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Shame of the system
Why Enron is business as usual

THERE IS A SIMPLE way to begin resolving the Enron scandal. Every federal, state, and local official who has ever worked (directly or indirectly) for Enron, or taken campaign contributions from the company or any of its executives, or cast a vote or made a regulatory decision favorable to the corrupt and now-bankrupt company should issue an apology ó to the nation (for helping to screw up an already shaky economy); to Enron shareholders (for robbing them of their money); and to rank-and-file employees (for costing them their jobs and retirement money, and ruining their lives).

Itís hard to say who should go first. After all, three-quarters of the US Senate and half of the House of Representatives took Enron campaign contributions. Republicans garnered an elephantine share of the loot, with $4.1 million, but with $1.6 million on their books, the donkeys among the Democrats are hardly clean. And thatís just at the national level. The Texas attorney general, for example, has had to distance himself from the companyís investigation because he has received $158,000.

As a rule, our political dislocations ó be they gross misjudgments, treasonous conspiracies, or reckless carnal interludes ó can be laid squarely at the feet of an individual (usually the president), supported by a cast of indicted or unindicted co-conspirators. There was Johnsonís war in Vietnam, Nixonís Watergate, Reaganís Iran-contra debacle, Clintonís Lewinsky caper. But Enron is different. Before itís over, this episode will demonstrate how fundamentally compromised and deeply corrupt the entire American political system is.

The word out of Washington is that Enron is a business scandal, not a political scandal. Donít believe it. As Dan Kennedy observes in one of our front-page stories (see "Enwrong," News and Features, page one) this week, Enron is a "business scandal created by politics." Scott Rosenberg, writing in Salon several days ago in a similar vein, feared that "Enronís dismal story simply doesnít meet the high bar of triviality the press today demands. The sums of money are too great; the flaws it exposes in our political system are too vast. Itís just too real to qualify." Letís hope heís wrong. So far the New York Times and the Washington Post are tracking the story with a vengeance. But broadcast makes the difference. And as the story gets more complicated and arcane, will the lowest-common-denominator values of television news be up to the challenge?

Corrupt business practices rooted in political connivance and public lassitude are nothing new. Of the great railroad scandals that rocked the nation in the years following the Civil War, Brahmin investor and political reformer Charles Francis Adams wrote: "It was something new to see a knot of adventurers, men of broken fortune, without character and without credit, possess themselves of an artery of commerce ... and make levies upon it, not only for their own emolument, but, through it, upon the whole business of a nation.... No people can afford to glance at these things in the columns of the daily press, and then dismiss them from memory."

But here in the United States of Amnesia, we quickly forget. The railroad scandals of the 19th century may be the stuff of ancient history. And the stock-market swindles that came to light at the dawn of the Great Depression may be fading memories to our grandparents and great-grandparents. One would think the pillage and collapse of the savings-and-loan industry, which cost US taxpayers more than $315 billion in the late 1980s, would have taught the politicians ó if not the public ó something. But it didnít.

Enron chair Kenneth Lay is a modern-day robber baron. In addition to the $5.7 million his company spent in direct campaign contributions to Congress, Enron spent another $3.45 million in 1999 and 2000 to lobby for the deregulation of energy-futures trading, among other goals. Enron, it must be understood, moved out of the business of actually creating energy and into the business of packaging it and marketing it as a commodity.

In effect, Enron bought a climate of opinion conducive to its needs and schemes. Investigations by state and federal officials concluded that power generators and power marketers, emboldened by the absence of oversight, intentionally withheld electricity, creating artificial shortages to increase the cost of power. Thatís how Enron and others sparked the California energy crisis.

According to Ralph Naderís Critical Mass Energy and Environmental Program, "Enron took advantage of lax oversight following deregulation and formed a complicated web of more than 2800 subsidiaries ó more than 30 percent (874) of which were located in officially designated offshore tax and bank havens."

Once in office, George W. Bush, who received $1.14 million in campaign contributions from Enron, scrapped plans formulated by the Clinton administration that would have limited the effectiveness of these offshore havens as high-class money-laundering operations. This came at the height of the California energy crisis. It doesnít stretch the imagination to suggest that Enron siphoned billions of dollars into these offshore accounts.

But who will investigate? Enron may not have bought and paid for Congress, the White House, and federal regulatory apparatus. But it did rent them. And thatís just as bad. With any luck, Enronís corporate bigwigs, its lawyers, and its accountants will do jail time. But the political enablers who allowed this to happen will still be in power. The more things change, the more they stay the same.

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Issue Date: January 24 - 31, 2002
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