Enron: Not the Only Bad Apple

I guess I'm not a nice guy. But when I heard that Enron's former vice-chairman Cliff Baxter had shunted his mortal coil, I shed no tears.

One tabloid even called Baxter a "hero" who courageously raised the alarm about his company's fantasy financials.

Maybe I'm missing something here, but this is the Baxter who last year quietly crawled out of Enron like a cockroach from a rotting log -- then dumped his stock on unsuspecting buyers, thereby pocketing a reported $35 million. You can just imagine Baxter chuckling to himself in January last year as Enron's office staff gathered their pennies for his retirement gift while he's thinking, "So long, suckers!" -- knowing they are about to lose their jobs and life savings.

There have been a lot of misplaced tears in the Affair Enron. The employees were shafted, no doubt about it. But the shareholders?

I didn't hear any of them moan when Enron stock shot up through the roof when the company, joined by a half dozen other power pirates, manipulated, monopolised and muscled the California electricity market a year ago.

All together, Enron and half a dozen others skinned purchasers for more than $12 billion in excess charges. That's the calculation of Calfornia's utility watchdog as presented to federal regulators in a damning petition for refunds.

Here's an example of how Enron's po' widdle stockholders, hero Baxter and chairman Ken Lay made their loot.

Soon after California dumbly deregulated its power markets, Enron sold 500 megawatts of power to the state for delivery over a 15-megawatt line. Very cute, that: the company knew darn well the juice couldn't make it over the line, causing panic in the state -- customers would then pay 10 times the normal cost to keep the lights on and traders could cash in.

The federal regulator caught that one. Within weeks of taking office, George Bush demoted the troublesome official. Lay boasted to one candidate expected to replace the sacked regulator that President Bush had given Enron veto over the government appointment.

Nor did Enron's stockholders object to their profitable business of trading politicians like bags of sugar. From Texas to Argentina to Britain, Enron used legal but sick-making use of political donations, consultancies and lobbying to twist contracts, rules and regulations to their liking.

You want to cry for a power industry exec who came to an early, violent, end? Then let me suggest to you Jake Horton, late senior vice-president of Gulf power, a subsidiary of Southern Company. (Southern is one of Enron's cohort in that fixed casino called the US electricity market.)

Horton apparently knew about some of his company's less-than-kosher accounting practices; and he had no doubt about its illegal campaign contributions to Florida politicans -- he'd made the payments himself.

But unlike Baxter, who took the money and ran, in April 1989, Horton decided to blow the whistle, confront his bosses and go to state officials.

He demanded and received use of the company's jet to go and confront Southern's board of directors. Ten minutes after take-off, the jet exploded.

While the investigation into the plane crash was inconclusive, the company's CEO believed his death was suicide. He told the BBC: "I guess poor Jake saw no other way out."

Ultimately, Southern pleaded guilty to the charges related to the illegal payments.

Jake and Baxter are the beginning and end of the story of deregulation. I was part of a team investigating Southern's finances after Jake's plane went down, just after a grand jury voted to charge his company with criminal racketeering for manipulating its accounts.

Millions of dollars were charged to customers of Southern's subsidiary, Georgia Power, for spare parts that were not used.

The internal revenue service recommended indictment, but George Bush Sr's justice department put the kibosh on the prosecution (their legal prerogative) -- in great part because the fancy financials had been blessed by the company's auditor: Arthur Andersen.