31.01.2002
Open the books
As the largest bankruptcy in the history of US capitalism, Enron's collapse has generated political fallout as well as economic disaster for employees and pensioners. The Bush administration has been implicated. So has the Blair government. Indeed, almost everyone seems embroiled in the scandal. Enron's largesse obviously spread very wide. The company was forced to declare bankruptcy on December 2 after a surprise $1.2 billion balance sheet adjustment in October led the US Securities and Exchange Commission to investigate the company's shady finances. Enron was once the biggest US energy trader and the seventh-largest company in the Fortune 500. It has sacked more than 6,000 of its 21,000 employees worldwide, and the company retirement plan, mostly invested in Enron stock, has been all but destroyed. In the sober view of the LA Times: "The name Enron now conjures up images of monstrous greed and massive fraud, shredded documents "¦ Company earnings and revenue were inflated or illusory. Hardly anything was real, unless it was the tens of millions of dollars that top executives were making from selling stock as fast as they could" (January 27). It quickly transpired that the Enron bosses thought nothing of massaging the facts if and when it suited them - which of course was all the time. Nothing was too shameful or deceitful. You begin to see why Enron was named business innovator of the year. The Financial Times (January 29) detailed one particular ruse. Enron and Blockbuster set up a partnership that was no more than a pilot scheme to supply video on demand to a thousand homes. Enron then sold its future earnings from the partnership to a bank in return for $115 million in finance - then promptly booked the money as profit. Nice one. Enron had a corporate structure which could have been lifted directly from Oliver Stone's film, Wall Street. Officially sanctified greed. A cut-all-corners culture. Extravagant bonuses for dubious deeds. There were tales of wild parties, sexual excess, serial adultery, Stakhanovite working practices, etc. Your typical all-American values. Naturally, a conscience was definitely surplus to requirements. It might interfere with profits. But it seems to have proved all too much for one senior Enronite. John Clifford Baxter, the company's former vice-chairman, was found dead in his car last week - he had shot himself in the head. It has been reported that Baxter had "complained mightily" about the Enron transactions which hid its vast debts in offshore ventures. The fact that Baxter was facing a class action brought by former Enron workers who had lost their life savings in the collapse, and was about to be hauled before congressional investigators as a potential key witness, might also have played no small part in his apparent suicide. Unsurprisingly, Enron was the best-connected company in the USA. It donated generously to the Republicans, to whom it gave $2 million during the presidential elections round, making Enron the biggest single contributor to Bush's campaign. Meanwhile it also gave $500,000 to the Democrats. Always hedge your bets. Many senior Bush officials previously worked for Enron or held large shareholdings. And Kenneth Lay, Enron's chairman and chief executive officer until he resigned a week ago, is a personal friend of the Bush family. Seven congressional committees in Washington are on the warpath. On top of this, the US Justice Department on January 9 launched a criminal investigation into the Enron bankruptcy, setting up a task force of federal (ie, national) prosecutors. However, the General Accounting Office, Congress's leading investigative arm, met a blank wall. David M Walker, who heads the GAO, had stated that he would begin legal proceedings this week if the Bush administration did not provide the necessary information. Democrats point out that vice-president Dick Cheney met Kenneth Lay at the very time he was drafting the energy policy last year. Bush and his administration now face a growing public relations problem - 67% of Americans surveyed late last week believe the administration is either hiding something or lying about its relationship with Enron. If it was not for the September 11 factor it is more than likely that the Bushites would be in serious trouble - Watergate starts to look a bit pale and unexciting by comparison. In Britain, Blair and his cohorts are trying to swat away the uncomfortable fact that Enron also gained useful audiences with ministers after sponsoring Labour Party events to the tune of at least £36,000 (the Tories were also bunged £25,000). Some £15,000 of that was given in 1998 upon Enron getting the go-ahead for a £1.36 billion take-over of Wessex Water. Money flowed into Labour's coffers as Enron busily laboured ministers, who included John Battle, Geoffrey Robinson, Peter Mandelson and Stephen Byers. Subsequently, the government lifted opposition to gas-fired power stations, permitting Enron to construct a 49MW facility. Confirming the 'money for access' raison d'être, Ralph Hodge, former chairman of Enron Europe, said: "My biggest interface with the government was over ending the moratorium on building gas-fired power stations." Interestingly, Hodge has now expressed some unease about Enron's aggressive lobbying. The purpose, Hodge told Channel Four news, was to "explain the differences in the UK political scene" to his US bosses. Rather piously, Hodge ventured the idea that "it would be a better world if it was not custom and practice" for big business to court/lobby government. But seeing how everyone else is doing it "¦ Labour too has been closely involved with Arthur Andersen, Enron's now suspect auditors and one of the world's top accounting firms. It advised the government on several initiatives, including the windfall tax on the privatised utilities. Under the Tory government, Andersen was sued by ministers and banned from further government business as a result of its role for the De Lorean car company debacle. Thatcher had not been amused. New Labour though quickly rehabilitated Arthur Andersen. US senator Joe Lieberman, chairing a congressional inquiry into the role of federal regulators in the group's failure, said officials at Andersen "could be on the other end of an indictment" following revelations that executives ordered the shredding of Enron-related documents. Officials at Andersen's Chicago head office are known to have taken part in regular conference calls when they openly discussed destroying documents with the firm's Enron auditors in Houston. Thousands of Enron employees have seen their life savings wiped out because Enron's pension scheme was heavily invested in the company's shares. On December 18, an International Brotherhood of Electrical Workers member, Robert Vigil, an electrical machinist foreman at Portland General Electric, testified to the US Senate Committee on Commerce, Science and Transportation hearing on Enron. "Little did those of us working hard every day to help make the company successful know what was going on at the top of Enron. If my eight co-workers alone lost nearly $2.8 million, that estimate is probably very low." (IBEW website) Richard Trumka, secretary-treasurer of the AFL-CIO (US equivalent of the TUC), said a week ago: "The future retirement security of practically every American worker was hurt by the collapse of Enron. In our opinion, directors who permitted the accounting deception that led to the collapse of a company worth over $70 billion dollars are not suited to serve on other boards." AFL-CIO-affiliated unions sponsored benefit funds hold an estimated 3.1 million Enron shares. Last weekend the AFL-CIO launched an international campaign against Enron directors who are also on the boards of other companies. One of those in the firing line is the Tory, Lord Wakeham, chairman of the Press Complaints Committee. As a qualified accountant, Wakeham was also on its audit committee. Time to start to losing sleep. Communists demand that Enron's books be opened so that working class organisations can do their own investigations - a democratic demand that will give our class a powerful weapon to challenge the class enemy on its own ground. Our class suffers when collapses such as Enron's occur, while company' board members appear able to ride the gravy train to a comfortable retirement. Not too many people were weeping when Linda Lay, the former Enron head's wife, blubbered on NBC's Today programme that their family now faced personal ruin - "Other than the home we live in, everything else is for sale. We are fighting for liquidity. We don't want to go bankrupt." They have a very big home. She also reassured the TV audience her husband was an "honest, decent, moral human being". Yes, there is their morality - and then there is ours: a communist morality which opposes the endless and inhuman search for profit which so fires the soul of Enron and its imitators. Jim Gilbert
Worker