ENRON2
7/18 LONG ART'L
see rivkin gg, bold lost here
enron loophole precursor to gt recession?
found on cressman site
https://secureservercdn.net/45.40.149.159/i2q.36b.myftpupload.com/wp-content/uploads/2018/06/Enron-Files-Rowland.pdf?time=1612212129
rowland is gov conn
Also in March 2001, Ken Lay flew to Portland to have dinner with Tim Belden, the head of the Enron Western trading desk, to congratulate him on the Western trading desk pulling in 80% of Enron’s profits at the time. Belden later pled guilty to manipulating the market in California. Despite soaring prices and energy shortages in California, the Federal Energy Regulatory Commission (FERC) still holds off on instituting price caps. Vice-president Cheney’s energy taskforce was meeting throughout the spring to discuss and formulate the nation’s energy policy. Lay met with the Cheney taskforce on six separate occasions, on at least one occasion, in April, meeting with Cheney personally. The taskforce would end up calling for deregulation of energy markets and the increase of power plants. Again, from December 1999 to October 2001, Enron and its executives gave $1 million to the campaign coffers of the RGA and Rowland.
On May 24, 2001, Ken Lay met with Arnold Schwarzenegger, Michael Milken, and Los Angeles mayor Richard Riordan to discuss California’s energy crisis. According to one report, Lay’s solution to the crisis is to have government play even less of a role in regulating the energy markets. Five days later, on May 29, President Bush meets with California Governor Grey Davis. Bush turns down Davis’ request for price caps. Bush tells the Los Angeles World Affair Council: “For too long – and too often – too many have wasted energy pointing fingers and laying blame. Energy is a problem that requires action: Not politics, not excuses, but action. And blame-shifting is not action – it is distraction.” Also on May 24, Senator James Jeffords quits the Republican Party, upsetting the balance of power in the Senate and destroying the Republican’s ability to thwart Democratic subpoenas. Also in May, Cheney’s energy taskforce releases its report. It offers no assistance to California. Filings in a case in Washington suggest that in the 18 month period which ended in June 2001, Enron manipulated the market on 474 of the 537 days. In June 2001, Nora Brownell and Patrick Wood were appointed to the FERC. Both are ardent supporters of the free market and deregulation; both were suggested by Ken Lay in a list of eight possible nominees to FERC. In August 2001, Enron vice president Sherron Watkins sent an anonymous letter to the Chief Executive Officer of Enron, Kenneth Lay, describing accounting methods that she felt could lead Enron to “implode in a wave of accounting scandals...
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90 pp
Juhasz, A. (2006). The Bush agenda: Invading the world, one economy at a time. New York: HarperCollins. Chapter 2 Ambitions of Empire
...INTRODUCING THE AUTHORS: CHENEY, WOLFOWITZ, KHALILZAD, LIBBY, EDELMAN, AND POWELL
The clearest early rendering of the ideas that would become the Bush Agenda took shape in the 1992 "Defense Planning Guidance" (DPG), which was one of the final products of the George H. W. Bush administration (1989-1993): It provides much of the Bush Agenda's military framework. The DPG is a classified, internal planning guide for the Pentagon prepared approximately every two years. It is not intended for public consumption. It describes America's overall military strategy and represents "guidance" from the president and the secretary of defense to the four military services on how to prepare their budgets and forces for the future.
The 1992 DPG was written by six men who served in the administrations of both Bush presidents: Dick Cheney, Paul Wolfowitz, Zalmay Khalilzad, Scooter Libby, Eric Edelman, and Colin Powell. These men, together with later authors of key Bush Agenda documents, have known and worked with each other, shared and sculpted ideas, and refined their positions for well over a quarter of a century.
. Vice President Dick Cheney, Defense Secretary Donald Rumsfeld (a later author), and World Bank President and former Deputy Defense Secretary Paul Wolfowitz have worked together in the administrations of Presidents Richard Nixon, Gerald Ford, Ronald Reagan, George H.W. Bush, and George W. Bush. Over the years, Cheney, Rumsfeld, and Wolfowitz have increasingly demonstrated a commitment to the combined forces of absolute U.S. military dominance and corporate -expansion that have found their fulfillment in the Bush Agenda. At age twenty-eight, Cheney began his government career as Rumsfeld's assistant in the Nixon and then the Ford White Houses, , eventually replacing his mentor as Ford's chief of staff when Rumsfeld became defense secretary.
Under Ford, Cheney established his cold-warrior credentials as a steadfast opponent to detente with the Soviet Union. In fact, the only administration official credited with being more opposed to detente at the time was Rumsfeld. When the Republicans lost the White House in 1977 to Jimmy Carter, Cheney moved to the House of Representatives, while Rumsfeld went to work for multinational pharmaceutical company, G.D. Searle, eventually becoming its CEO. Cheney maintained a consistent conservative voting record for eleven years as Wyoming's sole member of Congress. Wolfowitz, who also began his government service in the Nixon administration at the Arms Control and Disarmament Agency, was increasingly focusing his attention on two highly interrelated issues: U.S. dominance over oil in general, and U.S. dominance over the Middle East in particular.
In fact, Wolfowitz has shown a greater commitment to these twin modes of building the Pax Americana than to any particular party affiliation. Thus, unlike most of his fellow authors, Wolfowitz continued his government career working in President Carter's Pentagon. In 1977, two years before Saddam Hussein even became Iraq's leader, Wolfowitz conducted the first extensive study of the need for the United States to defend the Persi
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Texan. After all, Bush was born in Connecticut, and he returned to the East Coast at age fifteen to attend the prestigious Phillips Andover Academy in Massachusetts, followed by college and business school at Yale and Harvard, respectively.
As a result of his loss, Bush vowed that he "would never be out-Texaned again" in his political career.21 In 1984, Spectrum 7 Energy Corporation bought out Bush's oil companies. Although both of Bush's companies had failed, they were purchased and Bush was retained as Spectrum 7's chairman and CEO likely due to the fact that his father had recently become vice president of the United States. Spectrum 7, which owed more than $3 million in debts by 1986, was saved through a merger with Harken Energy, which retained Bush as a board member and consultant.22
:{:{Tapping into his many friendly and profitable connections to the Saudi royals, Bush raised $25 million for Harken by bringing Saudi real estate tycoon Sheikh Abdullah Taha Bakhsh onto the board. Harken subsequently received a gas and oil exploration contract with Bahrain in 1989. 23 After working on his father's presidential campaign as liaison to the religious right, Bush began his second career as an owner of the Texas Rangers baseball team in 1989.}:
When he sold his shares in 1998, he earned more than $14.5 million in profit. In the interim, he was elected governor of Texas in 1994 and again in 1998. Bush's policies as governor deeply favored corporations and the wealthy. For example, in 1999 Houston overtook Los Angeles as the smoggiest U.S. city. This was due in part to Bush's decision to allow Texas's more than 800 oil refineries and chemical plants (which were contributing 900,000 tons of pollution annually) to choose whether or not they would comply with the state's clean air regulations, rather than requiring them to do so.
Bush cut taxes on corporations and individuals and increased policies directing financial benefits to both. As a result, by 2000, Texas ranked forty-ninth among states in overall taxes collected and fiftieth in per capita state spending. Economic inequality overall in Texas rose dramatically during Bush's tenure as the incomes of those at the top soared and those in the middle and bottom either stagnated or dropped. Texas then joined Louisiana and New York as the three states with the worst income inequality in the nation.24
:{:{Bush was very good to the oil and energy sectors, and they, in turn, were very good to him. Kenneth Lay and the Houston-based energy services company, the Enron Corporation, were Bush's all-time career patrons, contributing more money than any individual and company to his political campaigns.}: That is, before Enron was found guilty of defrauding its investors, including the State of California, of billions of dollars, which led to the company's 2001 bankruptcy and Lay's 2004 indictment on eleven counts of securities fraud (for which he is currently standing trial).
In fact, Bush had an unprecedented ability to raise money for his campaigns. Charles Lewis of the Center on Public Integrity put it this way: "George W. Bush has altogether redefined the parameters of political fundraising," shattering all previous fundraising records in 1999 to 2000 and again in 2003 to 2004. 25
George W. Bush certainly had the right connections and the right politics, but, if there were any doubts that he belonged in the Pax Americana brotherhood, he put them all to rest with his 2002 National Security Strategy,}:}:
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Before the DPG -drafters reunited in 1997 to establish a virtual Bush government in waiting with the Project for the New American Century, each man pursued the ideas enshrined in the DPG in his own way. Cheney considered a run for president against Bill Clinton. In 1993 and 1994, he formed a Political Action Committee, which included Thomas Cruikshank, CEO of the Halliburton Corporation, the Texas-based energy services giant, and Stephen Bechtel, president of California's Bechtel Corporation, the largest engineering company in the world. The "Cheney for President" buttons he distributed are still highly sought after; the same, however, was not true of his candidacy. Cheney did not despair; in 1995, he accepted his first job in the private sector in more than twenty years as president and CEO of Halliburton. Paul Wolfowitz left the government as well. Apparently, President Cl...
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larry summers funder, women can't make it in college brookely born et al kicked his ass FIRE funder?
Meanwhile, gender- and ethnicity-speech battles continue. Horowitz says a particularly troubling example involved Harvard University President Lawrence Summers. In January Summers became the target of outrage when he suggested that “intrinsic differences” between men and women may account for the low representation of women at top levels of science.Women's groups and some faculty members loudly called for his resignation, and Summers ended up issuing repeated apologies.
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But the Enron loopholewas small potatoes compared to the devastation thatunregulated swapswould unleash. Credit default swapsare essentially insurance policies covering the losses on securities in the event of a default. Financial institutions buy them to protect themselves if an investment they hold goes south. It's like bookies trading bets, with banks and hedge funds gambling on whether an investment (say, a pile of subprime mortgages bundled into a security) will succeed or fail. Because of the swap-related provisions of Gramm's bill—which were supported by Fed chairman Alan Greenspan and Treasury secretary Larry Summers—a $62 trillion market (nearly four times the size of the entire US stock market) remained utterly unregulated, meaning no one made sure the banks and hedge funds had the assets to cover the losses they guaranteed.
In essence, Wall Street's biggest players (which, thanks to Gramm's earlier banking deregulation efforts, now incorporated everything from your checking account to your pension fund) ran a secret casino. "Tens of trillions of dollars of transactions were done in the dark," says University of San Diego law professor Frank Partnoy, an expert on financial markets and derivatives. "No one had a picture of where the risks were flowing." Betting on the risk of any given transaction became more important—and more lucrative—than the transactions themselves, Partnoy notes: "So there was more betting on the riskiest subprime mortgages than there were actual mortgages." Banks and hedge funds, notes Michael Greenberger, who directed the cftc's division of trading and markets in the late 1990s, "were betting the subprimes would pay off and they would not need the capital to support their bets."
These unregulated swaps have been at "the heart of the subprime meltdown," says Greenberger. "I happen to think Gramm did not know what he was doing. I don't think a member in Congress had read the 262-page bill or had thought of the cataclysm it would cause." In 1998, Greenberger's division at the cftc proposed applying regulations to the burgeoning derivatives market. But, he says, "all hell broke loose. The lobbyists for major commercial banks and investment banks and hedge funds went wild. They all wanted to be trading without the government looking over their shoulder."
http://www.prwatch.org/node/12232
Failing Up to the Fed, A Reporters' Guide to the Paper Trail Surrounding Larry Summers
by Mary Bottari — September 3, 2013 - 7:35am
- Topics: Banking
- Projects: Real Economy Project
The Washington Post's Ezra Klein reports that Larry Summers is the "overwhelming favorite" of the Obama team for the job as Federal Reserve chairman. To convince the American public that one of the chief architects of the 2008 financial crisis should be the chief regulator of the U.S. financial system, supporters of Summers have their work cut out for them.
Cue the rewrite.
The New York Times reports that some of Mr. Summers's supporters "argue that better oversight of derivatives would not have prevented or significantly diminished" the 2008 financial crisis. One former Treasury official told the *Times* that Summers secretly wanted derivatives regulated, but couldn't win the support of Greenspan or Senate Republicans so dropped the idea.
For journalists who are being told what a brilliant man and insightful regulator Larry Summers was behind the scenes, here are a few items from his public record you might want to review.
The final report of the National Commission on the Causes of the Financial and Economic Crisis in the United States puts over-the-counter (OTC) derivatives "at the center of the storm," and specifically cites the Commodities Futures Modernization Act as a major contributing factor. "The enactment of legislation in 2000 to ban the regulation by both the federal and state governments of over-the-counter derivatives was a key turning point in the march towards the financial crisis." Read the report here.
In the spring of 1998, Deputy Treasury Secretary Larry Summers called Brooksley Born, the head of the Commodity Futures Trading Commission (CFTC), and yelled: "I have 13 bankers in my office who tell me you're going to cause the worst financial crisis since the end of World War II" if she moved forward with plans to bring transparency and reporting requirements to the OTC market. OTC derivatives were already causing huge loses around the globe. In 1994 Orange County California lost $1.5 billion speculating on OTC derivatives. Watch the Frontline investigation "The Warning" here.
Summers attacked Born publicly, testifying in Congress in July 1998: "As you know, Mr. Chairman, the CFTC's recent concept release has been a matter of serious concern, not merely to Treasury but to all those with an interest in the OTC derivatives market. In our view, the Release has cast the shadow of regulatory uncertaintyover anotherwise thriving market-- raising risks for the stability and competitivenessof American derivative trading. We believe it is quite important that the doubts be eliminated." "The parties to these kinds of contracts are largely sophisticated financial institutions that would appear to be eminently capable of protecting themselves from fraud and counterparty insolvencies." Read Summers testimony here.
One of Summers primary arguments was that any new regulation could invalidate the burgeoning swaps market, yet Born made it clear in her release and in her testimony that new rules would be prospective. Previously the CFTC had generated prospective rules. "The release does not in any way alter the current status of any instrument or transaction under the Commodity Exchange Act. Any proposed regulatory modifications resulting from the concept release would be subject to rulemaking procedures, including public comment, and any changes that imposed new regulatory obligations or restrictions would be applied prospectively only." Read the concept release here.
Even though the 1998 Long-Term Capital Management derivatives disaster shook regulators anddemonstrated that derivatives deals could pose systemic risk to theentire economy,bank regulators and Congress ignored Born who cited "an immediate and pressing need to address possible regulatory protections in the OTC derivatives market."Instead they placed a six month moratorium on any CFTC regulation and Born resigned in early 1999.Read Born's speech on LTCM here.
Summers became Treasury Secretary in July 1999, receiving a congratulatory letter from Ken Lay, the President of Enron Corporation, addressed "Dear Larry." In his response to "Ken" on May 25, 1999, Summers included a handwrittenPS: "I'll keep my eye on power deregulation and energy-market infrastructure issues." Read the letters here.
Summers helped negotiate the World Trade Organization's Financial Services agreement that opened global markets to derivatives and other financial products and made it harder for signatory nations to regulate banking in the public interest. In the WTO agreement, which was negotiated behind closed doors, the United States effectively pledged to get rid of the 1933 Glass-Steagall law, which was seen as a barrier to market entry by many foreign banks that were structured differently. In 1997,Tim Geither urged Larry Summers to personally call the heads of America's top five banks to seal the deal. See the Geithner memo to Summers here and attached below.
Summers pushed for the repeal of the Glass-Steagall, which was created after the Great Depression to wall off traditional commercial banking activity from the Wall Street casino. The repeal allowed commercial banks to merge with investment banks, securities firms and insurance companies, creating "too big to fail" behemoths and unleashing an era of reckless speculation. On November 5, 1999 Summers hailed the passage of the repeal: "Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st Century. This historic legislation will better enable American companies to compete in the new economy." Read the statement here.
On November 9, 1999, Summers and other regulators issued a report that would serve as the Congressional blueprint for the Commodities Futures Modernization Act drafted the following year. The "President's Working Group on Financial Markets" concluded that "under many circumstances, the trading of financial derivatives by eligible swap participants should be excluded from the CEA [Commodities Exchange Act]. To do otherwise would perpetuate legal uncertainty or impose unnecessary regulatory burdens and constraints upon the development of these markets in the United States." Read the Working Group Report here.
Summers personally reassured Ken Lay on November 22, 1999 that Enron's derivatives trades would not be regulated, directing him to pages 34-35 in the Working Group report that reads "in light of their small market share and the apparent effectiveness of private counterparty discipline in constraining the risk-taking of such derivatives dealers, the Working Group is not recommending legislative action with respect to such derivatives dealers at this time." Read the letter here.
Summers wrote to Congress on December 15, 2000 to "strongly support" the Commodities Futures Modernization Act. The bill that went even further than the legal changes called for in the President's Working Group Report, exempting derivatives from regulation by any federal bank regulator not just the CFTC. Summers also allowed the "Enron Loophole" to be included in bill (over the objections of the CFTC), which exempted energy trading on electronic commodity markets from regulation and helped Enron to gouge billions of dollars from West Coast consumers. Read the letter in the Congressional Record here.
As energy prices skyrocketed in California, Summers opposed Governor Gray Davis' plan to intervene with price controls, claiming: "This is classic supply and demand. The only way to fix this is ultimately by allowing retail prices to go wherever they have to go." Enron filed for bankruptcy in 2001, putting 20,000 employees out of work and Ken Lay was convicted of 10 counts of securities fraud, wire fraud and other offenses. Read Kurt Eichenwald's 2005 book on the collapse of Enron, "Conspiracy of Fools."
Summers departed the Treasury in 2001 and went off to be the President of Harvard, where he ignored repeated warnings by expert staff and lost Harvard some $2 billion of its endowment funds, including $1 billion on toxic interest rate swaps. Read about it in the Boston Globe and Bloomberg News.
Back at the White House in 2009 as head of the National Economic Council, Summers was a chief architect of the generous bank bailout, the weak stimulus and the limited structural reforms in Dodd-Frank. Summers opposed numerous efforts to strengthen the bill, most tellingly, the President's effort to include the "Volcker Rule." Volcker's aim was to put an end some of the riskiest practices by curtailing proprietary trading at U.S. banks and limiting their investments in private equity firms and hedge funds, but the rule was slow walked and weakened by Summers. Read Richard Wolffe's book "Revival:The Struggle for Survival Inside the Obama White House."
Summers was overheard in November of 2008 chastising Arthur Levitt (former head of the SEC under Clinton) for saying that Brooksley Born was right "I read somewhere you were saying that maybe Brooksley Born was right. ... But you know she was really wrong." Levitt confirmed the account, available here.
In the years that followed the 2008 meltdown, Clinton, Greenspan, Levitt even Rubin admitted they made mistakes or expressed some regret for these actions. Summers abided by his own advice to Geithner, as Geithner prepped for his confirmation session as Treasury Secretary, "don't anyone admit we did anything wrong." Read Ron Suskind's "Confidence Men."
In 2012, Summers was grilled by a British reporter and defended his record on derivatives, saying "at the time Bill Clinton was president, there essentially were no credit default swaps. So the issue that became a serious problem really wasn't an issue that was on the horizon... If you want to assign responsibility, If you take amarket that essentially didn't exist in the 1990s, that grew for eight years from 2001 to 2008, and then brought on a major collapse, if you were looking to hold people responsible, you would look to... officials of the Bush Administration."Credit default swaps were invented by JP Morgan Chase to offset the risk of the Exxon Valdez disaster in 1994 and plenty of people were worried about them, including presidential adviser Joseph Stiglitz. Watch the Summers interview.
In the shadows, between 2000-2008, the OTC derivatives market grew from $95.2 trillion to $672.6 trillion, notational value. When the dark market deals started to go sour, the impact was felt around the world. The man who was featured on the cover of Time Magazine as part of the "Committee to Save the World" with Robert Rubin and Alan Greenspan in 1999,instead helped bring it to its knees.
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https://www.alternet.org/wrong-lesson-we-learned-enron-led-directly-2008-crash
benke HNN
Recently Jeffrey Skilling, the former CEO the infamous Texas energy company Enron, was quietly released from prison and placed into a halfway house. To some, the news might offer a satisfying conclusion to the Enron story. The details of the company’s 2001 collapse, involving a massive accounting fraud, were so outlandish that Skilling’s prison term seemed as if justice had been served. After all, many Enron employees lost their retirements when the company went under. The problems with Enron, though, are bigger than the few people who went to jail as a result. The company’s collapse was ultimately enabled by a number of business trends that developed during the late twentieth century and which are still with us today. Indeed, Enron was a warning sign about the dangers of the very financial derivatives that threatened the entire global economy ten years ago.
Skilling’s time at Enron reveals how the influence of Wall Street transformed U.S. business at the end of the twentieth century. In the late 1990s, Enron was celebrated in the business press for pioneering a new style of business. This success was largely attributed to Skilling, who had first come into contact with Enron when he was a consultant for McKinsey. As part of his work for the Texas energy company Skilling created a new business model for the natural gas pipeline company through the creative application of financial derivatives. At the time, the gas industry was in desperate need of a new approach to business. In the mid-1980s, natural gas deregulation ushered in sweeping changes for the industry. While in the past there had been strict rules that determined both the price of gas and how companies could operate, after deregulation, any company could contract with a pipeline to transport natural gas and, significantly, gas prices were no longer set by regulators. For gas pipeline companies such as Enron, this meant finding entirely new ways to operate. Skilling helped solve this problem by drawing inspiration from the innovations taking place on Wall Street. By offering a range of different derivatives deals, Enron’s customers were able to secure gas supplies at fixed and predictable prices. This, of course, was welcome news to industrial buyers of natural gas.
Skilling’s early work for Enron was enormously successful. Now at Enron fulltime and convinced that this business model could be applied to a range of different industries, Skilling pushed the company into areas beyond natural gas. Offering a comparison to the art world, Skilling told interviewers for a business school case study that Enron’s “paint” and “brush stroke” were now being applied to a larger “canvas.” Indeed, that Enron had just introduced financial derivatives related to changes in the weather reveals just how big that “canvas” was that Skilling had in mind. The influence of Wall Street could also be felt inside the company. Skilling changed job titles inside the company to match those found inside large investment banks. As a glowing Fortune magazine feature noted, the new job titles implied that each employee was “part of a portfolio” which would allow Enron’s leadership to tinker with employee assignments just as bankers did with stocks and bonds. With Enron, the financialization of the American economy seemed to have reached its pinnacle.
Ironically, Skilling’s early success with adopting banking practices also contained the seeds of Enron’s eventual ruin. Despite his belief that his business strategy could be applied to many different industries, Enron had trouble repeating its early success with derivatives. However, through the combination of complicated derivatives deals (often with strange names like “Nighthawk” and “Osprey”) and “mark-to-market” accounting – a method that was typically used for banking - Enron was able to hide losses on many of these new businesses. When the company did finally unravel at the end of 2001, there was widespread public outrage.
Enron’s bankruptcy, then the largest in American history, meant a swift reversal of Skilling’s public image. No longer seen as a business visionary, Enron’s CEO now seemed to be nothing more than a con man. On Capitol Hill, an impulse towards reform followed Enron’s failure. Sarbanes-Oxley, the major piece of legislation that emerged from the Enron scandal, focused more on accounting transparency than systemic change. Michael Oxley, the late congressman who coauthored the law, worried that the Enron scandal sent the message that “somehow the game is rigged against the average investor” and that the government needed to act in order to “restore confidence in the markets.” When President Bush signed Sarbanes-Oxley into law, Washington largely declared the affair over. Prison sentences for many, including Skilling, were handed down over the next several years. This spectacle of handcuffed executives, as some have ruefully noted, was missing after the 2008 crash.
However, neither congressional action nor criminal prosecution slowed the financialization of the American economy. On the contrary, the lack of any widespread economic disruption after Enron’s failure provided some with a false sense of comfort. While doing business with the doomed company, New York investment banks had taken out credit default swaps in case the company collapsed. To at least some policymakers, it seemed as though these new derivatives had worked. In particular, Alan Greenspan argued that Enron’s collapse was proof that “the combination of deregulation and innovation in the financial sector” had created a more fundamentally sound and secure economy. There was no need, in his estimation, to regulate credit default swaps because banks had been free to develop flexible strategies for managing risk.
Greenspan’s conclusion is one of the more tragic ironies of Enron’s history. Indeed, the next scandal brought about by financial derivatives would have much bigger consequences. That a post-Enron crisis caused by financial derivatives threatened the entire global economy should be a stern warning that have we did not learn the broader lessons of the Houston company’s collapse. Stopping the next crisis will require more than punishing bad actors. Rather, what we need now is a sustained conversation about the power and influence finance has over much of the economy.
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A most favored corporation: Enron prevailed in federal, state lobbying efforts 49 times
By M. Asif Ismail 7:00 pm, January 6, 2003 Updated: 12:19 pm, May 19, 2014
Enron Corp., which ran a formidable lobbying machine in Washington and state capitals, gained favorable treatment from Congress, federal and state governments and various regulatory agencies on no fewer than 49 occasions from the late 1980s to the company's bankruptcy in December 2001, a Center for Public Integrity analysis shows.
It has been almost a year since Enron's financial collapse created a political scandal. The company and its employees were the largest donor to President George W. Bush over the course of his political career. Kenneth Lay, the company's CEO, had also made significant contributions to a political action committee of Attorney General John Ashcroft, first disclosed by the Center on January 9, 2002; Ashcroft recused himself from the Enron investigation within hours of the Center's report.
Enron's efforts to exert its influence began early in its history, the Center found. Its successful efforts to deregulate electricity and natural gas markets paved the way to its rise, and the exemptions it won from regulatory scrutiny may have contributed to its collapse. Lobbying was a critical component in both the company's rise and fall.
The six-month analysis was based on federal and state lobby disclosure reports, documents obtained under the federal Freedom of Information Act and its state-level counterparts, thousands of news accounts from the Lexis-Nexis and Dow Jones databases, and other sources. The Center identified hundreds of issues on which Enron lobbied over the course of more than a decade and then analyzed the legislative and regulatory actions that followed the lobbying efforts.
The fallen energy giant lobbied on diverse interests that ranged from gas marketing and regulation of the broadband communications network to rules on the use of corporate planes and the gift ban (which limits the value of gifts congressional and executive branch officials can accept). The long list of issues where it tried to shape or alter public policy includes the federal budget, environmental law including efforts to address global warming, the privatization of utilities at military bases, product liability reform, the Investment Company Act of 1940, and health care reform, to name a few.
To achieve its legislative goals, Enron employed multi-pronged strategies that included doling out campaign contributions to influential politicians, employing a nationwide network of lobbyists and building grassroots support for policy changes by bankrolling think tanks and other organizations that advocated those changes. On many issues, it either allied with other companies and trade associations or was part of umbrella coalitions.
When Enron won, it was often part of a coalition of companies all seeking the same policy changes, all of whom benefited (some more than Enron). Enron joined 29 coalitions of special interests, including Americans for Affordable Electricity, for which it reportedly supplied 75 percent of the funds, and the National Wetlands Coalition, which included Amoco, Arco, Exxon and other oil companies.
While most of Enron's lobbying efforts were directed at blocking government actions, the company also campaigned for federal subsidies and sought government assistance in doing business overseas.
The issues Enron successfully lobbied on include:
The 1992 Energy Policy Act, which amended the Public Utilities Holding Company Act (PUHCA) of 1935. The legislation paved the way for the initiative with which Enron has been most closely linked, deregulation. The act opened electricity transmission grids, which had been monopolized by utilities, to outside competitors. Enron, one of the main lobbyists for the legislation became the largest wholesale power marketer in the country in less than five years after the act's passage. In 1996, the Federal Energy Regulatory Commission (FERC) issued the open-access rule, which forced utilities to unbundle generation and transmission services. On the same day the commission also ruled to facilitate the states' restructuring of the electric industry and allowed retail customers to choose service providers.
In April 1992, FERC restructured interstate pipeline operations. The move, which deregulated much of the industry, allowed companies like Enron the right to buy, sell, or trade and transport gas.
In 1993, the Securities and Exchange Commission exempted Enron from provisions of the Public Utility Holding Company Act that banned utilities from investing in unrelated, risky businesses.
Enron lobbied the administration of then-Gov. George W. Bush and the Texas legislature successfully on four separate issues, including tort reform, corporate tax reductions, an industry-friendly environmental plan, and electrical deregulation.
In 1997, the SEC exempted Enron from the Investment Company Act of 1940 that prohibits U.S. companies from leaving debt from overseas projects off the books.
So far 23 states and the District of Columbia have taken steps toward deregulation. Some of these states passed restructuring legislation different from what Enron endorsed. The company had waged lobbying campaigns in most of the states.
The federal government extended the energy tax credit for wind-generated electrical power several times. Enron, which had a subsidiary that generated power from wind, was one of the main lobbyists for the extension of the credit.
The Commodity Futures Modernization Act, which Congress passed in 2000, had a provision that precluded the Commodity Futures Trading Commission (CFTC) from regulating Enron's trading in energy derivatives.
The study also found that Enron had unprecedented access to officials in all branches of government, both in Washington and in states.
The Center counted only various changes to rules-that is, the enactment of new legislation, the adoption of new regulations, or specific exemptions for Enron from regulations-in its analysis. Many of Enron's lobbying efforts were aimed at blocking policies. For example, along with hundreds of other companies, Enron lobbied against the health care reform legislation proposed by the Clinton administration in 1994. Though the legislation did not pass, the Center's analysis did not count this as a victory for Enron.
The company received financial backing to the tune of hundreds of millions of dollar for several of its foreign projects from agencies such as Export-Import Bank and Overseas Private Investment Corporation. Though Enron received millions of dollars in aid from OPIC and EXIM Bank, the Center did not include these grants when totaling the number of times Enron prevailed, since Enron merely took advantage of programs available to all corporations.
In the states, the Center's analysis counted the passage of any deregulation plan that allowed Enron to either enter a market or expand its presence in a market as a favor, even if the final deregulation plan was not the one Enron lobbied for.
From think tanks to power plants
The company was formed in 1985 when Houston Natural Gas and Internorth, two regional pipeline companies, merged. Kenneth Lay, who earned a Ph.D. in economics at the University of Houston and worked in the Interior Department and the Federal Energy Regulatory Commission in the Nixon administration, headed the new company, which struggled with a huge debt load in the tightly regulated world of natural gas markets. Under Lay's direction, the company rose to transport as much as 20 percent of the nation's natural gas, to become the largest wholesaler of electrical power, the seventh largest corporation-and, when it filed for Chapter 11 in December 2001, the nation's largest bankruptcy up to that time.
Central to Enron's growth (and its collapse) was the company's ability to influence federal policy. Even before Enron was formed, Lay had some success as a lobbyist. As president of Florida Gas Transmission in the mid-1970s, he pushed for natural gas deregulation. I went around the state and tried to educate all of the [Florida congressional] delegation on the importance of this battle, Lay told Forbes in an October 2002 interview. At the end of the day, I got all but two of them to cosponsor those deregulation bills.
The Natural Gas Policy Act of 1978 was the result, which only partially deregulated the market and pipelines for natural gas. It wasn't until 1993 that Enron and other companies secured complete deregulation.
Before Enron started promoting the nationwide restructuring of electricity industry, the notion of a free market for electricity was an academic issue discussed by university economists and think tank policy specialists who debated what constituted a natural monopoly. Enron made it into a political issue.
In a November 2001 article, Irwin M. Stelzer, the director of regulatory studies for the conservative Hudson Institute and a paid consultant for Enron, wrote, What Enron and Lay deserve to be remembered for is leading the fight for competition. This battle was waged in the halls of Congress, in state legislatures around the country, and in regulatory agencies on the federal, state, and local levels. It included efforts to loosen the stranglehold on electricity markets of incumbent utilities, who used their monopoly of transmission lines to beat back threats from independent generators.
Enron, which did not have any power generation capacity in its initial days, envisioned that once the market was restructured it could make millions by selling power using the transmission grids owned by giant utilities.
Thanks to sustained lobbying campaigns by the company and its allies, utility deregulation became a legislative priority on Capitol Hill for a decade. Although Enron did not achieve everything it wanted at the federal level, in the states it had more successes.
According to the Department of Energy, deregulation is currently active in 17 states and the District of Columbia, while 23 states and the District have either passed legislation or issued a regulatory order to implement retail access. All the states except Nebraska have considered restructuring at some point, according to Channele Carner, electric power industry specialist at the Department of Energy.
As recently as 2000, Enron had lobbyists in more than half the states. A Center study released in May 2002 found that Enron was registered to lobby in 28 states that year. Only 38 other entities had a lobbying presence in more states.
At the national level, the agency that bestowed the most favorable decisions on Enron was the Federal Energy Regulatory Commission, the organization tasked with overseeing the energy market. Many of the rulings that allowed Enron to expand businesses in natural gas as well as electricity were issued by FERC.
The open access rule, also known as FERC Order 888, and Order 636 which restructured the interstate gas pipeline regulations, went a long way in the growth of the company from a natural gas company into a global energy powerhouse.
Unlike many other advocates of deregulation, Enron wanted FERC to have more authority in a restructured market. Testifying before a House subcommittee, Enron lobbyist and former FERC Chief Elizabeth Moler said the commission should be given more authority.
The company was instrumental in the nomination of two commissioners in the early days of the Bush administration. It pushed the candidacies of Pat Wood, the chairman, and Nora Mead Brownell, who had taken a favorable position as a Pennsylvania regulator in 1997. When the latter's nomination was in trouble because of opposition from officials from her state, Lay called Karl Rove, according to a May 2001 Wall Street Journal report.
The White House confirmed that the names of Wood and Brownell were recommended by the Enron chief.
Earlier, Lay had lobbied Bush to make Wood the head of the Texas Public Utility Commission. And Wood, a former oil man, supported electricity deregulation during his tenure in Texas.
Before he lost the job, Curtis Hébert Jr., Bush's first nominee for the FERC chief's post, told The New York Times that Lay had offered a deal to save his position. Hébert told the paper in May 2001 that the Enron chief had asked the commissioner to change his views on deregulation if the chairman wanted the company's continued support in the job.
Lay confirmed having a conversation with Hébert but denied that he had made any quid pro quo demand.
Bush replaced Hébert with Wood in August 2001.
Lobbyists
A key part of Enron's strategy was having influential lobbyists in Washington and elsewhere. Besides maintaining a stable of high-profile lobbyists with a wealth of experience in government on its payroll, the company hired top lobby firms, with a history of getting things done.
Pulling strings on behalf of Enron were such well-connected firms as Akin, Gump, Straus, Hauer & Feld; Bond Donatelli; Bracewell and Patterson; Davis Wright Tremaine; Price Waterhouse Coopers; Sideview Partners; Skadden Arps Meagher and Flom; Verner Liipfert Bernhard McPherson and Hand; Vinson & Elkins; and Quinn Gillespie.
Enron spent more than $5 million on lobbyists, both in-house and from outside firms, since 1997.
Former federal legislators who lobbied for or represented the company include Senator J. Bennett Johnston (D-La.), who chaired the Senate Committee on Energy and Natural Resources, Representative Mike Andrews, D-Texas, and Representative Ed Bethune, R-Ark.
Enron also hired a large number of officials who had previously served in the executive and legislative branches of government. Former Secretary of State James A. Baker III; former Commerce Secretary Robert Mosbacher; Brent Scowcroft, national security adviser to George Bush Sr.; Wendy Gramm, former chairman of the Commodity Futures Trading Commission and wife of Senator Phil Gramm, R-Texas; former Clinton treasury official Linda Robertson; former FERC Chief Elizabeth Moler; and Marc Racicot, chairman of the Republican National Committee and former governor of Montana, have all worked for the company as either lobbyists, consultants, or members of its board of directors. Enron also hired opinion makers-both Paul Krugman, the Princeton economist who writes an opinion column for the New York Times, and Bill Kristol, the editor of the Rupert Murdoch-owned Weekly Standard, were paid for consulting work for the company.
At least three members of the Bush administration, Secretary of the Army Thomas White Jr., Bush economic adviser Lawrence B. Lindsey, who resigned Dec. 6, 2002, and Trade Representative Robert B. Zoellick, worked for Enron. Lindsey, while advising Bush on economic issues during the last presidential campaign, was also a consultant to Enron.
Coalitions
On several issues, Enron lobbied along with, or as part of, coalitions representing industries and trade groups. The Center counted nearly 30 such umbrella organizations that the company allied with.
On deregulation, the company coordinated its lobbying efforts with several groups at the state and federal level, including Americans for Affordable Electricity (AAE), a coalition of industry and consumer groups advocating restructuring, and the American Legislative Exchange Council, a group of conservative lawmakers and policy advocates championing small government and free market ideas.
Former FERC chief Moler, under whose watch the commission opened the transmission grid for wholesale suppliers, represented both AAE and Enron. Electric USA, a group that lobbied against deregulation, claimed in May 1999 that Enron was providing up to 75% of the coalition's funding.
Two other coalitions Enron worked with on the issue were the Business Council for Sustainable Energy, a group of energy executives and companies and trade associations, and the Coalition for Competitive Energy Markets (CCEM), another industry trade alliance.
The company replicated this strategy in the states. By joining forces with PG&E Energy Services, the retail unit of PG&E Corp., and Shell Energy Services Co. LLP, part of Shell Oil Co., Enron created the New York Energy Providers Association (NESPA) to lobby New York's Public Service Commission.
In Louisiana it reportedly funded the Alliance for Lower Electric Rates Today (ALERT), which lobbied for deregulation in the state. The Direct Access Alliance in California, the North Carolina Coalition for Customer Choice in Electricity, South Carolinians for Competitive Electricity, the Competitive Power Coalition in Massachusetts (later, Enron parted ways with the Coalition) also coordinated efforts with Enron.
Campaign donations
Since 1989, Enron, its Political Action Committee and employees contributed almost $6 million to political parties and candidates at the federal level, according to the Center for Responsive Politics (CRP). More than two-thirds of it went to Republicans.
The company showered its largesse on several influential politicians, but none more than President Bush, who received $736,800 from Enron since he first ran for Texas governor in 1994-by far the largest amount Enron has given to any one politician. Senators Kay Bailey Hutchison and Phil Gramm, both Texas Republicans, received $101,500 and $101,350, respectively, from the company. Democratic Representative Ken Bentsen received $44,250 and Representative Sheila Jackson Lee, also a Democrat, took $39,200.
In 2000, Gramm, whose wife was on the board of the company, sponsored a bill to allow mutual funds to hold shares and receive income from publicly traded partnerships. Enron lobbied on the issue.
Former GOP presidential candidate and Senate Majority Leader Bob Dole received $95,650 in contributions from the company's employees and PAC. During his Senate days Dole had championed several issues where Enron had stakes, including the Section 29 tax credit for coalbed methane. In the early 1990s, Enron was one of the biggest beneficiaries of the tax break.
One of Enron's powerful friends in Congress was House Majority Whip Tom DeLay, R-Texas, who received $28,900 from the company employees since 1989. Deregulation legislation DeLay proposed in the 104th Congress was so favorable to the company that it was dubbed the Enron bill. Roll Call reported last February 2002 that DeLay had recommended the company to hire three political operatives in 1998 to conduct a grassroots campaign to push deregulation. Subsequently, the company hired the three strategists in early 1998: Ed Buckham, who had served as DeLay's chief of staff just weeks before, Karl Gallant, who worked as consultant to DeLay's political action committee, and John Hoy, a partner at Schuman, Hoy & Associates, which worked for DeLay during the 1996 GOP convention.
"Kenny Boy" and Bush
Enron's ties to the Bushes are well documented. Ken Lay, who turned the firm from a natural gas company into a global business behemoth, was close to both George H. W. Bush and George W. Bush.
During the senior Bush's failed 1992 re-election bid, Lay, a co-chairman of the president's campaign, chaired the host-committee of the 1992 Republican National Convention. Between 1990 and 1992, Lay and his wife, Linda, contributed $5,000 in hard money to Bush, according to CRP.
Bush signed the two key bills that significantly altered the country's energy landscape, the 1992 Energy Policy Act and the Natural Gas Wellhead Decontrol Act of 1989. Enron profited from the enactment of both laws.
In an October 13, 1992 commentary in the Houston Chronicle, Lay listed these and other favors that Bush doled out to the energy industry. In the long-term interest of a strong domestic exploration and production sector, President Bush championed alternative minimum tax relief for independent oil and gas producers and fought against efforts to enact federal pre-emption of states' pro-rationing regulation, he wrote. President Bush not only knows energy policy, he has lived it. George Bush is the energy president.'
Like father, like son
Lay has been a political and financial backer of the current president since the time Bush decided to run for Texas governor.
The Center first reported in The Buying of the President 2000 that Enron employees and directors had contributed $550,025 to Bush through June 30, 1999, making the company the top patron of the then-governor. (According to CRP, Enron has given $736,800 to Bush since 1993.)
Enron, the Lays, and Jeffrey Skilling, who briefly succeeded Lay as the CEO, each gave $100,000 to President Bush's 2001 inaugural fund. After the Florida voting fiasco, the Lays had given $10,000 to the Bush-Cheney 2000 Recount Fund, the maximum amount the fund accepted.
Internal Revenue Service revenue records show that the Bush campaign used Enron's corporate jets during the Florida election controversy. Bush's Recount Fund paid more than $13,000 to Enron for the use of the company's jets, but political campaigns typically are required to pay only a fraction of the actual costs for the flights.
Some two-dozen letters released by Texas archivists in February last year revealed that the Enron chief had personally lobbied the governor on several issues.
Lay's first letter to Bush, on Feb. 15, 1995, was on deregulation. Bush signed the restructuring legislation in Texas in 1999.
In another letter, Lay lobbied Bush for tough tort reform legislation, which was also on the Bush legislative agenda. The tort reform bill, which limited damages in lawsuits (which primarily benefited businesses), was enacted in the state in 1995.
The correspondence also shows that Bush had intervened on Enron's behalf on at least two occasions. In April 1997, Bush met with the ambassador of Uzbekistan at a time Enron was negotiating a huge business deal in that former Soviet republic.
You will be meeting with Ambassador Sadyq Safaev, Uzbekistan's Ambassador to the United States on April 8th, Lay wrote Bush in a 1997 letter. Enron has established an office in Tashkent and we are negotiating a $2 billion joint venture with Neftegas of Uzbekistan, and Gazprom of Russia to develop Uzbekistan's natural gas and transport it to markets in Europe, Kazakhstan, and Turkey. This project can bring significant economic opportunities to Texas, as well as Uzbekistan. ... I know you and Ambassador Safaev will have a productive meeting which will result in a friendship between Texas and Uzbekistan.
Another important law that Bush signed in Texas was a sweeping overhaul of the corporate tax system that lowered levies on businesses, an issue Enron had pushed.
Enron's close ties to the Bush gubernatorial administration didn't always yield results. In 1997, the governor made a phone call to then-Pennsylvania governor and now a member of the Bush cabinet, Tom Ridge, to push deregulation in that state.
"I very much appreciate your call to Tom Ridge a few days ago," Lay wrote in an Oct. 17, 1997, letter. "I am certain that will have a positive impact on the way he and others in Pennsylvania view our proposal to provide cheaper electricity to consumers in Philadelphia as well as make it possible for open and fair competition at a much earlier date." Ultimately, Ridge did not back the Enron proposal.
Similarly, the company's methanol-producing plant on the Houston Ship Channel had a string of air pollution violations dating back to the early 1980s, when it had a different owner (Enron bought the plant from Tenneco in late 1991). Enron officials said they would obtain one of the voluntary pollution-reduction permits offered under a Bush-sponsored program launched in 1999. However, in 2001, when the Texas legislature moved to end the failed voluntary effort, Enron had yet to obtain a permit.
Energy policy
In 2001, while Vice President Cheney was formulating a national energy policy, Lay met with Cheney for 30 minutes. Lay gave Cheney an eight-point agenda that included arguments against price controls on wholesale electricity, according to a report in The Wall Street Journal, giving Enron and other companies unfettered access to the electricity transmission system and removing regulatory obstacles to building new generating plants and power lines. The Journal said the energy plan the administration unveiled in May last year reflected many of those same priorities.
A report prepared for Representative Henry A. Waxman (D-Calif.) by the minority staff of the Committee on Government Reform said at least 17 policies in the White House energy plan were advocated by Enron or would benefit Enron financially.
The Vice President's office said the White House National Energy Policy Development Group, the task force that oversaw the energy policy, had met with Enron officials six times.
Enron had great access to the administration from its beginning. When the president was putting together his team, Enron lobbyist Ed Gillespie, of Quinn Gillespie & Associates, briefly served in the Commerce Department transition team. Gillespie, worked as acting director of public affairs for the Commerce Department for 15 days, helping Secretary Donald Evans recruit his staff, according to The Wall Street Journal. (His partner, Jack Quinn, served as White House counsel in the Clinton administration.)
In the early days of the Bush presidency, Enron spent at least $2.46 million on lobbying, records showed.
The Center revealed in January 2002 that 14 of the top 100 officials in the Bush administration had owned Enron stock.
Ties to the Clinton administration
Since 1990, Enron has given Democrats $1.5 million in hard and soft money contributions, roughly one fourth of the amount it gave to Republicans during the same period, according to CRP. Enron had privileged access to the Clinton administration as well. The company was one of the major beneficiaries of Clinton's economic diplomacy, which promoted the interests of American businesses abroad. Most of the money that Enron received from OPIC and ExIm Bank was granted during the Clinton years.
Company executives regularly accompanied top administration officials on overseas trips, and lucrative business deals were signed on several such foreign visits.
As the Center reported in The Buying of the President (1996), Lay signed a contract for a 2,000 megawatt power plant in India worth an estimated $400 million while accompanying the late Secretary of Commerce Ron Brown on a trade mission to that country in January 1995. Enron also won a contract to build a $920 million power plant on the West coast of India and a $1.1 billion contract for offshore gas and oil production. The Dabhol project, which was worth $2.8 billion, ran into a series of roadblocks, and the local Indian utility, the sole customer, stopped payments in June 2001 following a dispute. Enron owned 65 percent of the project.
Cheney, Secretary of State Colin Powell and a series of other top Bush administration officials and diplomats reportedly lobbied Indian leaders to save Dabhol. OPIC documents released in January 2002 revealed that the National Security Council had intervened on behalf of Enron on the Dabhol issue.
In 1994, during a Brown mission to Russia, Rodney L. Gray, chairman and chief executive officer of Enron International, finalized a deal to develop a market for Russian gas in Europe. During the 1991-92 election cycle, when Brown served as the chairman of the Democratic National Committee, Enron gave $28,525 to the Democratic party. (Enron gave $42,000 to the Democratic party in the 1993-94 cycle.)
During a trade trip to Bosnia and Croatia in July 1996, Brown's successor, Mickey Kantor, helped a senior Enron official that accompanied the secretary clinch a deal to construct a $100 million power plant, the Boston Globe reported. Six days before the trip began, Enron made a $100,000 contribution to the Democratic National Committee.
An Enron executive was part of a team that accompanied Commerce Secretary William Daley to Africa from Nov. 30 to Dec. 7, 1998. In 1997, Enron officials were part of trade missions led by Energy Secretary Hazel R. O'Leary.
In 1998, when Brooksley Born, then chief of the Commodity Futures Trading Commission, proposed regulating derivatives, Enron was one of a host of derivative users and underwriters who lobbied the Federal Reserve Board and the Treasury Department against it, The Wall Street Journal revealed in October last year. Fed Chairman Alan Greenspan and Treasury chief Robert Rubin vehemently opposed the move.
Congress passed a moratorium on any new regulation of derivatives, and then toward the end of the administration's term enacted legislation placing most of the derivatives outside the purview of regulation.
The creative use of derivatives was one of the means Enron used to keep debt off its books.
A most-favored corporation
Enron Corp. successfully lobbied? either alone or in conjunction with other companies ? the federal government and state governments at least 49 times. Here is a list of the company's successes.
Federal Issue
Outcome
Elimination of natural gas price control
President George H.W. Bush signed the Natural Gas Wellhead Decontrol Act in 1989,removing some key regulatory barriers, including the natural gas price controls mandated by the Natural Gas Policy Act of 1978.
Mojave pipeline
FERC gave the project, a partnership of Enron and El Paso Natural Gas, its final
approval in May 1990.
Restructuring of natural gas pipeline operations
The Federal Energy Regulatory Commission restructured interstate pipeline
operations in April 1992. It separated sales and transportation services,
allowing customers to choose supply and transportation services from any
provider. The move paved the way for greater domestic exploration and
production.
Section 29 tax credit for coal bed methane and tight-sands natural gas recovery
Tax credit for non-conventional fuels production, under Section 29 of Internal
Revenue Code, was established in the Windfall Profit Tax Act. Wells dug in
1992 were eligible for the subsidy until this year. The credit, which
ultimately expired in 2002, was extended on several occasions by Congress
thanks in part to Enron's lobbying.
Exemption from PUHCA
The SEC exempted Enron from the Public Utility Holding Company Act, which bans utilities from investing in unrelated, and potentially risky, businesses in 1993.
Open Access rulings
On April 24, 1996, FERC issued a pair of rules favorable to Enron. The open-access rule forced utilities to unbundle generation and transmission services and bring wholesale transmission transactions in an open-access transmission
tariff. The commission also ruled to facilitate the states' restructuring of
the electric industry and allowed retail customers to choose service
providers.
Enron-PGC merger
In 1997, FERC approved Enron's merger with Portland General Corporation in
record time. According to Enron, it was the first merger approved by the
FERC since October 1994.
Exemption from Investment Company Act of 1940
In 1997, the SEC exempted Enron from provisions of the Investment Company Act of 1940 which prohibit U.S. companies from leaving debt from overseas projects off the books.
Congressional moratorium on derivative regulation
A 1998 proposal by Brooksley Born, the Commodity Futures Trading Commission chief, to regulate derivatives prompted hectic lobbying by Enron and other
derivative users and underwriters. The proposal, which was also opposed by
Fed Chairman Alan Greenspan and Treasury chief Robert Rubin, did not pass.
In fact, Congress passed a moratorium on derivative regulation.
Alternative minimum tax
Enron and others lobbied for the repeal of the alternative minimum tax. The 1997 balanced-budget agreement relaxed its rules, reducing the potential tax liability of companies that invest in new machinery.
I-69 highway
Enron
lobbied for the NAFTA highway, which would extend the existing
Canada-to-Indiana artery all the way to Texas and Mexico. Congress
authorized the project in 1997. Although the precise route through some
states has not been finalized, construction has begun in Mississippi.
Wind energy production
tax credit
Enron had
been one of the main beneficiaries of the federal wind energy production tax
credit, created in 1992. The subsidy has been extended every two years since
then.
Privatization of power
at military bases
A 1988 bill mandated the Defense Department to buy power from local utilities.
After the lobbying efforts by Enron and others, the Pentagon issued a
directive in 1998, to privatize base utilities. In 1999, Enron clinched a
10-year, $25 million deal to supply energy to Fort Hamilton, N.Y.
African Growth and
Opportunity Act
The bill, signed by President Clinton in May 2000, sets condition for new aid and
trade benefits to African states. Among the conditions are opening up their
economies to foreign businesses.
Increase in the limit of H-1B visa for workers from foreign countries
In October 2000, Congress approved a bill that raised the limit of the
temporary visa from 115,000 to 195,000. Lay had personally lobbied Congress
on the issue.
FERC Order 637
The order, issued in 2000, further deregulated natural gas distribution, by
refining the remaining pipeline regulations. One of the effects of the order
was the development of a market for natural gas commodity trades.
Commodity Futures
Modernization Act of 2000
The legislation had a provision precluding the Commodity Futures Trading
Commission from regulating Enron's trading in energy derivatives; this made
permanent the moratorium Congress had passed in 199
...
Deregulation in States
Issue
Outcome
Arizona
The state passed the restructuring legislation in May 1998. The Arizona Corporation
Commission, which is responsible for regulating utilities, has opened
utility territories to competition and granted certificates to several
providers. (In early 1999, Enron applied for clearance to sell electricity
in the state.)
California
California enacted a deregulation bill in 1996. Enron signed contracts with
industrial and other customers worth millions of dollars. It suspended the
restructuring activities in September 2001, following the power crisis.
Connecticut
The restructuring legislation was signed into law on April 29, 1998. Enron had
lobbied on the issue. (According to the Associated Press, nearly three years
after Connecticut deregulated its power market, approximately 21,000
residential electric customers have switched from the two utilities in the
state.)
Delaware
The
Electric Utility Restructuring Act was enacted in March 1999.
District of Columbia
A
regulatory order to restructure power market was issued in September 2000.
Illinois
Illinois
inaugurated an eight-year deregulation and restructuring process in 1997.
Maine
Legislation to restructure electricity market was passed in 1997.
Maryland
Maryland
legislators passed utility deregulation legislation in April 1999
Massachusetts
The
Massachusetts legislature passed its deregulation law in November 1997 and
the state started competition in March 1998.
Michigan
The state
took concrete steps toward deregulating power market in June 2000 and two
deregulation bills were signed into law in June 2001
New Hampshire
Beginning
in May 1996, New Hampshire took a series of legislative and regulatory steps
to restructure its power market. Enron, which had lobbied for deregulation
in the state, won a pilot project.
New Jersey
New
Jersey passed deregulation legislation in 1999.
New York
New York
Public Service Commission issued a restructuring order in May 1996. Orders
for restructuring six state utilities were approved in 1997 and 1998.
Ohio
Ohio's
legislature passed deregulation legislation in 1999. It allowed consumers to
choose their supplier of electricity beginning 2001.
Oregon
Oregon
passed its first deregulation measure in 1999. Enron owns Oregon's largest
utility, PGE, which is the company's largest asset.
Pennsylvania
The state's deregulation bill was passed in 1996. Enron and PECO, the local
utility, quibbled over competing deregulation plans; the PECO-favored plan
was ultimately adopted, although Pennsylvania deregulation did allow Enron
to enter the market.
Rhode Island
Rhode
Island was one of the first states to restructure its power market. Governor
Lincoln Almond signed the restructuring law On Aug. 7, 1996. Breaking ranks
with other independents and marketers, Enron backed the legislation.
Texas
The Texas
deregulation bill favored incumbent utilities over outsiders, but did expand
Enron's opportunities in the state. The law took effect in January this
year. Among the first companies to enter the retail market was New Power
Co., an Enron spinoff that declared bankruptcy in June.
Virginia
Virginia
enacted restructuring legislation in 1999. Competition in power supply began
in January this year.
Arkansas
The state
enacted its first deregulation bill in April 1999. The restructuring will
not start before October 2003, according to the Energy Information
Administration.
Montana
Though
Montana passed legislation in May 1997, the process will not start until
July 2004.
Nevada
Beginning
in 1997, Nevada legislators and regulators took a series of steps toward
deregulation. Later they suspended part of the process.
New Mexico
The state
legislature passed a deregulation law in 1999, but in March 2001 delayed it
until July 2008.
Oklahoma
In 1997,
Oklahoma enacted a law calling for deregulation by July 1, 2002. A bill in
May 2001 delayed the deregulation process indefinitely.
Other Favors in States
Issue
Outcome
Cut in gas production
In 1992,
when the gas prices fell, the Texas Railroad Commission, which regulates oil
and natural gas in the state, set limits on natural gas production. Enron
and other gas companies lobbied for the production cuts.
Texas Environmental
Health and Safety Audit Privilege Act
The 1995
legislation, which was dubbed the polluter immune legislation by critics,
allowed companies to police themselves. When companies violate state
environmental laws, they do not have to make that information public. Enron
Methanol was a major beneficiary.
Tort reform in Texas
Texas
implemented a series of tort reform measures in the mid-1990s, under the
watch of then-Governor George W. Bush. Enron and other corporations had been
lobbying for such legislation to restrict lawsuit for years.
Corporate tax reduction
The 1999
Tax legislation signed by Bush reduced corporate taxes as well as sales and
property taxes. Enron lobbied for the measure.
International
Issue
Outcome Dhabol Power Project (India)
Several
Clinton administration officials helped Enron clinch the $2.8 billion
project, and later intervened several times on Enron's behalf to keep the
controversial and ill-fated project alive. The intervention was continued by
the Bush administration.
Mozambique pipeline
In 1995,
the Clinton administration, U.S. diplomats and some legislators reportedly
played a key role in Enron getting a natural gas development and pipeline
project in Mozambique.
Re-bidding for a power
plant in the Commonwealth of Northern Mariana Islands
After
Enron lost out to a Japanese company in the first bidding, the U.S. energy
giant sought Tom DeLay's help to reopen the competition. The bid was
re-opened in 1999.
Normalization of trade
ties with Vietnam
A top
Enron official told a congressional panel the company wanted EXIM Bank and
OPIC to be granted authority to fund projects in Vietnam. The Clinton
administration normalized trade relations with Vietnam in 1999.
Enron Corp. hired at least 28 former government officials to work for it either
as employees, officers, directors, consultants or lobbyists.
Individual
Position at Enron
Position in government
J. Bennett Johnston
Consultant/lobbyist
Former
U.S. Senator. He chaired the Senate Committee on Energy and Natural
Resources
Robert Mosbacher
Consultant and joint venture partner
Former
Commerce Secretary
Brent Scowcroft
Director
of Global Power and Pipelines, an Enron subsidiary with interests abroad.
National
Security Adviser to former President George H. W. Bush
Marc Racicot
Lobbyist
Former
Montana governor and current chairman of the Republican National Committee
Wendy
Gramm
Member of
Enron's board of directors
Head of
the Commodity Futures Trading Commission
Linda Robertson
Headed
Enron's Washington office
Clinton
administration Treasury official
Elizabeth
Moler
Lobbyist
Chair of
the Federal Energy Regulatory Commission
Charles
E. Walker
Director
Former
deputy secretary of the U.S. Treasury
Thomas
"Mack" McLarty
Briefly
worked for Enron
White
House chief of staff
Frank
Wisner
Served on
the board of an Enron subsidiary after returning from India
U.S.
ambassador to India
Mike
Andrews
Lobbyist
Former
Democratic member of Congress from Texas
Ed
Bethune
Lobbyist
on deregulation
Former
Republican member of Congress from Arkansas
Ed
Gillespie
Lobbyist
Former
communications director at the RNC and a top communications advisor to Bush
during the campaign
Gene E.
Godley
Lobbyist
Assistant
Secretary of the Treasury in the Carter administration
Greg
Simon
Lobbyist
Media and
telecommunications adviser to former Vice President Al Gore
Ken
Raisler
Lobbyist
Former
general counsel of the Commodity Futures Trading Commission
Edwin A.
Buckham
Lobbyist
Former
chief of staff to House Majority Whip Tom DeLay, R-Texas
Michael Lewan
Lobbyist
Chief of staff to Senator Joe Lieberman (D-Conn.) from 1989-92
Enron joined at least 28 separate coalitions that lobbied in Washington or state capitols on various issues. Enron is no longer active in many of these groups; others, having succeeded or failed in their efforts to affect legislation, were disbanded.
African Growth and Opportunity Act Coalition
A corporate coalition that lobbied on the African Growth and Opportunity Act. Chevron, Mobil, Exxon, Enron, Bank of America, the Gap, Texaco, Amoco, Citicorp, and Coca-Cola were members.
Alliance for Capital Access
The Alliance represented about 50 companies, including Enron, and lobbied Congress on the regulation of junk bonds high interest corporate debt. Kinder-Care Learning Centers and Manor Care were among the other members.
Alliance for Lower Electric Rates Today (ALERT)
The coalition, representing groups of residential and business consumers, was formed in 1996 to fight for deregulation of the power generation industry. It was active in several states, including Louisiana, Arkansas, Florida and Virginia.
American Council for Capital Formation
The Council's goal is to restructure U.S. tax, regulatory, and environmental policies in a manner that is favorable to capital-intensive industries. Ken Lay was a member of the board of directors. Former Treasury chief and Enron lobbyist Lloyd Bentsen and former Senator William E. Brock, were also on the board. Former Cabinet members Lloyd Bentsen (also an Enron lobbyist), William E. Brock, George P. Shultz, and former Federal Reserve chairman Paul A. Volcker were also on the board.
American Institute for International Steel
AIIS is a Washington-based trade group of steel importers. It has lobbied on steel tariffs.
American Legislative Exchange Council
ALEC, a group of state lawmakers and policy advocates that champions small government and free market ideas, supported a deregulation plan similar to the one Enron advocated. In 1997, Lay spoke at the council's 24th annual meeting in New Orleans. Enron was one of the financial backers of the council.
Americans for Affordable Electricity
Enron was a member of this lobbying coalition of power consumers, producers and marketers that lobbied for deregulation. Former Federal Energy Regulatory Commission Chairman Elizabeth Moler, who was with the Washington law firm Vinson & Elkins, lobbied for the group. According to Electric USA, a group that lobbied against deregulation, Enron provided as much as 75% of the puppet coalition's funding. Other Members included Exxon Corporation, Kmart Corporation and Koch Industries.
Americans for Fair Taxation
This group wants to replace the federal income tax system with a national sales tax on the final purchase of new goods and services. Enron was one of the financial backers of the group.
Business Council for a Sustainable Energy
The Business Council for Sustainable Energy consists of energy companies and trade associations. According to its web site, the Council supports policies and programs that increase energy efficiency, accelerate the development of renewable energy resources and promote greater use of natural gas. Its current members include Honeywell, the Maytag Alliance to Save Energy and the American Wind Energy Association.
Citizens for a Sound Economy
A think tank that advocates for less government oversight of the private sector, lower taxes and limited government. It lobbied on utility deregulation. Enron funded CSE studies.
Coalition for Competitive Energy Markets
A coalition of power marketers that advocated utility deregulation. Its members included Coastal Electric Services, Destec/Dow Chemical, Electric Clearinghouse, Equitable Resources, and Valero Energy, as well as Enron Power Marketing.
Coalition for Gas-based Environmental Solutions
A group of gas producers, pipeline operators and distributors that favors environmental regulations that would promote the use of natural gas over coal and other energy sources. Other members included Consolidated Natural Gas Co., Amoco Production Co., ANR Pipeline Co., ARCO Oil and Gas Co., Chevron Corp., Tenneco Gas and TransCanada PipeLines Ltd. John Palmisano was named executive director of the Coalition in 1995, while employed as Enron's director of environmental policy.
Competitive Power Coalition
A New England coalition of independent power producers, co-generators and power marketers that worked with Enron on deregulation. Enron left the coalition when its interests diverged from the other companies.
Direct Access Alliance
A coalition of energy service providers, marketers, and large power consumers that negotiated with California's three largest electric utilities and lobbied the California Public Utilities Commission to adopt a single statewide tariff for direct-access customers. It had some 30 members including the University of California, PG&E Energy Services and Enron Corp.
DOD Competition Coalition
A group of independent power and renewable energy producers, industrial end-users, natural gas industry associations and some utilities that advocated privatization of power supply in military bases. Among its other members were Geothermal Energy Association, California Energy Co., National Taxpayers Union, Citizens for a Sound Economy, American Forest and Paper Association, Elcon, Destec, Interstate Natural Gas Association of America, NGSA, UtiliCorp United and Wisconsin Electric Power Co.
Electric Power Supply Association
A trade association that represents competitive power suppliers, including independent power producers, merchant generators and power marketers. It advocates a competitive electric power supply marketplace, to be achieved through utility deregulation.
Emissions Marketing Association
Formed by a group of energy companies, including Enron, the group's goal was to promote market-based solutions for curbing state and regional air pollution problems. It also lobbies for the development of markets for trading emissions credits. Other members included Duke Power Co. and Wisconsin Electric Co.
Energy Group
A coalition of energy companies that lobbied on legislation to reauthorize the Commodity Futures Trading Commission. Among its members were BP Amoco, J. Aron & Co., Koch Industries, Mobil Business Resources Corp., Phibro, and Sempra Energy Trading Corp., as well as Enron Capital & Trade Resources Corp.
International Climate Change Partnership
A worldwide coalition of companies and trade associations from the industrialized world that aims to play a role in the international policy process on climate change. Its members include Boeing, General Electric, AT&T, Halliburton, Allied Signal, Dow Chemical, 3M, Dupont and Electrolux.
International Energy Development Council
A coalition of banks, construction companies and electric power utilities with interests in private power projects overseas. Among its members are Bank of America, Bechtel Enterprises Inc., Black & Veatch Power Development, Chase Manhattan Bank, Citicorp N.A., Coastal Power Corp. and Cogen Technologies.
Interstate Natural Gas Association of America
A trade organization of the natural gas pipeline industry in North America that represents most of the interstate natural gas transmission pipeline companies operating on the continent.
Mid-Atlantic Power Supply Association
A coalition of wholesale energy marketers, generation companies, and retail electricity suppliers that wanted to play a role in the deregulation processes in Pennsylvania, New Jersey and Maryland. Other members included the retail divisions of Consolidated Natural Gas Co., the now bankrupt PG&E Corp., Green Mountain Power Corp., and of Shell Oil Co.
National Wetlands Coalition
A corporate coalition that has lobbied against the Wetland Protection Program and advocated changes to Section 404 of the Clean Water Act, the primary federal program regulating activities in wetlands. Other members included Amoco, Arco, BP America, Conoco, Exxon, Fina, Freeport-McMoran, Hunt Oil, Kerr-McGee, Marathon, Mobil, Occidental, ODECO, Oryx, Panhandle Eastern, Phillips, and Shell.
New York Energy Providers Association
An energy coalition formed to promote and intervene in the deregulation process in New York. Other members included the retail divisions of Consolidated Natural Gas Co., the now bankrupt PG&E Corp., Green Mountain Power Corp., and of Shell Oil Co.
Oxygenated Fuels Association
A global trade group that promotes the use of oxygenated fuel additives to improve the combustion performance of gasoline. Among members were Texaco, El Paso Corp Merchant Energy, and Qatar Fuel Additives Co., as well as Enron Clean Fuels Company.
Pew Center on Global Climate Change
The Center's Business Environmental Leadership Council is composed of corporations that have similar positions on global warming. Members include Toyota, Boeing, Lockheed Martin, Sunoco, and BP Amoco. The Center on Global Climate Change is financed by the Pew Charitable Trusts.
Power Trading Council
A group of power marketers and large industrial power consumers who joined together to fight transmission system rules. It argued that a 1996 Federal Energy Regulatory Commission order that mandated utilities to open up power lines had several loopholes that nullified the order's intent.
Texas Renewable Power Coalition
A group of wind companies that promoted renewable energy. Members included FPL Energy, Inc. and American National Power, as well as Enron Wind Corp.
More stories about
George W. Bush, Enron Corp., Ken Lay, Kenneth Lay, Enron, Enron scandal, Federal Energy Regulatory Commission, Wendy Lee Gramm, Jeffrey Skilling, InterNorth, Deregulation, Houston Natural Gas, Energy Task Force, Vinson & Elkins, California electricity crisis
https://www.publicintegrity.org/2003/01/06/3160/most-favored-corporation-enron-prevailed-federal-state-lobbying-efforts-49-times
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