Enron's Global Game
Beyond the domestic fallout lies a sordid saga
of government-business collusion to control energy supplies
by Greg Guma
Toward Freedom magazine, February / March 2002
Until it imploded last October, Enron -long known as End-Run
by its critics-was often described as just "Y another aggressive
corporation eager to expand its portfolio and open routes into
new markets, albeit sometimes with "strong arm" tactics.
The implication in most press reports was that, so long as consumers
and shareholders came out on top, how it operated was a matter
of little public concern.
But Enron was never just another company. It was a major architect
and proponent of utility deregulation, with friends in both the
Clinton and two Bush administrations. Headquartered in Houston,
TX, it was also the largest contributor to George W. Bush's presidential
campaign, giving at least $550,000 to Bush and an estimated $1.8
million to the Republican Party during the 200() elections.
Since then, however, it has also emerged as one of the biggest
corporate rip-offs in history. Early evidence indicates that its
executives hid at least half a billion in debt while enriching
themselves through insider trading and financial gimmicks. In
the end, they ran the company into the ground. Citigroup, J.P
Morgan, and other banking houses were either hoodwinked or accomplices.
Either way, they lured in shareholders with empty promises.
Before Enron's share price plummeted from $80 to less than
a buck, its executives cashed out more than $1 billion in stock,
while simultaneously barring lower-level employees from doing
the same with their retirement accounts. Meanwhile, the company's
accounting firm, Arthur Andersen, was shredding financial documents,
even after Enron-related files were subpoenaed in November. When
the roof caved in, employees lost both their jobs and most of
their savings. California consumers and businesses were also victims.
As energy bills skyrocketed and the state dealt with blackouts,
the firm profited greatly, while leveraging even more debt.
Now that the press is paying attention, most of these alleged
crimes will be investigated. The Labor Dept. and Securities and
Exchange Commission are conducting civil probes, while the Justice
Dept. has opened a criminal investigation. The White House has
so far admitted that Enron representatives, including CEO Kenneth
Lay, met with Vice President Cheney repeatedly, including shortly
before the public disclosures began. Administration officials,
including cabinet members Don Evans and Paul O'Neill, talked with
Enron at least 15 times as the company sought help to obtain last-minute
bank loans. The president himself also had contact with Lay, a
friend and ally, during the run up to the crash. In the end, this
could well turn into Enron-gate.
Yet, still invisible, even now, is the predatory nature of
Enron s operations worldwide. Long a suspect in human rights violations,
it often used bribery and threats to get its way. It also profited
over the years from working relationships with the CIA, Pentagon,
and State Department, the latter of which proved over-eager to
pressure other countries into accepting Enron deals. Until recently,
the US-based energy trader also had a strong presence in Afghanistan
through its involvement in a pipeline project from Turkmenistan
to Turkey by way of Azerbaijan and Georgia.
One of Enron's many overseas moves was the 1992 takeover of
a power plant in Subic Bay, the largest US military base in the
Pacific. Helping with that Philippines purchase was Frank Wisner,
then US ambassador. From there, Wisner moved on to India, using
his ambassadorial status to help close Enron's Dhabol plant deal.
According to one former staffer, Wisner-who held the number three
spot at the Pentagon prior to his ambassadorial postings-opened
doors for Enron to CIA information about risks and competitors.
Another former ambassador claims that CIA service for select US
businesses abroad has been official policy for years.
Lay, Enron's founder and longtime CEO, launched the company
shortly after quitting the now-defunct Federal Power Commission.
During the Vietnam War, he worked for the Pentagon. A well-connected
Texan and major Republican contributor, he was a close friend
of the first President Bush, and used his association with three
of Bush's sons to win contracts. In 1988 George W. Bush successfully
pressured Argentinean officials into awarding Enron a contract
to build a pipeline to Chile. According to journalist Seymour
Hersh, Neil and Marvin Bush tried to influence Kuwaiti officials
to accept Enron's bid to rebuild a power plant destroyed during
their dad's Gulf War. But that deal fell through.
Lay was also instrumental in pumping money into the Bush II
campaign. The new administration returned the favor by letting
Enron pick federal regulators and occupy a favored seat at the
table for Vice President Dick Cheney's low-profile energy task
Bush I's Secretary of State James Baker and Commerce Secretary
Robert Mosbacker, as well as Thomas Kelly, who directed Pentagon
operations during Gulf War I, all subsequently went on the Enron
payroll. But the most helpful member of the Bush team may have
been Wendy Gramm, wife of Texas GOP Senator Phil Gramm. In 1992,
Mrs. Gramm, then chair of the Commodity Futures Trading Commission,
responded to an Enron request to help rewrite laws on energy futures,
exempting these financial instruments from government oversight
and fraud laws. Another deregulation movement was underway. Within
weeks of that breakthrough, she joined Enron's board of directors.
The futures market became a major source of company income.
Clinton's first treasury secretary, Lloyd Bentson, yet another
Texan, was a major recipient of Enron largesse-$14,000 for just
one of his Senate campaigns-before his appointment. He was replaced
in 1994 by Robert Rubin, whose relationship to the company dated
to his work as an investment banker. When Rubin first joined the
Clinton administration, he wrote to his former client, saying
that he "looked forward to continuing to work with you in
my new capacity."
Cultivating such relationships apparently paid off. Clinton
officials publicly helped Enron win contracts in India and Indonesia,
and cleared the way for government subsidies to help build power
plants in China, the Philippines, and Turkey. Enron officials
accompanied US diplomats on trips to Pakistan and Russia, returning
from both with additional deals.
Still, perhaps the most controversial intervention during
the Clinton era involved Mozambique. According to John Kachamila,
that nation s natural resources minister, while he was negotiating
a 1995 agreement with Enron to build a gas pipeline to South Africa,
US administration pressure included outright threats to withhold
development funds "if we didn't sign, and sign soon."
The Houston Chronicle reported at the time that Clinton s National
Security Advisor Anthony Lake, along with USAID and the US Embassy,
were involved in high-powered, commercially driven diplomacy.
"Their diplomats, especially Mike McKinley [deputy chief
of the US Embassy], pressured me to sign a deal that was not good
for Mozambique," said Kachamila. "He was not a neutral
diplomat. It was as if he was working for Enron."
BEYOND THE HYPE
Before dawn on June 3, 1997, police stormed the homes of several
women in western India who had led a massive protest against Enron's
new natural-gas plant near their fishing village. According to
Amnesty International, the women were dragged from their homes
and beaten by officers paid by Enron. Predictably, the company
denied any knowledge of the incident. But India isn't the only
place where Enron was accused of wrongdoing. Charges of influence
peddling, corruption, and environmental damage followed it around
In Brazil, where Enron was a major stakeholder in a 2000-mile
pipeline to Bolivia, the plan was to open up pristine Amazon forests
to unsustainable development. The livelihoods of indigenous communities
in both countries hung in the balance. In India, villagers protested
that the Dhabol power plant, approved without an environmental
impact statement, would pollute local waters, destroy the fishing
economy, and threaten delicate plantations of mango and other
fruits. That India deal also threatened to inflate electricity
prices, while the company stood to make a 32 percent after-tax
rate of return, three times the US average. Nevertheless, in exchange
for $20 million in "educational gifts"-basically bribes-the
details were initially kept secret.
Although Enron's ads stressed that its natural gas was "invisible
so the rest of nature never will be," it was, after all,
90 percent methane. And pure methane may be 20 times more damaging
to the global climate than carbon dioxide, since it traps heat
in the atmosphere. The effects of drilling are almost as damaging
as going for oil Each well produces tons of toxic liquid containing
arsenic, lead, and radium. So, Enron was really just conning the
public with its hype about "clean energy."
Over the years, pieces of the puzzle surfaced in the New York
Times, Houston Chronicle, New Yorker, Nation, Counterpunch, and
The Enron Story, a book focusing on the company's $3 billion,
2000-megawatt plant in India. Putting them together, what emerges
is a portrait of ongoing government-industry collusion at the
expense of fair play, real competition, and the environment. With
the approval and aid of intelligence agencies, the State Department,
and at least two presidential administrations, Enron strong-armed
its way into control of critical energy sources and distribution
systems worldwide, while simultaneously promoting domestic deregulation.
Nine years after it succeeded in shielding energy futures from
oversight and fraud laws, we finally understand some of the reasons
GOING FOR IT
Apparently, Enron hoped that the election of another Bush
would protect and extend its special and very private relationship
with the government. And despite Enron's collapse, some details-particularly
the full extent of Bush family involvement-still remain under
wraps. Yet, at least we can see the outline Acting as a private
extension of US foreign policy for more than a decade, this rogue
energy company bribed and bullied its way into control of crucial
energy production and distribution facilities in Asia, Africa,
the Middle East, and South America.
By the mid-90s, in order to protect fossil fuel and nuclear
investment, it also worked with other energy companies and aerospace
firms to control future development of alternative energy. In
fact, the first commercially competitive solar projects-in China
and India-involved Enron and Amoco in long-term deals to manufacture
solar cells and purchase power. As Bob Kelly, co-chair of Amoco/Enron
Solar, put it, "We think there is a big market out there
and we are going for it."
In the end, it was a temporary triumph of' image over reality.
Deregulation, combined with Internet trading, allowed Enron's
corporate cowboys to make outrageous and unwise deals to raise
capital. Everyone went along, seduced by Enron's worldwide reach
and free market fairy tales.
Now, the fantasy is over, and, for the Bush administration,
the nightmare may just be starting. At least 15 high-ranking Bush
officials, including Defense Secretary Donald Rumsfeld, owned
Enron stock, and two had professional ties to the company. In
an attempt to "get out in front" of the emerging debacle,
senior Bush adviser Karl Rove and Army Secretary Thomas White
have already admitted that they ditched their stock before the
collapse. White was Enron's vice chairman before moving to the
In a subtle acknowledgment of the dangers that lie ahead,
Enron has hired Robert Bennett, the legal maestro who helped Casper
Weinberger obtain a pardon from Bush I in the waning days of Iran-Contra.
Calling in Bennett, a master of both public relations and underdog
legal defense, is a sure sign that Enron and the administration
believes things will heat up further before this story concludes.
Soon, we may again be asking: What did the president-and his men--
know, and when did they know it?