Part I: Tom DeLay's Axis of Influence
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- "It is well known that Enron lavished money and attention on political figures all over the nation's Capitol. But for an insight into how carefully the company cultivated members of Congress, look no further than its efforts to please Representative Tom DeLay." (The New York Times, Jan 16, 2002)
By the time Enron collapsed, its tentacles had penetrated deep into our federal government. No investigation into just how deep would be complete without a comprehensive examination of House Majority Whip, Tom DeLay.
In researching this story, it quickly became apparent that Tom DeLay's deep and personal involvement with Enron was not an exception but part of a pattern of controversial relationships that reach back to DeLay's earliest days in Congress.
All these relationships were consistent with a far-right, free-market, anti-regulatory philosophy that DeLay has raised to nearly religious status and upon which he has created a lucrative and ruthless power base.
Among other discoveries, we found a startling contrast between the wholesome, born-again, pro-family image DeLay portrays to voters back home in Sugarland, Texas, and the controversial causes and companies he backs in Washington.
A closer examination of Tom DeLay seems particularly important now, not so much because of his Enron entanglements, but because of his pending political promotion. With the announced retirement of House Majority Leader, Dick Army, (R-Tex) Tom DeLay is widely expected to ascend to that important post, making him the second most powerful person in the House of Representatives.
From Bugs to Bureaucrats
When Tom DeLay came to Congress in 1984 as the Republican representative from Sugarland, Texas, he was widely dismissed as a lightweight. A quirky little man with squinty eyes and a hayseed drawl, he was quickly tagged with the unflattering description, "that little bug-killer from Texas."
But by his second term in office, the former owner of Albo Pest Control had wiped the smirks off those Yankee faces and earned a few more impressive nicknames. His friends call him "The Hammer," a title he earned for his never-take-no-for-an-answer lobbying style.
His enemies, defined as anyone to his political left, had come to know him as both ruthless and effective. They had lots of names for him too: "The Prince of Darkness," "The Exterminator" and "The Meanest Man in Congress."
DeLay's critics no longer dismiss him as a joke. His policies and positions on social, environmental and regulatory issues are extreme and far to the right of the mainstream. And, DeLay sees no difference between the personal and the political. Attacking DeLay's policies will elicit the same ruthless counter-attacks as a personal affront.
Nothing like DeLay's laissez-faire policies have been heard in Congress since the earliest days of America's industrial revolution when robber baron industrialists saw cheap labor as an indispensable ingredient for growth. A financial journalist (who asked that his name not be used in this report) described DeLay's free-market policies this way:
- "If there were a capitalist equivalent of the Taliban, Tom DeLay would lead it. He has hijacked a kind of Reaganesque free-market rhetoric to turn back the clock on such laws as those protecting workers and the environment, and those that require transparency in business dealing. His policies have enriched and benefited a handful of powerful corporate and political insiders who in turn, have fueled his political machine."
Millions of words have been written over the last decade detailing Tom DeLay's many controversial friends and policies -- most recently his strong ties to Enron. But even the most shocking of these revelations has failed to stop or even slow his rise to power within his party and Congress.
Tom DeLay has become the Teflon Don of the radical-right of his party. Undamaged by criticism, legal challenges and ethics complaints, DeLay has only grown bolder over the years. While few in Congress respect Tom DeLay, most fear him -- and with good reason. Anyone who crosses Tom DeLay quickly learns there is a price to pay.
- "This whole thing about not kicking someone when he is down is BS -- Not only do you kick him -- you kick him until he passes out -- then beat him over the head with a baseball bat -- then roll him up in an old rug -- and throw him off a cliff into the pounding surf below!!!!!" (E-mail between two Tom DeLay staffers)
Reading those words, one would think one were listening in on a pair of John Gotti lieutenants rather than employees of the House Whip. The message was unmistakably clear -- if you get in The Hammer's way, you get hammered.
Viral Marketing: Spreading the Influence
Once safely ensconced as GOP Majority Whip, DeLay and his closest aides began to move their operations outside government -- much the same way Enron moved partnerships offshore. Some things they had planned could lead to ethics problems if conducted out of DeLay's Capitol Hill office.
So, DeLay facilitated the migration of several trusted former aides to key lobbying positions. Outside government, these DeLay lieutenants would be unencumbered by House ethic rules.
Inside government, DeLay turned his attention to finding ways to buy the kind of political support on The Hill he could not win with honest debate. Using so-called "leadership political action committees," DeLay was legally able to launder corporate campaign contributions to individual Republican members of Congress.
- "(DeLay) is the financial godfather of congressional Republicans, overseeing the collection of nearly $30 million in campaign funds in 1999 alone
The whip -- enforcer of party discipline among 221 House Republicans -- is, in fact, a former pest exterminator who has used his relentless energy, formidable political skill, charm, intelligence and cunning to rise to power." (The Washington Post, May 2001)
Buckle Up. It's a Bumpy Ride
In the first installment of this story we will chronicle DeLay's relationship with Enron. From there, we follow the trail back in time to sweatshops in the North Pacific, Indian casinos in Mississippi, South Africa's apartheid government and a mob hit in Miami. Each story involves DeLay personally or members of his "kitchen cabinet." Taken as a whole, these tales draw a picture of a person whose extremist views on religion, society, business and government place him at the outer fringe of mainstream thought.
Part I: Tom Delay and Enron
Tom DeLay learned early in his political career that the best way to control people is with favors, particularly money. In 1994 he inaugurated his first "leadership PAC" --Americans for a Republican Majority (ARMPAC). It was created to raise money which DeLay could then parcel out to House members he wanted to influence. ARMPAC would preach DeLay's anti-regulatory mantra. The money raised would be used to reward those who supported DeLay and punish those who opposed him.
Even some Republicans were concerned that the money would be used in ways to steer their party into radical territory. "He's not above using his Whip organization to pursue rolling back EPA and OSHA to the nth degree," said Rep. Christopher Shays (R-Conn) at the time. "I think he believes it's a Republican cause."
But, DeLay was not swayed by those he viewed as too tied to big government. Nor was he at all concerned how his PAC activities might appear to anyone else. In fact, one of DeLay's most disarming devices is his candor. Rather than try to sugarcoat his policies he revels in embellishing them and confirming his critics' worst fears. "We have a new strategy for regaining the high ground," DeLay said. "We need to raise enough money to tell our story."
"Our story" translated to a convergence of DeLay's radical laissez-faire philosophy and the desires of various industries to be freed from any regulations that cost them money.
- "DeLay employs a number of vehicles to direct money to candidates: his own reelection campaign fund; his leadership political action committee, Americans for a Republican Majority; the National Republican Congressional Committee, the GOP's House campaign committee; the Restore Our Majority Program, a fund designed to funnel money to endangered incumbents; and in a more indirect way, the Republican Issues Majority Campaign." (Washington Post)
Enron Gave DeLay's PAC the Breath of Life
Enron hosted ARMPAC's first fundraiser. It was held in Enron's hometown of Houston, Texas and raised $280,000 for DeLay's new leadership PAC. Subsequent disclosures show that Enron and its executives gave early and often. Ken Lay contributed $50,000 to ARMPAC, Enron Vice Chairman, Joseph Sutton, contributed another $25,000. The full extent of Enron's financial support for DeLay's PAC may never be known since reporting such contributions became mandatory only in 2000.
In 1994, DeLay formed "Project Relief" another favorite of Enron. Project Relief represented hundreds of corporations and trade groups seeking regulatory relief of one kind or another. Project Relief (chaired by the father of Microsoft founder, Bill Gates) fought for a moratorium on federal regulations and the adoption of risk/benefit measures for future regulations. Adopting a risk/cost formula would mean that if a company could show that complying with an environmental rule would cost them too much, they could dodge it.
When the U.S. Senate stopped Project Relief, DeLay vowed to fight on. He lashed out at the Environmental Protection Agency, his least-favorite federal agency. Since his days as a pest exterminator back in Texas, trimming the EPA's powers had become nothing less than a jihad for Tom DeLay. His language was characteristically intemperate, employing a reference to Nazism commonly used by right-wing militia groups:
- "The EPA, the Gestapo of government pure and simple, has been one of the major claw hooks that the government maintains on the backs of our constituents." (National Journal, March 2, 1996)
No company could be more supportive of that goal than Enron. The company had already become one of the most notorious polluters in Texas, having received generous "grandfathering" relief under Gov. George W. Bush's administration. But the company had operations and subsidiaries in many states and the EPA was a source of constant irritation.
Ken Lay and his wife, Sharon, became regular fixtures on DeLay's FEC disclosures as well as his PACs. Enron pumped more than half a million dollars into ARMPAC for DeLay to use to reward House members who supported his anti-regulatory agenda. DeLay personally received nearly $29,000 in contributions from Enron and another $18,100 from Enron's accountants, Arthur Andersen.
Despite all the talk of The Hammer's powers of persuasion, DeLay's real power flows from his control of ARMPAC money. In 1997-98 he shoveled over $389,000 to Republican candidates. The next year $879,000 was parceled out by DeLay to compliant Republican candidates. The hammer, it appears, has a golden handle.
"I worked harder than anybody else," DeLay told reporters with his usual swagger. " I raised more money than anybody else. I was smarter than anybody else...Once I sink my teeth into something, I don't turn loose until I win."
Enron also helped DeLay move key aides into positions in the private sector where they could further both DeLay and Enron's interests. In 1998 Enron secured a lucrative $750,000 consulting gig for two of DeLay's closest aides. The money would be used for a secret "grassroots" campaign -- spearheaded by Enron -- to deregulate energy markets.
The DeLay/Enron scheme began with a meeting at Tom DeLay's Texas home. When Enron lobbyists asked how best to proceed, DeLay noted that Enron could begin by giving his Chief of Staff, Ed Buckham (who at that very moment was forming his own consulting company, the Alexander Strategy Group) and Karl Gallant, a consultant to DeLay's ARMPAC, the contract to manage the campaign.
Both men, members of DeLay's unofficial Kitchen Cabinet, were veterans of stealth political operations. Gallant had recently worked on a propaganda campaign for the tobacco industry and he quickly devised a similar campaign plan for Enron.
An outline for the plan was faxed to Tom DeLay's Washington office. It was printed on Alexander Strategy letterhead complete with Ed Buckham's name in print. The only problem was that Alexander Strategy's CEO was still in the employ of the federal government at the time. Buckham was still serving as Tom DeLay's chief of staff. It was a serious mistake and one they moved quickly to obscure. Gallant said the memo had been just a mock up and that they had used Alexander Strategy stationery by mistake.
But it was clear that Enron had been calling the shots the whole time.
- "There was a lot of high-level contact between Buckham and Enron," said a source close to the situation. "It was known among the (Whip's staff) that Buckham was trying to maneuver to get a big contract with Enron. It made a lot of people uncomfortable, but you would pay if you challenged Buckham."
(Roll Call, Feb. 24, 2002)
A month later when Buckham finally went off DeLay's federal payroll he was immediately put on the payroll of DeLay's ARMPAC. And Alexander Strategy Group was, as Enron promised, awarded the $750,000 contract to drum up support for electric power deregulation -- a goal that Enron believed would open the $300 billion a year electric markets to Enron.
The stealth campaign would operate out of an energy consortium dubbed, "Americans for Affordable Electricity" -- a name that Californians would find bitterly ironic just three years later. While other energy producers signed onto the campaign, Enron was calling the shots.
- "We envision an aggressive field force operating under the direction of Enron and capable of engaging the opponents (of deregulation) wherever necessary. Additionally, this would put in place an operation capable of addressing state regulatory and legislative issues of concern to Enron."
(From the memo generated on Alexander Strategy Group letterhead)
Once funded and in operation Alexander Strategy Group put DeLay's wife, Christine on its payroll. She reportedly pocketed a net "salary" of $40,000. Christine DeLay is a retired schoolteacher. What she did for her salary is unclear. According to Alexander Strategy Group, she neither lobbied for the company nor did she show up for work there. Why then were they paying her? The company says Alexander Strategies wrote the checks to Christine DeLay as a "bookkeeping convenience" for ARMPAC.
Americans for Affordable Electricity's lobbying assault -- directed by Buckham and Gallant -- swung into action. DeLay's legislation to deregulate electric markets quickly earned the nickname, "The Enron Bill" among members of the House. And DeLay earned another nickname: "Dereg."
- "The connection (Americans for Affordable Electricity) between DeLay and Enron offers a glimpse into how the Texas lawmaker and the corporate giant combined forces behind closed doors to deliver a bare-knuckled political punch aimed at breaking a legislative logjam frustrating efforts to deregulate the $300 billion-a-year electricity market, a top goal of both Enron and DeLay." (Roll Call, 2002)
Enron's leadership of AAE had critics among other member companies who viewed Enron's position on deregulation as too radical. And, they began to have questions about Buckham and Gallant, whom Enron had imposed upon them. A few months into the program the other companies had had enough of Buckham and Gallant's bare-knuckle Enron tactics and fired them.
"Hiring them was a mistake," a former AAE member said. "Enron was the eagle in this fight and the rest of us were geese."
But Gallant and Buckham were DeLay and Enron's men and they were not out of work long. Both men were rehired by Enron directly, Gallant for a total of $200,000 and Buckham $370,000.
With all this money flowing to DeLay and his lieutenants, the time had arrived for DeLay to deliver. In 1998, DeLay pushed for energy deregulation legislation virtually crafted for and by Enron. When DeLay introduced the bill, Ken Lay penned a letter lauding DeLay "for his vision." To drum up support for his bill, DeLay hosted a "power summit" in Houston at which Enron's former CEO, Jeffery Skilling, spoke in support of the measure.
- "Delay and a cadre of close political advisers operated at the center of an Enron-backed crusade for energy deregulation in the late 1990s." (Ft Worth Star-Telegram, Feb. 2002)
Despite all this, many in the energy business considered the bill too radical. It later died a quiet death in committee.
But Tom DeLay could help Enron in ways that did not require the votes of his colleagues on The Hill. For example, in 1999, Enron lost the bidding for a power plant project in the Mariana Islands -- a U.S. protectorate in the North Pacific. A Japanese company had been awarded the contract. DeLay stepped in and successfully demanded that the bidding be reopened so Enron could get back into the game. The bidding was reopened and Enron got the contract. DeLay had called in some favors from the island's politicians who owed him -- big time.
(More on DeLay's long-standing and controversial ties to the Mariana islands and the Enron power plant deal in the third installment of this report.)
Friends to the End
DeLay remained a friend to Enron to the end. Late in 2001 he threw his full support behind a bill granting big business, including Enron, a massive tax rebate. With Enron's energy Ponzi scheme nearing collapse, Ken Lay was frantic to get the bill passed and signed into law because it would have ensured Enron a $254 million rebate. The fact that Enron had paid no taxes in five years did not seem to matter to DeLay.
The bill did not pass and Enron collapsed leaving thousands of his Texas constituents unemployed and stripped of their retirement savings. But DeLay never apologized for his undying support for the energy giant. Instead, DeLay simply said he was "heartbroken" by Enron's bankruptcy -- but not heartbroken enough to return his Enron contributions, as many others in Congress did.
And despite the catastrophic meltdown of deregulated Enron, DeLay remains unapologetically committed to the deregulatory crusade that originally drew him to politics.
Investigative journalist Stephen Pizzo's bestselling book, "Inside Job: The Looting of America's Savings and Loans," is now available as an ebook.