by Sean Gonsalves

The ties between Enron execs and Washington politicians appear to be more incestuous than originally anticipated.

But according to a recent report by D.C. watchdog Public Citizen, the moral of this tale is not only about a handful of greedy sinners but the story of systemic shortfalls. Or as the report's title puts it, the fall of the energy giant points to "Blind Faith: How Deregulation and Enron's Influence over Government Looted Billions from Americans."

The genesis of the Enron collapse goes back to 1992 when Dr. Wendy Gramm, the wife of retiring Republican Sen. Phil Gramm, responded to a plea from Enron. At the time, she chaired the federal Commodity Futures Trading Commission.

In that capacity, she moved to exempt Enron's energy-swap operation from government oversight. Incidentally, Enron was one of Senator Gramm's biggest campaign contributors.

Soon after, Wendy Gramm resigned her commission post. Enron then appointed her to be on the company's board of directors. She served on Enron's audit committee, which supervises the internal finances of the corporation.

According to Public Citizen's report (www.citizen.org), she was paid between $900,000 and $1.85 million in stocks and dividends, as well as an annual salary of $50,000, plus an additional $176,000 in attendance fees. She left Enron in 1998 after having cashed in stock worth $276,912.

She told reporters that she left Enron to avoid even the appearance of a conflict of interest - a claim that might be more credible if she, say, donated that money to a fund for all the Enron employees who lost their entire life savings when the company filed for bankruptcy on Dec. 2.

In June 2000, Senator Gramm co-sponsored the Commodity Futures Modernization Act, which aimed to deregulate various kinds of futures trading with the exception of energy futures. The bill died before it reached the floor but six months later, Gramm co-sponsored another Commodity Futures Modernization Act, except this one sought to deregulate energy futures.

This time the act passed and, as James Ridgeway of the Village Voice reports, it passed "without undergoing the usual committee hearings and preliminary votes. (The act) was immediately attached as a rider to an 11,000-page appropriations bill. It passed and was signed into law by President Clinton six days later."

Public Citizen says the bill allowed Enron to gain "control over a significant share of California's electricity and natural gas market." Although the Golden State's energy problems were getting worse, Californians weren't getting bilked amid repeated rolling blackouts until after the Gramm act took effect.

Allegations started to circulate that out-of-state energy suppliers were ripping off California by holding back on gas supplies. Public pressure led to price controls imposed by the Federal Energy Regulatory Commission (FERC).

Meanwhile, revenues for Enron's "wholesale services" quadrupled, shooting up to $48.4 billion in the first quarter of 2001, which followed an increase in revenues from $35.5 billion to $93.3 billion between 1999 to 2000.

Frustrated by FERC's meddling, Enron execs sold off company stock. CEO Kenneth Lay started selling his stock in early 1999, amassing $101.3 million for himself.

Enron's general counsel, Jim Derrick, sold 160,000 shares of his stock in just one week in last June. Former CEO Jeffrey K. Skilling sold 500,000 of his shares by Sept. 17. Less than two months later, the company filed for bankruptcy. Now investigators are trying to figure out how Enron execs got rich while the workers got hammered.

So this is why Wenonah Huater, co-author of Public Citizen's report, says the Bush administration should immediately release all communications it has had with Enron. The Bush administration's selective disclosure, she says, doesn't tell the whole story.

"For example, on Feb. 17, 2001, Bush's Secretary of Treasury, Paul O'Neill, announced that the administration was scrapping an international treaty negotiated by Bill Clinton that would have ended the ability of U.S. corporations to utilize off-shore tax havens as vehicles to hide money," Hauter says. "Enron is perhaps the largest abuser of this practice, employing 874 subsidiaries in the Cayman Islands and other nations with weak bank disclosure laws."

It should also be noted that Securities and Exchange Commission chairman Harvey Pitt, who is heading up one of the major Enron investigations, also co-authored a 1994 law review article about the importance of destroying incriminating corporate documents, which just so happens to be exactly what Enron's accountants did.

Secretary O'Neill summed it up nicely for the Associated Press: "Companies come and go... . That's the genius of capitalism."

Sean Gonsalves is a Cape Cod Times staff writer and syndicated columinist. He can be reached via email: sgonsalves@capecodonline.com

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