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Closing in on Enron?

Richard Belliveau
Date Published: 
October 10, 2002

Less than one year ago, shortly after the collapse of the energy trading giant Enron, Bush and his administration scrambled to reassure the public that Enron was an isolated case, the exception to the rule. In fact, White House economic advisor Lawrence Lindsey went so far as to claim that the Enron disaster was “a triumph for American capitalism.” The assumption behind this twisted logic is that the mystical and omnipotent “invisible hand of the market” had swooped down and punished the rogue corporation.

The wave of corporate fraud scandals that have come to light over the past few months indicate that Lindsey may have jumped the gun in calling the Enron collapse a triumph. The fact is that Enron was not an isolated case but just the first case in an epidemic of corporate fraud—World Com, Tyco, Adelphia and Global Crossing are all restating their profits downward by billions of dollars.

With public pressure mounting, the Department of Justice has made a few arrests and even seized some assets in order to restore a level of confidence in the capitalist system. In late August, investigators netted Michael Kopper, a former top lieutenant to ex-chief financial officer Andy Fastow. Fastow and Kopper were the architects of the infamous Enron partnerships, such as Chewco, LJM1 and LJM2.

These partnerships were used primarily to conceal Enron’s debt, but they also functioned as personal cash cows for Fastow, Kopper and their cronies. Kopper’s cooperation has turned up the heat on Fastow, enough so that the feds have now seized $23 million in cash, real estate and other assets from Fastow and his family. In addition, Kopper has agreed to turn over $12 million in assets as part of his plea bargain. $35 million may seem like a lot but it is a drop in the bucket compared to the billions that vanished when Enron collapsed.

The seizure of Fastow’s assets and his impending arrest is a welcome development, however there is reason to believe that they may stop there. Federal investigators are claiming that due to the complex nature of Enron’s finances it has been difficult to nail the two former CEOs—Ken Lay and Jeff Skilling. As this issue of Left Turn goes to press, the former kingpins of corporate crime were enjoying unfettered access to their assets.

Corporate kingpins

They are working overtime to liquidate hard assets such as multi-million dollar mansions, no doubt to hide some in shelters and to raise cash for their legal defense. While some laid-off Enron workers are having their modest houses foreclosed on by the bank and left to ponder life without retirement savings, Skilling and Lay are living to good life.

If the Department of Justice went after corporate criminals with half the vigor they expend when pursuing so called “drug kingpins,” things would e very different. As a comparison, a suspect caught with $50,000 in cocaine would be immediately charged with possession and trafficking in narcotics, jailed, and bail set at $1 million. Assets including cars, houses and bank accounts would be seized pending trial. In contrast, the suspects of the largest corporate crime in history, involving billions of dollars, live in luxury with full access to their assets and the best lawyers money can buy.

The two different sets of rules that apply to corporate criminals and the rest of us have never been more apparent. As the epidemic of corporate fraud, insider trading, and tax evasion continues to spread, disillusionment with the current economic system is growing. Expressing concern over this trend recently, George Bush was quoted as saying he was “concerned about the loss of confidence in capitalism”!

He has good reason to be worried. Contrary to what Bush and his administration want us to believe, Enron was the rule not the exception. The epidemic will continue to spread because it is fueled by capitalism’s inherent greed and cut-throat competition. This dynamic serves to undermine the very democracy our rulers put on a pedestal.

When writing of democracy under capitalism in his book, The Proletarian Revolution, Lenin did not mince words, “…democracy under capitalism is bound to remain restricted, truncated, false and hypocritical, a paradise for the rich and a snare and deception for the exploited.” These words have perhaps never rang more true than they do today in the aftermath of Enron.