August 20, 2002:  A few days ago I stumbled on an old story in Business Week which pointed out the rising problem of companies using faked balance sheets to pump up their stock, a year before the current scandal that led to everybody having to retract their profit statements.  Now some Republicans have tried to blame the Clinton administration for fostering an atmosphere of moral laxity and thereby causing this corporate malfeasance, but Bweek makes it clear that companies have always worked this angle as much as they could, and that it spiraled to an extreme only as Clinton was stepping off the scene.  Why was that?  Basically, because the Clinton-era boom left Wall Street's expectations so high that CEOs didn't dare start showing slowed growth when we hit a recession!  They had the idea that they had to pretend to their stockholders that they were recession-proof -- an attitude that never could have arisen without an abnormally long period of prosperity.  Some of the accounting approaches described in the article are more reminiscent of the eighties than the nineties.  For instance, the "big bath" approach, where you try to hide all your small bad news under one very large item of bad news, so everything negative is reported simultaneously, in a way that makes it look like an isolated one-time occurrence.  Very popular in the mid-eighties... except then they always attached a large layoff to it.  Sometimes they laid off too many and crippled their own companies, but it got the stock back up in the short term.

As America's large corporations straighten out their books and get themselves honest, there's just one large organization left that is practicing wildly distorted bookkeeping in order to show unrealistic revenues:  the Republican party, when it argues for a new pro-business tax cut.  The new deficit is now so huge that even Dubya has suddenly noticed it, and started calling for a lot of spending cuts to help pay for homeland security and a war with Iraq.  Both are way past affordable with the current tax cut, but they want to cut more, and are trying to justify it the same way the Reagan team tried to tell us that a balanced budget was perpetually just a few years away.  The right wing is trying to convince the Congressional budget analysts to adopt their special accounting methods, but the analysts aren't buying, basically on the grounds that the approach amounts to wishful thinking, in which you can make up any numbers you want.

Politically, the Dub chose a bad time to call for budget restraint.  He just vetoed the bill that funds the extra efforts by America's firefighters, along with police and veterans' funds, on the grounds that the democrats attached pork to the bill.  Unfortunately for him, the outcome of this is that he's being attacked by organizations like the American Legion, the New York City police department is talking strike, and word is out that he's going to face a public protest by firefighters on the worst possible date: September 11.

The New York Fire Department is especially pissed off because the Fireman's Fund insurance company just refused to cover them any more.  Looks like that outfit needs to change its corporate logo from a red fireman's hat to a yellow sphincter orifice.

I mentioned previously that California is defying the Federal Energy Regulatory Commission's order to break up the Independent System Operator and hand over much of its authority to their puppets.  Well, FERC is suing the state now.

There are hundreds of other updates I could make on the ongoing corruption stories I've been covering, from the emerging troubles of banks and brokerages such as Lynch and Chase to the FERC report on Enron (which details all the crime that FERC's previous investigation, at the time the crimes were being committed, found no trace of); from multiple lawsuits against Ross Perot and his company to the gubernatorial campaign of Bill Simon, which has now sunk so far that even President Unembarrassable is starting to stand as far away from him as he can on the podium.  But to keep this manageable, I am only going to list some new, previously unmentioned corruption stories.

One example:  after Bush has started doing pro-environment things like sign new smog rules for diesel trucks (a sign of just how scared he is by the continuing collapse in his credibility and popularity), he's now trying to give another break to polluters in a different area.  They're arguing that the National Environmental Policy Act of 1969, which regulates ocean pollution, only applies to the U.S.'s "territorial waters", which traditionally extend only three miles from shore, not to the "exclusive" waters that the country, like most others, claims 200 miles out.  Meanwhile, two environmental groups are suing the administration for failing to enforce the National Marine Protection Act, which protects whales and dolphins from harmful fishing practices.

Speaking of Bill Simon and Bush's decision (barely) to still come out to California and raise money for him, I think I'll mention a thing or two about the kinds of friends Bush has in California when he wants Republican campaign contributions.  One of the biggest is David Murdock, the CEO and 1/3 owner of Dole Foods.  Murdock has lobbied for some time to repeal the law that forbids putting carcinogens in foods!  He previously owned a textile mill, and swore up and down to his employees that he would never close the plant out from under them, as part of a campaign to persuade them not to unionize.  He then closed it three years later.  After he did, they found out he'd been leveraging their pension fund for his personal profit, wrecking the fund.  He's a big Bush donor.  Another specimen is Gerry Parsky, who once swindled a Saudi prince on a real estate deal.  (That certainly indicates balls, if nothing else positive.)  When he was forced to pay the prince back, he managed to stick Bill Simon Sr., the father of the gubernatorial candidate, with part of the bill.  And Bill Simon Jr. now has to suck up to the guy as a Bush crony.

Bush's head of the anti-corruption task force, deputy attorney general Larry Thompson, just got accused of fraud himself, in a suit brought by Judicial Watch.  They allege that while on the board of the credit card company Providian, he indulged in the accounting shenanigans and insider trading that he's now supposed to police.

Here's a random piece of possible corruption that could use publicity:  the Bureau of Land Management is doing an exchange of acreage with the state of Utah, and somehow the state comes out $100,000,000 ahead on the deal.  Those within the BLM who point out that their official valuation of the land doesn't match what appraisers evaluate it as are being shushed or ignored.  They say that this is just one of a series of lopsided land deals, some with private landowners.

Also, the administration just opened up unleased areas of the Canyons of the Ancients National Monument in Colorado to oil and gas drilling.

The new corporate responsibility reform measures already have one group lobbying against them:  a group of mutual funds known as "buy-out funds", which specialize in taking over and salvaging (or stripping) failing companies.  They say that the new independence and conflict-of-interest rules would destroy their ability to seize management control of these companies, which would in turn spoil the value of investing in their kind of fund.  Gosh, that would be a terrible loss to society, now wouldn't it?  Boo hoo!

Meanwhile, some of the main lobbyists working to preserve offshore tax havens, it turns out, are retired ex-Congressmen.  Some of the main names in this group are Dennis DeConcini (D-AZ) and Bill Archer (R-TX, no surprise there).  DeConcini is working for Accenture, which used to be a branch of Arthur Andersen.  Accenture, an especially aggressive user of lobbyists, also has Steven Symms (R-ID).  Bob Packwood, oddly, is lobbying to close the loophole, but only because the company he's lobbying for (MBIA, a municipal bond insurer) feels it's benefiting their competitors more than it benefits them.  Richard Neal (D-MA), one of the main proponents of closing the loophole, says the effort "certainly has created a bonanza" for people with congressional connections to get lucrative lobbying jobs.

Two California state senators, John Burton and Martha Escutia, filed a complaint with the SEC charging that the New York Stock Exchange and the National Association of Securities Dealers are selectively stalling on arbitration claims by California investors, just to get back at the state for imposing tougher ethics standards on such arbitrators than the federal government does.  The new rules were enacted July 1, and no California cases have been processed since.  What's so bad about the California rule?  It requires disclosing conflicts of interest.  Apparently certain arbitrators feel that's asking way too much.  They had already sued the state to overturn the new rules, which were written by the California Judicial Council in response to a legislative requirement for new rules authored by Escutia.

Here's a different kind of corruption story that is less about money, apparently, than about ego:  the Pentagon recently conducted a big expensive wargame designed to test some new (or newly orthodox) fighting concepts.  But the general in charge of the "enemy" forces says the game was rigged, set up to have a foregone positive conclusion about the ideas it was supposed to be rigorously testing.

The charter airline industry has gotten what it lobbied for:  a postponement of the requirement to beef up their security like regular airlines.  A charter plane is probably now the easiest kind to take over and crash into a building... no other passengers to fight.

So has the TV industry:  an FCC mandate to force all new TV sets to include digital tuners by 2007.  Apparently the magic of the free market is not considered magical enough, when the public doesn't feel like buying.  What good all these digital broadcast tuners will do, when something like 80% of TV viewers already have cable, is not clear... except to those who sell the transmission and reception equipment.  If they can force the entire industry to abandon analog broadcast in one lurch, then everybody has to replace everything.

The worst of these pieces of corporate favoritism is probably this one:  the Bush administration just announced new rules for privacy of your medical records.  The new rule is that there is no privacy, if it interferes with your hospital's dealings with your insurance company.  You don't have to be asked or informed before your records are shared with whatever corporate bean counters feel a need to know your status.  If you don't like it, I guess you can always pay your $29,000 hospital bill in cash...

Is it any wonder that Bush, despite how his administration is foundering in its relations with the public, has just set a new all-time record for mid-term election fundraising?

There are several AIDS groups which receive some federal funding, who also protested health secretary Tommy Thompson (one of the flakier people in the Bush cabinet, in my impression) at the last international AIDS conference.  Well, his department is now "reviewing" their funding.  Thompson is being egged on by several congressmen who were also -- get this -- upset by the absence of religious themes at the AIDS conference.  We'll see how punitive he gets.

Though there have been a number of defections, many in the GOP are not giving up on their scheme to have people invest their Social Security savings in the stock market.  They should be reminded of the experience of ex-Democrat Ben Nighthorse Campbell, who invested his leftover campaign contributions in the stock market to build up a nest egg for his next election, and promptly lost half of the pile.

I can't resist mentioning one last bit of Enron greed.  Not content with a court ruling that allows Enron executives to keep all the skimmings they shared out among themselves as "retention bonuses" while the company went under (US Airways is the latest bankrupt company to get this treatment) five former Enron goons, including Rebecca Carter, who is married to ex-CEO Jeffrey Skilling, have now asked that they get a share of the severance package for Enron's laid-off employees.  These five took home an average of $1,400,000 each during the year of collapse, yet they're arguing to the judge that they need more to alleviate their hardship and cover "administrative expenses" that they supposedly incurred.  This doesn't mean they had to pay staff out of their own pockets -- it means that their own work on the bankruptcy issues constituted "administration" that they feel should be paid at the rate to which they would like to remain accustomed.  Carter alone is demanding $875,000.  David Cox, who headed Enron's disastrously unsuccessful internet broadband subsidiary, took home $1,100,000 in that last year, and now wants $1,100,000 more.  John Sherriff, who headed Enron Europe, wants to add $1,650,000 to the $4,300,000 he already got.  The judge says he'll rule at the end of August.  If he says yes, it could bust the whole severance deal apart, forcing everyone to start over on negotiations.

Finally...  would you like your investments to earn 25% a year, in good times and bad?  All you need is to know the right people.  Like the people in The Carlisle Group, whose prominent figures include the ex-PM of England, John Major, along with George H.W. Bush and many figures in his former cabinet.  They can get you into "private equity" investments that aren't yet available to just anyone who has the money.  "It all comes down to personal relationships."

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