Josh Marshall

Josh Marshall is editor and publisher of

Articles by Josh

Just after George W. Bush became president, many journalists were uttering a lament that transcended politics, ideology or government. President Bush was just going to be so boring.

Well, I mean, it's hard to match 1998 with the Lewinsky scandal, impeachment, the Balkan wars, and everything else. But President Bush is really giving Bubba a run for his money.

What do we have? The War on Terrorism, the return of structural deficits, and now a scandal that is spreading out through the administration like a splash of ink seeping into the fibers of a paper towel.

This article says the Justice Department has ordered the White House and the rest of the executive branch to preserve all documents that "relate in any way to Enron's financial condition and/or business interests."

It's worth noting that the order goes back to January 1st 1999 -- half way back into the second Clinton administration. No doubt the White House will note that. Unfortunately, for them, it doesn't matter.

This is the kind of announcement that gives press officers and political operatives cold sweats. Does this mean the Bush administration did anything wrong? Of course not. But it does mean that the Bush White House is now part of a criminal investigation. And it becomes very, very difficult for anyone at the White House to say this isn't a political scandal. Fair, or not.

Does Karl Rove and the White House media operation need some better liaison with the adobe-jockeys over at the Department of Energy? Seems like it to me. This pic on the right isn't some knock-off from It's from the Department of Energy website!

A Vito Corleone-imitating picture of Dick Cheney with his head eerily incorporated into an oil derrick? This is on-message?

And I thought the Dems were the ones trying to portray Cheney as an ominous goon doing the bidding of the big oil producers. Maybe this is more complicated than I thought?

P.S. Special thanks to TPM reader MF for the catch.

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.