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Enron
Bad Stuff About Enron
By John McDaniel 7/2/01
If ever we had a poster child for bad corporate behavior, Enron Corp. is definitely it. From their unethical dealings with foreign governments to their roll in manufacturing California's power crisis, (and the obscene profits they earned from it) Enrons actions read as a "how-to" book for corporate piracy. The company's roll as the largest contributor to the Bush-Cheney 2000 presidential campaign, as well as Chairman Kenneth Lay's close ties to the administration, have resulted in many ethically questionable arrangements being made in D.C. and beyond.
The Enron Corp. was born out of the July 1985 merger between Houston Natural Gas and Internorth, an Omaha, Nebraska natural gas supplier. The company is currently ranked 18th on the Fortune 500 list with $33 billion in assets and over 18,000 employees worldwide. They started with the humble goal of being the U.S.'s largest supplier of natural gas. In '95 they revamped their mission statement with the lofty goal of becoming "The worlds largest energy company".
Enron in India
The ongoing dispute between the Indian state of Maharashtra and Enron subsidiary Dahbol Power is getting uglier by the day. The planned construction of power generating facilities in the area has been plagued with protests by locals concerned with the negative consequences of the project. Accusations of human rights abuses by State Police and Enron security prompted the company to state that the protesters were violent and had been damaging company property. Further investigation of the incidents, however, reveal that out of 30-plus demonstrations between '92 and '98, one incident of rock throwing and one incident of a water pipe being broken were the only transgressions reported. As it stands now Enron is probably pulling out of the project based on a concern that the average Indian citizen will not be able to afford paying the rates that they deem necessary to run a profitable operation. The current tug-of-war is ongoing , with both sides threatening legal actions to recoup monies lost in the botched project.
At first glance, the Enron situation in India may just seem like another case of a corporation pulling out of an unprofitable enterprise, but the situation begs closer examination. Enron's claim that the project wouldn't be profitable makes one wonder whether or not they did a proper feasibility study before they invested in it. Well, rest assured they did a very thorough study of the project and went ahead anyway. Let's face it, no company gets to 18 on the Fortune 500 without extensively researching every aspect of a potential investment. The fair market price for their product in India could not have been a surprise to anyone at Enron. What did come as a surprise was the frequency and the extent of the protests their project drew from the locals, and the resulting negative press in India and elsewhere. In the end, this could actually be a situation where the will of the people won out over corporate greed. By tenaciously protesting, even in the face of fascist treatment, the residents of Maharashtra state may have succeeded in removing the profitability of a project which would have had many negative impacts and few positive ones for anyone but Enron Corp.
Manufacturing a Crisis
California's power deregulation legislation, AB1890, started out as a complex law which allowed the public utilities in the state ( Southern California Edison, Pacific Gas & Electric, San Diego Gas&Electric) to sell some , but not all, of their power generating facilities and become pure distribution companies. The power plants would be sold, in theory, to dozens of small startup companies, creating a super-competitive marketplace that would drive prices down and quality of service up.
Now, the actual reason the California public utilities wanted to divest themselves of their power plants had nothing to do with bringing prices down for the consumer. First of all, AB1890 included a provision which allowed the utilities to recoup bad investments in nuclear power plants. The power from nuclear plants, touted as "too cheap to meter" in the '70's, was now too expensive to produce to be competitive in the open market. Second, their other power generating facilities were starting to become a huge liability in the form of lawsuits resulting from the negligent operation of these facilities. The film "Erin Brokovich" is based on the true story of the largest settlement ever handed down in a direct-action lawsuit in U.S. history, in which PG&E ate it to the tune of $333 million. Several similar lawsuits have been tried or are pending.
The reality of the post-deregulation marketplace turned out to be quite different than the free-market advocates envisioned. Enter Enron, along with Dynergy, and Reliant, both of Texas, and Duke Power of N.Carolina. Behaving more like an organized crime family than competitive store owners, this 4 company cartel purchased nearly all of the divested power plants and embarked on an elaborate scheme to fix prices to ensure "profit maximization".
The newly formed power cartel is well connected in Washington D.C.. Enron, Dynergy, and Reliant collectively contributed $1.5 million to the Bush/Cheney presidential campaign and the Republican National Committee. Current U.S. Energy Secretary Spencer Abraham was the energy industry's single largest campaign 2000 donation recipient, in his failed bid for a Senate seat in Michigan. James Baker III, Bush Sr.'s Secretary of State, is a principal at Reliant. Enron Chairman Kenneth Lay is one of current Pres. Bush's biggest campaign contributors and closest advisors.
In the spring of 2001, California Lt. Governor Cruz M. Bustamante filed a lawsuit claiming that "..a cartel of out-of-state power generators ... are holding us hostage through a practice of illegal and unfair price fixing". Recently, a California Senate subcommittee investigating price manipulation found Enron in contempt for failing to turn over thousands of subpoenaed documents. Enron attorney's blatantly refused to comply with the order, challenging the subcommittee's authority to investigate, and claiming that the records in question are kept in Texas and are therefore out of California's jurisdiction. All of the other companies named in the action either turned over documents or have made arrangements to do so. These actions have angered many, including California State Senator Steven Peace, who said, " These guys make the tobacco guys look like paupers, (the tobacco industry) was nowhere as slick as these guys".
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