Subj: Enron: not the only bad apple
Date: 2/2/02 4:32:53 PM Pacific Standard Time
From: (American Patriot Friends Network)
To: (APFN Yahoogroups)

                 Enron: not the only bad apple
                 Guardian (London) Special Report
                 Friday, February 1, 2002
                 by Greg Palast -

                 I guess I'm not a nice guy. But when I heard that
                 Enron's former vice-chairman Cliff Baxter had shunted
                 his mortal coil, I shed no tears.

                 One tabloid even called Baxter a "hero" who
                 courageously raised the alarm about his company's
                 fantasy financials.

                 Maybe I'm missing something here, but this is the
                 Baxter who last year quietly crawled out of Enron like
                 a cockroach from a rotting log - then dumped his
                 stock on unsuspecting buyers, thereby pocketing a
                 reported $35m (£25m). You can just imagine Baxter
                 chuckling to himself in January last year as Enron's
                 office staff gathered their pennies for his retirement
                 gift while he's thinking, "So long, suckers!" - knowing
                 they are about to lose their jobs and life savings.

                 There have been a lot of misplaced tears in the Affair
                 Enron. The employees were shafted, no doubt about
                 it. But the shareholders?

                 I didn't hear any of them moan when Enron stock shot
                 up through the roof when the company, joined by a
                 half dozen other power pirates, manipulated,
                 monopolised and muscled the California electricity
                 market a year ago.

                 All together, Enron and half a dozen others skinned
                 purchasers for more than $12bn in excess charges.
                 That's the calculation of Calfornia's utility watchdog as
                 presented to federal regulators in a damning petition
                 for refunds.

                 Here's an example of how Enron's po' widdle
                 stockholders, hero Baxter and chairman Ken Lay
                 made their loot.

                 Soon after California dumbly deregulated its power
                 markets, Enron sold 500 megawatts of power to the
                 state for delivery over a 15-megawatt line. Very cute,
                 that: the company knew darn well the juice couldn't
                 make it over the line, causing panic in the state -
                 customers would then pay 10 times the normal cost to
                 keep the lights on and traders could cash in.

                 The federal regulator caught that one. Within weeks of
                 taking office, George Bush demoted the troublesome
                 official. Lay boasted to one candidate expected to
                 replace the sacked regulator that President Bush had
                 given Enron veto over the government appointment.

                 Nor did Enron's stockholders object to their profitable
                 business of trading politicians like bags of sugar. From
                 Texas to Argentina to Britain, Enron used legal but
                 sick-making use of political donations, consultancies
                 and lobbying to twist contracts, rules and regulations
                 to their liking.

                 You want to cry for a power industry exec who came
                 to an early, violent, end? Then let me suggest to you
                 Jake Horton, late senior vice-president of Gulf power,
                 a subsidiary of Southern Company. (Southern is one
                 of Enron's cohort in that fixed casino called the US
                 electricity market.)

                 Horton apparently knew about some of his company's
                 less-than-kosher accounting practices; and he had no
                 doubt about its illegal campaign contributions to
                 Florida politicans - he'd made the payments himself.

                 But unlike Baxter, who took the money and ran, in
                 April 1989, Horton decided to blow the whistle,
                 confront his bosses and go to state officials.

                 He demanded and received use of the company's jet
                 to go and confront Southern's board of directors. Ten
                 minutes after take-off, the jet exploded.

                 While the investigation into the plane crash was
                 inconclusive, the company's CEO believed his death
                 was suicide. He told the BBC: "I guess poor Jake saw
                 no other way out."

                 Ultimately, Southern pleaded guilty to the charges
                 related to the illegal payments.

                 Jake and Baxter are the beginning and end of the
                 story of deregulation. I was part of a team
                 investigating Southern's finances after Jake's plane
                 went down, just after a grand jury voted to charge his
                 company with criminal racketeering for manipulating
                 its accounts.

                 Millions of dollars were charged to customers of
                 Southern's subsidiary, Georgia Power, for spare parts
                 that were not used.

                 The internal revenue service recommended
                 indictment, but George Bush Sr's justice department
                 put the kibosh on the prosecution (their legal
                 prerogative) - in great part because the fancy
                 financials had been blessed by the company's auditor:
                 Arthur Andersen.

                 The company denied any wrongdoing.

                 But while Southern Company didn't face criminal
                 charges, regulators ordered it to pay back millions to
                 its customers.

                 And that's the big connection to Enron. Because it was
                 in those years of investigation that Southern Company
                 led the fight to "deregulate" the power industry.
                 Rather than conform to the rules, they lobbied to get
                 rid of the rules.

                 Southern and its buddies in the power industry were
                 successful beyond imagination. Industry lobbyists and
                 lawyers eviscerated America's Public Utilities Holding
                 Company's Act, and made mincemeat of the rules
                 which once barred power companies from making
                 donations to political campaigns.

                 Crucially, in the newly deregulated power markets,
                 the companies were relieved of the requirement to
                 follow the strict government-designed Uniform System
                 of Accounts.

                 Enron, founded in 1986, was the Rosemary's Baby of
                 this satanic coupling of free-market ideological hoodoo
                 and electricity industry greed.

                 Enron played it faster and looser than the others, but
                 it is wrong and dangerous to say Enron was one bad

                 It's the whole wormy tree of public services
                 deregulation mania which is rotten, root and branch.


                 More information on this topic can be found in Greg's
                 latest books, The Best Democracy Money Can Buy
                 and Democracy and Regulation, both of which will be
                 published in April

                 Greg Palast is an investigative journalist who writes a
                 column called "Inside Corporate America" for the
                 Observer, Britain's most respected Sunday
                 newspaper. View all of Greg's columns at


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