Enron-gate 
Molly Ivins - Creators Syndicate 

12.06.01 - AUSTIN -- Hail and farewell, o Enron! What a flameout. The 
Establishment media, sucking its collective thumb with unwonted 
solemnity, is treating us to meditations on two themes: "How the 
mighty have fallen," and, "Who would have thunk it?" Pardon me while 
I snort, in lieu of ruder noises, and offer two themes of my 
own: "What took so long?" and, "Anyone with an ounce of common 
sense." 

If you want to know what this story is about, pretend Bill Clinton is 
still president. Pretend Clinton's long-time, all-time biggest 
campaign contributor, a guy for whom Clinton has carried water for 
over the years, a guy with unparalleled "access," a shaper of policy, 
a man with a veto on regulatory appointments affecting his business, 
with connections at every level of the administration, a political 
fixer beyond the wildest dreams of James Riady -- imagine that this 
guy's worldwide empire has tumbled into bankruptcy in just three 
months amid cascading reports of lies, monumental accounting errors, 
evasions, iffy financial statements, insider deals, a board of 
directors rife with conflicts of interest, top executives bailing out 
with millions while regular employees see their life savings shrink 
to nothing -- imagine all this back in the day of Bill Clinton. 

Holy moley, we'd have four congressional investigations, three 
special prosecutors, two impeachment inquiries and a partridge in a 
pear tree by now. The Republicans would all be drumming their heels 
on the floor in full tantrum. 

But this is not President Clinton, it is President Bush -- so of 
course different standards must apply. The fact that Ken Lay, Enron's 
chairman, has been Bush's chief money man and key backer since he 
first went into politics is mentioned only in passing. The media 
don't want to be impolite. They have been credulously swallowing 
Enron's p.r. and overlooking the obvious for years. 

The main problem with Enron is that it has never produced much of 
anything in the way of either goods or services; it has not added a 
single widget to the world widget supply. Enron was in the business 
of "financializing," making markets, trading in wholesale 
electricity, water, data storage, fiber-optics, just about anything. 
One Enron executive told The New York Times the company's achievement 
was to create "a regulatory black hole" to suit its "core management 
philosophy, which was to be the first mover into a market and to make 
money in the initial chaos and lack of transparency." 

Enron started as a gas pipeline company that went into trading 
natural gas, and even then the company's critics claimed Enron was 
making profits by stoking volatility in gas prices. The same charge 
showed up again in spades with the newly deregulated electricity 
markets. Enron had lobbied for utility deregulation relentlessly, 
formidably and very expensively at both the state and national 
levels. The company seemed to spend more time influencing government 
than doing business. Like Long Term Capital Management, the hedge 
fund that went awry, it seemed to have only a parasitic relationship 
to actual economic activity. The problem with deregulating utilities 
is the reason they were regulated in the first place -- monopoly 
power and the threat of market manipulation are a set-up for unholy 
price-gouging. How many times do we have to re-learn that lesson? 

Just a few spiffy eye-openers on Enron's connections: 


Lay and Enron together donated $2 million to George W. Bush. In 2000, 
a company memo that was an open strong-arm recommended employees give 
campaign checks for Bush to the political action committee: low-level 
managers were urged to contribute $500 and senior executives at least 
$5,000. Another $1 million was given to mostly Republican 
congressional candidates. It gave more money last cycle than any 
other energy company. 

Lawrence B. Lindsey, Bush's top economic adviser, got $50,000 from 
Enron in 2000 for consulting, presumably giving the company the same 
excellent economic advice now proving so healthy for the nation's 
economy. 

Karl Rove, Bush's top political strategist, sold between $100,000 and 
$250,000 worth of Enron stock earlier this year, after being 
criticized for conflict of interest. 

The California Legislature passed a contempt motion against Enron for 
failure to respond to a June 11 subpoena. The legislature is 
investigating whether power generating companies willfully 
manipulated electricity supply in order to drive up prices last year. 

Lay was the only energy executive to meet alone with Vice President 
Dick Cheney while Cheney was drawing up a new national energy policy 
in secret. 

Enron influenced public policy time and again while Bush was governor 
here, including the infamous "grandfathered plants" deal. In 1997, 
Lay asked Bush to contact every member of the Texas delegation to 
explain how "export credit agencies of the United States are critical 
to U.S. developers like Enron, pursuing international projects in 
developing countries." These agencies provide political risk coverage 
and financial support to U.S. companies abroad. It's called corporate 
welfare. 

In Texas, Enron was a major player during the utilities deregulation 
debate, for which Bush lobbied actively, and, of course, in "tort 
reform," making it harder to sue corporations for the damage they do. 
© 2001 Creators Syndicate 

*****

Enron Execs Earned $600 Million From Stock In Last Four Years
By Nelson Antosh and Tom Fowler
Copyright 2001
HoustonChronicle.com
12-9-1

Enron Corp. executives and directors earned nearly $600 million from 
selling company stock over the past four years, with many individuals 
topping $12 million in the past year alone, according to trading 
data. 
  
The players Chart: Biggest bankruptcies 
  
The profits from those stock sales are at the heart of a lawsuit 
filed earlier this week against 29 Enron current and former 
executives and directors. 
  
The plaintiff, New York-based Amalgamated Bank, alleges that the 
executives and directors knew the value of Enron's stock was 
overinflated and would eventually fall but did not share that 
information publicly with other shareholders. 
  
The union-owned Amalgamated Bank manages pension funds that hold 
Enron stock. 
  
Bill Lerach, of the law firm Milberg Weiss Bershad Haynes & Lerach, 
and the lead attorney, suggested Friday during a hearing on the 
lawsuit in Houston federal court that the defendants could flee the 
country with their millions of dollars in stock sale profits. 
  
He also called flight risk a "more than academic possibility" and 
asked the court to freeze the defendants' assets. 
  
According to trading data provided by Thomson Financial/First Call: 
  
* Lou Pai, the former chairman of Enron Energy Services, netted the 
most from his stock sales so far this year, earning $33.6 million by 
selling more than 911,000 shares. 
  
* Chairman and Chief Executive Officer Ken Lay ranked second for the 
2001 stock sales earnings, with $16.1 million from 491,000 shares 
sold. 
  
* Former CEO Jeff Skilling earned $15.5 million by selling 240,000 
shares. 
  
* Ken Rice, the former head of Enron Broadband, earned $14.7 million 
from selling 656,000 shares. 
  
* Andy Fastow, the former CFO many have blamed for the complicated 
financial partnership that led to the current troubles, didn't sell 
any shares of stock this year and was the only company insider to buy 
Enron stock on the open market in 2001. On Aug. 16, he purchased 
10,000 shares at $36.98, a transaction that cost him $369,800. 
  
U.S. District Judge Lee Rosenthal questioned whether her court had 
the authority to freeze the funds, however, and gave attorneys from 
both sides until Dec. 19 to file their arguments. 
  
Though the lawsuit is trying to raise an issue about the stock sales, 
it is normal for executives to regularly sell company stock given as 
part of their compensation package, said John Coffee, a securities 
law professor at Columbia Law School. 
  
It becomes questionable, however, when executives sell off the 
majority of their shares in a short period of time, what Coffee calls 
a "bailout." 
  
Attorneys for the defendants say the stock sales are not the smoking 
gun the plaintiff's claim. If they were true bailouts, the executives 
would have sold all their stock before it became worthless, the 
attorneys said. 
  
Lay, for instance, sold only 24 percent of his shares, hanging onto 
the rest far after the company's stock fell below a price he could 
have profitably sold them for, his attorney said during the hearing. 
  
Typically, executives are limited to selling their shares only during 
specific times, usually in a short window between earnings 
announcements. 
  
But since last November, a number of Enron executives took advantage 
of a new rule that allows one to sell shares on a regular basis all 
year, as long as it is on a plan approved by securities regulators. 
  
For instance, Lay used a plan where almost every day he would 
exercise rights to purchase a fixed number of shares of stock at a 
given price and sell that stock on the open market. 
  
>From Nov. 1 until early February 2001, Lay's daily transactions 
included about 4,000 shares per day, while from February to April 
that amount dropped to about 3,000. 
  
Between May 1 and Aug. 21, the last day there is record of Lay 
selling shares, he exercised and sold 3,500 shares per day. 
  
Rice sold 1,000 shares per day on the market until June of this year. 
After that, he sold a large number of shares on July 13, about 
385,000 shares, for a little over $9 million. Rice left the company 
in late August. 
  
Skilling regularly sold 10,000 shares a week. 
  
Enron stock sales in the past year have not been completely worry-
free, some analysts said. 
  
For Paul Elliott, a senior analyst with Thomson Financial/First Call, 
the first red flag came early this year, when Enron insiders 
continued to sell their stock at the same, steady rate as the per-
share value started to fall. 
  
"Selling your stock into a powerful climb in price makes sense, but 
when they're still selling it when it goes lower and lower, you start 
to get nervous," Elliott said. "It makes you wonder if they knew that 
after they hit the peak that the stock was already expensive and 
wasn't going to go back up." 
  
While the data for 2001 only goes through the end of August, it is 
unlikely the net value of insider stock sales this year would top 
those for 2000. Executives and others sold 8.5 million shares last 
year with a net value of $416.6 million. In 1999, 4.6 million shares 
were sold with a net value of $37 million. 
  
Before the late 1990s, it was rare for energy companies to give stock 
options -- the right to purchase a stock at a fixed price, usually 
below the market price -- to their executives, Elliott said. 
  
But as energy markets started to become deregulated and integrated 
companies like Enron, Dynegy and Calpine grew, stock options became a 
larger part of the executive compensation package. 
  
"They started acting like tech companies, handing out the stock 
options, and the executives started acting like tech executives, 
cashing them in once they became vested," Elliott said. 
  
At first, the money made from cashing in the options was staggering. 
But with so many companies seeing their stocks climb throughout the 
late 1990s, analysts and investors stopped being surprised and paid 
less attention. Henry Hu, a law professor at the University of Texas, 
notes that while U.S. laws take insider trading very seriously and 
impose stiff fines -- including 10 years in jail and fines up to 
three times the profits made on such trades -- plaintiff attorneys 
have a heavy burden of proof. 
  
"Courts that are asked to grant this kind of injunctive relief tend 
to be skeptical unless you can show a really good reason for doing 
it," Hu said. "But if they don't freeze the assets, that doesn't mean 
the plaintiffs will lose their case, either."