HUFFINGTON: Enron -- Cooking The Books And Buying Protection
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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 history.
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 George).
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 stock crashed.