ENRON & FRIENDS

November 15, 2002:  The Republican sweep of Congress may not change as much as we thought it might.  Immediately after the election, the mood of the party's business backers was described by one insider as "bordering on giddiness", but as individual congressmen and senators start to take a look at the agenda that the party has been trying to push past Democratic resistance, cooler heads are prevailing, not to mention colder feet.  From tax cuts and social security privatization to anti-environmental measures, enough moderates are recognizing the insanity of these measures that it looks like opponents will still have a majority.  Once people have to take responsibility for actually passing these notions into law, it becomes difficult even for loyal party footsoldiers to keep their consciences quiet.  Even drilling in the Alaska National Wildlife Refuge may be unpassable in the new Senate.  And it looks like they're going to handle the tax cut issue by turning the huge cut that the Bushies campaigned for into a tiny token cut, just enough to be able to claim they did something.

One exception is the effort to pack the courts with right-wing judges.  It looks like this will move forward.  Ever since the Federalist Society came to prominence some twenty years ago, the GOP has appointed numerous judges who are not merely ideologically biased toward hard conservatism, but actively partisan in conflicts between Democratic and Republican interests, as documented in David Brock's Blinded By The Right.  The Supreme Court case of Bush v. Gore exposed the full effects of this partisanship.  Some of the recent judicial nominations that have been stalling in the Senate Judiciary Committee, such as Dennis Shedd, are probably as bad as any judicial appointments in recent memory, as discussed briefly in my September 7 entry.  The newly realigned Judiciary Committee just gave up and passed Shedd, along with the similarly contreversial Michael McConnell.  Even Priscilla Owen, the nominee who was rejected then for blatant partisanship and apparent conflicts of interest, will get another shot at the seat with the new senate, according to one anonymous White House aide.

(Some Democrats are starting to catch on that they lost the election by being spineless.  Democratic strategist Peter Fenn said "I'm ready to write a book [called] 'Why Democrats Have No Balls'."  Even Molly Ivins declared that the democrats "deserved to lose."  One wonders how many times they have to be taught this lesson... they've only repeated the same mistake about a dozen times since the fifties.)

And it looks like we'll finally get a Department of Homeland Security, for whatever good that might do in fighting terrorism.  So far, the only thing the new departmental organization is fighting is government workers' union rights.  And I hardly think SEIU and AFSCME are our big obstacles in the fight against terrorism when the FBI has seemingly been putting more effort into covering bureaucratic asses, persecuting whistleblowers, ignoring possible suspects whose investigation would be embarrassing, putting peace activists on the list of "suspicious" persons to be carefully searched by airport security workers, and even undermining other government departments like the BATF, than into preparing itself to really stop terrorists, despite all the alarming new police powers they have been granted.  If a Homeland Security department would clean up this dysfunctionality at the Bureau, then it might be good for something, but I see no evidence that it will make a difference.  Bush is reportedly considering the option of setting up a new agency to take over domestic espionage from the FBI... you know this wouldn't be discussed if the FBI was doing its assigned job properly.

Even without a Homeland Security bill, union jobs in the federal government are likely to get scarcer.  It seems that Bush's strategists are planning to "privatize" up to 850,000 federal jobs -- that is, contract them out to for-profit companies.  If this saves any money, or even breaks even, it will be because random private businessmen will have been granted a special privilege to siphon off money that previously went to people who actually worked for it.

The taint of corruption does not exclude our War on Terror.  Already we have seen the hunt for Osama bin Laden and Al Qaeda marginalized and sidetracked in the effort to whip up hate against Iraq.  Fighting in Afghanistan is petering out as it becomes clear we're not accomplishing anything, and the new government there turns gradually back into the old one.  Now we learn that the effort to fund Bush's "son of Star Wars" missile defense plan is getting billions allocated to it, while counter-terrorism defense efforts go without.

Incidentally, the Navy has been planning for years to build a fleet of giant dirigibles, for no purpose ever clearly stated.  Well now those monster blimps are part of the missile defense effort.  Once again the solution is proposed long before a problem is identified to attach it to.  Remind you of anyone?  Say, like Bush's tax cut plan, which was first a response to prosperity and surpluses, and then a response to a recession and lost revenue.  Or even like Bush's plan to attack Iraq, which was brewing before he was elected and only after the fact became attached in some way to September 11.

The Iraq resolution passed the UN because they worded it so that if Iraq isn't cleaned up by inspections, they report back to the Security Council.  This was ambiguously worded so that some could read it as requiring another vote to authorize war, and others -- or rather, Bush -- could read it as authorizing war without another vote.  For some reason they all agreed to pass a document that guaranteed another fight over what it meant.  Well sure enough, the White House has announced that no second vote is required, and they are authorized to attack whenever they think the inspection policy has failed.  Some other Security Council members, naturally, are objecting.  They say they only voted for the resolution because we promised them that we would not attack without bringing the case back to the UN.  That our White House wants inspections to fail is pretty much inarguable; they've even gone so far as to block inspectors from being able to get into Iraq at one point.  According to one story, the White House almost didn't bother to wait for any UN approval at all.

And now the White House is claiming that Iraq has already violated the terms of the resolution, by shooting at one of the planes patrolling the no-fly zone, as has been a common occurrence ever since the last war.  Even Tony Blair isn't ready to stretch the UN resolution that far.

Saddam Hussein, seeing how the US has opened up the checkbook to buy support from possible allies, is now doing the same: suddenly his treasury is open and all kinds of lucrative deals are being made with foreign countries like France and Australia which might help block a US attack.  Their balance of trade is going to suffer but it's hard to argue with the need.

Here's an example of how far the partisan pundits can go in trying to back whatever international aggression Bush and company want to instigate: an article in the National Review deploring the pacifism and alleged non-armament of Canada, and suggesting that we should improve their backbone by invading the country to stamp out any enemies there that they don't deal with themselves to our satisfaction.  Otherwise, he warns, we'd have to fortify the whole border because it would be too vulnerable with such softies on the other side.  Invading Canada would, of course, be consistent with the Bush Doctrine of preemptive attacks anywhere a threat exists.

Remember how we used to deplore the Soviet Union for their international aggression?  Nowadays, Russia is adopting a new policy of attacking their enemies (mainly Chechen separatists) in other sovereign countries, and the reason for the new policy is because we led the way.

Meanwhile, despite our patting them on the back and looking the other way when it comes to how they handle the Chechens, the Russians are still undercutting our war effort by building new oil wells in Iraq.  Well, they'll never rebuild as many as Halliburton did, illegally, under Dick Cheney before he and Bush were (cough) elected.

According to Green party member Medea Benjamin, who ran for Senate two years ago and got some votes, Bush is threatening our allies that if they don't support our war push, they will be cut out of any share they would otherwise get of Iraqi oil.

If you look for reasons why the focus is so strongly on Iraq, and not on places like North Korea or Pakistan, it's hard to think of any reason other than the one I saw on somebody's protest march sign: "North Korea has no oil."  Every reason we've heard for attacking Iraq applies more strongly to Pakistan and North Korea than it does to Iraq, except for dislike of Saddam Hussein as a person.  For instance, some reporters in Pakistan are saying that after having helped North Korea get the bomb, they are now helping Saudi Arabia get one.  China is allegedly involved in both cases, and is probably the real source of the know-how.

Speaking of Pakistan, we recently committed a pretty bad gaffe there, asking Benazir Bhutto to throw her political support behind General Musharraf.  This would be like asking George Washington to support Aaron Burr, if Burr had succeeded in seizing the Presidency by force.  Benazir, who has taken enough insults from Washington already, lost her temper and said she was about ready to support the Islamist parties, including the pro-Al Qaeda candidate, Maulana Fazlur Rehman.  And because stability in Pakistan is suddenly important to US interests, she now had an audience here that has to listen to what she's saying...  It's hard to get any good news sources on what's going on over there, but apparently a lot of arm-twisting and loyalty-changing is going on as the new parliament tries to put together a governing coalition... and some of the arm-twisting is coming from Washington, which naturally wants Rehman's faction pushed out, regardless of whether it's popular.  Rehman could be a more dangerous enemy to us than Saddam Hussein, but I bet if he wins the US will still try to get along nicely with him, and not with Saddam.

Comparing our treatment of Iraq with Pakistan, Iran, and North Korea is like comparing our relations with China to those with Cuba.  Any argument for hostility to Cuba also applies to China, and any argument for good relations with China also applies to Cuba, yet the established policy uses completely opposite logic for the two cases.

By the way, here's how our military planners are dealing with the White House reversal on "regime change" in Iraq, due to the notion being considered unacceptable by the UN Security Council:  our current plans simply assume that Saddam will have been deposed by the time our troops reach Baghdad.  What the heck is the justification for presupposing this, if it's not somehow more than just an assumption?

Anyway, Iraq decided after some debate to go along with inspectors again, so we have yet another round of delay before any war.  Any more time we can have is good at this point.

Back to our usual topics.  Aside from the thirst for Iraqi oil, there seems to be a good deal less quid-pro-quo going on between the energy industry and the Bushes nowadays than there was at first.  The embarrassments of Enron seem to have had some effect.  Nowadays the industry that seems to have the Bush White House most thoroughly bought is the pharmaceutical industry.  That industry was one of the biggest spenders of special-interest campaign ads in the recent election, and of course pro-Republican.  They say that CEO Raymond Gilmartin of Merck is as close a "personal friend" (which is to say, heavy contributor) to George W. Bush as Ken Lay of Enron used to be.  Nationwide, the pharmaceutical industry has apparently now become the biggest spending of all lobbies.

And guess what, a new rider has just been attached to the homeland security bill, granting drug companies increased protection against consumer lawsuits.

I've been writing occasionally about the weird stuff going on at the Department of Health and Human Services.  Well, it's not just removing information about condoms from their websites, or packing scientific committees with industrial representatives.  It's also rolling back all normal oversight on fraudulent activities by the drug companies it deals with.  Under the old system, any company that had been found to have defrauded the government in the past would have to work under a "corporate integrity agreement", which meant their books got put through strict accounting oversight.  Under the current Inspector General of HHS, though, these agreements are being dropped and past fraudsters are being left to entirely voluntary compliance with guidelines.  The Inspector General, in a moment that shows she has developed a deep inner understanding of the spiritual path of Bushness, said she was "concerned about the financial impact" of strict bookkeeping on health providers.  Who is this Inspector General?  Janet Rehnquist, daughter of (speaking of partisan judges) our Chief Justice.  She's now coming under investigation... not just for selling out to corporate interests, but for questionable spending and personal travel, and for keeping a government-owned gun in her office.

The main things the pharma lobby wants are (1) that any national perscription drug coverage plan pay full price, and money is found so that more people can pay it, and (2) that there be no obstacles to the current system of monopoly pricing.  They are asking for things like a law against importing any drug that is sold for a lower price in other countries.

One thing the public ought to start recognizing is that our country's system of intellectual property law is running out of control.  Things like the Digital Millenium Copyright Act and many other recent enhancements to the patent and copyright rules are turning these laws more and more into tools of monopoly.  These changes are arguably becoming unconstitutional, since article I section 8 says that these laws are to be passed in order "to promote the progress of science and useful arts", and these recent enhancements are starting to have the opposite effect, stifling new work more than encouraging it.  And no industry profits more from patents than pharma does.  All the books, movies, and records in the world can't match it, I bet.  And one result is that any third world country that goes along with US pressure to respect these patents ends up with thousands of needless deaths from infectious diseases, because treatments that would otherwise be inexpensive become twenty times as costly when the drug companies get what they want.  When the European members of the G8 summit worked out a plan for two-tier pricing so that poor countries could afford medicines, it was the Bush White House that stopped it.  I may end up having to rename this page "Merck & Friends" someday.

To deal with the energy industry proper:  Westar Energy is an outfit that I don't think I've mentioned previously.  The CEO has been indicted for fraud.  We'll see how this up-and-coming rookie among crooked energy companies does against the big league veterans.

Four of those veterans -- Duke, Williams (and its partner AES), Dynegy, and Southern Co. of Atlanta (which used to own Mirant but sold it off) -- just got served subpoenas by the US Attorney in San Francisco, pursuing an antitrust investigation related to the California energy crisis.  Duke and Williams were already named in a lawsuit by the state government, along with Reliant and Mirant.  All of these companies are suffering stock drops.  The testimony of Enron's Timothy Belden may be an important part of what brought this about, because he testified that other energy companies were committing the same kinds of fraud that Enron was.  There may be other subpoenas; the companies are under no obligation to reveal them to the public.

Williams, surprisingly, responded by settling the suit with the state.  The agreement is complicated and, in cash terms, doesn't amout to a whole lot.  The actual refund payment is only about $180,000,000, which is a drop in the bucket compared to the total cost the crisis inflicted on the whole west coast.  Yet the state accepted it, possibly because Williams no longer has the resources to refund the amount they grabbed during the crisis, what with their stock being less than a tenth of its peak value.  They're selling off assets at bargain basement prices to cover their debts.  (You have to wonder about the competence of the people who run these outfits... where the hell did all that cash go?  How can this cash crisis follow immediately after the biggest unearned windfall they could imagine?  Should we be looking for offshore bank accounts?)  After announcing this settlement, their stock started to recover.

Governor Davis and Attorney General Lockyer say that the total value of the package might be ten times the refund figure.  Also, it lets the state out of the overpriced long-term contracts that it has with Williams.  They're interested in similar deals with the other generating companies.  I fear the end result will be that the money we lost will mostly stay lost, but there may not be much more we can get.

For every energy company investigation, you can often expect a matching one into a financial house involved in the deal.  In the case of Westar Energy, the indictment also named Clinton Odell Weidner II, former president of Capital City Bank in Topeka.

Another financial house in trouble is GE Capital.  This time, instead of overestimating their profits, they're confessing that they underestimated their leverage debts.  Now the measure of profit can be pretty slippery, but I thought debt was pretty concrete.  You'd think they'd have a count of the total, not an estimate or an assumption.  But what do I know, I've never leveraged anything.  Some are predicting that GE Capital will soon have to suck about $5,000,000,000 out of its parent, General Electric.

(To get an idea of how truly slippery "profit" can be, look to Hollywood.  Down there, lots of actors and writers have contracts that entitle them to a share of profits, and somehow many hit movies and TV shows never show an actual profit.  The most extreme case is probably the recent movie Spider-Man, which grossed over $400,000,000 but somehow showed a profit of $0.00 when it came time to calculate the share for Stan Lee, the character's creator.  Lee is suing.  The recording industry is similar in the share of "profit" that commonly goes to musicians.)

I should mention that the resignation of Harvey Pitt at the SEC was followed by two of his underlings also quitting.  I wonder how badly that office will bleed before it's done.  It's rumored that the next SEC head will be Michael Chertoff, head of the Department of Justice's criminal division, who helped lead the recent investigations of Enron and Worldcom.  This time, Bush is finally getting the message.

One SEC official stated the other day that the accounting crisis has ended up costing the average US family $60,000 in lost stock value.  He made this point to, of all groups, the Federalist Society.

Our final farrago of financial finagling this week comes from World Wrestling Entertainment, where the former general manager of their Times Square complex just got arrested for "suspicious transactions".  Jeez, if you can't trust professional athletes who are role models for our children, who can you trust?

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