Cooking The Books And Buying Protection
by Arianna Huffington
The opponents of campaign finance reform keep trying to convince
us that it's a non-issue: a matter of inside-the-Beltway baseball
that no one cares about except a few money-hating policy wonks.
Rep. Dick Armey derided it as "the lowest thing on the
American radar screen" while Sen. Mitch "Money Is Free
Speech" McConnell took time out from his busy fund-raising
schedule to chastise the editors of The New York Times for "continuing
to obsess" about an issue that has completely "dropped
off the list" of the public's priorities. In other words,
"No one cares, why should we?"
The answer is simple. So simple, in fact, it can be summed
up in one word: Enron. Its chairman, Kenneth Lay, is the former
800-pound gorilla of Washington power brokers who is looking more
and more like the spiritual offspring of Charles Ponzi.
Enron stands accused of, basically, cooking its books, fraudulently
pumping up the company's value by concealing massive amounts of
debt in an array of complex partnerships set up by Enron officers.
Nudged into reluctant action by a Securities and Exchange Commission
investigation, the company was forced to admit that it had over-reported
profit by nearly $600 million during the last four years. These
disclosures caused Enron's stock to plummet from a high of $90
to 26 cents, culminating on Sunday in the energy giant filing
for Chapter 11 protection, the largest corporate bankruptcy in
And it gets uglier. Much uglier. While all these financial
shenanigans were going on and the stock was flying artificially
high, Lay, in his position as CPSO (Chief Pyramid Scheme Officer),
cashed in stock and options worth $150 million. And former Enron
executive Jeff Skilling pocketed $62 million before abruptly abandoning
ship this past August.
Shareholders were not so lucky -- I mean "market-savvy."
Neither were some 20,000 current and former Enron employees whose
retirement accounts evaporated as the company nose-dived. It turns
out that these employees were not given the same opportunity as
Lay and Skilling to cash out while the cashing was good. The company
froze the retirement fund, and employees could only watch helplessly
as their nest eggs cracked and turned sunny side down.
But the little guys weren't the only ones taken in. Big-boy
bankers Citigroup and J.P. Morgan lent Enron a total of $1.6 billion,
$540 million of which is unsecured. Starved for a good laugh?
Try asking your friendly neighborhood banker for an unsecured
loan and watch his reaction.
So what was Enron's secret? It was the aura of power that
glowed around the company and Kenneth Lay -- a key shaper of the
administration's energy policy, and an intimate FOG (Friend of
This aura doesn't come cheap. Enron and its executives doled
out $2.4 million to federal candidates in the 2000 election and
were among George W.'s biggest donors. Lay and his wife alone
have donated $793,110 to the GOP since W.'s dad was in office.
Enron has also spent big bucks lobbying Congress and the White
House: $4 million in the last two years. The money has bought
the company a bipartisan who's who of Washington insiders -- including
James Baker, Mack McLarty and Gore 2000 fund-raising director
Johnny Hayes -- to help push its corporate agenda.
If the congressional investigations into Enron's collapse
slated to begin this month are to have any political impact, they
need to focus on how much clout and protection the energy giant
was able to buy through lobbying and donations.
Witness, for example, the unprecedented input Lay and Enron
were given on the makeup of the Federal Energy Regulatory Commission
(FERC), the agency charged with regulating Enron's core business.
Lay went so far as to brag to one potential nominee about his
"friends at the White House." He also personally put
the screws to FERC chair Curtis Hebert in an effort to change
his views on electricity deregulation. Hebert didn't, and was
soon the former chairman of FERC, replaced by an Enron ally.
The Enron debacle has exposed the dark side of capitalism
-- and the unseemly link between money and political influence.
Let's hope it also sheds a light on the desperate need for fundamental
campaign finance reform. Because trust in the fundamental decency
of our political system is not a trivial, inside-the-Beltway issue.
Just ask the scores of people who were being sold on the virtues
of investing their golden years in Enron -- right up until the