- May Connect to Money Laundering
BIGGER BUSH ADMINISTRATION
CONFLICTS OF INTEREST LOOM AFTER ASHCROFT RECUSES FROM ENRON
Michael C. Ruppert
[© Copyright 2002, All Rights Reserved,
Michael C. Ruppert and From The Wilderness Publications,
May be copied or distributed for non-profit purposes only.
May not be posted on any internet web site without express
FTW January 11, 2002 - Even as Attorney
General John Ashcroft today recused himself from involvement
in any Justice Department investigation into the mushrooming
Enron scandal, larger conflicts of interest - potentially
more damaging to the Bush Administration -- are becoming
increasingly apparent. The conflicts involve the Chairman
of the Securities and Exchange Commission (SEC), Harvey
Pitt and the head of Congress’ investigative arm, the General
Accounting Office (GAO), David Walker. Both agencies are
charged with investigating allegedly criminal behavior by
the energy trading firm, once the seventh largest company
which has now become the single largest bankruptcy in world
history and may soon become the largest financial and political
scandal in American history.
As new revelations of Enron’s unethical
and insider-based improprieties, apparently facilitated
by more than $2 million in Bush campaign donations, continue
to flash across TV screens on a daily, sometimes hourly,
basis -- more serious allegations of criminal money-laundering
activities by a respected financial expert suggest that
what is already known about Enron’s behavior is but the
barest tip of a razor sharp iceberg that could sink the
Spokespersons for Pitt and Walker both
denied to FTW in interviews on January 10 that there is
any reason for the heads of these two agencies, long regarded
as the last and best protections against unchecked government
corruption, to recuse themselves from Enron investigations
even though their respective agencies have key statutory
obligations to investigate the growing scandal.
SEC Chairman Harvey Pitt, who took office
in August of this year, after most of the acts leading to
the Enron collapse had been committed, was, according to
a Jan. 9, 2001 report by the Center for Public Integrity,
a partner in the law firm of Fried, Frank, Harris,
Shriver and Jacobson. In that capacity he represented accounting
firm Arthur Andersen, Enron’s auditor, which disclosed in
a press release dated yesterday, that "in recent months
individuals in the firm involved with the Enron engagement
disposed of a significant but undetermined number of electronic
and paper documents and correspondence related to the Enron
This is significant because Andersen, one
of the big five accounting firms, had routinely signed off
on falsified financial statements concealing almost $20
billion in "off-balance-sheet" debt from stock
and bond holders, regulatory agencies and Enron employees.
Many of Enron’s pre-bankruptcy 20,000 employees were barred
by the company from cashing in their 401(k) retirement plans,
primarily consisting of Enron stock, while key executives
including Chairman Kenneth Lay, former President and CEO
Jeff Skilling, and CFO Andrew Fastow reportedly personally
made more than $1 billion selling Enron shares before the
SEC spokeswoman Christi Harlan told FTW,
"The Chairman filed an agreement that he would recuse
himself from votes in any matters where he had a conflict
of interest. The investigation is being run by the enforcement
division and they keep him [Pitt] advised.
"Once the Commission launches an investigation
to go forward they just do their thing. There’s no requirement
for a vote until an action is recommended."
Harlan stated that the enforcement division
acts autonomously from any input from the Chairman’s office
and that the head of the division has management oversight
for any investigations. This appears to be a different SEC
practice from the long-respected partnership of SEC chairman
Arthur Levitt and enforcement director Richard Walker who
were known as a team for their single-minded and thorough
non-partisan investigation of securities violations in the
1980s and 90s. Walker
was recruited by Deutschebank shortly after the attacks
of September 11th, 2001.
When asked if, in spite of his past representation
of Andersen, Pitt was confident that there would be no conflict
of interest or any resultant influence on the Enron probe,
Harlan said, "Absolutely!"
Comptroller General of the United States
David M. Walker, who heads the GAO, has an even more obvious
dilemma. Until November 9, 1998 he was a partner, board member
and global managing director at Andersen. As persistent
questions bubble about Andersen’s possible complicity in
Enron’s criminal falsification of financial statements Walker’s
past relationship with Andersen management raises a question
about his own ability to investigate in an unbiased fashion.
GAO spokesman Jeff Nelligan told FTW, "There
is no link, no reason to recuse at all. When Mr. Walker
was at Arthur Andersen he had nothing to do with Enron and
he left well before all of this took place. He’s been gone
for three plus years now."
The possibility that Walker
had no knowledge of Enron activities (Enron was Arthur Andersen’s
second largest account paying Andersen some $52 million
last year) is questionable given his position as a director
and board member. And the statement that he was not at Andersen
when Enron’s financial statements were being falsified is
flatly contradicted by a 2001 Enron corporate filing with
the SEC (form 8-K) which states that "Enron will restate
its financial statements from 1997 to 2000 and the first
and second quarters of 2001" to account for the fraudulent
or grossly negligent financial statements given to the SEC
by Enron executives and certified by Andersen.
was on the board of Andersen for almost two years while
Enron was cooking the books and Andersen was signing off
Many of the Andersen connections and possible
improprieties have been noted by Rep John Dingell (D), MI
the ranking member of the House Energy and Commerce Committee.
On December 5,
2001 Dingell wrote to Pitt with a series of detailed
accounting questions that, when addressed in any one of
eight announced Enron investigations, cannot help but draw
Andersen deeper into the controversy.
THE ENRON ADMINISTRATION
A January 3 letter from Vice President
Dick Cheney (former CEO of oil construction giant Halliburton)
to California Congressman Henry Waxman disclosed that between
January and September of 2001 Enron executives, including
Lay, had met on six occasion with Cheney’s National Energy
Policy Development Group. The letter did not disclose details
of the meetings but did reveal that the last such meeting
occurred on October 10th just six days before Enron publicly
announced the hidden debt, triggering the collapse of its
The October 10th meeting was approximately
two weeks before Enron’s Chair, Ken Lay made calls, as reported
by the Associated Press on January 10, to Treasury Secretary
Paul O’Neil and Commerce Secretary Don Evans to discuss
the fallout from Enron’s pending collapse. Lay is a long-time
personal friend of George Herbert Walker Bush and has headed
the company which has given over $2 million in hard and
soft campaign donations to George W. Bush and the Republican
Party since 1999.
A pending constitutional crisis loomed
this summer as the GAO and Waxman moved closer to suing
the Vice President for refusing to let Congress know what
his energy task force was debating behind the same closed
doors that proved to be no barrier for Enron. Waxman’s letters,
frequently copied to Dingell and Walker, established a robust
paper trail closing off avenues of escape for the Administration
in its repeated refusals to cooperate.
A January 10th letter from Waxman to Attorney
General John Ashcroft inquiring about his acceptance or
more than $75,000 in campaign contributions from Enron during
his 2000 Senate campaign from Missouri
was followed, within hours, by Ashcroft’s announcement that
he would have nothing to do with the Justice Department’s
investigation of Enron. However, Ashcroft has chosen the
less aggressive investigatory tactic of creating an in-house
task force to investigate Enron, rather than empanelling
a grand jury capable of bringing criminal charges.
As of press time the Department of Justice
has not returned a call from FTW asking why the less aggressive
approach was chosen.
Other Bush figures connected to or having
a financial stake in Enron include Presidential advisor
Karl Rove, U.S. Trade Representative Robert Zoellick (formerly
on Enron’s advisory council) and multi-millionaire Secretary
of the Army Thomas White who is a former Enron executive.
Lawrence Lindsay, the President’s economic advisor, formerly
served on an Enron advisory board. The newly elected Chairman
of the Republican Party (RNC), former Montana Governor Marc
Racicot, is Enron’s former chief lobbyist with the firm
of Bracewell and Patterson. Racicot has indicated that he
will not sever his relationships with the firm and may continue
to lobby as he leads the Republican Party. As RNC he has
unobstructed access to all key decisions and votes made
by Republican members of Congress.
Racicot is not subject to any governmental
regulation or oversight because he is not a federal employee.
Enron influence throughout the Bush Administration
is nearly ubiquitous. Several news stories have reported
that CEO Lay, who had supported Bush since his first run
for Texas Governor has actually cast an imperial thumbs
up or thumbs down on cabinet-level appointees and key regulatory
officials including the head of the Federal Energy Regulatory
Commission which controls electrical rates for providers
and oil, gas and electricity movements throughout U.S. markets.
CUTTING TO THE CHASE AND CLUES OF
When asked about Justice’s decision to
create a task force instead of convening a grand jury, a
former federal prosecutor with experience in government
corruption and energy matters told FTW, on condition of
anonymity, "I’m a little relieved by Ashcroft’s recusal
but a task force is not a grand jury and cannot charge criminal
offenses. There is still one or more steps removed from
actual criminal charges. Given the evidence of criminal
behavior a task force, then, is less than a perfect solution.
It’s not really any solution."
The former prosecutor added that Andersen’s
destruction of records, "is extraordinary. Andersen
has known for many months that documents in their possession
might very well become the subject of civil and criminal
discovery. It was incumbent upon Andersen, at the moment
that it knew that these documents might become a part of
litigation, to suspend their records retention schedules.
It was Andersen’s lawyers’ duty to advise Andersen to err
on the side of retention. That is considered ‘best practices’
for record retention in virtually every major company. The
decision makers who failed to flag the documents at the
proper time critically ill served the partnership."
Catherine Austin Fitts, a former Assistant
Secretary of Housing and Urban Development (HUD) and a past
Managing Director of the Wall Street investment bank Dillon
Read noted that Enron’s trading patterns, internet money
movements and [other activities] were consistent with a
large-scale money laundering operation.
She told FTW, "The fact that subpoenas
were not issued months ago to obtain all Enron Online off
shore and onshore digital and paper trading records and
corresponding bank records defies logic, unless one presumes
that Enron's generous donations have bought them time for
a shredding party that protects all the beneficiaries of
the real dollars that flowed through the Enron money pipeline.
If my years working on the clean up of BCCI and the S&L
crisis taught me one thing that I would communicate today
to the shareholders, retirees and employees who have been
harmed, it is this: People like the people on the board
of Enron absolutely make money on insider trading, bid rigging
and fraud, and they do so with help from the highest levels.
They are superb at financial fraud because they are superb
at persuading people that they are respectable and legitimate.
The money they steal buys a lot of respectability.
"Presume the worst form of fraud and
criminal enterprise is plausible. If not, then we are looking
at gross negligence that, according to traditional standards
of fiduciary responsibility, in fact constitutes criminality
and fraud. Either way the specifics come out -- intentional
fraud or gross negligence -- the Enron board and
management are criminals. That is a fact.
The rule of law says that they should be held to the same
standards of accountability as the millions of people they
and their institutions have evicted from their homes, thrown
into jail, denied health care and jobs or had burnt at the
proverbial stake. The rule of decency says that any American
who will continue to do business or associate with these
individuals is part of the culture of corruption that has
neatly disconnected action from accountability.
"I will bet every last dollar I have
that Enron was the largest laundromat of stolen and tax
evading dollars in American history and that the Department
of Justice's primary goal is cover-up --- to make sure that the
money trail disappears forever."
Fitts is also well qualified to speak on
issues of government impropriety. She has recently successfully
beaten a five-year Department of Justice attempt to destroy
her reputation after she had discovered mismanagement of
government funds and other improprieties at HUD in the mid
1990s. Her ordeal has recently resulted in statements completely
exonerating her and revealing that there was no legal basis
for the government to have begun the investigations of her
company, Hamilton Securities, in the first place. Emerging
from the ordeal as a recognized innovative thinker on economics,
Fitts routinely consults with major economic-financial research
groups in the U.S. and Europe and has just participated
in the New York Times drug policy forum with Nobel Laureate,
economist Milton Friedman.
[Michael Ruppert is the Publisher/Editor
of "From The Wilderness," a monthly newsletter
read in 27 countries and by two committees and 20 members
of the U.S. Congress. He may be reached at firstname.lastname@example.org.]
The FTW web site is located at www.copvcia.com.