Is Army Secretary Thomas E. White pulling an Argyros?
As TPM readers know, White was a major player at Enron as well as Chairman and CEO of Enron Operations Corporation, a major Enron subsidiary. Here’s his description of his Enron involvement in his pre-scandal Defense Department bio …
Prior to his appointment as Secretary of the Army, Secretary White served as Vice Chairman of Enron Energy Services, the Enron Corporation subsidiary responsible for providing energy outsource solutions to commercial and industrial customers throughout the United States. Mr. White was responsible for the delivery component of energy management services, which included commodity management; purchasing, maintaining, and operating energy assets; developing and implementing energy information services; capital management; and facilities management.
Secretary White also served as a member of Enron’s Executive Committee and was Chairman and Chief Executive Officer for Enron Operations Corporation. He was also responsible for the Enron Engineering and Construction Company, which managed an extensive construction portfolio with domestic and international projects.
Here’s the description in the new bio …
From 1990 to 2001, Mr. White was employed by Enron Corporation and held various senior executive positions.
Special thanks to TPM reader RC for the catch.
This is classic. The Texas GOP has sent a cease and desist letter to Kelly Fero, who runs a Texas GOP parody site called www.EnronOwnsTheGOP.com.
“Texas GOP attorney Jonathan Snare said the site was clearly intended to mimic the party’s trademark symbol and Web site and mislead the public,” reports the Associated Press.
My only question is how we can get Snare and his doofus boss at the Texas GOP to come work for the national Republican party.
Well, the momentous day of the TPM relaunch has finally arrived. As you can see, we’ve made a great effort to keep the design of the site simple (and hopefully elegant) and more or less what regular readers are used to.
The big change is the new web address. If you’re reading this you no doubt made it here successfully. But let’s say it anyway. You can now find TPM at http://talkingpointsmemo.com at a web browser near you.
This will involve some temporary inconvenience. And the new domain is admittedly on the long side. But after much consideration it became clear that if the website is known as Talking Points Memo then j-marshall/talk is at least not the most intuitively obvious place to try to find it. The old domain also proved quite a pain to give out over the radio.
Radio Guy/Gal: And what’s the web site people can find you at, Josh?
Josh: Okay, it’s ‘J’ and then a hyphen — you know, not an underline but a dash — and then ‘Marshall,’ that’s with two ‘L’s by the way, and then dot com. Then forward-slash. Then ‘talk’.
Well, you get the idea. Anyway, from now on it’s talkingpointsmemo.com. If you have old links to specific posts under the old address, they’ll still work. Or you can just find them substituting the new domain.
It will also make possible future Talking Points mugs and shirts look more aesthetically pleasing.
What else? There’s also a handy new search function, which will help you find all the goodies from Talking Points past. There were a lot of gizmos we considered adding. And this was the one that really seemed useful and didn’t busy things up too much.
We’re also introducing the new TPM Book List. TPM reads quite a lot of books, many of them obscure but many of them interesting. Every week or two we’ll be posting a short review. The review will explain some of why I found it interesting and hopefully give you a sense of whether you’d like to read it too. Many will be new or at least recent. But certainly not all. The first, for instance, Winston Churchill’s My Early Life was first published in 1930.
These won’t be formal books reviews. They’ll be shorter and less formal than a regular book review but longer and, hopefully, more thoughtful than a blurb.
Talking Points Memo has about sixty- or seventy-thousand individual readers a month (unique IP addresses, to use the technical jargon) so hopefully we’ll be able to send a few readers to some worthy books.
The reviews will be posted as normal posts. But then they’ll be separately linked down there on the left hand side of the site beneath the pitch for contributions. After we’re up and running for a few weeks, at any one time there should be about a half dozen books listed with links to the review and where they can purchased. (Full Disclosure: We include links to the books on Amazon.com. If you go to Amazon and purchase the book, we get a 15% cut.)
Well, with all the web-designing and hassling with the gizmocrats who run our web provider, I’m pretty much too worn out to write any commentary. But this is TPM after all. Some I’m bound to be back with a few more posts by the end of the day.
P.S. By the way, some friends of TPM (FoTPM) have been kind enough to blurb the site for the relaunch. Not to worry, though, these blurbs are just for relaunch week. They won’t be a regular part of the site. Even TPM is only so shameless.
P.P.S. The Talking Points Memo relaunch also coincides with the birthday of TPM Editor, Writer, and CEO Josh Marshall, who turns 33 today.
What would the Talking Points Memo relaunch be without a few more names of Bush administration appointees who owned a piece of the ‘Ron?
Appointee: Robert E. Fabricant
Position: General Counsel
Relationship: Enron Corp. stock value less than $1,001, dividends and capital gains $5,001-$15,000
Appointee: William J. Leidinger
Title: Assistant Secretary for Management.
Relationship: Enron stock $1,001-$15,000
Appointee: Thomas N. Slonaker
Title: Special Trustee for American Indians
Relationship: Enron stock $50,001-$100,000 assets, $1,001-$2,500 dividends
Appointee: Diane L. Tomb
Title: Assistant Secretary for Public Affairs
Department: Housing and Urban Development
Relationship: Enron stock $15,001-$50,000
You can find the earlier-posted complete list here.
This is a splendid book and if you’re a Churchill fan I recommend it to you heartily. What’s more, even if you’re not a Churchill fan I think you may find it a treat. It’s not a big book in either the literal or figurative sense of the word. But it accomplishes in spades what most books can only hope to do: it pulls you into another world.
Churchill wrote this book in 1930 when he was 56 years old, at the tail end of a long, successful, but in some many checkered career in public life. Of course, we know that from our perspective he had barely even gotten started yet. But at the time that was hardly clear. The book covers the years from his dawning of consciousness into his late twenties when a mixture of luck, daring, heredity and ingenuity landed him in the House of Commons, where he was to stay – more or less continuously – for the next six decades.
Churchill writes in his characteristic simple but vigorous prose. But what’s captivating about this book is its candor, its ingenuousness, and really its alien-ness. Not only did most of these events take place more than one hundred years ago. But
Churchill lived in a world that doesn’t exist anymore, that of the Victorian British aristocracy. And the book is filled with the details of that life. Most surprising is that much of it is quite funny, intentionally so.
He recalls very early years in Ireland, fitful experiences in school, Sandhurst, his posting to India where he gets terribly bored but discovers the written word, and then the whirlwind series of events which had him in Cuba during the Spanish-American war, in the Sudan during its reconquest by Kitchener, then in South Africa during the Boer War, and finally back in Britain and even on a speaking tour of America where he has a momentary encounter with Mark Twain. (Having read a good Churchill biography will help read between some of the lines, but it’s by no means necessary.)
A few points. Churchill intentionally writes to mimic the level of knowledge and awareness he had at the time he describes. This occasionally misfires, but in general works quite well. So early on you have such gems as â¦
In 1880 [when he was six] we were all thrown out of office by Mr. Gladstone. Mr. Gladstone was a very dangerous man who went about rousing people up, lashing them into fury so that they voted against the Conservatives and turned my grandfather out of his place as Lord-Lieutenant of Ireland.
Churchill’s grandfather, of course, was the Duke of Marlborough.
What stands out about this book for me is how it captures the fact that failure and disappointment were, in many ways, the defining experiences of Churchill’s life – depression also, though he doesn’t call it such here – and his successes and greatness were found in coming up with ways to overcome them, finding novel ways out of or solutions to his circumstances.
His high birth, his politically-connected family, his mother’s special relationship with the future King of England all helped Churchill. But he was also given up on and ignored by his father, whom he revered, as too stupid to ever amount to anything. His mother was loving, but distant. (She did him her best turns later on when she got her influential lovers to pull strings for him.) He never did well in school and was sent off for a career in the army because it was thought he wasn’t cut out for the University. It took him three tries to get into Sandhurst. But once he was there he began, he begins, to find himself. And he begins charting his way.
It’s become an article of faith among Democrats that Enron is a political scandal. For Republicans, quite the same certainty that it’s only an financial scandal. By and large, I think the Democrats have, and will increasingly have, the better part of this argument. But my God if there isn’t enough scandal to go around.
We still don’t know if there are any political bigwigs and fat-cats who got cut in those debt-concealing outside partnerships at Enron. But what we do now know is that many — perhaps most — of the big Wall Street investment houses were actively involved in marketing investments in these partnerships.
If these partnerships perpetrated a fraud on the investing public then almost everyone’s hands seem to be dirty.
Will someone stop Howard Fineman before he writes yet another risible George W. Bush puff-piece?
Heâs the Texas Ranger of the World, and wants everyone to know it. Heâs the guy with the silver badge, issuing warnings to the cattle rustlers. He will cut deals when necessary â his history shows that â but, as a matter of inclination and strategy, heâs the toughest talker on his team.
Do the folks at Newsweek need to plan the journalistic equivalent of an intervention?
Get me Jon Alter’s phone number!
Maybe as part of the eagerly-awaited Talking Points relaunch on Friday we need to set up a new feature called the Dick Cheney Own Worst Enemy Watch.
Look at this astonishing scoop from Bob Novak on CNN yesterday …
WOODRUFF: Unusual plans for Dick Cheney, going to the Middle East soon?
NOVAK: Vice presidential trips have turned into circuses because very little business is down. Remember Lyndon Johnson’s — well, you are too young for that.
WOODRUFF: Much too young.
NOVAK: But he has very spectacular — I remember it well. And you do remember the Spiro Agnew and the Dan Quayle trips were circuses.
Dick Cheney is going on 10-day trip to the Middle East. And his staff is considering whether they really want to take any press along, no members of the media whatsoever, to avoid all these made-up stories. They are very serious about it. No decision has been made, but they may say, hey, this is a business trip and we don’t need the media. After all, he goes to undisclosed locations without the media.
WOODRUFF: That would be almost unprecedented.
NOVAK: Without precedent, absolutely.
I don’t like to toss around the word ‘Nixonian’ loosely. But this is Nixonian. I had already half suspected that Cheney’s trip to the Middle East might have more to do with events taking shape at the other end of Pennsylvania Avenue than stuff going on in the Middle East. But this speaks volumes about the direction the Vice President is going in and his views about the place of the press.
Barring any media coverage will “avoid all these made-up stories.” Is it too much to say that this sounds like something out of the Generalissimo Franco handbook, or something from Robert Mugabe? Media coverage apparently is only necessary or required when trips or events are only for show. But this is a “business trip [so] we don’t need the media.”
It’s certainly worth noting that these words are Novak’s, not those of the Vice President or his staff. But he’s a good reporter. And I doubt he’s not conveying the gist of their thinking.
But don’t get caught up with the arrogance. This is the sort of thing White Houses pull before they get into big trouble.
Here’s more interesting back-n-forth from today’s Senate hearing about just who the investors were in those debt-concealing outside partnerships …
SEN. DORGAN: And let me go back to one more point, if I might, on LJM, one of the partnerships. In your report, on page 73, you said LJM had — excuse me — quote, “We understand that LJM-II ultimately had approximately 50 limited partners,” and then you mentioned some of them — Home Assurance, Arkansas Teachers Retirement, MacArthur Foundation, Merrill Lynch, J.P. Morgan, Citicorp, First Union, Deutsche Bank, GE Capital, and Dresdner (sp), Kleinwort (sp), Bensen (sp). This 50 limited partners, is that a population that you’re certain of? Did you see the names of the 50 limited partners, or is that what you were simply told by someone?
[Dorgan then discusses the identity of the partners with Enron board member William Powers. Powers describes how much difficulty they had prying the partner list out of Andersen. Then Powers agrees to turn the document over to the committee.]
SEN. DORGAN: All right. Well, that’s a very small start. We have been, as you know, for a month and a half on this committee asking the corporation and asking all who are relevant to receive these requests that we need to understand what is the matrix of the investors — friends, businesses and others who were brought into this web, this complex web of partnerships — who are they? How much did they invest? Did they always make money on these investments? It looks to me like the corporation was backstopping everything with respect to these investments. So, we need to get that information, and at least today, at 1:30 in the afternoon, we will get the first 50 names, and we appreciate our ability to do that. And that comes courtesy of your copying a piece of information given by Arthur Andersen but then substantially — then subsequently taken back by them. So, we will hope that the rest of the names will not be quite so hard to receive or to achieve. And we’ll see.
So Dorgan and his staffers are clearly on to the mystery of the partners.
But let’s not miss the big story here. The MacArthur Foundation?!?!!? The sugar daddy of every good liberal activist and pressure group had a slice of LJM2? Does this mean the Economic Policy Institute and the American Prospect have to give back their fat grants? Where will it end?
There’s still more information on the investors in Enron’s debt-concealing outside partnerships.
As we’ve noted before, all of Enron’s outside partnerships were not created alike, and not everyone came in on the same terms. Some offered investors a windfall with no risks. Others promised conventional enough returns that potential investors had to be sold on the plans.
Despite his claims last week that he knew little or nothing about the outside partnerships, in December 1997 former Enron CEO Jeff Skilling appeared personally at a meeting of the board of directors of the California state-employee pension fund (CalPERS) to sell them on an investment in JEDI II.
It looks like we were on to something last week when we pointed out the importance of revealing who invested in Enron’s outside partnerships. This article at SmartMoney.com publishes some of the first documentary evidence on the investors in LJM2.
(Hint: they’re big Wall Street firms, though it’s not immediately clear whose money they were investing.)
But on CNN’s Capital Gang last night Senator Kent Conrad implied that the search for the partners might get more explosive still. Asked by Mark Shields whether Enron was a political scandal, the Senator replied…
CONRAD: I don’t think we know yet. I think in fairness, what we know is this is corporate scandal of enormous dimension. It may become a full blown political scandal. Goodness knows there’s tremendous amounts of money that Bush — the administration got the greatest level of financial support from Enron people.
We see an involvement of Enron and the replacement of the FERC chairman. I think that’s going to lead to a lot of serious questioning. But I’ll tell you the real bottom line. The thing that I think is going to turn this into a scandal of even greater dimension is when the partners are revealed. Who was at the trough? Who had the advantage of these partnership agreements that enriched themselves at the expense, its shareholders and its creditors?
SHIELDS: Do we know any major figures you think were partners or?
CONRAD: Those names have not yet been revealed, but I’ve been told by those who are hot on the trail, that there’s going to be some very, very embarrassed major figures in the days ahead.
So what’s going on here? I think that what Conrad is saying is likely absolutely true. He doesn’t know who the investors are. But he’s hearing that the lists include some very high-profile names. Believe me, a lot of people are hearing that.
There are investigators on the Hill, ones working in private lawsuits against Enron, and presumably many in the Justice Department who are piecing together this information. And given that investments in one of Fastow’s particularly lucrative sweetheart deals would likely be politically fatal and perhaps even worse, the rumor mill is bubbling with names. Names high up the political ladder. Really high up the political ladder.
A good bit of this is probably just wishful thinking on the part of Democratic politicos in Washington. But not all of it, I’d bet. In any case, we’ll know soon enough.
Special thanks to TPM reader A. for the Kent Conrad catch.
Enron may not have been so hot at devising innovative mechanisms for allocating and trading energy and other commodities. But, as this article explains, they were fonts of innovation when it came to gaming Washington.
This included a specially-designed computer program which precisely calculated the costs various regulations would create for Enron. The numbers generated out of this influence-peddlotron were then used to determine when the big-money lobbying machine should be kicked into gear. It all amounted to what the management consultant types might call total quality corruption.
Then there was Ken Lay’s idea of “gathering up pundits, journalists and politicians and placing them on lucrative retainers.” At least one anonymous Enron exec says the pundits ended up being PFBNBs (see post below). But you wonder.
Then there are some choice gems like this…
“The ingrained philosophy was, me first, money counts and the government should eliminate my taxes,” said another former manager. “That’s all they cared about — what impacted them personally.”
The theme of the article is that the Enronians ended up being too clever by half. Their titanic arrogance did them in.
1998 was the year of Monica and Impeachment. 2002 is turning out to be the year of PFBNB.
What’s that? Paid For But Not bought — the excuse, explanation and defense of choice for politicians high and low.
Like the Bush administration. Yes, Enron gave us tons of money for access and favors. But when they came calling, we dropped ’em cold, left ’em in the lurch! We were paid for, but not bought.
I was so busy yesterday that I forsook my normal routine of coffee at Starbucks poring over the daily papers. And I missed this fun, complimentary review of Talking Points Memo in the Washington Post. (Note to self: no criticisms of Post — i.e., Bob Woodward — for rest of February, if possible.)
P.S. Excitement for the TPM relaunch continues to build. Even George Argyros is apparently getting into the spirit.
Actually, it’s time for another Argyros update. Back on January 28th we noted that Argyros, US Ambassador to Spain, had used the Embassy website to post a list of comically self-promoting awards he had gotten, or bought, over the years. (You know, like his induction into the “Horatio Alger Association of Distinguished Americans, perhaps the single most coveted award given in American (sic) to non-military, non-show business individuals…”) Then Tuesday we noted that our mockery had gotten picked up in Argyros’ hometown paper and he’d had the good sense to take it down, or maybe Colin Powerll made him take it down. Then later Tuesday we revealed that he was still show-boating among the locals since he hadn’t taken down the Spanish language version of the list. Now it’s gone too.
Note to Ambassador Argyros: if you’re visiting TPM so often, maybe it’s time to support the site with an easy online contribution?
Yesterday’s testimony from various current and former Enron executives confirms, I think, the importance of the questions we raised here a few days ago.
That is, who else got to sign on to one of Andy Fastow’s outside partnerships, in which investors incurred no risk yet made windfall profits? We now know that many non-Enron employees got into these deals. Fastow apparently used them as chits on occasion when dealing with investment banks who did other business with Enron, though sometimes the Enron business was the plum he used to leverage folks into the partnerships.
One thing that’s clear is that all the partnerships were not alike. Or at least not everyone came in on the same terms. Some were the uber-sweetheart deals that made millions. Others only got investors who had to be coaxed into the deal.
What is important to know, however, is just who all the partners were. Why? Because if there was financial or political corruption going on which reached outside of Enron, this almost has to be where you’d find it.
There’s even apparently an example of a partnership deal being used in this fashion with an Enron employee. Soon after quasi-whistleblower Jeffrey McMahon got reassigned for questioning Fastow’s partnership deals, his replacement got cut in on a piece of the action. Says today’s Times …
A short time later, Mr. McMahon was replaced as treasurer by Ben F. Glisan Jr. According to an investigation by Enron’s board, Mr. Glisan put $5,800 in one of the partnerships organized by Mr. Fastow and two months later was given $1 million.
More to come later on conflicts of interest and ingenious ways to hedge your bets against business losses.
Today’s Enron profile in the New York Times is of one-time Enron CEO Jeff Skilling, who testifies tomorrow on Capitol Hill. The title of the piece is “Darth Vader. Machiavelli. Skilling Set Intense Pace.” But reading the piece you get a pretty clear sense that the author’s working title was “Jeff Skilling: Big Jerk.”
Here’s one of the key passages …
Mr. Skilling tried to incubate a culture of risk-taking at Enron that sometimes even went beyond the boundaries he set. At a worldwide meeting of the corporation’s vice presidents in 2000, he singled out Louise Kitchen for praise. Ms. Kitchen had started the company’s Internet-based trading operation, Enron Online, even though Mr. Skilling had repeatedly refused to allow her to do so. Instead, she pulled the new network together in secret, using funds allocated for other purposes.
A former vice president who attended that meeting was aghast: “The moral of this story is, `You can break the rules, you can cheat, you can lie, but as long as you make money, it’s all right.’ ”
And you wonder why they got into trouble.
‘Aggressive accounting‘ means massaging the numbers so they’ll yield a deceptive impression of a company’s financial health.
‘Overly aggressive accounting‘ is bad because that’s too deceptive.
But ‘aggressive accounting’ is okay because that’s only deceptive, not too deceptive.
Is this the attitude that’s at the root of the problem?
As we noted Tuesday evening, one key question now is who the ‘investors’ were in the debt-concealing outside partnerships overseen by Andrew Fastow.
Yet the authors of the Powers Report (as I try to explain here) seem not to have been able to determine precisely who the investors were. Indeed, the authors of the Report say that they were not able to get access to the “the materials in the possession of the Fastow partnerships or their limited partners.” These papers, I would imagine, are where you find out precisely who the partners were. Finally, the Times profile of Fastow notes the incentives that existed to recruit partners who were either not employees of Enron or employees who were of low enough rank not to need to show up in SEC filings.
By 1999, there were small fissures in Mr. Fastow’s labyrinthine financing empire. As early as 1997, Enron had difficulty finding a partner to buy out Calpers’s interest. So, apparently to skirt disclosure rules, Mr. Fastow proposed listing his wife’s family as outside investors. When he was rebuffed, Michael Kopper, who worked under Mr. Fastow at Enron, was selected. Because he was a lower-level employee, Enron would not have to disclose his interest in S.E.C. filings. Mr. Kopper would eventually make at least $10 million in profit from the venture.
To recap, ‘investors’ in the partnerships reaped immense profits by investing little money and assuming no risk. If people outside the company were getting these sweetheart deals, who were they?
LATE UPDATE! Does TPM get results or what!?
Last week, we noted how America’s Ambassador to Spain, George Argyros, was embarrassing the United States by using the US Embassy in Madrid website to post a biography with a pitiful “Partial List of Awards Received” numbering twenty-five in all.
This included such honors as his induction “into the Horatio Alger Association of Distinguished Americans, perhaps the single most coveted award given in American (sic) to non-military, non-show business individuals.”
Well, when we returned to the ambassador’s website this evening, we found (surprise, surprise) that at some point between the 29th and today the offending biography had been removed and replaced with a new one which is at least slightly less injurious to the dignity and reputation of self-respecting Americans.
Talking Points Memo: bringing shameless dorks to heel in North America and the Iberian Peninsula.
Late Late Update: You can still see the original list in the archived version available from Google. Plus, our reputation among web-savvy Spaniards may still be suffering because Argyros’ show-boating list is still online in the Spanish language version of his biography. Special thanks to TPM reader A. for the Google catch.
Excitement continues to grow for the upcoming Talking Points relaunch, especially at Talking Points world headquarters! Or, well, at least at Talking Points world headquarters. Anyway, the big date is Friday, February 15th.
Also, remember George Argyros? As TPM noted last week, he’s the high-rolling slumlord from Newport Beach, California. He bought an ambassadorship from the Bush administration. And now he’s making America look bad in Madrid with his comical, show-boating ways.
Well, now Argyros’ hometown newspaper The Orange County Register has picked up TPM’s comments in its ‘Buzz’ section. Clearly Argyros can run but he cannot hide from the long arm of TPM’s satire and mockery.
Coming up soon, details on Argyros’ whacky, boondogglian plan to convert the former El Toro Marine Air Station into a passenger airport even though the main take-off path flies right into a mountain.
If you’re looking to see where the Enron story might get explosive, this might be the place to look.
Consider the following: the Powers Report describes how Enron’s outside partnerships (controlled by Enron CFO Andrew Fastow) allowed Fastow and others to make millions of dollars for transactions which had no other purpose than to obscure Enron’s true financial health and make money for “Fastow and others.”
Who were the “others”?
The partnerships were paper companies which made large sums of money for transactions which involved no risk. They were, in other words, perfect vehicles for sweetheart deals political or otherwise, for helping friends ‘make’ tons of money. Fastow was key to each of the partnerships. The report discusses other Enron employees who were “partners.” So, again, who were the other partners?
Footnote 65, on page 149 of the report, says …
We have not seen any evidence that any member of the Board of Directors had a financial interest in any of the partnerships that are discussed here.
Let’s unpack what this means.
According to the report, the board’s investigators had “no access to the materials in the possession of the Fastow partnerships or their limited partners.” This and the quote above imply that the investigators didn’t have access to records detailing who all the partners in the partnerships were. Otherwise, why use the phrasing “have not see any evidence that…”? If you have the list in front of you, there’s no need to say you haven’t seen any evidence, etc. You either know or you don’t, period. (One also assumes, since this was the board’s committee, that the board members cooperated with the investigation and said they weren’t partners.)
So we know there were multiple partners in the partnerships. Some are named Enron employees. None of them, according to the report, were members of the Enron board. But the investigators assumed that there were, or at least could be, other unnamed partner/profiteers out there.
Again, who are they?
Yesterday I noted how the Enronians were acting like five year olds.
But I didn’t know the half of it.
As expected, congressional committees are now subpoenaing Ken Lay. But now they can’t find him to serve the subpoena. He’s on the lam.
Like a five year old, indeed!
Where’s Kenny-Boy? In the pantry? Behind the door? In the tree-house?
Is this guy for real?
Someone who is this unhinged sounds like the type who might turn on his benefactors. Of course, when you’re that high up on the ladder there aren’t that many available to flip on.
Thank God we’re in the responsibility era.
You know things are really, really bad when grown men and women with advanced degrees and six-figure salaries start making excuses which, in the normal course of things, you wouldn’t accept from a five year old.
That’s Enron today, in spades.
(Mom: Who ate the cookies?! Johnny: Umm, Mom, I’ve gotta say I was out of the loop on the decision-making on that one.)
The clearest explanation I’ve yet heard of what Enron was doing is found in this paragraph from today’s Times, quoting the so-called ‘Powers Report’ …
If the Raptor accounting was correct, the committee concluded, then “a company with access to its outstanding stock could place itself on an ascending spiral: an increasing stock price would enable it to keep losses on its investments from public view; which, in turn, would spur further increases in its stock price; which, in turn, would increase its capacity to keep losses from its investments from public view.”
And who’s to blame?
Ken Lay’s wife says her husband, the founder, longtime CEO and Chairman of the Board of Enron was just ‘out of the loop‘ when it came to the accounting shenanigans that swindled millions of Americans out of billions of dollars.
Jeff Skilling, Lay’s longtime number two who briefly served as CEO in 2001, told the Enron Board’s investigating committee that he too didn’t have much sense of what was going on.
The upshot of the Board’s investigating committee report is that the members of the board just didn’t keep a close enough eye on all the inappropriate and/or criminal acts the company’s executives were committing, i.e., they didn’t know what was going on either!
If these bozos still don’t know what was going on they should definitely pick up the Monday New York Times, which provides a nice timeline of the hidden events which led to Enron’s collapse.
The aforementioned ‘raptors’, the paper vehicles used to hide Enron’s losses, began to buckle and strain a bit more than a year ago. They had to be reorganized first at the end of 2000 and then again in March 2001. This provided Enron executives and insiders the window of time necessary to cash out their stocks. Things apparently began to hemorrhage again about three months later. But this time the problem couldn’t be papered over and the fireworks began.
As I mentioned today on MSNBC, what is now coming into focus is that the work of the Cheney Energy Task Force, the California energy crisis, and Enron’s desperate efforts to save itself were all happening at roughly the same time — with many of the most important developments taking place in the late Spring. As Henry Waxman no doubt realizes, this makes the Energy Task Force records more important than anyone could have imagined six months ago.
And speaking of things that were taking place at the same time, I continue to be interested in the sequence of events taking place at Enron at the end of last summer, many of which at the time must have appeared unconnected, but now merge into a larger whole.
Consider a few …
August 8th: On August 8th Enron board member Frank Savage leaves Alliance Capital to form Savage Partners, LLC. Backstory: Alliance Capital, the largest institutional holder of Enron stock, instructed the Florida state pension fund, among others, to buy Enron stock after the end of October. Savage was the Chairman of Alliance Capital International, a division of the firm handling investments in the Middle East and Africa, until leaving Alliance on August 8th.
August 14th: Jeff Skilling unexpectedly resigns as Enron CEO after only a few months.
August 21st (on or about): Sherron S. Watkins sends whistlblower letter, anonymously, to newly-returned CEO Ken Lay.
September 4th: Senator Phil Gramm, husband of Enron board member Wendy Gramm, announces his retirement from the Senate. Gramm’s name was on the list of potential Senate retirees; but his announcement came as a surprise.
I mean, hell, I can wait on the Cheney Energy Task Force notes. But the minutes and papers of the members of the Enron board during July and August are what you just really want to see.
Lawyers not involved in any [Enron-related] lawsuits said the report appeared to support an argument that Enron’s directors did not recklessly or willfully participate in fraud. That is the conclusion the board, which appointed the investigators, might want a bankruptcy court to reach in deciding whether to leave the company under its control instead of naming a special trustee …
This other article in the Times, by Kurt Eichenwald, paints a slightly different picture of the report, describing it as an effective road map to a number of indictments. But the key point here is not how damning the report is, but who it was damning of. The report squarely places the blame on key executives, not the board, even though such a distinction may be difficult to sustain given what we now know of the board’s close involvement with Enron’s inner-workings.
Also worth noting is the membership of Enron’s investigating committee. Two of the members, William Powers Jr. and Raymond S. Troubh are new members of the Enron Board. They signed on after the current crisis was already underway. But the third, Herbert S. Winokur Jr., has been on the Board since at least 1986.
I’m wondering if Winokur’s utility was as something on the order of an expert witness. So, for instance, when the authors of the report said that the board had “failed . . . in its oversight duties,” perhaps Winokur was able to detail all the screw-ups he and fellow board members had been responsible for? It sounds like he could be really helpful with that.
I’m unclear on this. But maybe some TPM reader who’s down with corporate management practices could help me out with this one?
If you’d like your Talking Points delivered live to your office TV, you’re in luck. Talking Points will be pundit-in-residence from 1 PM to 6 PM EST Monday on MSNBC. You know the drill, one on the right, one on the left — there to provide commentary as needed on Enron, the budget, and whatever else comes up during the afternoon news churn.
I’m always amazed at how these things work. Ken Lay was dead set on testifying tomorrow and setting the record straight. But this morning his lawyer Earl J. Silbert, watched the Sunday shows and saw that Reps and Senators really take a dim view of his client. And he “instructed Mr. Lay to withdraw his prior acceptance” of the congressional invitation.
Obviously, Ken Lay is just bustin’ at the seams to get in that chair and clear things up. But the hyper-cautious Silbert won’t let him. Lay is like the hothead spoiling for a fight whose friends keep holding him back, even as he flails his arms trying to get into the melee.
Lay must be giving Silbert an earful tonight: Don’t hold me back! Don’t hold me back! Lemme at ’em!
Another interesting factoid.
As we noted earlier, Comdisco is another Fortune 500 company that managed to go into bankruptcy with a lot of stockholders’ cash, but had execs and insiders who made out just fine.
Comdisco’s CEO is Norman P. Blake, a ‘turnaround’ expert who took over the company early last year.
Blake is also on the board of Enron.
It turns out there’s another similarity between Enron and Comdisco. They were both on the list of the sixteen corporations in line to get $100 million or more in rebates from the federal government if the House GOP stimulus bill went through.
Enron which was #7 on the Fortune 500, came in at #9 on the windfall list, in line for $254 million. Comdisco, which was #433 on the Fortune 500, came in at #13 on the windfall list and was in line for a check for $144 million.
If only they could have held on for the pay-off.
Get set for the exciting Talking Points Memo relaunch, coming later this month. More details soon.
Company goes belly up. Investors take a bath. Bigwigs had been cashing out for months and managed just fine.
Sound familiar? Enron?
No. But close. We’re talking about Comdisco Inc., which went into bankruptcy last July.
Comdisco’s CEO Norman P. Blake, Jr. sits on the Enron Board.
(For more details, see Crain’s Chicago Business, July 23, 2001, p.6)