Josh Marshall

Josh Marshall is editor and publisher of TalkingPointsMemo.com.

Articles by Josh

We don't do reader comments on TPM. But here we'll make an exception since this whole issue of pension fund management is such a complicated one.

Dear TPM: Your comments on Alliance Capital go beyond the realm of facts and into speculations that are unfair and not true. You ask if Alliance was buying Enron stock for the account of Florida and other clients while simultaneously selling for its own account. This is demonstrably not true, as Alliance, a money management firm, does not own stocks for its own account.

Having said that, buying Enron shares in October goes under the heading of an honest mistake. To really understand the impact of Enron on Florida or any other Alliance Capital client, you would need to know the performance of the portfolio they were managing. While Enron obviously hurt their performance, its the return of the whole portfolio that matters.

Your comments this morning are much closer to the mark.

-- Anonymous TPM Reader
(Who Works in the Money Management Field)

These are some good points. But as I say below, I still think Alliance has some real explaining to do. One point particularly seems worth making. For a company like Alliance it seems to me that there's an easy to make distinction between one of 'their' mutual funds (which are obviously made up of clients money) and pension funds like Florida's which they advise on what to buy and sell.

One other point, a number of readers have argued that it could never be rational for Alliance to have a client blow money on Enron late in the game because Alliance's reputation and profitability is completely tied up with their reputation for making their clients money, not losing it. True enough. But humans don't always work in such a mechanistic or logical way. More about this point soon.

A few readers have said I was terribly unfair to Jeb Bush for implying that he had some role in getting the Florida state pension fund to buy Enron stock as it slid into oblivion last Fall.

This surprised me because I didn't say that, or even imply it.

Here's what I said ...

One of the three trustees of the Florida pension fund is Governor Jeb Bush. But there is as yet no evidence that he acted as anything more than a passive overseer. The actual decision-making was coming from the private company managing the state's money.
That sounds pretty straightforward to me. How 'bout you? In fact, my reason for mentioning Bush was to make the point that though he was a fiduciary of the fund, and thus had some legal responsibility for its management, he didn't seem to have actually made any of the decisions about which stocks were bought.

In any case, some thought I was trying to accuse him or perhaps accomplish the same through innuendo (perhaps because of the ordering of the paragraphs?). So let me say for the record that I wasn't. I've seen no evidence that Bush took any role in choosing which stocks were purchased.

A few readers have also said I'm being unfair to Alliance Capital. To them my response is quite different. We don't know Alliance did anything more than make a bad call in getting Florida to load up on Enron as the company was being exposed as a money-loser and a book-cooker. But as far as I'm concerned they have a lot of explaining to do.

Let's connect a few dots on the Florida-Enron front. But let's also keep an eye on some complexities and an even wider range of remaining questions.

As noted earlier, the Florida state pension fund lost more than $300 million on Enron stock. What's key is that roughly a third of the shares were purchased after October 22nd. (To get a feel for what was publicly known about Enron at the time, read this reprint of a New York Times article from October 28th.)

Most, though not all, of this Enron purchasing was done on the advice, perhaps even the de facto authority, of Alliance Capital Management -- the pension fund's paid advisor.

Alliance was also itself the largest institutional investor in Enron. A high-level Alliance executive, Frank Savage, also sat on the Enron board.

Now, as this new article in the Washington Post clearly demonstrates, as far back as 1997 Enron board members were kept abreast of the notorious private partnerships which allowed Enron to hide its debt and eventually dragged into bankruptcy. So Frank Savage went into 2001 quite aware of the precariousness of Enron's position.

Thus one question is whether Alliance was unloading its own Enron stock while getting pension funds, which it advised, to buy -- thus keeping some demand in the system and facilitating sale. (One article in the Financial Times from December 19th, 2001 seems to imply that Alliance was getting out while it was advising Florida to buy, but I haven't found anything definitive on this.) One might also speculate that Alliance might have pushed pension funds to buy in order to stabilize the price of a stock it owned quite a bit of.

At this point, much of this is just speculation: some one needs to go through the books and see who was buying and selling what when. These are the sorts of questions which underlie the lawsuit Florida is now filing against Alliance. And no doubt their lawyers are looking at all this stuff right now.

But before we go too far down this road, at least with Frank Savage, two points must be made.

According to Alliance, Savage was involved in the firm's international work, and thus shouldn't have been 'in the loop,' shall we say, on domestic pension fund management. And he left Alliance in August, before Enron started to really tank and before the manic buying began.

As far as I'm concerned the big question right now is what Alliance was doing with its own Enron stock while it was telling Florida to buy. More generally, I think we're going to be hearing a lot in the coming weeks about corporate donations to state controllers who are entrusted with control over state pension funds, and are thus in a position to have their funds buy or sell their patrons stock.

Coming up soon: the Carl McCall / Frank Savage connection.

On a DC radio show last night I said there was no evidence of Enron-like accounting shenanigans in the Global Crossing bankruptcy (the fifth largest ever), just a company that went belly-up. Maybe I spoke to soon.

Andersen accounting clients now count for the 1st and 5th largest bankruptcies in American history. When Andersen inevitably goes under what place will they come in?

Refusing to disclose the details of the Veep's Energy Task Force to Congressman Henry Waxman of the House Government Reform Committee to check on possible Enron connections = A matter of the highest principle.

Disclosing the details of the war on terrorism to Bob Woodward of Washington Post for an endless series of puff pieces = A matter of the highest necessity.

Talking Points has received a secret internal memorandum from Presidential Advisor Karl Rove, relative to the visit of interim Afghan leader Hamid Karzai. TPM releases it here for the first time.

From: Karl Rove
To: Card, Hughes, Fleischer, Rice

#43's nicknaming has always been a good thing for us. Polls well. Works very well in the red states. But the recent Ken Lay stuff could hurt us ("Kenny-Boy" etc.). Believe me, I think it has legs. I think it's imperative we come into the SotU with an outta-the-park nickname the president can use for Hamid Karzai. Here's what I've come up with.

1. Hammy, Hammy-Boy, 'big ham.' Discussion: This works really well. Rolls off the tongue. The sorta thing #43 might come up with on his own if he weren't so busy. But there's a problem. According to smarties at State Department, Muslims don't go in for ham and don't even like talking about it. Could offend. This always seems to be a problem with them. (Remember 'Operation Infinite Justice'? Ouch!) You wish this were the one. But apparently it's a no-go. Ideas?

2. 'The Ham-ster' … Discussion: Again. Works well. If You Haven't Clued in Already, Yes, This is a Parody.Rolls off the tongue. #43 would get right to it. However, it may sound like the rodent, which could be demeaning, but also might be endearing since hamsters were a popular pet in the 1970s and 1980s when Karzai, I'm told, spent some time in America. Could Muslims have same 'issues' with rodents as with pigs? (Note: Don't go to State with this. Someone check this with Grover Norquist. He may know.)

3. 'Yo-Hamid' … Discussion: I like this. I like it A LOT. Sounds eerily like Mo-Hamid (i.e. Mohammed) who is extremely popular among Muslims around the world. Also, this could be a two-fer. Could help on minority-outreach, inclusion, 'uniter not a divider' front. (Yo, yo, yo... etc.)

4. 'Kar-man', 'Green Hat', 'Greenie', 'Caped Crusader.' Any thoughts on any of these? I just came up with them at the end.

Let's huddle. This is important!


Okay, one more TPM scoop for the day.

As TPM reported back on December 6th, there was always major controversy within the law firm of Morrison & Foerster over its decision to represent TPM World Exclusive!  You heard it hear first!  Must Credit.American Taliban fighter John Walker Lindh. Now, according to this article, the firm has removed its name from the representation and the case is being conducted under the names of the attorneys handling Walker's defense. (The lead attorney is MoFo partner James J. Brosnahan.)

Now, however, TPM can reveal a heretofore unreported element of the controversy -- a fact, at first at least, not even revealed to many partners in the firm.

Morrison & Foerster not only agreed to take Walker's case. From the beginning, they agreed to do so pro bono.

Ya heard it here first.

For all the stuff I've seen about Enron, nothing has shocked me more than what I'm about to describe.

You may already had read that the Florida state pension fund took a bath on Enron stock. The fund owned 7.6 million shares of Enron stock totalling roughly $300 million.

But according to this editorial in the St. Petersburg Times, "nearly a third of the state's 7.6-million shares were bought after Oct. 22."

That's shocking.

If you look at this chart of Enron's stock decline last year, you'll see that October was the month that Enron stock went into complete free-fall. On October 16th, Enron announced a $1.2 billion decrease in company value. On October 22nd, the SEC announced an investigation of the company. And the next day, October 23rd (unbeknownst to the public, at least) Andersen kicked the document shredding into overdrive. Though the formal bankruptcy came later, October was the month that Enron fell through the floor.

Ok, sure, they say 'buy on the dips.' But is there any reasonable explanation why a pension fund would invest $100 million in Enron as it was heading into its death spiral? I can't imagine what that explanation would be.

This AP article portrays it as a case of hindsight being 20/20 and the persistent power of misplaced trust in Enron. But I'm not sure that's credible. Nor does the Florida AG, who is considering filing a RICO suit.

Who's responsible? That's not clear. But there are some intriguing clues.

One of the three trustees of the Florida pension fund is Governor Jeb Bush. But there is as yet no evidence that he acted as anything more than a passive overseer. The actual decision-making was coming from the private company managing the state's money.

That company was Alliance Capital, the biggest institutional holder of Enron stock. Until last August a member of Enron's Board, Frank Savage, was a high-level Alliance executive. (Specifically, he was the chairman of Alliance Capital International, a division of Alliance Capital Management.) Savage left Alliance Capital on August 8th, a week before Jeff Skilling resigned as CEO of Enron.

(Savage's political contributions heavily favor Democrats.)

U.S.-based institutional client sales and marketing for Alliance Capital is directed by Roger Hertog, a major funder of conservative causes, a major contributor to the Republican party, and apparently also a friend of Ken Lay.

If you go look at the just-released updated list of administration appointees who owned Enron, you'll notice that George Argyros' name is at the top of the list.

Now, I'll grant you, that's mainly because his name starts with 'A'. Even so, let's talk for a moment about George Argyros, Ambassador Extraordinary and Plenipotentiary of the United States of America to Spain and Andorra.

It's not just that Argyros owned between $100,000 and $250,000 of Enron stock, which in itself isn't a bad thing. Nor that he bought his ambassadorship for $130,000. Not even that he's considered a notorious slumlord in his haunts in Southern California.

No, what's really bad about George Argyros is that he's apparently an incorrigible egomaniac and pitiful self-promoter who's probably making us look bad to most Spaniards.

If you look at Argyros' biography on the US Embassy in Madrid website, you'll see a "Partial List of Awards Received" numbering twenty-five in all. These include, and I quote, such honors as ...

"Heart Award", presented by the Costa Mesa Chamber of Commerce, in recognition of all his years of community service and philanthropic contributions. (1987)

"Paul Harris Fellow Award", presented by the Orange Rotary Club on behalf of the Rotary Foundation of Rotary International, in appreciation of tangible and significant assistance given for the furtherance of better understanding and friendly relations between peoples of the world. (1990)

Inducted 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. (1993)

Recipient of the American Academy of Achievement Golden Plate Award, honoring him as a representative of the many who excel in his chosen profession. (1996)

Inducted as Chairman of the Horatio Alger Association of Distinguished Americans. (1998)

Recipient of Manager of the Year Award presented by Society for Advancement of Management, California Chapter. (2001)

Glad he didn't have to scrape the bottom of the barrel or anything.

What American can hold his or her head high in Spain if this goofball is our Ambassador?

Here's your updated list of administration appointees (Senate-confirmed and otherwise) who either owned Enron stock or hadTPM World Exclusive!  You Heard It Hear First!  Must Credit. some other relationship with the company. It supercedes the earlier list we published on January 2nd and has eight new names.

Let's stipulate again that most of these folks disclosed Enron assets in the one-thousand to fifteen-thousand dollar range and probably just had Enron as some obscure line-item in their investment portfolios. Others had much more. (Remember: the employees who lost their shirts because they had Enron-heavy 401(k)s had a piece of the 'ron too. And they're victims, not perps.)

In any case, the data speaks for itself and is provided as such.

Appointee: George L. Argyros
Title: Ambassador Extraordinary and Plenipotentiary of the United States of America to Spain and Andorra
Department: State
Relationship: Enron Stock $100,000 - $250,000; $1,000 - $15,000

Appointee: Grant D. Aldonas
Position: Under Secretary for International Trade
Department: Commerce
Relationship: Enron stock value $15,001-$50,000, dividends and capital gains $2,501-$5,000

Appointee: Vicky A. Bailey
Title: Assistant Secretary, International Affairs & Domestic Policy
Department: State
Relationship: Enron stock $1,001-$15,000

Appointee: Charlotte L. Beers (Beadleston - married name)
Title: Under Secretary of State for Public Diplomacy
Department: State
Relationship: Enron Stock $100,000 - $250,000

Appointee: Stephen F. Brauer
Title: Ambassador Extraordinary and Plenipotentiary of the United States of America to Belgium
Department: State
Relationship: Enron Common Stock $50,000 - $100,000

Appointee: Nicholas Calio
Position: Assistant to the President, Director of Legislative Affairs
Department: White House
Relationship: Enron stock value $1,000-$15,000, dividends and capital gains $1,000-$2,500

Appointee: Bruce Carnes
Title: CFO
Department: Energy
Relationship: Enron Stock $1,000 - $15,000

Appointee: Steven M. Colloton
Title: US Attorney (S.D. Iowa)
Department: Justice
Relationship: Enron stock $1,001-$15,000

Appointee: Kathleen B. Cooper
Title: Under Secretary for Economic Affairs
Department: Commerce
Relationship: Enron stock $1,001-$15,001

Appointee: Harry Cummins
Title: U.S. Attorney, Eastern District of Arkansas
Department: Justice
Relationship: Enron Stock $1,001-$15,001

Appointee: Linnet Deily
Title: Deputy
Department: Office of the Trade Representative
Relationship: Enron Stock $15,000 - $50,000

Appointee: Nils J. Diaz
Title: Commissioner
Department: US Nuclear Regulatory Commission
Relationship: Enron Stock $1,000 - $15,000

Appointee: Thomas C. Dorr
Title: Under Secretary for Rural Development
Department: USDA
Relationship: (1) Enron stock $1,001-$15,001 (MG Dorr IFT), (2) Enron stock $1,001-$15,001 (Roth IRA)

Appointee: Richard J. Egan
Title: Ambassador to Ireland
Department: State
Relationship: Enron Partial Sale
Value: $250,000-500,000
Dividends: $5,001-15,000
Capital Gains: $100,001-1,000,000

Enron Corporation (SOLD)
Value: Less than $1,001
Dividends: $201-1,000

Egan's spouse: The following is owned through his wife's Lawhill Capital fund for the year 2000:

Enron Gas & Oil
15,679 US G/L

Enron Corp.
Lost 12,429 US G/L

Appointee: Linda J. Fisher
Position: Deputy Administrator
Department: EPA
Relationship: (Two separate direct holdings) 1. Enron Corp. Oregon NPV stock value $1,000-$15,000 2. Enron Corp. Oregon NPV stock value $15,001-$50,000, dividends $201-$1,000

Appointee: Peter R. Fisher
Position: Undersecretary for Domestic Finance
Department: Treasury
Relationship: Enron stock value $1,000-$15,000

Appointee: Emil H. Frankel
Title: Assistant Secretary for Transportation Policy
Department: Transportation
Relationship: Enron stock $1,001-$15,000

Appointee: Eugene Hickok Jr.
Title: Undersecretary
Department: Education
Relationship: (1) Spouse Katherine Hickok Rev. Trust: Enron stock $15,001-$50,000 value, $5,001-$15,000 dividends/capital gains; (2) Son Adam Eugene Hickok Trust: Enron stock $15,000-$50,000 value, $5,001-$15,000 dividends/capital gains; (3) Daughter Katherine C. Hickok Trust: Enron stock $15,001-$50,000 value, $5,001-$15,000 dividends/capital gains.

Appointee: Allen F. Johnson
Title: Chief Agriculture Negotiator
Department: US Trade Representative
Relationship: Enron stock $1,001-$15,000

Appointee: Hansford T. Johnson
Title: Assistant Secretary
Department: Navy
Relationship: Enron stock $1,001-$15,000

Appointee: I. Lewis Libby
Position: Chief of Staff
Department: Office of the Vice-President
Relationship: Sold Enron stock value $1,001-$15,000

Appointee: John H. Marburger
Title: Director
Department: Office of Science and Technology
Relationship: Enron stock $1,001-$15,000 value, $201-$1,000 dividends

Appointee: Alice H. Martin
Title: US Attorney, Northern District of Alabama
Department: Justice
Relationship: Enron stock $1,001-$15,000

Appointee: Sandra L. Pack
Title: Assistant Secretary
Department: Army
Relationship: Enron stock less than $1,001 value, $5,001-$15,000 capital gains.

Appointee: John Price
Title: Ambassador to Mauritius, Comoros, Seychelles
Department: State
Relationship: Enron stock through four direct/indirect sources: (1) less than $1,000; (2) $15,001-$50,000; (3) $1,001-$15,000; (4) $15,001-$50,000.

Appointee: John E. Robson
Title: Chairman/President
Department: Export Import Bank
Relationship: Enron stock $1,001-$15,000

Appointee: Karl C. Rove
Position: Senior Advisor to the President
Department: White House
Relationship: Notation on SF-278: "All individual stock holdings to be sold (dated) 5/18/01." Enron stock value $100,001-$250,000, dividends $201-$1,000

Appointee: Donald H. Rumsfeld
Title: Secretary
Department: Defense
Relationship: Enron stock $1,001-$15,000
(Click here for more on the Rumsfeld holdings, now apparently sold.

Appointee: William Schubert
Title: Administrator, Maritime Administration
Department: Transportation
Relationship: Project Consulting Services for Enron, paid over $5,000

Appointee: Thomas Scully
Title: Administrator
Department: HCFA
Relationship: Enron stock $15,001-$50,000

Appointee: Martin J. Silverstein
Title: Ambassador to Uruguay
Department: State
Relationship: Enron stock $15,001-$50,000

Appointee: Margaret Tutwiler
Position: Advisor to the President
Department: White House
Relationship: Enron stock value $15,001-$50,000

Appointee: Alexander Vershbow
Title: Ambassador to Russia
Department: State
Relationship: Enron stock $50,001-$100,000 value, $201-1,000 dividends

Appointee: Marcelle M. Wahba
Title: Ambassador to the UAE
Department: State
Relationship: Enron stock $1,001-$15,000

Appointee: Donald W. Washington
Title: US Attorney (W.D. Louisiana)
Department: Justice
Relationship: Enron stock $1,001-$15,000

Appointee: Thomas E. White
Title: Secretary of the Army
Department: Defense
Relationship: Former Vice-Chairman of Enron Energy Service; Enron Corp-common stock worth $25,000,001-50,000,000 that paid over $5,000,000 in dividends and capital gains; Enron Corp-stock options worth $25,000,001-50,000,000 that paid $100,001-1,000,000 in capital gains; Enron Corp Cash Balance Retirement Acct (Enron Stock will rollover into permissible property) worth $100,001-250,000 that paid less than $201 in dividends; Enron Corp-DLJ Private Equity Partners Fund II that paid $5,516,131.08 in salary; Enron Employee Stock Ownership Plan, Defined Contribution Plan Managed by Enron worth $1,000,001-5,000,000 that paid less than $201 dividends; Enron Phantom Stock Award worth $5,000,000-25,000,000 that paid less than $201 dividends; Enron Retirement Account (Enron Stock) worth less than $1,001 that paid less than $201 dividends; Agreements: Pursuant to provisions of employment agreement and routine practice of Enron Corp, given $1,000,000 in severance pay; The Phantom Stock Award in Enron (approximately 240,000 shares) were accelerated and paid out when he left Enron.

Appointee: Mark Weinberger
Title: Assistant Secretary for Tax Policy
Department: Treasury
Relationship: Enron stock $1,001-$15,000 value, $201-1,000 dividends

Appointee: William Winkenwerder
Title: Assistant Secretary
Department: Defense
Relationship: Enron stock $1,001-$15,000

Appointee: John S. Wolf
Title: Assistant Secretary for Nonproliferation
Department: State
Relationship: Enron Stock $50,000 - $100,000

Appointee: Robert Zoellick
Title: US Trade Representative
Department: USTR
Relationship: Enron stock $15,001-$50,000, Enron advisory fees $50,000