Bush Gave Enron Breathing Room

White House Backed Off Banking Laws

While the Bush administration is seemingly open to finding out what happened with Enron, its disclosures are selective, omitting Cheney's energy task force and the role Enron played in framing White House energy policies, which depended largely on the increased production of natural gas at home and abroad. Natural gas is an underlying economic factor in Central Asia, for starters, and U.S. pipelines for the fuel were one of Enron's biggest hard assets.

One unexplored approach to unraveling the Enron scandal may lie in the company's use of offshore tax havens, which have scant banking-disclosure laws. The company had over 2800 subsidiaries, some 800 of which were headquartered in nations officially designated as tax havens, including the Cayman Islands. In its lengthy study of Enron, the watchdog Public Citizen argues that by stashing money in this myriad of subsidiaries, Enron could conceivably hide from a growing list of creditors as well as U.S. tax investigators. Indeed, Enron appears not only to have paid no taxes for four of the past five years, but also may have been eligible for hundreds of millions in refunds.

It's an intriguing story. Under Clinton, the feds made an effort to gain more information about how these tax havens operate by joining with other countries in the Organization for Economic Cooperation and Development (OECD), which wanted to clamp down on lax banking laws. At first, the Clinton Treasury Department just named the offending countries, hoping to embarasss them into changing. After Osama bin Laden's 1998 attack on U.S. embassies in Kenya and Tanzania, there was a new urgency to tracking Al Qaeda's money. Two years later, the U.S. was able to negotiate deals with the Cayman Islands and others to work on tightening their rules. And Clinton threatened economic sanctions if they didn't move.

With Bush, everything changed. Less than a month after his inauguration last year, his Treasury announced the Clinton deals had been placed under review. Last spring the administration told OECD that it wouldn't be going along with the Clinton agreements. Instead, on November 27 of last year, in the midst of the gathering Enron scandal and a few days before the company formally filed for bankruptcy, Treasury Secretary Paul O'Neill said the Cayman Islands had agreed to start cooperating with U.S. investigators in 2004. That might sound tough, but it actually gives Enron and other companies a 25-month breather to clear the decks and find somewhere else to stash their money. Even then, as Manhattan District Attorney Robert M. Morgenthau charged, the Cayman Islands could back out of an agreement with three months' notice and suffer no repercussions.

The question, of course, is whether Bush undertook this change in offshore banking policy with Enron in mind. That could be answered by a congressional investigation, but with Enron at the center of a partisan battle, such a prospect is problematic at best. The situation is clouded futher by Attorney General John Ashcroft having recusing himself, Congress resting in Enron's pocket, and members of the administration suffering stock losses from plummeting Enron stocks. It may take an investigation by a special independent counsel—Whitewater, anyone? Turning the matter over to an outside investigator may be our only hope, but it will cost millions of dollars and, as the Clinton inquiries demonstrated, take forever and ever.

The biggest problem in the Enron scandal is making sense out of a blizzard of statistics used by different sides to back up their arguments. For example, last week, Public Citizen reported that Senator Phil Gramm got more than $260,000 in campaign financing from Enron—information picked up by media, including this column (see "Phil Gramm's Enron Favor,"). When questioned by reporters, the watchdog did a recount and came up with a figure of $98,000. It's important to note that without the work of groups like Public Citizen, few would ever draw the direct, subtle connections between contributions given to politicians and the legislative favors they return. Even as the nation strains to understand this scandal, the top echelon is counting the millions they've made.


Afghan Casualties Outnumber WTC Dead
Beyond an Eye for an Eye

"The United States of America is a friend to the Afghan people," President Bush said in October as the bombing began. "Anytime there's a civilian casualty, one can't help but just regret it terribly," added Secretary of Defense Donald Rumsfeld this month. And there was a plus side to the equation, Rumsfeld pointed out: "A repressive government has been taken out, and it has been done with the fewest civilian casualties of any time in recent decades."

In war, the idea has always been to dehumanize the enemy, but in this campaign we have dehumanized our allies and the innocent neutral as well. We like to see American lives as simply worth more, which starts to explain the initial reluctance of U.S. commanders to have Yankee troops scour the abandoned caves of Tora Bora when they could wrangle Afghans into assuming the risks. American generals always find it easier to make that kind of case when the people involved have dark skin. In stark terms, the deaths of stockbrokers and firefighters in the World Trade Center count far more than the agony of some Afghan kid who gets his leg blown off in a U.S. air raid.

Even now, as mounting evidence suggests we have caused more civilian casualties than Al Qaeda did at the World Trade Center, the issue is still not a primary concern for U.S. leaders. Members of Congress have recovered their nerve enough to question the president's propriety in the Enron scandal, but when it comes to war they sound like precocious children tugging on a parent's sleeve. Tammy Baldwin, the Democratic congresswoman from Madison, Wisconsin, sent Bush a letter signed by seven other members in early December that stated, "We believe it is absolutely imperative that the United States make every effort to minimize civilian casualties."

With conflicting or scant reporting by mainstream media, the job of chronicling civilian casualties fell to Marc Herold, a professor at the University of New Hampshire. By the middle of last week, Herold, recovering from an eye operation, his voice-mail boxcrammed to overflowing, was still running a "one man" volunteer show, cross-referencing news accounts and rounding up graduate students to help post the latest horrors on his Web site at www.cursor.org. He estimates a total of 4000 civilian casualties so far, and expects another thousand will die. He says none of the big humanitarian organizations have shown interest in his work or even called him. "I have stayed away from taking shots," he says, "but if they challenge me, I'm ready to go."

When a reporter told Rumsfeld about Herold's figures, he replied, "First of all, I don't know this individual, Herold. And I have asked somebody to try to provide some facts as to how in the world he could have conceivably come up with such a breathtaking statement. I think that if he or others investigate carefully, and analyze it, and talk to people on the ground, we will find that there probably has never in the history of the world been a conflict that has been done as carefully, and with such measure, and care, and with such minimal collateral damage to buildings and infrastructure, and with such small numbers of unintended civilian casualties."


Feds Lowball Terror Dragnet
Jailhouse Crock

It turns out that most of the men picked up in the 9-11 dragnet are being held in New Jersey jails. An article in the current New Jersey Law Journal reports that while Attorney General John Ashcroft says the numbers of Muslim men held on minor immigration charges since September 11 has declined to 450, the real number actually may be higher.

Most of these men are Arabs or South Asians, and are being held in New Jersey and Florida on minor immigration charges for such infractions as overstaying student or work visas. The law journal counts 346 in Jersey's Passaic County jail and 200 in the Hudson County one, with another 52 in Miami's Krome Detention Center.


Representative Calls for Conscription
Rough Draft

With Bush ramping up the war against terror around the world, Nick Smith, a conservative Republican congressman who represents Michigan's southern tier, has introduced a bill to restore the draft for men between the ages of 18 and 22. The Universal Military Training and Service Act would "require the induction into the Armed Forces of young men registered under the Military Selective Service Act, and to authorize young women to volunteer, to receive basic military training and education for a period of up to one year."


Additional reporting: Michael Ridley

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