entity called RADR to preserve the legal illusion that Zond was an independent renewable energy producer entitled to government incentives and regulatory exemptions that could not be claimed by Enron.
Unfortunately, Justice department officials are saying it's going to be difficult to build a criminal case against Kenneth Lay, the chairman, or Jeffrey Skilling, the CEO at the time of the price gouging. Those two are the ones who can probably retrieve the most money.
Recently a small-time stock fraudster named Michael Nnebe got nine years for defrauding investors of $2,000,000. I wonder what sentence Fastow, Lay, and Skilling will get for their fraud in the tens of billions? Probably less.
More progress: somebody tried to ease some money out of the brokerage accounts of Andrew Fastow, but a federal court slapped a freeze on the accounts. They are moving to seize the assets, along with Fastow's unfinished mansion, and thanks to the unconstitutional law that allows alleged drug dealers' assets to be seized without proving any criminal guilt, they don't have to wait for Fastow to be found guilty...
The chairman and CEO of Wessex Water in England just got arrested for a bribe of around £1,000,000... his company was also involved in another embarrassment: a rail crash on a section of track it was responsible for maintaining. The bribe was allegedly part of the dealmaking involved in Wessex Water being taken over by YTL Power of Malaysia. This is of interest because Wessex used to be a subsidiary of Enron, until it went independent during the bankruptcy.
By the way, here's a report which says that the CEOs who faked their profit balances and so on, and are getting investigated or are under suspicion, made more personal income on average than honest CEOs did.
In the Old News department, here's somebody alleging that George W. Bush may be technically guilty of tax fraud in how he reported the income from selling his share of the Texas Rangers in 1998 as long term capital gains. Even if this is not the case, the Rangers episode is surely one of the smellier episodes in Dubya's odoriferous financial past, including multiple occasions when he used governmental powers to financially aid the baseball team, starting with the land grab that got their stadium built.
Bush, as I have mentioned, wants to restimulate the stock market by creating yet more tax breaks for investors, including a further capital gains tax cut (something his dad kept calling for, no matter how far it had already been cut). Now the democrats are pointing out that a capital gains cut will encourage people to sell out of the market, rather than to buy in. It would also, of course, be yet another break for the rich, leaving the middle class to pay an ever larger share of the total tax burden.
As you may have heard, Bush is visiting forest fire sites (as part of a tour of the western states which is mainly for campaign fundraising), calling for support of his new forestry management plan that would fight fires through increased logging. Protesters are saying that the new plan basically lets loggers run amok. The cause of forest fires is trees, so if we get rid of the trees.... His speeches on this subject have been accompanied in the background by the hiss of pepper spray and the thud of batons. For that matter, so have some of his campaign appearances in the west. I've seen two reports of prices at west coast Bush fundraising dinners being dropped from $1000 a plate to $250...
I've been reporting from time to time on progress of the McCain-Feingold campaign finance reform bill and its implementation, or lack thereof, once enacted into law. Well, here's a report that the two major parties have found a legal technique to evade all the new soft money rules. Perhaps controlling soft money is simply not doable... In the meantime, the ever helpful Federal Election Commission has just made a rule exempting "short messaging service" ads from reporting rules. Prepare for a flood of political spam on your pager or text-receiving cell phone.
Now this scares me a bit. A New York Times business
editor, Allen Myerson, fell to his death four days ago. The police
are treating it as a possible suicide -- but nobody knows how he fell.
He used to work for the Dallas Morning News. This scares me a bit
because Myerson specialized in energy industry stories and Enron news,
just as I am doing here...
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