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A Top EPA Official ResignsAssociated Press March 17, 2002
(3/3/02) - WASHINGTON (AP) - The resignation of a top EPA enforcement official, who complained about White House interference in pursuing violations at power plants, is prompting Senate hearings into the Bush administration's environmental record.
Eric Schaeffer, the Environmental Protection Agency's director of civil enforcement, resigned after a dozen years at the agency, complaining that the White House ``seems determined to weaken the rules we are trying to enforce.''
Schaeffer, in a letter to EPA Administrator Christie Whitman, said that the message being sent by the Bush administration has prompted utilities accused of clean air violations ``to walk away from the table'' and refuse to negotiate settlements.
Sen. Joe Lieberman, D-Conn., called the resignation which surfaced Thursday ``a disheartening development'' and ``direct confirmation ... that this administration is not fulfilling its responsibilities to enforce critical environmental laws.''
He said his Governmental Affairs Committee will begin a series of hearings next week ``on the administration's troubling environmental record.''
EPA spokesman Joe Mardiak on Thursday disputed many of the assertions made by Schaeffer, a career civil servant, and said the agency ``remains committed to enforcement (of air pollution laws)... in a major way.''
Mardiak, said Whitman had seen Schaeffer's letter but would have no direct comment.
Reached at his home Thursday, Schaeffer said the problems he outlined in his resignation letter ``reflect the views of just about all the civil servants working in enforcement'' at the EPA.
``This is the kind of thing you can't say when you're in government, and it is something I really feel needs to be said,'' added Schaeffer, a lawyer who began working at the EPA in 1992 during the first Bush administration and prior to that had been a staffer in Congress.
Only last August, Schaeffer received an award from Attorney General John Ashcroft for exemplary public service because of his work in getting settlements involving pollution violations at a number of refineries.
In his letter to Whitman, the enforcement chief strongly criticized a White House proposed overhaul of a regulation that requires power plants, as well as refineries and industrial sources, to install new pollution controls when they make significant improvements or expansions that result in additional chemical releases.
During the Clinton administration, the EPA had aggressively begun to use those rules in a series of enforcement actions against a dozen electric utilities, mainly those using older, much dirtier coal-fired plants.
Four of the utilities already had agreed to make improvements that would have led to a cut of about 1 million tons of pollution and the lawsuits involving the others was expected to cut another 4.8 million tons, maintains Schaeffer.
``Fifteen months ago it looked as though our lawsuits were going to shrink these dismal (pollution) statistics, ... yet today, we seem about to snatch defeat from the jaws of victory,'' he wrote Whitman.
Schaeffer said that two of the companies that had tentatively agreed on a settlement have refused to sign a final agreement ``hedging their bets'' that the rules now will be weakened. ``Other companies with whom we were close to settlement have walked away from the table,'' he wrote.
``We are ... fighting a White House that seems determined to weaken the rules we are trying to enforce,'' Schaeffer complained. He said the changes being considered by the White House would open ``loopholes that would allow (older) plants to be continually rebuilt and emissions to increase without modern pollution controls.''
Mardiak, the EPA spokesman, said the proposed changes criticized by Schaeffer are still under review. As to the lawsuits and negotiations with the power companies, he said: ``We are still pursuing those settlement discussions.''
But environmentalists said Schaeffer is only bringing to the open what they had suspected all along.
``What's it going to take for this administration to crack down on polluters? If this doesn't shake them up, what will?'' asked John Coequyt, an official of the Environmental Working Group, a Washington-based environmental advocacy group.
The resignation ``confirms our fears that the Bush administration is preventing the nation's environmental cop from policing his beat,'' said Sierra Club executive director Carl Pope.
Enron Mess Cited in SS DebateHouston Chronicle by Julie Mason March 11, 2002
(3/5/02) - WASHINGTON -- Saying the collapse of Enron Corp. shows the vulnerability of the nation's retirement system, Democrats on Tuesday used the plight of former company employees to argue against privatizing Social Security.
"We should resist plans to turn Social Security into another 401(k) plan," said Rep. Robert Matsui, D-Calif., ranking member of the House Ways and Means' subcommittee on Social Security.
President Bush last week called for a Social Security overhaul that would let workers invest retirement funds in stocks.
The president said private retirement accounts would generate more income for future retirees than the current Social Security system, which is invested in low-yielding government bonds.
Deborah Perrotta, a former Enron employee from Houston, called Bush's plan "a huge mistake."
"We can't take a chance with this," she said. "It's too dangerous a situation, and knowing what happened at Enron, the demise of Enron should throw up a red flag for everyone."
Thousands of employees, many of whom were heavily invested in company stock through their retirement plans, lost their savings when the company collapsed.
Dary Ebright, an employee at Enron subsidiary Portland General Electric, said the private retirement accounts contemplated in Bush's plan would create too much uncertainty for workers. Many retirees from Enron and its subsidiaries who once regarded Social Security as a supplement are being forced to live on it, Ebright said.
Breaking the ContractNew York Times by Paul Krugman March 6, 2002
(3/5/02) - If converting Social Security to a system of private retirement accounts is such a good idea, why can't advocates of that conversion try, just once, to make their case without insisting that 1+1=4?
Last week George W. Bush did it again, contrasting Social Security benefits with what retiring workers would have if they had invested all their Social Security taxes in the stock market instead. As an article in The Times pointed out, this was a misleading scenario even on its own terms; financial planners strongly advise against investing solely in stocks, and a diversified retirement account wouldn't have risen nearly as much in the 1990's bull market.
But there's something much more serious wrong with Mr. Bush's story. Indeed, the latest remarks perfectly illustrate how he uses bogus comparisons to make private accounts sound like a much better idea than they really are. For by emphasizing what today's 65-year-olds could have done if they hadn't paid Social Security taxes, Mr. Bush has forgotten something rather important. Without those taxes, who would have paid for their parents' benefits?
The point is that when touting its plan to privatize Social Security, the Bush administration conveniently fails to mention the system's existing obligations, the debt it owes to older Americans. As with so many other administration proposals, private accounts are being sold with deceptive advertising.
The truth which Mr. Bush's economists understand perfectly well is that Social Security has never been run like a simple pension fund. It's really a social contract: each generation pays taxes that support the previous generation's retirement, and expects to receive the same treatment from the next generation.
You may believe that Franklin Roosevelt should never have created this system in the first place. I disagree, but in any case Social Security exists, and older Americans have upheld their end of the bargain. In particular, baby boomers have spent their working years paying quite high payroll taxes, which were used mainly to support their elders, and only secondarily to help Social Security build up a financial reserve. And they expect to be supported in their turn.
Mr. Bush proposes to allow younger workers to place their payroll taxes in private accounts in effect, to break this ongoing contract. But then what happens to older workers, who have already paid their dues?
There are only two possibilities. One is default: make room for the trillions diverted into private accounts by slashing the baby boomers' benefits. The other is to buy the baby boomers out that is, to use money from other sources to replace the diverted funds.
Those really are the only alternatives. Last year the special commission on reform of Social Security, which was charged with producing a plan for private accounts, came to an ignominious end it issued a deliberately confusing report, then slunk quietly out of town. But wade through its menu of options, and you'll find that in the end the commission grudgingly rediscovered the obvious: Private accounts won't "save" Social Security. On the contrary, they will create a financing crisis, requiring sharp benefit cuts, large infusions of money from unspecified outside sources, or both.
But nervous Republican members of Congress want to send all Social Security recipients a letter (at government expense, of course) assuring them that their benefits will never be cut. And now that the magic budget surplus has turned back into a pumpkin, the government is in no position to infuse new money into Social Security on the contrary, the government at large is now borrowing from Social Security at a furious pace.
So why is the Bush administration reviving its push for private accounts right now? Did it really learn nothing from the implosion of the reform commission? I doubt it; the administration's economists aren't fools, though loyalty often requires that they pretend otherwise.
A more likely interpretation is that this is entirely cynical. War frenzy is subsiding, the Bush domestic agenda is stalled, and early indications for the November election aren't as good as Karl Rove expected. So it's fantasy time: tantalize the public with visions of sugarplums, then blame Democrats for snatching the goodies away. And it doesn't matter that the numbers don't add up, because the plan will never be tested by reality.
Secret Government 60 Feet UnderNew York Times by Maureen Dowd March 4, 2002
WASHINGTON In a banner headline on Friday, The Washington Post blared: "Shadow Government Is at Work in Secret." The article said President Bush had assembled a cadre of officials to operate under the radar, out of the sunlight.
This is news?
The president did that on Jan. 20, 2001.
But it turns out that after Sept. 11, wanting to make sure that everything wouldn't collapse if there was a nuclear attack on Washington, he did it again. He formed a secret government within a secret government.
A shadow of a shadow.
It suits this administration to a T- ball, reflecting its twin obsessions with secrecy and self-perpetuation. The president realized that Dick Cheney couldn't govern all by himself after an Armageddon, so he set up a pre-post-apocalyptic staff, sending about 100 midlevel officials to two subterranean locations outside the capital.
Now Mr. Cheney is Lord of the Rings, ruling over his very own Moria, an underground kingdom of bureaucratic hobbits and orcs.
"Officials who are activated for what some of them call `bunker duty' live and work underground 24 hours a day, away from their families," The Post reported.
The hidden administration is known as Continuity of Government, or C.O.G., while the one at 1600 Pennsylvania is known as C.O.D., or Continuity of Dynasty, a project designed to keep the Bushes in the White House until 2008 and beyond.
In the bunker, the Bush-Cheney dream of ruling without justifying their actions is beautifully realized. The administration-in-waiting features only the executive branch.
Continuity does not require checks and balances. Sixty feet under, the vice president will never be sued by the General Accounting Office. Executive privilege is safe when the only branch is executive.
The Senate majority leader, Tom Daschle, said on Friday that he hadn't even been told about the existence of a shadow government, much less offered a cranny or a cot in case of a nuclear attack.
"We have not been informed at all about the role of the shadow government or its whereabouts or what particular responsibilities they have and when they would kick in," Senator Daschle said drily. First he'll have to figure out which administration to pry the information from the secretive one or the really secretive one.
The Bushies probably need Mr. Daschle's space for Karl Rove, a.k.a. King C.O.D. And by keeping out the legislative and judicial branches, the atomic government can continue to do what it's already done: set up a long mahogany bar with single-malt Scotch for Pioneers, out-of-gas Enron chieftains and other corporate sycophants.
Down there, they won't have to heed the nagging of Senator Robert Byrd, who last week threatened to stop writing "blank checks" for the military if the administration could not explain its war plan.
The Bush bunker does not bother with bipartisanship or even the pretense of it. It is all about blank checks and carte blanche.
If Washington gets whacked, C.O.G's mission is to maintain "essential government functions."
C.O.G. will implement the I.R.S. dictum that in the event of nuclear attack, tax collection will continue (from the poor and the middle class, not the rich). It will undoubtedly figure out how to keep up those arsenic levels after the E.P.A. is flattened and commence drilling in Alaska after the Energy Department is gone.
Without Democrats or journalists, the underground executive branch can operate the way the real executive branch would like to, and frequently does without a lot of second-guessing, Freedom of Information Act requests, complaints from civil libertarians and attention to the rights of Marin County hot-tubbers.
Nothing will be transcribed. So there will be no reason to clean up the language in President Bush's transcripts, as the White House has done routinely since 9/11.
The government Down Under won't need a press secretary, even one who is as opaque as Ari Fleischer. It is universally accepted there that all the world's woes can be traced back to Bill Clinton, and there is no need to apologize for simply stating the obvious.
Economic Security is Top PriorityPress Release by Congressman Dennis Kucinich February 27, 2002
The following statement by Congressman Dennis Kucinich, Chairman of the Congressional Progressive Caucus was delivered at a news conference where Progressive Caucus members presented an "alternative state of the union" address. The Progressive Caucus believes the Administration must make economic security the top priority for domestic security. "We will relentlessly pursue economic security for every American," Kucinich said.
Ordinary Americans are worse off today than they were one year ago. In the past year, More Americans became unemployed than at any time in the last 6 years, 251 public companies have gone bankrupt, 11 of them were Fortune 500 companies, and the national economy fell into recession.
Over the course of the year, the Administration has shown a preference to serve the powerful. Often, that has come at the expense of ordinary Americans. For instance, it refused to enforce the Federal Power Act for several months, allowing Enron and other energy companies to gouge California consumers, small businesses, and large companies. In the months of delay, Californians overpaid at least $6.8 billion for electricity. According to a minority staff report from the Committee on Government Reform, "at least 17 policies in the White House energy plan that were advocated by Enron or that benefited Enron financially." Enron also benefited when the Administration replaced the chief of the federal energy regulatory agency at Enron's request. The Administration also appointed an Enron advisor to be a White House economic advisor, and an Enron executive to be Secretary of the Army. The result of this administration's energy policies is higher electric rates for ordinary consumers.
The Administration repealed a regulation that would have denied lucrative federal contracts to corporations with a record of breaking the law. As the Enron and Arthur Andersen cases illustrate, there are few deterrents against crimes committed by corporations. The proposed regulation was one of the few, and it was needed. The GAO found that 261 companies receiving more than $38 billion in federal government business had documented violations of workplace-safety laws, and 80 companies receiving more than $23 billion in federal contracts had violated labor laws. The result of these violations - a transfer of wealth from workers to corporations.
The Administration pushed through a tax cut, the largest share of the benefits of which went to individuals with an average income of over $1 million.
The Administration wants to invest $48 billion more in the DoD. Yet, the Department of Defense cannot pass an honest audit. According to the GAO, "No major part of DoD's operations has been able to pass the test of an independent audit." "DoD uses unrealistic assumptions in all aspects of planning These problems have proven resistant to reform in part because underlying incentives have not changed."
The stock market collapsed this year; yet the Administration wants to dismantle Social Security and gamble senior citizens' only guaranteed retirement income in the stock market. It appointed a Commission on Social Security that was utterly biased in favor of privatization. According to the Wall Street Journal, "It's no secret that President Bush stacked his bipartisan Social Security commission with members who agree with his goal of creating private accounts." (Wall Street Journal, May 10, 2001) So the Administration stacked the deck in favor of Wall Street and against ordinary Americans. Who would benefit from Social Security privatization? The Wall Street brokers who would be able to charge billions of dollars in fees.
The majority of Americans do not believe that what's good for Enron is good for America. Americans believe in and deserve to be protected by an economic bill of rights. An economic bill of rights would acknowledge that all Americans, regardless of income, race or creed, are entitled to certain rights that are needed by an individual to be truly free. These rights include: the right to health care, the right to a clean environment, the right to high wage jobs, and the right to a secure retirement.
Fifty-eight years ago, in his State of the Union Address, President Franklin Delano Roosevelt made this critical observation: "All of these rights spell security. America's own rightful place in the world depends in large part upon how fully these and similar rights have been carried into practice for our citizens. For unless there is security here at home there cannot be lasting peace in the world."
The Congressional Progressive Caucus believes that these words are true today.
Bush Helps Executives Shelter PensionsWall Street Journal by T. Francis, E. Schultz February 26, 2002
(2/25/02) - Despite criticism over how top Enron Corp. officials were able to protect their special executive pensions while other employees saw retirement savings devastated, tax consultants say the Bush administration has softened proposed new rules, which will allow top executives to continue sheltering billions of dollars in pension savings.
The guidelines, released in January 2002, appear to offer a reprieve from an earlier, tougher version promulgated in the final weeks of the Clinton administration. Those rules essentially slammed the door on so-called split-dollar life-insurance policies, in which companies pay the vast majority of the premiums on lucrative insurance policies that benefit top executives or their families. These policies are typically used to shelter executive pension benefits.
The Bush administration's willingness to allow executives to continue to shelter their special executive pensions and enjoy other protections not available to regular workers' retirement plans contrasts with the administration's deliberations over policies that would punish top corporate executives for various abuses involving such things as misleading shareholders. The bottom line is that, regardless of what move the administration may make affecting top executives in the wake of the Enron scandal, it is unlikely to take any actions that will curtail their special pension benefits and protections.
In a typical split-dollar arrangement the company pays most of the premium -- costs it ultimately would recoup. At the same time the executive could borrow against this policy for a variety of uses, or leave the funds until the executive's death for his or her heirs to recoup, largely tax-free.
The new Treasury rules would grandfather in billions of dollars in existing policies and allow the insurance industry to craft new ones that, while somewhat less attractive, achieve much the same ends of those currently in place. This is a departure from the guidelines developed under President Clinton that didn't provide any interim or grace period.
Many in the benefits industry see the rules as a way to continue offering such products, which would have been curtailed under the Treasury's previously announced position before President Bush took office. "I think we're in a huge window of opportunity right now," says Michael D. Weinberg, a Denver consultant and a member of the Association for Advanced Life Underwriting's Split-Dollar Task Force. Insurers and pension consultants, including his firm, have begun developing computer models to show what kind of plans are best under the new rules, he says. "I'm very bullish on it."
Joseph Hessenthaler, a consultant in Philadelphia with Towers Perrin, adds, "We're sort of back to where we were, but with greater certainty. Frankly, I think you're going to see people using this again." The insurance industry, he adds, has "got to be jumping for joy."
The administration says it didn't soften the tax treatment for split-dollar policies. Indeed, says Mark Weinberger, assistant secretary of the Treasury for tax policy, the latest rules are "as tight if not tighter" than those released last year. "What we thought we were doing is tightening the rules," because the final regulations, once implemented, will impose taxes that eventually will make most split-dollar life-insurance policies more costly, said Pam Olson, a deputy to Mr. Weinberger.
Split-dollar policies drew attention recently because both Kenneth Lay, Enron's former chairman, and Jeffrey Skilling, Enron's former chief executive, used split-dollar policies to shelter millions of dollars of retirement benefits from the company.
Such policies have been a popular tool for funding retirement benefits for top executives, because under the most common arrangements, executives would pay -- and be taxed on -- only a sliver of the total premiums for the policy. The rest of the premium is paid by the employer, which later recoups its costs when the benefits are paid out.
The IRS has long wanted to tax the cash value in the plan once the employer's premiums were paid back. And in early 2001, the Clinton administration sought to tax the arrangements either as a loan of the premiums from the company to the employee, or as a transfer of property once the premiums were repaid.
Once final regulations are in place, the Treasury says the new rules will look much like those proposed last year.
Executives can shelter retirement money other ways, too, of course. Regular employees are often loaded up with company stock in their retirement plans, and can't diversify out of it. Executives can protect themselves without selling the shares and triggering taxes by using various hedging techniques.
These include "swap" funds, which let them swap the returns on their employers' stock for the return on a diversified pool of securities. Last year, Democratic Rep. Richard Neal of Massachusetts, introducing a bill to rein in the use of swap funds -- also called exchange funds -- characterized them as a tax-avoidance scheme. The bill went nowhere.
Now, citing recent events at Enron, Mr. Neal is seeking new co-sponsors for the bill, noting recent disclosures in The Wall Street Journal that top Enron executives used swap arrangements to protect themselves from exposure to Enron stock. "While the employees of Enron looked on helplessly, one director was able to use exchange funds to hedge his bets, diversify his portfolio, and postpone taxes," Mr. Neal wrote in a letter to his colleagues on Friday.
Tax consultants say it is unlikely the administration will make any changes. According to federal financial disclosure documents, prior to Mr. Weinberger's appointment as the Treasury tax official, the law firm he founded had been retained by the Swap Funds Coalition, a group of financial firms that ran exchange, or swap, funds and opposed changes in how the funds are regulated.
Speaking through a Treasury spokeswoman, Mr. Weinberger said the bill died before reaching committee and that the department didn't take a position on it. The spokeswoman also said Mr. Weinberger hadn't lobbied in the year before his appointment, and that the Swap Funds Coalition probably paid his firm in 1999.
Bush Reaps as He Has SownEmployee Advocate DukeEmployees.com February 24, 2002
President Bush is making a career out of censoring information. He does not want the public to have access to historical political records. He does not want the public to know anything about who advised his administration on its energy policy. His administration is the first to be sued for information by the General Accounting Office.
When Bush made his speech in China, giving his laundry list of expectations, the Chinese government knew exactly how to deal with him. When they broadcast his speech, they simply censored anything that they did not like! Almost half of his speech was cut out, according to the Los Angeles Times.
The Phantom Tax RebateNew York Times by Paul Krugman February 23, 2002
First comes the victory parade. Later we'll find out if we won.
Celebrating victory well in advance seems to be the style lately. And that includes the economic front. Both the administration and many business leaders have taken a modest improvement in economic indicators as proof that the economy is poised for full recovery. They could be right but don't count on it.
The good news to date consists mainly of evidence not that things are getting better but that they are getting worse more slowly. New claims for unemployment insurance have fallen; that means fewer people are being laid off, but not that laid-off workers are finding new jobs. Industrial production has stabilized; that means that companies have worked off the excess inventory that led them to slash production in 2001, but not that demand for their products has increased.
We won't have a serious recovery until what economists call "final demand" shows substantial increases, and workers start being rehired. Where will that recovery come from?
This has not been a standard recession, in which nervous consumers pulled back and will start spending again once they have been reassured. In fact, consumers have continued to spend freely right through the slump. So the surge in consumer demand that usually drives recovery seems unlikely.
What drove this recession was a plunge in business spending, as companies realized that they had over invested in the bubble years. Thus far there is very little evidence that companies are willing to start spending again anytime soon. And even if they did feel like spending, banks and financial markets, spooked by the Enron scandal, are reluctant to make the money available.
The only clear force for recovery I see is the administration's military splurge. After all, even useless weapons spending does create jobs, at least for a while. Japan props up its economy by building bridges to nowhere; the Bush administration buys Crusader artillery systems and F-22's.
Against this, there are at least three important forces that will place a drag on the economy.
First is the impact of unemployment. The number of Americans without jobs seems to have stabilized, but their pain is growing: more and more of the unemployed have been without jobs for months rather than weeks, and a rapidly growing number have exhausted their benefits (which House leaders have refused to extend). Will consumer demand remain robust as the human toll of recession becomes increasingly apparent?
Second is the plight of state and local government. The Pentagon may be getting everything it wants, and then some, but state and local governments are desperate; they will be slashing spending, laying off workers and even raising taxes all with depressing effects on the economy.
Finally, there's line 47. You haven't heard about that, but you will.
Here's the story. The Bush administration didn't want to give those famous $300 rebate checks; its original plan would have pumped hardly any money into the economy last year. Under prodding from Democrats the plan was changed to incorporate immediate cash outlays. But those outlays were included only grudgingly, and with a catch: they really weren't rebates. Instead, they were merely advances on future tax cuts.
What that means is that most taxpayers, when they reach line 47 of their 1040's, will discover that they owe $300 more in taxes than they expected. In other words, the one piece of the Bush tax cut that probably did help the economy last year is about to be snatched away. The direct monetary impact will be significant; the psychological impact, as taxpayers realize that they've been misled, may be even greater.
Many forecasters think that the impact of these drags on the economy will be a recovery that is slow and generates so few jobs that it feels more like a continuing recession. A few analysts notably Stephen Roach of Morgan Stanley, who deserves a medal for his dogged skepticism about the "new economy" during the bubble years think that we're headed for a "W-shaped" or "double-dip" recession, in which we have reached a bottom but not the bottom.
Personally, I find the pessimists more convincing than the optimists though any economist who honestly keeps track of his own forecasting record quickly learns to be humble. What's certain is that it's much too soon to declare victory.
Enron ArroganceL. A. Times by Johanna Neuman February 18, 2002
(2/11/02) - WASHINGTON -- Jeffrey K. Skilling was visiting Capitol Hill to press the case for energy deregulation. It was September 1999, and Enron Corp. was the darling of Wall Street.
Skilling, then the energy giant's president, had almost single-handedly imprinted his combative style on the company's lobbying culture, and he used it now: We're Enron. We're the economy. Buy it.
But Joe Barton, a Republican congressman from Texas and ordinarily a fan of open markets, wasn't buying it. As chairman of a House Energy and Commerce subcommittee, Barton didn't think Enron had the votes then. Skilling told him he was wrong. So Barton kicked Skilling out of his office.
"There was no foul language, but he got so frustrated that he started telling me how to run my subcommittee," Barton recalls of their meeting.
"I told him I was no CEO of a Fortune 500 company, but I was not an idiot, and I knew he didn't have the votes. He told me I was wrong, that I was just being stubborn. I told him there was no reason to come see me again until things calmed down."
By many accounts, that exchange with Skilling--who subsequently became chief executive of Enron but resigned in August, before the company's collapse--was typical of Enron's lobbying efforts. But while the brash and raw tactics ruffled feathers, Enron was generally successful in getting its way.
"Enron was willing to be very active physically, as well as financially--showing up, testifying, walking the halls of Congress," said Daryl Owen, a partner at the lobbying firm of Palmetto Group, who attributes many of Enron's victories to hard work.
"Most companies focus overwhelmingly on Wall Street to the diminution of Washington," he said. "Enron correctly perceived that what happens in Washington" has a lot to do with "how successful you can be in business."
The priority for Enron was electric power deregulation, winning Washington's approval to open natural gas markets in all the states. When Congress balked, the company turned to the Bush White House, convincing the administration to replace the independent-minded chairman of the Federal Energy Regulatory Commission with a deregulation man--Pat Wood, whose name was on a list vetted by the company's then-chairman, Kenneth L. Lay.
With Enron's collapse, its hardball lobbying tactics are coming under fire. This week, the issue of Enron's lobbying the White House to stay out of California's energy crisis, as well as for changes at FERC, could flare at hearings on Capitol Hill. However, Lay's views will remain a secret since he's expected to invoke the 5th Amendment when he appears before the Senate Commerce Committee.
But Enron's influence wasn't limited to FERC. The company also won permission from Congress to expand its online futures trading operations, which gave it a huge competitive advantage. And its chairman met regularly with Vice President Dick Cheney--a heady level of access by anyone's measure.
Nor was its influence limited to Republicans. When Bill Clinton was president, his Commodities Futures Trading Commission approved rules that exempted energy trading--the heart of Enron's business--from government regulation.
The Clinton administration also pushed for the Kyoto Treaty on global warming, which would have given Enron a chance to sell "credits" to companies that exceeded their carbon dioxide limits, purchased from those that did not.
In its heyday, the Houston company gilded Washington with campaign contributions (during the 2000 presidential election, the company was number 36 on the top 100 list of donors to federal candidates compiled by the Center for Responsive Politics) and employed hundreds of lobbyists, lawyers and other influence peddlers.
"Enron was everywhere, literally everywhere," said a Federal Energy Regulatory Commission staff member, who asked not to be named. "If you walked into an energy meeting anywhere in the world and Enron lobbyists weren't there, you figured you were in the wrong place."
Washington lobbyists are trained to play hardball. What Enron added was arrogance.
"The mentality appeared to be 'We revolutionized the energy industry; enjoy our brilliance,'" said Christopher Horner, who worked briefly as an Enron lobbyist and is now a senior fellow at the Competitive Enterprise Institute, a free-market think tank. "This led to lobbying efforts ranging from the ambitious to the utterly hubristic."
Old-line energy lobbyists, who bristled at Enron's depiction of them as stodgy, take special delight in Enron's fall. Deriding the Houston company as more hype than heft--the doomed "dot-com of the energy world" is a common epithet--they note with pride that old-fashioned lobbying by buttonhole won the day as Enron's flashy demands for deregulation lost.
"This is not selling potatoes," said one high-ranking energy lobbyist who declined to be named because he is a direct competitor to Enron. "Our industry is complex. We were talking substance. They were doing hubris."
Despite the company's flameout, many think the trend toward deregulation will continue. Though Enron never won a "date certain" for retail competition in all the states, even adversaries admit Enron improved the climate for the idea of loosing the bonds of government regulation. "They moved the ball forward," said the competitor energy lobbyist. "There are going to be other companies that try to capitalize on that."
Enron's Washington offices are closed now. No one sits behind the proud mahogany desk with its black marble top. The phone goes unanswered. Instead of high-profile lobbyists like Ed Gillespie (once described by the New Republic as "the most powerful Bushie you've never heard of") and the Alexander Strategy Group (home to Ed Buckham, former chief of staff to House Majority Whip Tom Delay of Texas), Enron and its in-trouble executives have become the full employment act for high-stakes lawyers.
Robert Bennett, who represented Bill Clinton in the Paula Jones sexual harassment case, is representing Enron. And David Boies, who took Al Gore's election appeal all the way to the Supreme Court and battled Microsoft Corp. for the Justice Department, is representing Andrew S. Fastow, the ousted chief financial officer who reaped at least $30 million by running Enron's off-the-book partnerships, and who took the 5th Amendment in congressional testimony last week.
Ironically, some think Enron was so well-connected it did not need to behave like a bully. Enron had the kind of power that comes of financial success. When company officials used it quietly, they usually won.
In the years he led Enron, Lay knew how to play the town. He had worked as an economist at the Pentagon, while a young Navy officer. During the Nixon administration, he led the fight against price controls at FERC and the Interior Department. Mostly, he knew how to disagree amiably. Sen. Frank H. Murkowski (R-Alaska) then chairman of the Senate Energy and Natural Resources Committee, remembers how disappointed Lay was when Murkowski advocated a go-slow approach on deregulation. Instead of blowing up, Lay went downtown, winning an agreement from then- Energy Secretary Federico Pena, in February 1998, for the Clinton administration's help in pushing back deregulation.
Skilling's cockiness--he once told a stock analyst at an investor conference that his questioning of Enron's finances showed his stupidity--ignored a key component of life in official Washington--deference. In a town that treasures presidential dinner settings and official titles, Skilling broke the china.
"They set an unreachable standard for arrogance," Owen said.
But even competitors suspect the boasting of financial prowess will continue to be a compelling selling point. "Enron got carried away; they wanted to call themselves the coolest company," said James Christian, an attorney at the Washington lobbying powerhouse of Patton Boggs. For now, he added, everyone is going to "tuck their chin down a bit," but the lure of winning votes in Washington by wowing Wall Street is a lobbying tactic sure to resurface.
Bush Helped Promote EnronPress Release Public Citizen - February 17, 2002
Newly Released Documents Indicate that as Texas Governor, Bush Helped Promote Enron's Business Interests
AUSTIN, Texas - Documents obtained by Public Citizen on Friday suggest that as governor of Texas, President Bush helped promote Enron Corp.'s foreign and domestic business agenda on behalf of company CEO Kenneth Lay.
The documents were among 350 pages of Bush records released by Bush's father's presidential library, where Bush sent them, after a request by Public Citizen under the state's open records law.
Though Bush has tried to distance himself from Ken Lay following the implosion of Enron and the loss of billions of dollars by investors and employees, the documents include handwritten letters exchanged between Lay and Bush reflecting a personal relationship. They also show Lay frequently sought help from Bush. Lay and Enron have contributed $736,800 to Bush's political career, including his 1994 and 1998 campaigns for governor, his 2000 presidential campaign, and his recount and inaugural funds.
"These documents suggest that Bush was acting as promoter-in-chief for Enron and its business interests at a time when he was getting ready to raise money for his run for president," said Public Citizen President Joan Claybrook. "They certainly raise questions about how far Bush went to help Enron and what other favors he might have done."
In 1999, Lay sent Bush a letter asking him to meet with the Romanian prime minister when he visited Houston. Lay noted that Enron had just finalized a gas marketing joint venture with Petrom and had a Bucharest office. Lay noted that "we are committed to participation in the Romania energy and water markets."
In 1997, Lay sent Bush a letter noting that Bush would be meeting with Uzbekistan's ambassador and saying that Enron was negotiating a $2 billion joint venture to develop Uzbekistan's natural gas. Lay noted that "this project can bring significant economic opportunities to Texas" and said that "I am delighted that the two of you are meeting."
In 1997, Lay sent Bush a letter thanking him for calling then-Pennsylvania Gov. Tom Ridge, noting that "I am certain that will have a positive impact on the way he and others in Pennsylvania view our proposal to provide cheaper electricity to consumers."
In 1997, Lay sent Bush a letter thanking him for his efforts to find a middle ground on the debate regarding electricity industry restructuring in Texas. "Thanks to your leadership . . . we made significant progress towards the goal of making the state's electricity industry fully competitive. . . . Enron looks forward to continuing to work with you."
In 1998, Lay, as chair of the governor's business council, sent a letter to Bush thanking him for his "outstanding and committed leadership" in getting eight bills passed that made changes to the legal system to help business.
In 1998, Lay wrote Bush to bring his attention to a federal tax bill relating to wind production tax credits that Lay was supporting for Enron's wind energy business and asked Bush to send a letter to U.S. House Ways and Means Committee Chairman Bill Archer in support of the measure.
Last week, Public Citizen obtained documents showing that Lay made a number of recommendations to Bush, as governor of Texas, for appointments to public office.