Author: Molly Ivins

The New Yorker published an amusing parody on recent business scandals last week, including this gem: “Mr. Cheney called for an end to innuendo about his activities in a now-bankrupt Pitcairn Island firm that sold itself the air rights to a million acres of West Texas flatlands, deducted the transaction from its taxes as an entertainment expense, then borrowed $14 million interest-free from the Liechtenstein bank it owned, using its assets of company-acquired Callaway golf clubs as collateral, to finance the purchase of gifts for some Bessarabian oil prospectors who were then passing through Dallas.”

The Wall Street Journal published this less-amusing account of the dealings of Enron’s bankers: “About a decade ago, Chase Manhattan Bank (now merged with J.P. Morgan) set up a special-purpose entity named Mahonia. Its very special purpose was to reduce Enron’s taxes. By trading preferred oil and gas contracts with Mahonia, Enron was able to transfer its tax liabilities from one period to another.

“As the years rolled by, the cash-up-front property of the contracts proved irresistible, and Enron increasingly tapped Mahonia as a source of financing. The money flowed back and forth, the size of the transactions grew bigger and bigger, and the repayment periods got longer and longer. Enron booked the money as cash from trading operations, thereby pumping up its cash flow and obscuring the size of its debt. Meanwhile, Morgan hedged its risk with credit derivatives and surety bonds from insurance companies.

“The result of this daisy chain was that Enron got almost $9 billion that may have overstated its cash flow by 50 percent. The money also decreased Enron’s debt by 40 percent, allowing it to avoid nasty credit downgrades. Meanwhile, ahem, the banks made hundreds of millions of dollars in fees and commissions.”

Hard to tell which is the parody, isn’t it?

Meanwhile, we are now treated to the edifying sight of innumerable politicians scrambling to get right with Jesus or at least with the voters. Witnessing this land-rush toward civic virtue requires a cast-iron stomach.

Such specimens as Rep. Billy Tauzin of Louisiana, who last cast a vote in the public interest sometime around 1981, are now attempting to emerge as born-again populists. The eternally pious Sen. Joe Lieberman of Connecticut is, as usual, favoring us with Deep Thoughts on the need for moral rearmament. That would be the same Lieberman who in 1994, when the Financial Accounting Standards Board was fixing to rule that stock options had to be treated as a company expense, sponsored a nonbinding Senate resolution urging the board to back down, which it did.

The ability of companies to dispense options without having to account for them led to the explosion in executive compensation and gave corporate officials a big incentive to artificially inflate their stock prices. As Public Campaign, a campaign-finance reform group, points out in a recent bulletin, the industries that pushed so hard for the free stock options — security, high-tech, and accounting — have put $346 million into congressional campaign coffers since 1989, and Lieberman has gotten more than $750,000 from those three groups.

Speaking of edifying sights, how nice to see Larry Lindsey, President Bush’s chief economic adviser, on the Sunday chats assuring us that all is well despite the Dow Jones. How can you have Larry Lindsey on and not mention the relevant information that, before he went to the White House, he was a financial consultant and advisory board member for Enron?

I used to yearn for a sexier name than campaign-finance reform. In fact, I once ran a contest to find a punchier way to describe it. The readers favored “End Legalized Bribery.” But it seems to me that campaign-finance reform is now peculiarly apposite, since we are looking at a political-financial scandal directly attributable to the way campaigns are financed. Political financing is the root of the rot.

Molly Ivins writes for Creators Syndicate and the Fort Worth Star-Telegram.

If the American public is not by now completely confused about what George W. Bush did or did not do at Harken Energy Corporation, it’s sure not because us media folks got the story straight. I haven’t seen us get so tangled up in the facts since we tried to explain global warming.

This is an old story, but it is not an old story. It has been gone over again and again by journalists, and it has not been gone over by journalists. It was thoroughly investigated by the Securities and Exchange Commission, and it was not thoroughly investigated by the SEC. The SEC concluded there was nothing wrong at all, and the SEC concluded there was something very wrong indeed.

So which part is true? All of it is. All of the above is quite accurate, unless you report one set of facts without the other. What we have here is two separate stories or, to be strictly accurate, two and a half.

The old story is that, in 1990, George W. Bush sold his stock in Harken for $848,560 while serving both as a consultant to the company and on its board of directors, assigned to both the audit committee and the fairness committee. He unloaded the stock 16 days after receiving an internal “flash report” that the company was about to record huge losses.

He then failed to report this insider sale to the SEC for eight and a half months. He sold the stock at $4 a share. It fell to $1 by the end of that year.

It is also true, but only arguably relevant, that the company eventually recovered. The SEC investigated all this in 1991, cleared Bush on the insider-trading charges, and gave him a slap on the wrist for late reporting.

On the other hand, it would have been highly unusual if he had been charged with anything for late reporting, which can be dismissed as a mere technical violation or argued that the law’s the law — depending on your taste.

That Bush’s father was president of the United States at the time, that his father had appointed one of his own loyalists as chairman of the SEC, and that the SEC attorney in charge of investigating young Bush’s actions had himself actually been George W.’s personal attorney are all relevant facts. But it’s up to you whether you conclude there was a thorough investigation or an obvious whitewash or just another case of the insider connections and dealings that plague the whole system.

Yes, many people over the years have claimed that it all looked very fishy.

The second story, the new one, is about insider dealing at Harken. While Bush was on the board’s audit committee, the company started hemorrhaging money from losses in commodities-futures trades. So insiders at Harken borrowed money from the company to buy Aloha Petroleum. They spent $1 million to buy it and booked it as a $7.5 million gain.

When the SEC investigated this deal back in 1990, it ruled that what the company had done was impermissible, and Harken was forced to restate its earnings to show a big loss.

So this is the story about which one accurately says the SEC ruled it wrong. The half-story is that Bush himself, while a consultant and director, got two loans worth a total of $130,000 from Harken in order to buy Harken stock. That was not only legal but also common practice and is of interest today only because the practice has gotten out of control and Bush himself urged that it be changed in his speech to Wall Street last week.

The Center for Public Integrity has posted much of the relevant material from the SEC investigations on its Web site, publici.org, so you can look it up yourself.

In journalism, our sins of omission are almost always more grave than our sins of commission. So, despite our lamentable performance last week, I believe a more serious problem than the error and confusion is what we are not hearing about at all.

No one is connecting the dots between the financial scandals and government. Here’s almost every politician in Washington hot to trot on the terrible, terrible conduct of some corporate leaders, and no one is pointing out that the government itself — by its 1990s mania for deregulation, by underfunding regulatory agencies, and by opening critical loopholes such as energy-futures trading — is in large part responsible for this whole mess.

Molly Ivins writes for Creators Syndicate and the Fort Worth Star-Telegram, where this column first appeared.

Our personal trainer the president, up and running after his colonoscopy, is trying out a new role — Scourge of Corporate Misbehavior. This has approximately the same effect as opening the refrigerator door and finding Fidel Castro inside, smoking a cigar. “Hard to believe” barely begins to hint at the surrealism of this development.

The Bush people are going to force us to take this nonsense seriously. I guarantee we will soon be hearing about the Pepster’s long-cherished populist beliefs. Ever since the man told us he was the father of the Texas Patients’ Bill of Rights (which he first vetoed and then refused to sign), I have been resigned to the Red Queen quality of his political act.

In the interest of lending some verisimilitude to this new pose — Dubya Does Nader — let us pass lightly over Bush’s own business career, including insider dealing and the time he dumped his Harken Energy stock just before the announcement that the company was going bankrupt. In violation of SEC rules, Bush failed to report that sale to the Securities and Exchange Commission until eight months after the fact. The SEC contented itself with a warning letter but has specifically stated that Bush was “not exonerated.”

And let’s also pass over his six-year record as governor of Texas, an unbroken stretch of kissing corporate butt, including firing an agency head for enforcing state law against one of Bush’s biggest contributors.

Instead, let us concentrate on the repairable: a few things Bush can do to bolster his brand-new image as a champion against corporate malfeasance.

• Appoint someone to head the SEC who has not spent his career as a lawyer for accounting firms, including advising them to destroy documents in case of lawsuit. Chairman Harvey Pitt has been criticized even by The Wall Street Journal‘s editorial page for being too easy on his old accounting clients and for having lost all credibility after his meeting with Xerox’s auditor.
• Stop the government loans to Enron, which is still manipulating Third World energy markets while applying for $125 million in taxpayer money from the Inter-American Development Bank.
• n Come out in favor of the Sarbanes bill, now stuck in the Senate. It’s the only serious proposal to deal with corporate chicanery. The Republican plans are a sick joke. Call off Sen. Phil Gramm, who is working closely with the White House to block the bill.
• Stop working with business lobbies to block the accounting reforms that would prevent Enron from happening again.
• In order to avoid the appearance that you have been bought outright by corporate contributions, try not to make a recess appointment to the Federal Elections Commission of someone who has long sworn to oppose every effort at campaign finance reform and who is now destroying the McCain-Feingold bill.
• As you stated in your hilarious radio address, “We must have rules and laws that restore faith in the integrity of American business.” So how about reinstating the Clinton policy, which you reversed last year, against giving government contracts to corporations that have repeatedly violated federal laws?
• Supporting the repeal of the alternative minimum tax is probably not smart when giant corporations are already paying less in taxes than the janitors who clean their floors.
• It’s not a good time to push for repeal of the estate tax to benefit only the richest 2 percent of Americans.
• Your proposal to relax New Source Review standards at the Environmental Protection Agency stinks: It allows dirty coal-fired power plants and the nation’s other biggest polluters to operate indefinitely and to increase their pollution by massive amounts.
• Ix-nay on the Republican effort to block closing the Bermuda loophole in the federal tax code. They’ve taken to doing things like walking out of committee meetings to keep the bill from coming up. It would clearly pass overwhelmingly if it got to the floor. Time to call the boys in for a chat.

Molly Ivins writes for Creators Syndicate and the Fort Worth Star-Telegram.

The financial industry has always been anathema to

populists. “Bankers all have hearts like caraway seeds” is

one of the mildest populist pronouncements on the

breed, and the pugnacious populist William Brann used

to denounce life insurance companies as “vampire bats.” So I

thought it was just me when reading the financial pages caused me to

wonder, “Is there anybody in this business who is not a crook?”

I don’t think it’s just me.

“Republicans led by Sen. Phil Gramm of Texas and the

accounting industry’s trade group are working to kill a

Democratic measure that would impose new rules on auditors,

companies, and investment banks in the wake of Enron’s

collapse,” reports The New York Times. That would be the same Phil

Gramm who got $101,350 in contributions from Enron and

$927,055 from the financial industry while chairman of the banking

committee. (By way of contrast, the late Henry B. Gonzalez of Texas,

a populist, accepted no contributions from the financial industry

while serving as chair of the House banking committee.)

Gramm’s wife served on the board of Enron, but a

spokeswoman for Gramm announced the reform bill has nothing

to do with Enron and is therefore not a conflict of interest.

The entire purpose of the bill, by Paul Sarbanes of Maryland, is

to prevent precisely the abuses that led to the collapse of Enron.

This cheerful effort to scuttle mild financial

reforms comes amid regular updates on Enron’s frauds and

felonies rigging the market during the California “energy

crisis,” playing games with Global Crossing to disguise loans and

other financial facts, etc. Try these exercises in financial fakery:

n “Using prearranged but undisclosed plans,

executives may sell stock without being accused of insider trading.

Now regulators, worried about the use of fake plans, may

force advance disclosure of them.” (The New York

Times)

n “House Republicans are blocking an effort by

Democrats to force a vote on a measure that would prevent

companies from avoiding income taxes by reincorporating in

Bermuda and other offshore tax havens.” (The New York

Times)

n And The Wall Street Journal is reporting abuses by

the big currency traders, derivatives companies, and the

usual run of scoundrels and cheats.

One is reminded of poor Bob Dole in the 1996

campaign, crying, “Where is the outrage? Where is the

outrage?” I suppose a lot of it got used up as right-wing

demagogues whipped dittoheads into a froth of fury over Whitewater,

the longest-running nonscandal in history. What a tragic waste

of perfectly good anger. Another source of rampant apathy is

the ubiquitous feeling that there’s absolutely nothing we can

do about any of these advanced financial shenanigans.

No point in getting outraged if there’s nothing you

can do. And besides, it’s all very complicated. Most of us

couldn’t explain how derivatives work to save our souls, or how

currency trading works, or how Enron gouged California.

But we do understand buying politicians.

The financial industry is so greed-driven it doesn’t

have the sense God gave a duck. It’s always pushing for

something ruinous to itself and everybody else, like

savings-and-loan deregulation or doing away with Glass-Steagall, so

now insurance companies, securities firms, and banks can

marry each other. Naturally, they’ll be “too big to fail” when

they go under, so the taxpayers will have to bail them out.

Paul Krugman, the economics writer, recently

inquired, “Wouldn’t it be nice, just once, to see the Bush

administration oppose the interests of a privileged elite?” He was referring

to the administration’s foot-dragging on accounting reforms

and Bush’s own declaration that he sides with the CEOs on

not treating their stock options as a business expense. That’s one

of those cute little tax advantages the rich buy for themselves

with their campaign contributions. Don’t forget that George

W. Bush’s biggest campaign donor was Ken Lay of Enron.

Edwin Sherwood once wrote me the following about

Wright Patman, a great populist: “Power tends to corrupt, and

absolute power corrupts absolutely. Instead of applying this rule to

distant dictators, Patman applied it to wealthy and powerful

Americans. Wealth too often opposes the public good in principle

and practice. Do we look to Exxon for our national conscience?”

Molly Ivins writes for Creators Syndicate and the Fort

Worth Star-Telegram.

Seminal historic events always affect the language. Already we can see that Enron is of this shattering magnitude. A stick-up artist goes into the Jiffy Mart to pull a heist. He whips his heater and says to the clerk, “Put ’em up. This is an aggressive accounting practice.”

Or you take your car to Ralph’s Rip-off Garage to get a $50 problem fixed and, sure enough, he bills you $600. You say, “What an aggressive accounting practice!”

Euphemism of the Year, and it’s not even February yet.

The single most distinguishing feature of the Enron collapse is that no one is yet sure the company did anything illegal. (Aside from destroying documents, which arguably falls in the “seriously ill-advised” category.) As we gyre and gimble in the wabe of Enron, we run across such delightful items. Did you know that Enron’s board twice voted to suspend its own ethics code in order to create private partnerships? But how thoughtful of them to suspend the ethics code first! Otherwise, they might have violated it.

The funniest line of argument about Enron so far is “This is not a political scandal.” Boy, there’s a triumph of denial. Of course it’s a political scandal.

Business writers solemnly explain that Enron was in the business of buying and selling everything from natural gas and electricity to — as the company grew increasingly delirious — broadband telecommunications, water, and weather contracts. Also legislators, congressmen, governors, senators, and presidents — the company bought them with campaign contributions and then sold them on fatally foolish policies. Anyone who tells you campaign contributions only buy “access, not policy” needs to have his nose rubbed in this one. Just to mention a few highlights:

* Wendy Gramm’s key decision as chair of the Commodities Futures Trading Commission to deregulate energy futures markets. She has been on the Enron board since 1992.

* Sen. Phil Gramm received over $97,000 in Enron contributions and passed legislation that exempted key parts of Enron from government

* President George W. Bush got $2 million in contributions from Enron and its officers over the years, and numerous administration officials have Enron connections. A key decision by the administration was to call off the Clinton-led effort to stop international money-laundering (used by terrorists, drug-traffickers, kleptocratic dictators, and tax evaders) by going after off-shore banks. As has been widely reported, Enron maintained more than 800 offshore accounts in order to avoid taxes — and paid none in four of the last five years.

There’s some serious business here. If we are lucky, plucky, and raise lots of hell, Congress will probably make some improvements in campaign-finance laws, the conflict of interest on auditors also working as consultants, and oversight of private partnerships. And that will not be enough.

As Bill Greider writes in the current issue of The Nation: “The rot consists of more than greed and ignorance. The evolving new forms of finance and banking, joined with the permissive culture in Washington, produced an exotic structural nightmare.

“They converge, with back-scratching in the business of lending and investing other people’s money. The results are profoundly conflicted loyalties in banks and financial firms — who have fiduciary obligations to the citizens who give them money to invest. Banks and brokerages often cannot tell the truth to retail customers, depositors, or investors without potentially injuring the corporate clients that provide huge commissions and profits from investment deals. Sometimes bankers cannot even tell the truth to themselves because they have put their own capital (or government-insured deposits) at risk in the deals.”

It seems pointless to continue the argument over free-market capitalism versus regulated capitalism. It is a theological, not a practical, argument, requiring perfect faith from the free-market fundamentalists.

The greater danger is that as these enormous financial institutions run into trouble, they’ll take everybody else with them.

Molly Ivins writes for Creators Syndicate and the Fort Worth Star-Telegram. Her work appears in the Flyer periodically.

Looking on the bright side, as we are wont to do at this stand, privatization of Social Security is a dead letter and at least Congress didn’t pass the economic stimulus package.

Incredibly enough, the Washington pundit corps spent a couple of weeks running around bellowing, “Whose fault is this?” and fingering Senate Majority Leader Tom Daschle as the most likely suspect. No Republican was allowed to mention Daschle’s name without the word “obstructionist” preceding it.

If Daschle did stop the bill, the man should get a medal. Did it never occur to the Washington press corps to look at what was in the bill? The Bushies had already whizzed away the entire budget surplus last April on a monumental folly — a tax cut to enrich the rich. And, you may recall, it took a lot of blood on the political floor to erase the deficit and get to a surplus in the first place.

Not content with that piece of stupidity, when it came to “economic stimulus” congressional Republicans then decided to repeal the alternative minimum tax for corporations, the one that says no matter how many loopholes a corporation has found to shelter its enormous profits, it has to pay something in income tax.

The Republicans not only wanted to spare our biggest corporations from this dread burden, they also thought it would be a dandy idea to refund billions from the United States treasury to the likes of I.B.M. and General Electric for such taxes as they had to pay in earlier years. The New York Times‘ business section gave the Republicans the coveted Leona Helmsley Memorial “Only the Little People Pay Taxes” Award for such egregious chutzpah.

High on my scoundrel list is Bill Thomas, chairman of the House Ways and Means Committee, who waited two whole days after September 11th before introducing a steep capital-gains tax cut — 80 percent of the benefits to the richest 2 percent of taxpayers.

The Times economic columnist Paul Krugman had some startling figures on the Republicans’ final “compromise offer” to pass an economic stimulus package. Tax cuts accounted for 95 percent of the cost of the original Republican bill — the compromise got that down to 92 percent, leaving that much more for the unemployed. In the original bill, 69 percent of those tax cuts were for corporations — the “compromise” went all the way down to 63 percent.

The original bill retroactively eliminated the alternative minimum tax, refunding $24 billion in past corporate taxes. The “compromise” put that down to a mere $16 billion. But then Thomas put in another tax break for the very rich “to console himself for all these compromises,” said Krugman.

Some deal. I used to think the problem was that Washington doesn’t understand what the rest of the country is actually like. I mean, you’ve lost your job, you’ve got no health insurance and so Washington promises you a tax credit in the future, and somehow that’s supposed to pay for your health insurance now.

Actually, insurance companies, which rather famously have hearts the size of caraway seeds, do not accept future tax credits as payment. But it occurs to me maybe the problem is the rest of us don’t understand how things look from Washington.

Suppose you had gotten lots of big campaign contributions from insurance companies — now wouldn’t that make a difference in how you viewed insurance companies? Suppose nice insurance lobbyists came around regularly to kiss your posterior and tell you how brilliant you are and buy tickets to fund-raisers? Wouldn’t that make you feel warm and fuzzy about insurance companies?

You see, it’s just a question of us getting attitudes adjusted so we can understand Washington. At the very least, there’s an attitude adjustment overdue somewhere.

Molly Ivins, whose work frequently appears in the Flyer, is a columnist for the Fort Worth Star-Telegram and a member of Creators Syndicate.