TomPaine.com
Recuse Me!
Conflicts Of Interest In Congress
John Moyers is the editor and publisher of TomPaine.com.
Editor's Note: Laura Ephraim provided research for this article.
Congress will take a look at crooked Enron. The Washington Post reports that
three House and seven Senate committees intend to hold hearings on the
scandal -- better late than never.
The White House isn't happy about the hearings. On January 17, Press
Secretary Ari Fleischer had the temerity to suggest that congressional
curiosity is uncalled for. An incredulous reporter replied, "We should just
trust you on that?"
The incident affirms the obvious -- the White House is wired to Enron. But
it's not the only place in Washington that is. The company shared its
fleeting wealth with some 250 friends on Capitol Hill.
Many of them sit on committees now launching investigations.
You don't have to be Ralph Nader to ask: Who in Congress should recuse
themselves from the investigations?
In fact, on January 20, The New York Times called for Senator Phil Gramm to
disqualify himself. He sits on two important committees, Finance and
Banking, that will look into the scandal; on the latter he is the ranking
Republican. He's taken $97,350 from Enron, and his wife has a long
association with the company, including service as a paid director.
If Gramm should recuse himself, then why not Senator Kay Bailey Hutchinson,
Enron's biggest friend in the Senate, who sits on Commerce. She has received
$99,500 -- Gramm is ranked second. How about Senator Jeff Bingaman, chairman
of the Energy and Natural Resource Committee? He's seventh in the top ten at
$14,124, a relatively cheap investment for Enron, but a nice boost to
anyone's political career.
When it comes to recusal, the question is not: How much money does it take
to buy a politician? A better question is: How much does it take to
undermine public confidence that a politician is acting in the public
interest? That's a question citizens must answer for themselves, but a
little number crunching adds some helpful perspective. Compare committee
assignments against the handy nonpartisan contribution data at
OpenSecrets.org and the result is eye-opening.
Enron's reach goes far and deep. The company's top 10 friends in the Senate
benefited from contributions ranging in size from Pete Domenici's $12,000 to
Hutchinson's $99,500. Each of the top 10 sits on at least one of the
investigating committees, and seven out of 10 sit on two or more.
Take another look at Senator Bingaman. Besides his chairmanship, Bingaman
sits on two other committees -- Finance; and Health, Education, Labor and
Pensions. Former Enron employees whose retirement accounts were dashed when
the company's stock crashed might reasonably ask if Bingaman should recuse
himself from hearings in the latter committee.
Now look at Bingaman's Energy and Natural Resources Committee. It's packed
with Enron's friends -- Conrad Burns ($23,200), Chuck Schumer ($21,933), and
Gordon Smith ($18,000) among them. If Enron's top 10 Senate friends
disqualified themselves, the committee would lose six of its 23 members; if
Enron's top 20 Senate friends recused, the committee would lose 10 of its 23
members. If a $1,000 Enron contribution warranted recusal, no Republicans
and just four Democrats would remain on Bingaman's panel. And we haven't
even mentioned contributions from Enron's sidekick in this calamity, Arthur
Andersen, which is nearly as big a donor as Enron.
All but two of the Banking Committee's 21 members would be eliminated if a
$1,000 contribution from either Enron or Arthur Andersen triggered recusal
-- senators Thomas Carper and Daniel Akaka would have the hearing room to
themselves. Looked at another way, eight members of the committee are among
the top 20 recipients of Enron or Anderson contributions, and six are among
the top 10.
The conflict of interest is clear -- both Enron and Andersen have invested
heavily in the political careers of many members of Congress who will now
investigate them. Are we supposed to have confidence that there's enough
independence left in the capital to protect the public interest? Washington
is wired -- our public servants are privately funded by the people they're
meant to oversee. They promise to get to the bottom of this mess, but an
ordinary American might reasonably wonder: We should just trust them on that?
When he was a senator running for re-election in 2000, John Ashcroft took
$57,000 from Enron. Now as U.S. Attorney General, he's recused himself from
looking into the mess.
Who among his former congressional colleagues should follow suit? The real
question is: Who shouldn't?
Published: Jan 22 2002
*****
The Loyal Opposition:
The Enron Affair
The Scandalous Attitude Of The Bush Administration By David Corn
With most scandals in Washington come the naysayers -- those quick to
declare the matter no big deal, dismiss it as a partisan witchhunt, or
assert it is nothing but the concoction of headline-hungry reporters. The
Enron case is no exception.
"I'm still trying," columnist Andrew Sullivan says, "to figure out what this
Enron thing is all about." He calls the Enron affair "less of a deal" than
Whitewater, noting, "I haven't seen any argument yet that takes us beyond
the line that many in the Bush administration were close to Enron, that
Enron helped bankroll Bush's campaigns, and that therefore there is some
sort of guilt by association." Similarly, National Review's Byron York
comments there is "scant evidence that Enron equals Whitewater," as if that
is now the standard measurement of scandal, and he attributes all the hurly-
burly media attention to the knee-jerk, follow-the-pack tendencies of the
media.
New York Times columnist William Safire opines, "the scandal I see in this
corporate debacle is non-political; it's professional." That is, the
culprits worth bashing are Enron's accountants at Arthur Andersen who
awarded their good housekeeping seal of approval to the company's
sleight-of-hand finances and then destroyed documents.
Safire and Company are not wrong to point out that the cliched smoking-gun
-- a piece of incontrovertible evidence hog-tying George W. Bush or one of
his aides to Enron fraud or coverup -- has yet to be discovered in the
massive pile of bad paper and shredded documents that federal and
congressional investigators will be poking through for years to come. (The
scandal is still young.) And the Bush White House and its defenders
vehemently maintain administration officials did not rush to the rescue of
Enron chairman-in-distress Kenneth Lay, Bush's most generous contributor,
after Lay called his pals in government to say Enron was in deep doo-doo.
But none of this means the scandal is politics-free.
There are Bush critics who grouse that by doing nothing the Bush
administration was a silent accomplice to the screwing of Enron employees,
who were forced by the company to keep their retirement plans loaded with
plummeting Enron stock while Lay and other top execs had dumped over a $1
billion in personal Enron securities before the bubble burst. (Lay pocketed
$30 million in his oh-so prescient sell-off; another Enron honcho skated
away with $353 million.) But it is hard to make a federal case over the
absence of Bush intervention.
Perhaps the Bush administration should have moved to assist the company in
some fashion out of concern for the workers but did not because it feared
such an act would be blasted as blatant favoritism. More importantly, the
Enron failure illuminates the problems and dangers of the Bush
administration's we're-all-buds approach toward the corporate community. It
stirs up significant questions -- political questions -- about the
predilections and judgments of the Bush Gang.
Consider this: when the Bush administration decided to cook up a
comprehensive energy policy, Enron executives were invited several times to
meet with Vice President Dick Cheney's energy task force. In these sessions,
Enron had the opportunity to sell the White House on proposals that would be
good for Enron. Many environmental groups, alternative energy experts,
energy conservation specialists, and consumer advocates were not that
fortunate. Why did Enron get a special place at the table? How could they
not, is a better way to put it.
Lay and his comrades had poured hundreds of thousands of dollars into Bush's
various campaigns. Lawrence Lindsey, Bush's top economic adviser, was paid
$50,000 in 2000 for serving on a do- nothing Enron advisory board. (But he
did earn that money by passing along Lay ideas to the Bush presidential
campaign.) Enron Field, a baseball stadium, was built by Halliburton, the
construction company Dick Cheney headed before becoming Bush's sidekick.
Dozens of Bush officials had held Enron stocks; several others had worked
for Enron or received campaign contributions from the firm.
Remove from the equation all these connections -- forget reality, for a
moment -- and then ask, why should the Bush White House have sought advice
from Enron? The company was more a paper tiger than an energy policy
pioneer. It made its phony billions by recording as revenue the total value
of the goods it traded -- say, electricity, gas and other energy commodities
-- not by calculating the profit or loss from each transaction. Sell $10
million worth of natural gas? Who cares if it cost $10.1 million? You have
$10 million in revenue.
Enron was like Catch 22's Milo Minderbinder, whose M&M enterprises bought
eggs for 7 cents a piece, sold them for 5 cents a piece, and claimed a
profit. The reason for letting Enron in the door at 1600 Penn was
corporate-political camaraderie that was greased by Enron's past
contributions and payments to assorted Bushies. Rather than being granted
audiences with Cheney's energy team, Enron should have been hauled in before
the Securities and Exchange Commission -- and the IRS. The firm paid no
income taxes in four of the past five years, via the use of hundreds of
overseas tax havens and other trickery.
It's not just that the Bush crowd was duped by Lay and his partners-
in-fraud. The Bush White House deliberately created a friendly climate for
such scoundrels. Prior to the fall on Enron, SEC chairman Harvey Pitt, a
Bush appointee, had refused to take on the accounting industry, claiming
that in recent years the SEC had been too adversarial toward accounting
firms. He told Barron's "there is nothing rotten with the accounting
profession" and called for better self-regulation, not tighter government
oversight. (Surprise! Pitt used to be a lawyer for the American Institute of
Certified Public Accountants. And two other Bush SEC nominees hail from big
accounting firms.)
After the Enron mess hit the front pages, Pitt chastised the industry for
not moving fast enough to deal with the sort of iffy bookkeeping practices
exploited by Enron, and he unveiled the sketchy details of a reform plan.
But the centerpiece of his proposal was a new over sight board that would be
funded by -- guess who? -- the industry. Here he was sticking with the Bush
Doctrine: let corporations regulate themselves.
Whether Bush and his aides pulled a favor for Enron is only one issue. Zoom
out, and the broader landscape shows a Bush administration all-too
sympathetic and open to corporate bamboozlers.
Washington Post reporter Paul Farhi pooh-poohs the Enron affair as "another
Incomprehensible Washington Scandal." He explained: "By definition, an IWS
is so convoluted that it is understood only by participants, partisans,
lawyers and a few very nerdy journalists -- all of whom are paid to pay
attention anyway." (Other examples: Iran- contra, the S&L scandal,
Travelgate.) But the big brush strokes -- the Bush administration's far too
hospitable disposition toward Enron and Arthur Andersen -- are not hard to
discern or to fathom. The search for that smoking gun -- which can be a
mind-numbing, detail- dominated process -- ought not to distract from the
wider view. (And, yes, the Clinton administration was also in the hayloft
with Lay and Enron. The company gave the Democrats hundreds of thousands of
dollars and won much-coveted seats on overseas trade missions headed by Ron
Brown and Mickey Kantor, Clinton's secretaries of commerce.)
In noting that Enron's collapse was not unusual business, Treasury Secretary
Paul O'Neill remarks, "Companies come and go. Part of the genius of
capitalism is people get to make good decisions or bad decisions, and they
get to pay the consequences or enjoy the fruits of their decisions." In
other words, the government doesn't have to fret about employees who get
nothing while execs -- the people who made the bad decisions -- skip off
with millions of dollars earned through sleazy transactions. The market
rules. As does campaign contributions and personal connections. What's
scandalous (so far) is not the Bush administration's actions (or lack
thereof), but its attitude.
Published: Jan 18 2002
David Corn is the Washington editor of The Nation. His first novel, Deep
Background, a political thriller, was published recently by St.
Martin's Press.
*****
Enron-omics At A Glance
A Primer On What Really Happened Before The Fall
Theresa Amato is president of Citizen Works, a non-profit, non- partisan
organization working to strengthens citizen participation in power.
Editor's Note: Katie Selenski contributed to this article.
The following is excerpted from introductory remarks Theresa Amato gave at a
press conference on January 21, 2002. To read the statements given by other
participants at the press conference, visit the Citizen Works Web site.
Dr. Martin Luther King, Jr, whose memory and life work we celebrated this
week, said that, "Injustice anywhere is a threat to justice everywhere."
As the Enron/Arthur Andersen scandals unfold and the resulting injustices to
the employees, pension holders, shareholders, and community become clear, we
are putting forth a set of citizen proposals for reform.
Before we turn to our distinguished citizen advocates who are going to
address proposed component parts of this Citizens Agenda for Reform, let's
do a quick recap of Enron-omics as we know it thus far.
Enron-omics At A Glance
In 2001, Enron, a 15 year-old energy-trading corporation, was ranked number
seven of the Fortune 500. In December 2001, Enron laid off 4,000 employees
and filed for bankruptcy, the largest such filing ever. Many employees lost
70 to 90 percent of their retirement savings as they were forced to hold
their shares from October 16 to November 13 while Enron's value plummeted to
pennies per share.
As late as September 2001, Enron employees and other shareholders were
consistently reassured by top management that the stock was stable -- "a
bargain" -- and that future prospects were good, while executives sold off
$1.1 billion in company shares and amassed personal fortunes.
Enron accumulated more than $1 billion in debt since 1997, debt that top
executives hid off the books.
Arthur Andersen doubled as an auditor and as a management advisory services
firm for Enron, making more than $50 million in fees in a single year. When
criticism began to surface about its accounting practices, Enron management
ordered its law firm to run a limited investigation, not to include
"second-guessing," which resulted in an October report finding no wrong
doing at Enron or Andersen. Andersen stood by its reports until shortly
before Enron failed, when Enron decided that four years of earnings had to
be restated and $600 million - or 20% -- of reported profits had to be erased.
Andersen shredded thousands of paper and email documents pertaining to Enron
audits.
Of the securities analysts following Enron, only one put a sell
recommendation on the stock prior to the date of bankruptcy; Enron had 3500
subsidiaries and partnerships, and paid no income taxes in four of the past
five years because it was able to transfer assets among 881 subsidiaries
that were set up abroad in tax- sheltered countries. According to Public
Citizen, from 1989 to 2002, Enron and its employees gave $5.95 million in
individual, political action committee and soft money contributions to
federal candidates and parties, 74 percent to Republicans and 26 percent to
Democrats. Enron employees were the single largest funding source of George
W. Bush's presidential campaign, and gave $623,000 directly to President
Bush throughout his career.
According to the Center for Responsive Politics, Arthur Andersen ranked 5th
on President Bush campaign's list of corporate donors. Since 1989, Andersen
has contributed nearly $5 million in soft money, PAC and individual
contributions to federal candidates and parties. Enron officials were
invited to participate in six meetings of Vice- President Cheney's energy
task force, which endorsed many Enron proposals. Enron chairman Kenneth Lay
made calls throughout the fall to the Treasury Department, the Federal
Reserve, and the White House "providing information" about the company's
situation to top officials at each, though reportedly no assistance was
granted.
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