ENRON: The trillion dollar fall-out

various | circa November 1997

[Liz]

Media reports say we should expect a trillion dollar figure associated with the Enron collapse. Significant milestones in the path toward Enron's financial ruin are excerpted below from "Enron: The Global Gospel of Gas," circa 1997 report by the environmentalist group, project underground.

Bi-partisanship
In this country Enron has traditionally been a major supporter of the Republican party. Ken Lay, the chief executive of Enron, hosted the Republican national convention in Houston in 1992. After George Bush....lost the 1992 election, Enron started to pump money into Democratic coffers such as Lloyd Bentsen, another Texan, and Clinton's first treasury secretary. In one Senate election campaign, the Democrat received more than $14,000 from Enron. According to the Washington, D.C.-based Center for Responsive Politics, the amount is the second highest paid out by Enron to a political campaign. (Editor's note: Enron later gave the DNC $100,00 in soft money).

Bentsen quit his job as Treasury Secretary at the end of 1994 and was succeeded by Robert Rubin, who worked closely with Enron when he was co-chair of Goldman Sachs investment bank. Clinton first hired Rubin to head his National Economic Council. Soon afterwards, Rubin wrote on Goldman Sachs stationery to former clients, including Enron, saying he "looked forward to continuing to work with you in my new capacity."

After this ethical lapse, Rubin filed a White House financial disclosure form that listed Enron among the names of 42 former clients with whom he had had "significant contact." Rubin pledged to recuse himself from any government dealings affecting these former clients for one year, a period that has since lapsed.

Enron's lobbying clout was demonstrated in its attempts to deregulate the energy futures markets that enhance its profits. Enron was one of nine energy companies that asked the U.S. Commodity Futures Trading Commission (CFTC) in November 1992 to exempt energy derivative contracts from federal government oversight as well as from fraud laws. The request was made right after Bill Clinton won the U.S. presidential election at a time when the political composition of the board was likely to change soon. The five-member commission is made up of three members from the ruling party and two from the majority party.

The deregulatory push was advanced by Wendy Gramm, the CFTC chair, who authorized the commission staff to begin the lengthy rule-making process required when a federal agency makes a major policy decision. Gramm, a former senior staff member of the Reagan White House, resigned as chair of the commission on January 21, 1993, as Clinton took office. Wendy Gramm is the wife of Phil Gramm, the ultra-conservative Republican Senator from Texas.

Five weeks after Gramm resigned, she was appointed to Enron's board of directors, just as the commission voted two to one to deregulate the energy derivative contracts business. President Clinton had yet to appoint anyone to the two vacant seats on the CFTC board; the commissioners who embraced deregulation were Gramm allies appointed during the Bush administration.

The regulatory exemption for energy futures was made retroactive to 1974 - when the CFTC was created - to remove any potential legal challenges to past energy contracts. The exemption from fraud legislation that the industry wanted was dropped in response to objections in Congress. Gramm and Lay say there is no connection between the CFTC decision and Gramm's appointment to Enron's board.

Enron has also been under fire for the environmental impact of its activities at a company power plant in Boston. Each day, for six weeks in the summer of 1995, a million litres of water were trucked to the plant just outside Boston to prevent the Charles river from shrinking to less than half its normal flow as a result of plant operations.

War bounty from Kuwait
In the early 1990s Enron bid for a contract to rebuild Shuaiba North, a 400-megawatt power plant that supplied 5 percent of Kuwait's electricity before it was bombed during the 1991 Gulf war, according to journalist Seymour Hersh.

Hersh wrote in a 1993 New Yorker magazine article that Enron's price for supplying the power is 11 cents a kilowatt hour. The rival bid put forward by the German company Deutsche Babcock was six cents, while the state-subsidized rate is half-a-cent a kilowatt hour.

Uncle Sam's heavy hand
In Mozambique, the Philippines and Argentina, Enron has been accused of putting pressure on the local authorities through powerful figures in the United States government.

Mozambique
In November 1995 Enron signed an agreement to build a 900-kilometre long gas pipeline from Mozambique to South Africa to develop the Pande gas field, in southern Mozambique, which has an estimated two trillion cubic feet of natural gas reserves. Enron beat Sasol, the South African state petroleum processing company, for the bid. The month that Enron signed the contract the Houston Chronicle carried a detailed report alleging that Anthony Lake, President Bill Clinton's National Security Adviser, the U.S. Agency for International Development (USAID), and the U.S. Embassy in Maputo, put pressure on the Mozambican government to sign with Enron. "Enron was forever playing games with us and the embassy forever threatening to withdraw aid. Everyone was saying that we would not sign the deal because I wanted a percentage, when all I wanted was a better deal for the state," says John Kachamila, Mozambique's natural resources minister and the leader in the negotiations, told the Chronicle.

Philippines:
In 1993 Enron won a contract to build a 105-megawatt, diesel-fired power plant in the Philippines that critics said would cost the Philippine National Power Corporation (NPC) eight cents a kilowatt hour - 20 percent more than NPC charged consumers. The controversy led to resignations in 1993 of all seven members of the NPC board.

[Liz]

.....great list - good job!!!