To the reader who kindly inquired about my sleep: yes, those F-16s continue to rumble overhead 24 hours a day, seven days a week. Last Monday morning, before 8am, I counted no fewer than 12 separate vapour trails they had made over DC: at any one time, four are patrolling directly over us in Washington (compared with two in New York). There are at least 16 other F-16s patrolling over other parts of the US at any one time, too, at speeds of around 1,350mph; 13,000 separate missions of this kind have flown since 11 September, and the US air force is now worried that its F-16s are getting worn out.
That is the end of my war bulletin for now. This week, I am turning to a subject that is not for the squeamish: the sheer vastness and squalor of the world of financial wheeler-dealing, and of the backslapping cronyism going on between the Bush administration and its countless hangers-on, those who creep and lurk around boardrooms and casually flit between being in government and making hoards of money – thus intertwining the two inextricably. I suspect that no US administration in history has been aligned so closely to supposedly respectable people out to make a dishonest buck or two – or, rather, billions of dishonest bucks. I should say, at this point, that not for the merest nanosecond am I suggesting that any person mentioned hereinafter has done anything remotely illegal, dishonest or improper.
First, the Enron scandal. Enron was a conglomerate started in 1985 after a merger of the Houston Natural Gas and InterNorth companies. That sounds very boring (and is, if you’re not interested in making money), but to the likes of George Dubbya and Kenneth Lay, the Texan crony who headed it, the vision of megabucks loomed. In 1997, it acquired the Portland General Corporation for $2.1bn and the following year swooped on Margaret Thatcher’s privatised Wessex Water for $2.2bn. It contributed $623,000 to the political campaigns of George Bush Jr, and has made contributions to 71 current members of the Senate and 189 members of the House of Representatives since 1989 – some of them Democrats, but mostly Repub-licans (including, notably, John Ashcroft). And it handed over $200,000 just to give a little pizzazz to Bush’s inauguration a year ago.
Before long, indeed, it had become the world’s biggest energy trader. “Our performance has never been stronger,” Lay exulted in an e-mail last 14 August. “Our business model has never been more robust. We have the finest organisation in American business today.” He went on to speak of “a significantly higher price” that lay ahead for Enron stock (which stood at $83 per share a year ago). No fewer than 15 Bush administration figures – including Donald Rumsfeld, the defence secretary – held Enron stock. But, even after Lay’s morale-boosting message about the promise of bigger bucks, top Enron executives sold their shares – netting a cool $1.1bn between them. Lay is a very close buddy of Vice-President Dick Cheney (who, incidentally, is rumoured among administration insiders to be fast becoming history), and met him at the White House last year, one of a half-dozen or so meetings between top Enron and White House people. Lay also helped Cheney write his secret blueprint for US energy policy last year; meanwhile, he felt free to phone several Bush insiders including Andrew Card, Bush’s chief of staff (who now says that he did not pass on details of their contact to the president). As a result, the company had enormous political clout: Enron was successful in getting its candidates on to the Federal Energy Regulatory Commission, with Pat Wood (yet another Texas energy man) becoming the commission’s chairman. It was one of 16 companies that would have received as much as $240m in tax rebates under Bush’s economic “stimulus” programme.
But while Lay was gung-ho in public, desperate things were happening within Enron. Aided by one of the world’s top accounting companies, Arthur Andersen (which, to use a favourite Bushie phrase, is now in very deep doo-doo indeed), it had adopted a policy of forming subsidiaries – they had names like “Enron Capital LLC” or “Enron Capital Resources LP” – and then borrowing money from these entities, which were in effect non-existent. The “loans” that Enron took out became tax-deductible, as “trust-preferred securities”. These fiddles and the labyrinth of companies, aided by offshore accounts in the Cayman Islands, enabled the company to hide huge losses and disguise the inexorable fact that it was teetering on the edge of collapse. In the same month that Lay wrote his e-mail, an Enron vice-president named Sherron Watkins wrote to Lay: “I am incredibly nervous that we will implode in a wave of accounting scandals.”
Indeed, on 2 December last year, Enron went bust – the biggest collapse of any business in history. Its final share price was 63 cents rather than $83, all of which matters little to those who were forewarned by the sleazy nod-and-wink of the boardroom cronies. But to the 5,000 Enron employees who lost their jobs, to the thousands more who saw their life savings and pensions go up in smoke, as well as countless other small investors, it has all been catastrophic. Their bleak futures contrast with that of Lay, who in the past four years alone picked up (not including his mega-salary) $205m in stock-option profits.
Last but not least, I must look at another company, this one prospering more than ever. Founded in 1987, it is called the Carlyle Group and is now thought to be worth around $12.5bn. It is run by Frank Carlucci, Ronald Reagan’s defence secretary and a close chum of Donald Rumsfeld (they used to wrestle together at Princeton). It specialises in buying defence companies that are performing indifferently, and injecting them with new blood. One such typical company was United Defense Industries, a firm that manufactures the $20bn, 42-ton Crusader Advanced Field Artillery System – a system about to get the chop when Bill Clinton left office, but restored by Rumsfeld.
Carlyle’s reach is staggering: until it speedily divested itself last October, its investors included the Binladin Group, the $5bn family business run by Osama’s half-brother Bakr. And on its payroll you will find such luminaries as George Bush I, James Baker, the former secretary of state, and John Major: it helps, you see, if a chap trying to beef up the defence business has a little governmental star pulling power. Bush I and Major went to Saudi Arabia last year on behalf of Carlyle, I am told (when Bush II, lest we forget, was already US president); Bush I netted $17m in his first coup for Carlyle and has probably now accrued around $50m. The current President Bush, apparently, sees nothing wrong with what Dad is now doing.
The shenanigans of Enron, meanwhile, are now being investigated by six Congressional committees, the labour department, the justice department (from which Ashcroft has recused himself) and the Securities and Exchange Commission. Arthur Andersen, which destroyed key documents during its audit of Enron, is now the subject of a criminal investigation. But where was Arthur Levitt, chairman of the SEC and crusader against “greed and arrogance” while the Enron mayhem was unfolding? Er, we don’t know. Where is he now? Working for Carlyle, that’s where.
Content from our partners
Related
