Charles R. Smith
Thursday, Feb. 28, 2002

I must admit to an error in my most recent article on the Enron scandal. Lovers of ex-President Bill Clinton will be overjoyed to find that Enron's top exec Ken Lay did not stay at the White House 11 times.

However, the bad news for those who still worship Mr. Clinton is that Enron not only donated $100,000 to Clinton's 1993 inauguration but, according to the records, also added an additional $25,000 to the Clinton 1993 celebrations.

The documented evidence shows that Enron did make it into the Clinton White House by special invitation. Senior Vice President Terrance H. Thorn had coffee with Bill Clinton on March 5, 1996.

Many of the other attendees of the Clinton White House coffee sessions also make up a long list of convicted criminals, arms dealers and bagmen for illegal DNC contributions.

For example, Wang Jun had coffee with Clinton in 1996. Wang is also the president of Poly Technologies, the largest arms trading firm owned by the People's Liberation Army. Poly Tech is currently banned from doing business in the United States after several of its top executives conspired to smuggle machine guns into the U.S. for sale to a major drug dealer – who later turned out to be a Customs agent posing as a gangster.

Charlie "Yah Lin" Trie, who was later convicted of illegally passing hundreds of thousands of dollars to the Clinton/Gore re-election campaign, brought Wang into the White House. Trie also gave an additional $645,000 to the Democratic National Committee, and most of this money was from illegal foreign sources.

Trip to Russia

Enron's association with the Clinton White House comes even closer to home when you consider the many corporate foreign trade trips paid for by your tax dollars. In 1994, Enron's CEO Ken Lay surfaced on a list of attendees wishing to travel to Russia with Ron Brown.

One person who did make the trade trip to Russia was Roger Tamraz. Interpol then wanted Tamraz, a Lebanese oil financier, for embezzling nearly $80 million from a Middle Eastern bank. Tamraz, who made most of his money selling Libyan oil, would later give more than $300,000 to the DNC after having coffee with Bill Clinton in the White House.

Russia was not the only target of Enron wheeling-and-dealing with the Clinton administration. Enron execs traveled on a profitable trade trip to India with Ron Brown, landing a major contract for a power plant. The India power plant deal later fell apart with allegations of illegal payments and bribery.

Trip to Bosnia

Enron also traveled in 1997 to Bosnia with Commerce Secretary Kantor in hopes of landing a U.S. taxpayer-backed energy deal in the war-torn state. According to the Chicago Tribune, Enron made a $100,000 donation to the DNC just days prior to the trade mission to the former Yugoslav province. Commerce Department documents clearly note that Enron was interested in the "Zagreb" portion of the trip.

Even in the last days of Bill Clinton, Enron execs were on the go. Enron traveled to South Korea with Commerce Secretary William Daley in 1999. Daley would go on to run Vice President Al Gore's failed bid for the White House in 2000.

Trip to Indonesia

The most damning evidence linking Bill Clinton and Enron to corruption is the documentation that shows Enron received U.S. taxpayer monies in order to finance a corrupt deal with Indonesia.

P.T. East Java Power Corp., which was then 50.1 percent owned by Enron, wanted to conclude a deal for a 500 megawatt power plant in East Java, Indonesia. The 20-year deal was later signed by Enron with P.T. PLN Persero (PLN), Indonesia's state-owned electric utility, which agreed to purchase the power from the natural-gas-fired plant.

According to Enron, the natural gas for the project was to be provided by Pertamina, Indonesia's state-owned oil and gas company. Commerce Department documents noted that Pertamina stalled the project with excessive demands for gas prices.

"Enron is now engaged with Pertamina over access to natural gas. These discussions may prove difficult," states a 1994 Commerce Department advocacy document.

"Enron is registered for OPIC (Overseas Private Investment Corporation) insurance," states the document, noting that the giant corporation obtained U.S. taxpayer-backed insurance if the Indonesian deal fell apart.

Ron Brown Letters for Enron

Ron Brown personally sought approval for the Enron electric power plants inside Indonesia. According to a personal letter directed to the Indonesian Minister for Trade and Industry, Brown endorsed two Enron deals for gas-fired power plants with the corrupt Suharto regime.

"Enron power, a world renowned private power developer, is in the final stages of negotiating two combined cycle, gas turbine power projects," wrote Brown in his 1995 letter.

"The first, a 500 MW plant in East Java, should bring commercial power generation by the end of 1997 if it can promptly negotiate a gas supply Memorandum of Understanding with Pertamina. The other project, a smaller plant in East Kalimantan, also awaits a gas supply agreement.

"I urge you to give full consideration to the proposals," concluded Brown to the Indonesian minister. In October 1995, Brown wrote another letter, this time to Hartarto Sastrosurarto, Indonesia's Coordinating Minister for Trade and Industry, pressing him to conclude the Enron power plant deals.

"I would like to bring to your attention a number of projects involving American companies which seem to be stalled, including several independent power projects. These projects include the Tarahan power project, which involves Southern Electric; the gas powered projects in East Java and East Kalimantan, which involves Enron," wrote Brown.

"Your support for prompt resolution of the remaining issues associated with each of these projects would be most appreciated," concluded Brown.

On Nov. 18, 1996, Enron CEO Ken Lay announced that the deal with Suharto was complete. According to Enron's public statement, the U.S.-led energy company had finally won the East Java Power project.

Corruption, Collusion and Nepotism

Yet the Enron success was clouded by allegations that the power plant deals were filled with kickbacks for the Suharto family. In October 1998, U.S. Ambassador J. Stapleton Roy wrote a diplomatic cable that he had recently met with Indonesian Director General of Electricity Endro Utomo Notodisoerjo.

"Commenting on corruption, collusion and nepotism (KKN), Endro said that in the past there was no separation between 'power' (not electric but former first family power) and business. 'All the IPP's (Independent Power Projects) have a relation with power, and it is still going on,' added Endro."

According to State Department documents, Enron signed on to a deal filled with "corruption, collusion and nepotism." One State Department cable included an entire section titled "Dealing with unwanted partners" that detailed corruption inside the two Enron power plants at East Kalimantan and East Java.

"Unocal executives told resources officer that the firm is close to reaching a deal with its partner, PT Nusamba (controlled by former President Soeharto crony Bob Hasan) to sever ties in two production sharing contracts (PSC) in East Kalimantan and East Java," notes the State Department cable.

Eventually, the Indonesian economy collapsed and Suharto was overthrown. The resulting economic mess forced Indonesia to default on its payments for the Enron power plants. The U.S. taxpayer using its insurance, however, paid off Enron. One such policy for Enron was obtained through the World Bank Multilateral Investment Guarantee Agency or MIGA.

"In June of this year, MIGA paid $15 million to Enron Java Power Co. for its investment in P.T. East Java Power Corporation in Indonesia," states the 2000 official public release from the World Bank.

"The venture was one of many suspended by the presidential decree of September 20, 1997, issued in response to the country's economic crisis," noted MIGA officials.

Thursday, July 25, 2002

Democrats Hush Up Rubin's Enron Scandal

Senate Democrats claiming to investigate the collapse of Enron Corp. don't want to question former Clinton Treasury Secretary Robert Rubin, a top official at Citigroup Inc., about its role in concealing Enron's debt from investors.

Asked whether he intended to call Rubin as a witness, Sen. Joseph Lieberman, chairman of the Governmental Affairs Committee, said, "I don't," the Washington Times reported today.

He said that decision was up to Sen. Carl Levin, D-Mich., chairman of the subcommittee probing Enron's internal practices.

Levin said he "probably" would call the chief executive officers of Citigroup and J.P. Morgan Chase & Co. to testify - but not Rubin.

Look What Citigroup Is Doing

As we reported in February, the former Clintonoid is on Citigroup's payroll for an astonishing $40 million a year just to "advise on strategy" - even as he continues to help Democrats undermine President Bush.

Congressional Republicans note that "Senate Democrats are playing politics by issuing subpoenas for Bush White House aides in the Enron probe but shielding a former Clinton official from sensitive questions," the Times reported.

"You can't ask questions on one side if you're not going to ask questions on the other side if something like this is done," said Senate Minority Leader Trent Lott, R-Miss.

'See What Happened'

"I think that they may want to call in Mr. Rubin and others before the Government Affairs Committee, and - if that's where the trail leads - and see what happened."

Rep. Mark Foley, R-Fla., is tired of the Democrat hypocrisy. He wants testimony from Rubin and from Sen. Jon Corzine, D-N.J., who used $60 million of his fortune from embattled Goldman Sachs to buy his Senate seat.

"If we're going to have hearings, Mr. Lieberman, let's have Goldman Sachs, let's have Citigroup brought to the dais," said Foley.

"When we talk about Enron, we ought to talk about all the players," Foley said on the House floor. "And there seems to be some real mischief. In fact, Mr. Corzine used $60 million to run for the Senate. Goldman Sachs was hyping Enron stocks past $90. They encouraged people to buy it."

And Then There's Clintonoid Erskine Bowles

And now another Clintonoid, former Chief of Staff Erskine Bowles, a U.S. Senate wannabe in North Carolina, "is taking heat for a corporate scandal as a board member of Merck Pharmaceutical Inc., which is accused of inflating revenue by $12 billion," the Times reported.

North Carolina's Republican Party blasted Bowles' "unwillingness to explain his role in a string of disastrous investments while a managing partner of investment bank Forstmann Little that led to the loss of more than $100 million for Connecticut retirees."

Goodness, how those rich Democrats' corporate corruption scandals are growing: Bill Clinton's Enron boondoggle, Global Crossing and Terry McAuliffe, Corzine, Bowles, California Gov. Gray Davis, Tom and Linda Daschle, Democrat diva Martha Stewart ... does the list ever end?

Phil Brennan, NewsMax.com
Thursday, Jan. 17, 2002

Senate ratification of the treaty, which foes explained would have cost the U.S. billions and had a deadly effect on the U.S. economy, would have been a bonanza for Enron.

What's Good for Enron Isn't Good for America

According to Washington Times reporter Jerry Seper, a December 1997 private internal memo written by Enron executive John Palmisano said the treaty would be "good for Enron stock!!"

"The memo said the Kyoto treaty - later signed by Mr. Clinton and leaders of 166 other countries, but never ratified by the Senate - 'would do more to promote Enron's business than will almost any other regulatory initiative outside of restructuring the energy and natural gas industries in Europe and the United States.'"

Easy Access to Clinton and Gore

Writing in Wednesday's Times, Seper reports, "Federal and confidential corporate records show that after donating thousands of dollars in soft money and PAC donations beginning in 1995, Enron received easy access to President Clinton and Vice President Al Gore."

Seper revealed that Clinton's Energy Department and Environmental Protection Agency "often made themselves available for Enron executives to discuss the firm's needs, according to records, even arranging for meetings with key congressional staffers."

Enron's drive to get the Kyoto Protocol ratified continued even after the Senate voted 95-0 to set restrictions on any climate negotiations. The Senate resolution warned U.S. diplomats against negotiating any climate treaty in which less developed nations such as communist China would have fewer restrictions imposed on them than the U.S. and other developed countries.

That vote gave clear warning that the Senate would never ratify the treaty, costing Enron potential profits in the billions. As a result, Enron used its open door to the Clinton White House to lobby hard for a treaty that would give it the ability to buy and sell trading credits to emit carbon dioxide as part of a strategy to reduce "greenhouse gases."

Under the system pushed by Enron, new investments in gas-fired plants and pipelines would be expanded and coal-fired power plants, which emit more carbon dioxide, would be curtailed. Seper noted, "Natural gas, electricity and their delivery systems constitute Enron's major businesses."

During a White House meeting in July 1997, Enron Chairman Kenneth L. Lay prodded Clinton and Gore to support a "market-based" approach to what he described as the problem of "global warming," a theory discredited by a majority of the world's climatologists.

In the face of Senate hostility to the Kyoto accords, Enron continued to urge the Clinton administration to seek a "restructuring" of the treaty that would have been a "first step to solving the problems of global climate change." Seper notes that the company "sought laws that would have favored Enron's natural gas inventory and reduced competition from coal."

On Feb. 20, 1998, during a meeting with Energy Secretary Federico Pena, Lay "encouraged the Clinton administration to seek electricity legislation favored by Enron," outlining for the secretary what the company believed were the "important" pending legislative concerns.

"Today's meeting between Ken Lay and Energy Secretary Federico Pena to discuss electricity legislation went very well," said a memo written by Jeff Keller, the company's Washington governmental affairs chief.

"Secretary Pena indicated that the White House proposed bill is 'on the president's desk,' and that Clinton could be convinced to release the White House proposal in the next few days," Keller wrote. "He suggested that President Clinton might be motivated by some key contacts from important constituents."

The records showed that Lay took that advice and sent a letter to Clinton that day, asking him to "move this matter forward."

Seper writes that Clinton administration officials have denied any wrongdoing, saying they were only responding to constituent requests.

Hypocrisy Alert

But while such Democrats as Rep. Henry Waxman of California attempt to create suspicion that Enron's contributions to President Bush and other Republicans gave the company undue influence with the administration without a scintilla of evidence to back up their imaginings, more real proof of the cozy ties between Enron and the Clinton administration continues to unfold.

Seper recalls, for example that, the Washington-based Export-Import Bank approved a $302 million loan toward a $3 billion Enron-controlled power plant in India in 1994.

Wrote Seper: "Mr. Clinton took an interest in the deal, asking the U.S. ambassador to that country and his former chief of staff, Thomas F. 'Mack' McLarty, then a presidential adviser, to monitor the proposal.

San Miguelito, Bolivia -- Enron's Cuiaba natural gas pipeline passes just 200 yards from San Miguelito, an indigenous village in Bolivia's Chiquitano Dry Tropical Forest. When Enron sought approval for the controversial pipeline in 1997, the company offered money to local residents and pledged to help them secure land ownership titles. Today, says village leader Bolnino Socore, the community has received 50 cows and a water well, but little else.

"The company says they will do no more to help us. But we have to live with the consequences of their pipeline for at least another 40 years," he said. Socore has cause for concern. The access roads Enron cleared in the Chiquitano are already attracting timber poachers and illegal cattle ranchers to the forest. He is also concerned about spills; another Enron pipeline in Bolivia burst on January 2000, leaking 30,000 barrels of oil into a river in the Andean highlands.

Ever since the Houston-based energy giant imploded in the midst of scandal last year, the name Enron has become synonymous with corporate corruption, accounting tricks, influence peddling, and environmental negligence. The company's record in Bolivia is no exception. Now, Enron faces government investigations and lawsuits as Bolivia tries to deal with the social, environmental, and economic damage inflicted by the company.

The 390-mile long Cuiaba natural gas pipeline, partly owned by Royal Dutch/Shell Group, stretches from near the city of Santa Cruz in eastern Bolivia to Cuiaba, Matto Grosso, Brazil. There, it fuels Enron's new 480-megawatt thermal power plant. The pipeline cuts through the 15 million-acre Chiquitano, the last, large, relatively intact tall dry forest in the world. The Chiquitano forest is "one of the world's richest, rarest and most biologically outstanding habitats on Earth" and one of the planet's 200 most sensitive eco-regions, according to the World Wildlife Fund. Approximately 90 species of mammals, birds and reptiles in the Chiquitano are listed as endangered. The adjacent Pantanal is the world's largest wetlands region, spanning 89,000 square miles and straddling the borders of Brazil, Paraguay, and Bolivia. It is one of the world's richest wildlife habitats.

Bolivia: Cuiaba Pipeline, June 2000. Photo: Amazon Watch

There are 271 indigenous communities in the Chiquitano forest region surrounding the pipeline, numbering an estimated 57,000 people. Poverty runs deep here. The thatched-roofed homes are generally without electricity, many without running water. Many villages lack schools, and almost all lack access to medical facilities. But in this hot and humid region on the southernmost fringes of the Amazon, the communities have also maintained a lifestyle that sustainably draws upon the animals and plants of the forest. To many villagers here, the pipeline symbolizes the rapidly encroaching threats to their environment and way of life.

In September 2000, protesters shut down Enron's pipeline work camp near San Miguelito. More than a hundred Chiquitano men, women and children from three nearby communities peacefully blocked the entrance. Within hours, indigenous communities nearby occupied two other Enron work camps. The protest, which lasted 16 days, ended after negotiations between Enron and indigenous leaders. At issue was a May 1999 agreement between Enron and 36 indigenous communities from the surrounding areas. The agreement required Enron to pay $1.9 million for an "Indigenous Development Plan" and to fund efforts to secure land titles for local residents. But as the pipeline neared completion, indigenous groups said they had only received about one-third of the promised funds, and they were no closer to owning their land.

Carlos Cuasace Surubi, president of the Chiquitano Indigenous Organization, said they had no choice but to fight the company: "We told them that as indigenous people we still believe in a person's word. You have put the pipeline in the ground, but you have lied to us. We demand you comply with the agreement or we will not go."

After further negotiations, Enron did release the rest of the promised funds, but the dispute over the land titles persists. According to indigenous advocacy groups, no titles have yet been issued. But the government says that 30 percent of the indigenous communities have received their titles so far. According to Ivan Altamirano of the government's National Institute for Agricultural Reform, the other 70 percent of the titles require still more technical and legal work -- and therefore more funding. Enron maintains it has already fulfilled all of its commitments. "The land titling has been done, what we are waiting on right now for the majority of it is the signature of the president of the republic and we can't make him sign this stuff," said Laine Powell, manager of Enron's Cuiaba project.

Jorge Landivar, director of the national park service for the region that includes the Chiquitano, says that the villagers living near the pipeline were duped. He says they never should have signed the deal. "When the company came in with their negotiators prior to the pipeline, the communities did not know what they doing. They signed an agreement but were not prepared or trained to know what were the real benefits and disadvantages of the project. They don't even have land for all those cows the company gave them as compensation."

The OPIC Connection

The "Cuiaba Energy Integrated Project" cost an estimated $600 million to build, $200 million of which was originally to be financed by the Overseas Private Investment Corporation (OPIC), a US government agency that helps US companies with business projects in less-developed countries.

Over objections from environmental groups, Enron sought to build the pipeline straight through the Chiquitano dry forest. Environmental groups pointed out that by financing the Cuiaba pipeline, OPIC was violating its own regulations, which prohibit it from financing "infrastructure projects in primary tropical forests." Since 1992, the politically plugged-in Enron has been OPIC's No. 1 client, receiving more than $1.7 billion for its foreign projects, and had been promised $590 million more at the time of Enron's financial crash last year.

Five environmental organizations -- World Wildlife Fund, Missouri Botanical Garden, Wildlife Conservation Society, Noel Kempff Museum, and the Bolivia-based Friends of Nature -- carried out an assessment of the Chiquitano and told OPIC that it was "a primary tropical ecosystem of global importance." The groups also warned that the pipeline would open up the forested region to loggers, miners, hunters, farmers, colonizers, and cattle ranchers, while increasing the likelihood of forest fires.

But OPIC and Enron saw things differently. Originally, says Jon Sohn, international policy director of Friends of the Earth, Enron's own environmental impact assessment called the Chiquitano a primary forest. But in the spring of 1999, OPIC Chief Environmental Officer Harvey Himberg decided that the project would only be judged on how it impacted the forest immediately surrounding the pipeline. Meanwhile, OPIC also adopted an extremely narrow definition of a primary forest. Under OPIC's definition, for a forest to qualify as primary it must contain only limited "artisanal" or subsistence logging and other human activities. This definition was called antiquated by the non-governmental Forest Stewardship Council (the group Himberg claimed to have taken the definition from) and subsequently repudiated by the World Bank's senior biodiversity official.

After fires swept parts of the Chiquitano forest in the summer of 1999, OPIC even created a video highlighting the burnt out areas in an effort to convince individuals from other government agencies that the forest was not primary. The video led one US Agency for International Development staffer to tell an environmental group that he came away with the impression that there was no forest left.

"At every step OPIC sided with Enron, finding every way possible to circumvent its primary forest policy," says Atossa Soltani, executive director of Amazon Watch: "OPIC management put on an all out effort to defend its largest business client."

Eventually, the environmental groups who produced the study were persuaded to drop their opposition in exchange for $20 million from Enron toward a "Chiquitano Forest Conservation Fund." The World Wildlife Fund (WWF) later pulled out of the program citing concerns over conflict of interest and lack of indigenous participation in the leadership of the fund's board of directors. Indeed, a June 2001 WWF-UK report concluded that due to such flaws the program had "increased social and environmental conflicts" and presents "a risk to the sustainability of the forest and indigenous populations."

The Chiquitano fund caused a rift between indigenous leaders and the conservation groups who had endorsed the program. It also provoked bitter division among environmentalists, with critics branding the fund as an exercise in corporate "greenwashing." Henry Tito, who works on Chiquitano issues for CEADES, a social development group based in Santa Cruz, argues the fund violates international and Bolivian laws; these laws, he says, require indigenous participation in development decisions that affect them. "Indigenous people are not against conserving the Chiquitano. But as this is their home they have the right to decide how their ancestral land is conserved. Enron and the conservation groups continue to ignore that right," says Tito.

Indigenous leaders in the Chiquitano also maintain that while some conservation groups enjoy big salaries and other perks from the fund, the impacts of the pipeline on local communities are not being adequately addressed. While Enron is estimated to rake in $50 million per year over the 40-year life span of the pipeline project, the company's compensation to indigenous groups amounts to only four percent of the pipeline's first year income. Meanwhile, Erwin Chuve, president of the Natividad indigenous community, said the roads built by Enron are already adversely impacting the villages. "Illegal timber cutters, cattle ranchers, and others are starting to invade the Chiquitano with greater speed," he says.

Enron claims it merely improved existing roads in the area." In the Chiquitano forest, there were concessions for mining [and] concessions for forestry. It is not an area that has never seen the impact of humans. The commitment that we made was that we would use the access roads that were there and not build anymore and that is what we did," said Powell, general manager of the Cuiaba project. But residents in the town of San Matias, located on the border with Brazil, complained that Enron had created more than 60 unauthorized access roads. And Patricia Caffrey, former executive director of World Wildlife Fund Bolivia, says Enron's "improvements" created a new network of roads that violates the commitments contained in the company's own environmental management plan. "You couldn't penetrate the mass of forest before, now you can very easily with Enron's so-called improved roads. I was with two visitors from WWF-UK when we saw, coincidentally in one afternoon, two illegal logging trucks hauling out logs via these roads."

Enron also violated a host of environmental requirements during construction of the pipeline, causing Bolivian authorities to issue a warning to the company in February 2000. In September 2001, OPIC sent a 6-page letter to Enron outlining how the company had failed to meet its environmental obligations. OPIC canceled the Cuiaba loan in February, allegedly because the company failed to resolve contractual disputes with Brazilian authorities. But critics say the damage has already been done.

In a May 6 letter to OPIC president Peter Watson, six leading US environmental groups called on OPIC to take responsibility for its role in facilitating Cuiaba. "Significant promises were made by OPIC with respect to environmental and social protections that would occur on the condition that OPIC's Board approved the Cuiaba project, " the letter stated. "Those promises were not met by Enron nor were they met by OPIC. A mechanism for repairing the damage done and resolving outstanding promises is now sought."

Environmentalists have also long alleged that Enron used its influence with the Bush administration to shape the White House's energy policy. Indeed, one section of that policy does seem aimed at justifying the Cuiaba project and other Enron operations in South America. Chapter 8 of the document includes a provision stating that gas pipelines in Bolivia, Brazil and elsewhere in South America "aid the environment."

Greasing palms?

In Bolivia's 12,500-feet high capitol La Paz, the national congress has formed a special committee to investigate Enron business deals in light of events in the US. In particular, the Bolivians are looking into charges that Enron illegally obtained its ownership interest in the Bolivia-Brazil gas pipeline and the transportation unit of the formerly state-owned oil and gas company YPFB.

On July 9, 1994, Enron won a public bid to partner with YPFB in the construction of the Bolivian side of the Bolivia-Brazil pipeline. Armando de la Parra, a congressmen and president of the Bolivian commission investigating Enron, says that as early as five months prior to the public bid, Enron began communications about the venture with then-Bolivia President Gonzalo Sánchez de Lozada. Meanwhile, competing companies were only given 13 days advance notice of the bid, said Parra.

Parra says that two days after Bolivia officially gave Enron the nod for the project, a 20-page detailed memorandum of understanding was speedily signed. Such negotiations normally drag on for weeks, he says. Then, in December 1994, the final contract was signed under New York state law between Sánchez de Lozada and Enron. The contract, which was illegal under Bolivian law, allowed Enron to set up the joint venture as an international, offshore company free of Bolivian taxation. Furthermore, says Parra, this original contract has mysteriously disappeared: Enron and government officials told his commission that they cannot find it.

"We have not yet uncovered conclusive evidence proving it, but all signs point to probable corruption... The public bid was obviously a sham to mask a secret deal between Sánchez and Enron," said Parra.

However, Enron was never able to line up financing for the pipeline and eventually Brazil's state energy giant Petrobras said it would back the project. It appeared that Enron would be forced out of the deal. But in October 1996, Bolivia offered up for sale the transport unit of state oil and gas company YPFB as part of its privatization program. The transport agency, now called Transredes, is responsible for all the pipelines in the country. Enron, in partnership with Shell, gained controlling ownership of Transredes. Parra says Sánchez de Lozada also inexplicably awarded Enron an additional 40 percent ownership of the Bolivian side of the Bolivia-Brazil pipeline without any evidence that the company had invested so much as a dime in the planning or construction of the project. Because of Enron's 50 percent ownership of Transredes, Enron now held the rights to 70 percent of the pipeline's annual profits, which it later split down the middle with Shell. This amounted to an annual gift to Enron and its partner in excess of $25 million net profit.

Enron's Transredes has since demonstrated serious environmental negligence. In January 2000, their "Sica Sica Arica" oil pipeline burst, depositing nearly 30,000 barrels of oil along 160 miles of the Desaguadero River and contaminating as well the surrounding watershed, farmland, Lake Uru Uru and Lake Poopo. The livelihoods of many communities, including the 5,000-year old native tribe, Uru Morato, were destroyed.

Environment ministry officials called the company negligent for allowing the petroleum to flow out of the pipeline for more than 23 hours before shutting off the valves on either side of the hole. They said the company failed to clean up the mess until 8 days later. Further, Bolivia's Environment Minister Hernan Cabrera says that Transredes was warned by his offices well in advance of the spill that the pipeline was old and needed to be replaced. "They had ample time and warning to prevent this from happening and they did nothing."

Cabrera says Enron has agreed in principle to pay $5.9 million in compensation for damage to the communities, public infrastructure and ecosystems, but it is refusing to pay a $1.9 million government fine. Steven Hopper, general manager of Transredes, maintains that the company's response to the disaster was "a model for other companies in Bolivia."

Shell game

According to US congressional investigators, Enron's Bolivian investments were part of the company's elaborate accounting shell game. Investors in the Cuiaba pipeline included LJM1, one of the fictional investment partnerships that eventually brought down Enron. According to a Feb. 16 article in the Washington Post, in order to present a rosy image to investors, Enron wanted to record profits from its Cuiaba project by using "mark-to-market calculations," an accounting trick that allows projected revenue to be put on the books in a current year.

"But Enron was not allowed to use such a calculation because its pipeline ultimately connected to an Enron power plant," the Post reported. "To get around that, Enron sold a 13 percent stake in the plant for $11.3 million to LJM1, that allowed Enron to book the revenue, and it did so in the last two quarters of 1999. The deal was all the more stunning because the pipeline had yet to deliver any gas and, therefore, had produced no revenue." In August 2001, Enron bought back LJM1's interest in the power plant for $14.4 million, giving the Enron execs in control of the LJM1 partnership a $3.1 million profit.

Enron's Bolivian operations were not included in the company's December Chapter 11 bankruptcy filing, and company officials say the Cuiaba is a key aspect of their reorganization plan. Despite its financial woes, Enron claims it will honor its social and environmental obligations in the country. But Bienvenido Zacu, secretary for land and territories of the Confederation of Indigenous Peoples, is not optimistic. He says that indigenous groups have had to resort to strikes and blockades to get the company to comply with many of its promises. "If Enron wants to stay in the Chiquitano, they must respect their permanent obligations to the people who were there before them," said Zacu.

Enron's collapse may have begun with the kind of misadventures it engaged in half a world away among the quiet coastal villages of Dabhol, India.

In 1992, the Enron Corp. announced it would build a $3 billion natural-gas power plant in Dabhol in the western state of Maharashtra. The project was to be the poster child of economic liberalization in the country -- the single largest direct foreign investment in India's history.

Instead, Enron in India has been an economic disaster and a human rights nightmare.

From the get-go, the Dabhol project was mired in controversy. Enron worked hand in hand with corrupt Indian politicians and bureaucrats in rushing the project through. Charges filed by an Indian public interest group allege Enron and the Indian company Reliance bribed the Indian petroleum minister in 1992-93 to secure the contract to produce and sell oil and gas from the nearby Panna and Mukta fields to supply the plant.

A Human Rights Watch report recounted incidents of farmers' land stolen, water sources damaged, officials bribed and opponents of the project arrested on trumped-up charges. In 1997, the state police attacked a fishing village where many residents opposed the plant. The pregnant wife of one protest leader was dragged naked from her home and beaten with batons.

The state forces accused of abuses provided security to the Dabhol Power Corporation (DPC), a joint venture of Enron, the Bechtel Corp. and General Electric, overseen by Enron.

The U.S. State Department issued the DPC a human rights clean bill of health. Charged with the assessment was U.S. Ambassador Frank Wisner, who had also helped Enron get a contract to manage a power plant in Subic Bay in the Philippines in 1993. Shortly after leaving his post in India in 1997, Wisner took up an appointment to the board of directors of Enron Oil and Gas, a subsidiary of Enron.

Thanks in part to Wisner's positive rights review, Washington extended some $300 million in loan guarantees to Enron for its investment in Dabhol -- even though the World Bank had refused to finance the project, calling it unviable.

A recent Indian investigative committee report exposed an "utter failure of governance" -- bribery, lack of competitive bidding, secrecy, etc. -- by both the Indian federal government and two successive state governments as they rushed the Enron project through.

By June 2001, the Maharashtra state government had already broken off its agreement with DPC because its power cost too much. That was the plant's one and only customer.

By December, news of Enron's collapse was in newspapers across the world. But the company still filed a $200 million claim with the U.S. government's Overseas Private Investment Corporation, a U.S. taxpayer-funded insurance fund for American companies abroad, in an attempt to recoup losses from the DPC. Indian newspapers reported that Vice President Dick Cheney, Treasury Secretary Paul O'Neil and Commerce Secretary Don Evans tried to twist the Indian government's arm into coughing up the money. Otherwise, U.S. officials warned, other investment projects would be jeopardized. International media reported last month that U.S. government documents showed Cheney tried to help collect the debt.

Today in Dabhol, the power plant is considered polluting and undependable. Spring water has become undrinkable, the mango crop is blighted and the fish catch is dwindling. Often at nightfall, the electricity fails.

While the bonuses have been the subject of rumor and angry comment in and out of the company for some time, Salon is the first news organization to obtain the detailed list. The generous executive payouts, many of which were handed out on Nov. 30, have led some former Enron officials to conclude that the company has yet to abandon its greedy ways. The bonuses were approved by an Enron management team largely still running the company -- Jeff McMahon, then Enron's chief financial officer and now the president, and Ray Bowen, then-treasurer and now CFO. And they were approved after the departure of the "bad guys" who have been hauled before Congress, such as former president and chief executive Jeff Skilling and former chief financial officer Andrew Fastow. McMahon himself received a bonus of $1.5 million and Bowen got $750,000.

Some former managers expressed dismay about the company handsomely rewarding its executives just days before reneging on its employee severance commitment. They also raised questions about the circumstances in which many of the executives received their lavish bonuses. Congressional investigators share these concerns.

During Thursday's House Energy and Commerce Committee hearing on the Enron collapse, Rep. Henry Waxman, D-Calif., asked the chairman of the committee's oversight arm, Rep. Jim Greenwood, R-Pa., to consider subpoenaing Enron for the list of retention bonuses, supposedly used to secure the services of well-performing employees. Combined with an earlier disbursement of $50 million in bonuses to 75 executives who worked on the company's doomed merger with Dynegy Inc., the bonuses are further evidence that Enron was eager to reward those near the top at the expense of the entire company.

"It adds insult to injury," said Sen. Joseph Lieberman, D-Conn., who chairs the Senate Governmental Affairs Committee, earlier in the week. "Enron is still a functioning company. Why they can't find a way to pay the severance really pains me, especially in light of the retention bonuses."

Many of the generous retention bonuses were given to executives who played a role in the fall of Enron's house of cards. At least one of the recipients was faulted in Enron's internal investigation of its collapse, the so-called "Powers Report," named for the chairman of the committee, University of Texas Law School dean William Powers.

The official Enron severance rules state that each eligible ex-employee is entitled to one week of pay for every $10,000 of salary, plus one week of pay for each year or partial year of employment, up to 26 weeks. But the reality has proved to be quite different. Enron employees laid off before Dec. 2 have been told they have no funds coming to them. U.S. Bankruptcy Judge Arthur Gonzalez ruled that the 4,500 Enron employees laid off since bankruptcy were entitled to each receive a $4,500 severance check.

According to one former senior executive, Enron's original severance package -- subsequently scrapped -- cost $120 million and would have provided each employee approximately $30,000 in severance on average. That plan was reduced, then discarded. Instead, at least $105 million was distributed in executive bonuses. "What I'd like to know is why the creditors' committee is letting them get away with this," the former executive asks. "What about this new CEO, Stephen Douglas, doesn't he need that money to operate? This is outright fraud and theft." Another Enron source reports that word inside the company is that members of the creditors' committee received a copy of the executive bonus list earlier in the week "and they are furious."

Enron spokesman Mark Palmer has defended the bonuses as standard operating procedure when a company is trying to retain its talent. The documents show that Palmer's own bonus was $200,000. He did not return a Friday call from Salon.

Relying on an in-house e-mail that broadly described the bonuses, the Houston Chronicle reported in December that 11 Enron executives received one-quarter of the retention bonuses. The e-mail listed McMahon; president and chief executive of Enron Americas John Lavorato, slated for $5 million; chief operating officer of Enron Americas Louise Kitchen, who received $2 million; and president and chief executive of Enron Broadband Services Jim Fallon, who like McMahon received $1.5 million. Approximately 500 employees were included on the bonus list and their rewards ranged from $2,000 to $5 million apiece.

If the company's strategy was indeed to retain these employees, it often failed to achieve its objective. Those who received bonuses agreed to stay with Enron only until the end of February 2002. One former Enron executive reported that "a lot of these people who took the money and signed the contracts have either already left the company -- keeping the money -- or have done nothing but look for and secure their next job when their contract runs out. A number of them have been traveling on Enron's expense accounts negotiating their next job."

John Nowlan, who received a $500,000 retention bonus, has already negotiated a deal to take his crude/products trading team to Transammonia, Inc. Gary Hickerson, who received $600,000 for his "retention," has, according to sources, been working on developing his own private equity fund. Neither Nowlan nor Hickerson returned calls for comment. Based on a conversation with Nowlan's assistant, it wasn't clear that Nowlan still worked at Enron.

Nor did the $5 million bonus that Enron lavished on John Lavorato or the $2 million awarded Louise Kitchen secure their services. Lavorato and Kitchen are following Enron's energy-trading component, Enron Americas, to its new corporate owner, UBS Warburg. Some Enron insiders argue that since Enron Americas was a valuable commodity it could sell, thus helping the firm to stay alive, it was important to keep Lavorato and Kitchen during the transition. But the size of their bonuses has raised eyebrows.

On Thursday McMahon defended the bonuses. "The notion behind the retention payments," he said, "was one that if we were to go into bankruptcy, that these key individuals would remain in the company to protect the businesses' and assets' value for the creditors."

But their performance during Enron's meltdown casts doubt on some of these executives' managerial worth. Mark Haedicke, an attorney with Enron North America, is described in the Powers Report as sitting back and doing nothing when alarms were sounded about the controversial shell partnerships blamed for the company's implosion.

Haedicke and ENA's other senior attorney were warned about the problem in a memo written by employee Stuart Zisman, who stated: "We have discovered that a majority of the investments being introduced into the Raptor Structure are bad ones. This is disconcerting [because] ... it might lead one to believe that the financial books at Enron are being 'cooked' in order to eliminate a drag on earnings that would otherwise occur under fair value accounting."

Zisman then met with Haedicke and the other senior attorney to discuss his concerns. But the two "believed the assertion in Zisman's memo to be untrue, so they did not take any further action," according to the Powers Report. Despite this nonchalance, Haedicke was compensated with $750,000 in bonuses last November. Haedicke is also about to leave Enron to work for UBS.

Another group of lucky bonus recipients raising eyebrows among current and former Enron employees is the team that ran Enron Broadband Services. EBS was one of the biggest money losers for the company and has been criticized as being one of the phoniest of Enron's ventures. It officially died after poor second quarter 2001 reports. This did not stop Enron from awarding EBS's former president and chief executive, Jim Fallon, a $1.5 million bonus. Other former senior executives with EBS were also handsomely rewarded with retention bonuses: Rich Dimichele snagged $800,000; Paul Racicot got $400,000; Stewart Seeligson was handed $350,000, general counsel W. Lance Schuler received $300,000; and Rajeev Thapar was gifted with $250,000.

"People are really upset" about all the money EBS executives were given, said an Enron source.

Reached by phone on Friday, Seeligson wouldn't answer questions about his bonus or even respond when asked what his title was when he was with EBS.

As Salon reported on Jan. 29, Enron attorney Julia Murray cried when she heard that her friend, ex-vice president Kristina Mordaunt, turned a $5,800 investment in one of the shell partnerships into $1 million just a few weeks later. Perhaps some of the sting was taken out for Murray when she received her $200,000 retention bonus.

In Thursday's hearing, Rep. Ed Markey, D-Mass., asked McMahon -- who was chief financial officer at the time -- about the flurry of November retention bonuses and merger bonuses. "As CFO, you would have known that the $100 million was about to be paid out," Markey said. "Did you also know about the imminent bankruptcy at that time?"

McMahon replied that "the retention payments were something that was recommended and approved by the board." McMahon was vague about whether he and other officials knew the company would declare bankruptcy in a matter of hours. "We knew certainly that the bankruptcy was one of several options that could occur," he blandly remarked.

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< Previous Article Media sharks circling around wrong administration in Enron Corp. probe Author: Doug Schmitz Published on: January 14, 2002 Related Subject(s): Press and politics -- United States ,  Enron Corp. (Houston, Tex.) ,  Journalism -- Objectivity -- United States

 

Ever since U.S. Attorney General John Ashcroft recused himself from the Enron Corp. probe, the liberal media sharks have presumably smelled GOP blood in the water and are now circling in a full-scale effort to further discredit the Bush administration. After all, prior to President George W. Bush, it's been a long time since a Republican president sat in the Oval Office. And it seems whenever there is a Republican president, the liberal media salivate over any GOP upheaval that even remotely smacks of possible impropriety. Never mind the countless opportunities the media establishment passed up to hold the Clinton administration accountable for its actions. They unequivocally dropped the ball on the one chance they had to call on the carpet the only man responsible for creating the most corrupt and unethical administration in U.S. history—bar none. During those eight years alone, there were countless, unprecedented scandals: Whitewatergate, Hillary "Healthcare"-gate, Travelgate, Filegate, Chinagate, Vince Fostergate, Ron Browngate, the infamous Monica Lewinskygate, and Pardongate; not to mention how the Clintons undermined American national security, allowing Sept. 11 to happen, according to former FBI agent Gary Aldrich. Even though one of the media's main civic functions is to be governmental watchdog, they unashamedly ran more damage control and PR during the Clinton-Gore years than in any other presidential era. In retrospect, John F. Kennedy and Richard M. Nixon never got the kind of free passes from the liberal press that the Clintons still enjoy today. Now the liberal media want to hone in on a possible Enron-Bush connection that has Clinton's fingerprints all over it—which is exactly what the press is deliberately ignoring. One of many talking heads leading the charge is CNN's ultra-liberal anchor Judy Woodruff. On a recent program, Woodruff squawked about the allegedly scandalous ties between Enron and the Bush administration. She further ranted about how much money Bush raised while he was a gubernatorial and presidential candidate. Likewise, Los Angeles Times liberal columnist Robert Scheer compared Bush's connections with Enron to Whitewater, contrasting it with Bush's deregulation policy in Texas that allegedly "allowed dubious bookkeeping and other acts of chicanery." According to Accuracy in Media's Reed Irvine and Cliff Kincaid, however, what the liberal press collectively failed to inform the public was that the Clinton administration was the first to stick its hands in Enron’s corporate cookie jar; from Tom Daschle to Joe Lieberman—as well as the Clintons, all have reportedly benefited from their political liasion with Enron. (Visit: http://www.aim.org/publications/media_mo... to read Irvine and Kincard’s investigative report on the Clinton-Enron connection. What's more, Media Research Center, a media watchdog group, exposes blatant liberal biases from several news organizations concerning the Bush administration's ties with Enron in its latest investigative report: http://www.mediaresearch.org/news/cybera... .) Now the liberal media are on their perennial Republican witch-hunt, zeroing in on the Bush administration, while continually disregarding the Democrats' original role in the Enron saga. From The Washington Post, The Los Angeles Times, and The New York Times, to CNN, MSNBC, and CBS, the media left are on a crusade to make the Bush administration the primary focus of the investigation when, in reality, the probe should commence with the Clinton administration. Clinton Chief of Staff Mac McLarty, then-Treasury Secretary Robert Rubin, and the Clintons, all had highly questionable Enron ties—to the tune of over $100,000 in political kickbacks from none other than Enron chairman Ken Lay. The probe stems from reports of Enron executives and accountants—as it was later discovered—allegedly doctoring the books in a calculated attempt to conceal devastating profit losses and debts the company subsequently accrued. And Enron employees unwittingly suffered the most in the end during the past four years when the company brass made nearly $600 million by selling Enron Stock bilked directly out of its employees' 401K accounts. As it turned out, employees apparently weren't allowed to sell their stocks, which made more than a few workers suspicious. And little did employees know at the time that Enron Stock was plummeting from more than $80 in value to barely 80 cents a share. Although no apparent smoking gun currently exists in the GOP concerning the Enron bankruptcy probe, the liberal press will likely scour the latest Enron revelations to try to find one. That said, the following facts are now surfacing about the Enron-Clinton connection from such reliable and trusted news sources as The Washington Times, Fox News, NewsMax.com and The Drudge Report: · At Clinton's urging, then-Chief of staff Mac McLarty contacted Enron's Ken Lay and closely supervised a controversial $3 billion power-plant project with the U.S. ambassador to New Delhi, according to a 1995 Time magazine report. McLarty kept Lay informed of the project’s progress, and in June 1996, just four days after Enron won the contract, the corporation gave over $100,000 to the Democratic Party. (Also visit: http://www.newsmax.com/showinsidecover.s... to read a Newsmax.com report on Clinton's Enron connection with China.) · According to The Drudge Report, Enron subsequently hired Lay, who routinely played golf with Clinton and slept in the Clinton White House. Known to many as a master manipulator of both political parties, Lay served as an adviser to the Clinton White House on energy issues. The Clinton administration, in turn, helped Enron get a contract for a gas pipeline in Mozambique and other projects. · Clinton Treasury Secretary Robert Rubin worked closely with Enron during his tenure at Goldman Sachs. He first recused himself from his relationship with Enron, but later resumed the association upon his 1994 Clinton appointment. · Enron's two largest contributions went to House Democrats Sheila Jackson Lee and Ken Bentsen; Dick Gephardt accepted nearly $5000 in cash from the corporate giant. It's become painfully clear that the liberal press doesn't care about reporting the facts or getting to the real underlining issues involving the Enron controversy or any controversy involving its political allies. They have become willing pawns in the Democrats' political games and undoubtedly will never make the paradigm shift back to the basic tenets of journalism. Ultimately, the media-at-large want to have its cake and eat it, too: It wants to altruistically declare itself the beacon of truth, while simultaneously editorializing and censoring the very information it claims to accurately and sacredly disseminate. How sad it is that a medium, whose primary objective should be to get at the truth of a matter, vehemently refuses to expose their political cohorts for the sake of its own personal biases without the slightest vestige of conscience. Media Research Center said it best when describing the liberal media establishment's current state: "It cares more about influencing the public than informing it." How sad, pathetic...and true. AUTHOR'S NOTE: This article is dedicated to the memory of Barbara Olson, who was aboard American Airlines Flight 77 in the Sept. 11 terrorist attack on the Pentagon. Barbara, wife of Bush Solicitor General Ted Olson, was a conservative commentator and former federal prosecutor. She devoted her life to exposing political corruption, and righting the wrongs of the liberal media establishment. Her life truly exemplified unshakable character, courage and integrity. © Copyright 2002 by Doug Schmitz