Enron Is Only the Tip of the Iceberg
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 oversight 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 do campaign contributions and personal connections. What's scandalous (so far) is not the Bush administration's actions (or lack thereof), but its attitude.
David Corn is the Washington editor of The Nation.