ENRON & FRIENDS


July 3, 2004:  Okay, I'm sorry.  For a while there, I just couldn't stay in the fight -- instead of following the obscure news items and trying to publicize all the corruption out there, I retreated into harmless distractions, and produced this: a set of reviews of comic book movies.  I don't think anything I've ever done was more harmless or irrelevant (but I did have some fun).  So, no Enron & Friends for eight months.  Not much in The Rattler (the War On Terror blog I co-write) either.  I'm afraid I just wimped out.

People were getting plenty enough bad news during this time without my help.  America's position in Iraq turned sour in just the way those of us who opposed the war predicted it would (though at least our fear of really massive civilian casualties such as happened in the previous Iraq war did not come about), and numerous other hubristical and arrogant Administration actions are now coming back to bite the Bushies in the ass, leaving them politically in a very troubled defensive position for the first time since 9/11.  And now people like me can say "I told you so."

Now you usually hear "I told you so" coming from cynics who said nothing more specific than "that ain't gonna work" and contributed nothing useful.  But in this case, I personally told you a good deal more than that:

I am hardly alone in having pointed these things out.  Others of us in the anti-war camp predicted, correctly, that the bloodshed would be worse after we conquered the country than during the invasion itself.  The establishment media persist in treating all the things that went wrong in Iraq as surprises.  But every one of the misfortunes and embarrassments that has plagued us internationally in recent months, including the torture scandal, was easily foreseeable by anyone who paid attention in the months before the war.  It was all there out in the open -- as a country, we didn't lack the information, we just lacked the willingness to hear it or believe it.  The only element that was a surprise to us was the discovery that Chalabi turned out to belong to both the group of pro-war liars and the group of agents of Iran.  So, those of you who supported the war at first and are now feeling duped: maybe you should ask what the anti-war side is saying today, because our track record is looking pretty dependable right now.  What it's saying, if you want to know, is that there is no way to get to a truly sovereign democratic Iraq on the path we're following so far.

A further note on the "surprise" torture scandal:  America has been involved semi-indirectly in torture overseas for decades, most notably through the notorious School of the Americas (now rebranded as the Western Hemisphere Institute for Security Cooperation).  It was never really kept secret.  It was merely kept deniable.  That's all those in power really want: not to keep the knowledge of what they're doing hidden, but to keep it obscure and uncertain enough that most of the public can ignore the charges.  The photographs from Abu Ghraib did not shake things up because they exposed that we were guilty of torture, but because they made it undeniable.  (Not that a lot of Limbaugh types didn't still keep trying to deny it.)

Personally, my own main hope for a positive outcome from Abu Ghraib is not for a big change in our foreign policy, but for a fresh look at the conditions and practices of our domestic criminal justice system.  If we can't tolerate such abuses overseas, I hope we also refuse to tolerate related abuses at home.  Unfortunately, prison reform is a poison issue for anyone running for office... now that Johnny Cash is gone, it's something almost nobody will touch, other than some Quaker groups and maybe Amnesty International.

How is the White House handling all this trouble -- all these crises that have put it so far back on the defensive that even Republicans in Congress, like Dennis Hastert, are now dissing them in public?  According to a report on the nonpartisan political news site Capitol Hill Blue, anonymous off-the-record insiders -- Republicans -- are saying that Bush is turning paranoid.  "It reminds me of the Nixon days."  His people are compiling an ever-lengthening enemies list, they spend far more time thinking of ways to attack John Kerry than to attack Al Qaeda, and so on.  He has become absolutely intolerant of any dissent or backtalk or questioning of his ideas by his underlings.  That's why John Tenet was forced out of the CIA, with Bush allegedly pronouncing the words "I cannot abide disloyalty!" as he demanded Tenet's resignation.  And he describes everything he does as the will of God.  In short, he's become practically a caricature of a beleaguered small-time dictator, showing exactly the mental traits you least want to see in someone in charge.  He's losing it.  People are starting to talk about long-term brain damage caused by prolonged alcohol abuse, and the permanent effects it can have even after drinking has ceased... not to mention the common psychological failings of the kind of person who stops drinking but doesn't deal with the personality flaws that made him a drunk in the first place.

I predict he'll become more mentally stable if his poll numbers go up.  He's the kind of personality that gets along fine with people as long as he's getting his way.  (Shatner Syndrome.)  This makes him a weird sort of mirror-image of Bill Clinton, who was at his best when in the most trouble, and most prone to misjudgement when everything looked like smooth sailing.

If Bush wins (or "wins") in November in spite of all this, I'm afraid the only person with the ability to stop him might be James Bond.

Speaking of Clinton, I just heard him give a book-tour interview in which he said that in New York he knows lots of millionaires, and every one of them admits that he feels it was wrong of Bush to give a huge tax cut to millionaires.  Clinton described the Bush tax cuts, at least the second one, as acts of selfish greed.  So much so that even many of those who are benefitting from it don't want it.

He also said he was ready to militarily attack Afghanistan in response to the bombing of the USS Cole, but the FBI and the CIA stalled on coming to an official finding that Al Qaeda was responsible until he was out of office.  When you read reports about how the Bush administration in the spring and summer of 2001 neglected the anti-terror effort, most importantly Against All Enemies by former antiterrorism head Richard A. Clarke, remember that this was after Al Qaeda had committed an act of war against a US Navy vessel just months ago!


I've been talking about Halliburton here for a while, of course.  It now looks like the Halliburton issue is coming to a head, as an inside whistleblower has gone public with reports of gross profiteering in Iraq.  Marie DeYoung, a former army chaplain, originally set out to fight "political slurs" against her employer.  A few months of auditing work later and she was calling Halliburton's Iraq operation a "gravy train".  She found laundry service costing taxpayers $100 a washload, employees living it up in five-star hotels, "duplication... and gold plating" in equipment purchased for employee use... and people paid to do nothing.  (One such person, labor foreman Mike West, has come forward.  He says he was paid $82,000 a year to "walk around and look busy.")  When she tried to make an issue of it inside the company, she says her superiors told her "We can be as dumb and stupid as we want in the first year of a war, nobody’s going to care."  Halliburton's official response to all this is that the charges are politically motivated and come from people who want to see the rebuilding of Iraq fail.  Yet they've already had to confess in certain particular instances, including $45-a-case soda pop revealed by DeYoung, and a pair of staffers taking $6,000,000 in kickbacks from a Kuwaiti who got a monopoly on selling gasoline to the occupiers, which he did at prices over fifty times what Iraqi citizens were paying, costing the Pentagon $61,000,000 or so.  Halliburton fired those two, probably because the company didn't get a cut.

Now even the Pentagon is threatening to hold money back from Halliburton's contracts.  And contention over the blatant thievery of the Iraq "reconstruction" efforts erupted into a dispute on the Senate floor in which Dick Cheney told Senator Patrick Leahy to go fuck himself.  (Ironically, the same Senate had just passed a new "decency" bill, in response to the Janet Jackson incident.)

First of all, let's check out some of the complaints coming from inside Iraq.  One important one is that the reconstruction effort produces no jobs for Iraqi citizens.  The country is full of skilled (and affordable) workers who could do a lot with the reconstruction, who can neither get paid to rebuild, nor sell any goods used in rebuilding.  Everything, both goods and services, is imported at inflated prices -- prices often set in sweetheart deals with favored suppliers.  As a result, some physical reconstruction gets accomplished (at greatly excessive cost) but no economic reconstruction is happening.  We're leaving Iraq in a state resembling the Great Depression, even assuming all the physical infrastructure gets restored.  (Which isn't likely, since the World Bank estimates true restoration of public services will require $55,000,000,000 even without wastage, and we haven't allocated nearly that much.)  In the meantime, sixty percent of the populace is still dependent on food handouts for daily sustenance -- not because there's no food being produced, but because nobody has any money to buy it with.  Many are also dependent on handouts of bottled water.  Second, funds that were earmarked for positive uses keep getting diverted elsewhere.  For instance, contractors in Iraq are now spending a quarter or so of the funds they're supplied with on making fortresses to keep from getting killed by the people they're not helping.  Funds for water supplies get diverted to build fancy administrative offices, funds get held back for use as a lever to control the decisions of the interim government, and so on.  Third, logistical services that were supposed to be supplied to the military by Halliburton's subsidiary Kellog Brown & Root have produced constant complaints of incomplete or inadequate work.  Things like food service that doesn't maintain any basic hygiene to keep the food safely edible.  (And then overcharging by $16,000,000 for nonexistent meal customers.)  Meanwhile the civilian contractors ride around with far better protection against insurgent attack than the soldiers get.  Fourth, according to one Christian charity, up to $4,000,000,000 in oil revenue that should have been used for aid and reconstruction has gone missing, and there's no system of accountability to see where it went.

One of the guys who's been most on the spot with tirelessly pursuing all this crap has been Congressman Henry Waxman (D-California).  He did good on Enron issues too.  He's one we need to keep.

Rumors (denied) keep saying that the military is starting to build permanent bases there.  The much-celebrated sovereignty that Iraq is supposed to be getting looks more and more like long-term colonial occupation, which means continuing bloodshed for years.  And the bloodshed will continue, because the worst side effect of Halliburton's choice to use Iraq as an opportunity for profiteering rather than helping people is that it has probably blown our last chance of convincing the general population that we're their friends and should be welcomed.  The decision by Dick Cheney's old comrades over there -- and decisions by Cheney's new comrades in the White House -- have led directly to more US soldiers and more Iraqi citizens getting killed.  By the same action they undercut any chance of any de-occupied Iraq achieving a peaceful democracy rather than a violent struggle over who will establish a new tyranny.  And thereby the last remaining justification for having waged the war is thrown away.

If we're going to save the situation there, we have to make some drastic and dramatic change to the way we are handling the occupation.  Booting Halliburton out and hiring Iraqis for reconstruction would be a big and necessary part of that.  But what would probably be most convincing to the Arab world would be the sight of George W. Bush leaving the White House, and his replacement instituting improved and sharply different policies on all fronts.  The more visibly a new administration breaks with the precedents of the old, the better.  Even that might turn out to do little good, of course.  We won't know until we try.

Why are the Bushies doing all this, in spite of how bad it looks and how much it hurts both Iraq and the USA?  As far as I can tell, they simply believe that they have the right to do whatever they feel like and nobody should ever question their decisions.  With Bush himself describing his every little snit as "the will of God" and Cheney describing the passage of perks for his rich friends (in another context, quoted by Paul O'Neill) with "This is our due", I can only conclude that these people are simply the modern equivalent of old-line aristocrats: they believe in the divine right of kings.  A similar belief extends to their feeling about the USA as a whole: they see it as the king of nations.

As extensive and grotesque as Halliburton's abuses in Iraq have been, it's hardly the full extent of their dubious behavior.  An entirely separate case arising in Nigeria is being dragged into court in France -- $180,000,000 in bribes (ah, "retrocommissions") allegedly paid to win Kellogg Brown & Root a $4,000,000,000 to $6,000,000,000 contract for building a liquified natural gas plant in the 1990s -- and the possibility exists that the French court could subpoena, or even indict, Dick Cheney!  (The US Justice Department, also involved in the case, certainly isn't likely to.)  That would be fun to watch.  The French are involved because Halliburton partnered with Technip, a French company.  By the way, Transparency International rated Nigeria as the second most corrupt country in the world.  Even so, it is suspected that a good part of the "retrocommission" money may have ended up coming back to people in the United States.

For still more Dick Cheney fun, let's look back at an issue that has cropped up throughout Enron & Friends' brief history: the lawsuit by Judicial Watch and the Sierra Club to get Dick Cheney to release his Energy Commission's internal papers, so we can see whether or not they really allowed Enron to dictate the content of Bush's energy bill.  (The administration certainly followed many of Ken Lay's recommendations... including one to blame the California crisis on Gray Davis's administration.)  In a previous entry, I said "He has been defeated at every step, his defenses never succeeding in court, yet the case drags on unsettled, year after year.  I am fairly convinced that Cheney's essential strategy is a simple one of stalling and delaying."  Well, it looks like I was right on the money.  Because the case has finally been ruled on by the US Supreme Court -- the one that put Bush and Cheney in office by refusing to allow ballots to be counted -- and guess what: their decision is that the case, or what they left intact of it, has to be delayed until after the November election.  Well, not in so many words, but they required everything to be reprocessed by a lower court in a way that will almost certainly take that long, and required the lower court to apply very strict standards to what the plaintiffs can ever be granted.  Now, this court has been very aggressive in holding the White House accountable to civil law in the past... as long as the president in question was Clinton.  They ruled that Clinton had essentially no executive privilege when accused of sexual harrassment by Paula Jones, and similarly in other cases.  But now, ruling from exactly the same body of law, they find that Cheney shouldn't be bothered by any such thing while he's in office except under the narrowest constraints, citing "the paramount necessity of protecting the executive branch from vexatious litigation" and complaining that the plaintiffs had asked for "everything under the sky".  For the high court to dismiss such an important case with sarcasm (of which that is not the only example) is, of course, almost unprecedented, and very likely will strongly prejudice the lower court, as seems to be the intent.

Justice Scalia, of course, refused to see any reason why he should recuse himself just because he was palling around with his good friend Dick Cheney on duck hunting trips and the like before the case was heard.  He just got on his high horse and pronounced that "I do not think my impartiality could reasonably be questioned."  And if we can't trust the word of a Supreme Court justice, whose can we trust, eh?  Oh well, it wasn't a 5-4 case anyway.

(In the same session, the court faced two of the most important cases arising from the War on Terror: Rumsfeld v. Padilla, and Hamdi vs. Rumsfeld.  In these cases, the administration was essentially asking them to rule that the Fifth and Sixth Amendments don't count when the accused is a terror suspect.  They wouldn't quite go along with that, but they didn't refute it either: they threw the Padilla case back on a technicality.  In the end, they did rule that terror suspects can be held for long periods without criminal charges, but they finessed it by saying the suspects do have a right to counsel, and to protest the treatment in court.  Fortunately, the court also asserted similar rights for non-US citizens held at Guantanamo, a move that was almost surprising because the public debate has constantly seemed to assume that these constitutional rights apply only to US citizens, though these amendments use terms like "any person".)

Speaking of delaying tactics, I notice that Bush has instructed the commission investigating intelligence failures before the war on Iraq -- basically, the question of why we thought there were Weapons of Mass Destruction, and intent to use them, when there weren't -- not to report until March 2005.  I can tell you the source of the intelligence failure in one sentence, right now: you failed to use your critical intelligence when listening to bullshitters like Chalabi.  It's the oldest mistake in the book, when it comes to intervention in foreign countries.  It led to the Bay of Pigs fiasco and many other blunders... it may even have been the root cause of us going into Vietnam.


As you probably heard, good old Enron was back in the news last month, as tapes came out of its members gloating over how thoroughly they were stealing from the people of California.  To wit:

"He just fucks California.  He steals money from California to the tune of about a million."
"Will you rephrase that?"
"OK, he, um, he arbitrages the California market to the tune of a million bucks or two a day."

"They're fucking taking all the money back from you guys?  All the money you guys stole from those poor grandmothers in California?"
"Yeah, grandma Millie, man."
"Yeah, now she wants her fucking money back for all the power you've charged right up, jammed right up her ass for fucking $250 a megawatt hour."

"Do you know when you started over-scheduling load and making buckets of money on that?"

"It's called lies.  It's all how well you can weave these lies together..."

"Just cut 'em off.  They're so fucked.  They should just bring back fucking horses and carriages, fucking lamps, fucking kerosene lamps."

"What we need to do is to help in the cause of, ah, downfall of California."
"You guys need to pull your megawatts out of California on a daily basis."

"They're on the ropes today.  I exported like a fucking 400 megs."
"Wow.  Fuck 'em, right!"

"It'd be great.  I'd love to see Ken Lay Secretary of Energy."
"When this election comes Bush will fucking whack this shit, man.  He won't play this price-cap bullshit."
Funny thing, for some unexplained reason the Department of Justice didn't want these tapes released.  The tapes also reveal them cheering for a forest fire that caused a power plant shutdown, and issuing instructions like "Well, why don't you just go ahead and shut her down" to other plant operators.

The good news is, these tapes might be the tool that finally allows the state to repudiate the overpriced long-term power contracts it had to sign during the crisis.  The state has renewed its demand for $8,900,000,000 in refunds, but finding the money among all the bankrupt players and offshore accounts is not going to be easy.

I am struck by the degree to which they seem to see California as an enemy to be brought low.  Texans have rather a history, I sometimes fear, of treating the rest of the United States as nothing but a bunch of rubes to be plucked whenever possible.  That's how the state's money-men and legislators seemingly behaved during the Savings and Loan crisis of the eighties: as an opportunity to get Federal deposit insurance money to be pumped into the state.  Set up a bank, clean it out, and let your small depositors get reimbursed, all with the legislature's assistance in giving you a regulatory environment practically tailor-made for the tactic.  The banker wins and the state wins, at the expense of the other 49.  That S&L scam remains, probably, the only corporate robbery of the general public bigger than the California electricity crisis.  Many of those who stole that money still have it.  One of the robbers was George W. Bush's younger brother Neil, by the way.  He was fined a whopping $50,000 for it.  Ouchie!  The cost to taxpayers: over $1,000,000,000.  (Neil then went into the venture capital business -- just the sort of job you'd expect of someone who surrendered his ill-gotten gains and isn't rolling in extra decimillions, right?  He then started an education company selling a testing product of just the sort that would be mandated by the President's "No Child Left Behind" law, and then in 2002 he went to Saudi Arabia to teach the movers and shakers over there how to more effectively lobby in Washington.  Then he divorced his wife and offered her $1,000 a month, which even I couldn't live on.  What a guy.  His ex, Sharon, then threatened to write a book about the whole Bush family environment... that got him to open up his wallet.  Too bad the book won't happen now.)

Some criminal trials of Enronites have moved forward: Andrew Fastow pled guilty to two charges (faking data on the company's health, and skimming money for himself) and appears to be cooperating with further prosecution.  Six more defendants, including some Enron colluders at Merrill Lynch, are going on trial soon.  Jeffrey Skilling comes later, as does chief accountant Richard Causey.  Prosecutors are apparently planning to save Fastow's testimony for these later cases.

The one real positive outcome to arise from the Enron scandal was the determination in Washington to tighten regulations around the accounting industry.  In the end, a lot was said and little was done (from the White House end, nothing at all was done), but the one thing that did pass and become law was the Sarbanes-Oxley bill, mandating strict separation of auditing from profit-seeking activities such as brokering.  It wasn't much, but it was, everyone agreed, a necessary reform that the business community was entirely eager to sign up for and willingly cooperate with.

Well, it used to be.  Now that some time has gone by, business leaders are starting to complain that Sarbanes-Oxley, which everyone at the time described as minimal reform, is too onerous.  They want things pretty much put back the old way!  It's bad for America, they argue, for companies to be forced to report their financial numbers honestly... after all, this gives the dreaded Asian companies a competitive advantage.  Among the complainers are Larry Weibach of Unisys, Maurice Greenberg of AIG, and John Devine, CFO of General Motors.  Even Scott McNealy of Sun Microsystems griped that it was too time-consuming.  Various voices in the financial press, and Bushies in the SEC (chairman William Donaldson) are chiming in by wondering aloud if we've gone too far.   The response from Representative Michael Oxley, in essence: quit your whining.  Oxley (R-Ohio) asks where these guys were two years ago when the law was being debated.  He also pointed out that the same companies that are complaining have seen their valuations go up because investors had regained confidence in them (which you'll note was, as far as the Bushies were concerned, the whole reason to go along with the reforms).  Senator Paul Sarbanes (D-Maryland) had similar remarks.

One accounting company, KPMG, is now embroiled in a trial rougher and uglier than any of the Enron cases seem to be.  They've decided that their best legal strategy is to railroad their own employees for selling the bogus tax shelters the company gave them to sell!  (KPMG's position is that these scams, which involved fake offshore loans, were legal before 2001... but no law changed, only defacto IRS policy.)  If this works, former employees like Jeffrey Eischeid might get twenty years while the company as a whole, and its bosses, escape consequences.  Eischeid had the unenviable job of trying to get the government to approve the bogus shelters after the IRS started objecting.  He didn't invent them, but he did sell some of them.  One layer says "It used to be that companies would come in and say, 'If you let our employees go, we'll plead guilty'.  Now it's the other way around: they say, 'We'll give you our employees, so long as we don't have to plead guilty'."  The Department of Justice is more or less going on with this kind of policy, on the rationale that dividing up the defendants keeps them from all sticking to one story.  There's not much I can add to a story like that, except that by the time this is all over, Hell will probably need a whole new circle for these guys.


Of course, with such a long gap between entries, I can only touch on a few important or favorite stories.  Probably hundreds of minor corruption items have slipped by under my radar since last fall... well, I can rest easy in the knowledge that even if nothing happens for the next few months, I'll still have plenty of material to write about.  For instance, I haven't mentioned the pharmaceutical industry, or even the electronic voting issue, which is getting increasing attention at a time when I thought it might be slipping to the back burner.  More soon.
 



 
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