truvy
Tuesday, July 09, 2002
Battlecry!
Sound the alarms! All investigative journalists and Americans who care for justice, truth, and well, at least some equality of treatment. Remember Whitewater & all the crazed headlines? Remember the untold hundreds of millions spent investigating real estate deals? Remember Clinton's impeachment? Remember all the Hillary bashing? I do, and I still resent it.
Well listen up all you Bush supporters - someone will dig into this deeper and expose our current POTUS for the privileged insider he really is, and show the different ways he's broken the law and the myriad ways his team has spun the truth beyond recognition.
Here are few articles, I'm posting rather than linking, because I find them That interesting. Mr. Krugman, may I buy you a cup of coffee someday to thank you for the first cries to battle?
Following the Money - Old Advice for Wary Reporters
Opinion
By Stephen Pizzo (the Daily Enron)
JULY 2: Funny how styles change. What was in yesterday is out today. I'm not talking about ties or hemlines. I'm talking here about journalism. Being a reporter has always meant a being a member of the-what's-happening-now club. Often, what's happening can be pretty intoxicating. After a few jolts of the stuff we convince one another that this is probably the most happening thing, ever. We then proceed to over-indulge.
Then what's happening changes, the party ends and the hangover sets in. Left behind are millions of words in cold hard ink that we
feverishly penned while under the influence. We feel strangely unnerved now by the hyperbolic copy to which our bylines are now
unalterably attached.
That's what happened the morning after the six-year-long Whitewater bash ended. The press sobered up, realized that we had been
conned into the back seat by smooth-talkers from the conservative right, and let them have their way. We felt, well, kind of sullied by it all - six years of sweaty copy about a pissant of a real estate deal and some consensual sex.
"I am just happy to be back writing about real stuff again," one DC reporter told me after Clinton left office. Journos all over town were gathering in bars for what can only be described as journalistic 12-step programs as they weaned themselves off scandal and back to covering the actual business of government. The lead dog during those years was former rightwing journalist David Brock, who later fell from his horse on his way to trying to figure out how to make a living without the Clintons. Brock went so far as to write a true crime confessional about his excesses during those years. Brock's book was just another serious setback for many mainstream reporters. Just as they thought the grieving process was nearing completion, Brock disclosed exactly how he and others on the right planted stories and got the press to make mountains out of Arkansas molehills.
So, what's all this got to do with what's happening now? Well, read the papers. What you see is a press corps still cowering from the memory of Whitewater excesses. As Americans thirst for answers in the wake of the worst corporate scandals since the Great Depression, only a few columnists seem prepared to probe beyond the carefully choreographed scapegoating and spin.
Whitewater, it seems, left the press corps more deeply scarred than it did the Clintons.
The size, severity, and implications of the current round of corporate scandals eclipse anything that has hit our economic and political systems in seventy-five years. And, where there is money there are always politicians. "Follow the money" was sound advice 30 years ago during Watergate, and it's sound advice now. So….
· Follow the money - from nearly bankrupt Harken Energy to George W. Bush
· Follow the money - from Enron to the Bush campaign.
· Follow the money - from the cooked books of Halliburton Corp. to the bank accounts of Dick Cheney.
· Follow the money - from Enron to Americans for a Republican Majority - Rep. Tom DeLay's leadership PAC.
· Follow the Money - from Enron to associates of Tom DeLay at the energy deregulation lobby group "Project Relief."
· Follow the Money - from Enron to DeLay insiders and the now-defunct $85 million Marianna's Power Plant Project.
· Follow the Money - from Enron to the DeLay-backed group Americans for Affordable Energy
· Follow the Money - from Enron to lobbyists at Alexander Strategies which in turn was providing an annual stipend to Tom DeLay's wife, Christine.
To reporters who cover this beat I say: It's okay to go back to poking your noses into dark holes. As long as you cover these allegations in an honest, accurate, and balanced way, we will still respect you in the morning.
The real question is, will you still respect yourself if you don't?
Everyone Is Outraged
By PAUL KRUGMAN
New York Times, July 2, 2002
Arthur Levitt, Bill Clinton's choice to head the Securities and Exchange Commission, crusaded for better policing of corporate accounting - though he was often stymied by the power of lobbyists. George W. Bush replaced him with Harvey Pitt, who promised a "kinder and gentler" S.E.C. Even after Enron, the Bush administration steadfastly opposed any significant accounting reforms. For example, it rejected calls from the likes of Warren Buffett to require deduction of the cost of executive stock options from reported profits.
But Mr. Bush and Mr. Pitt say they are outraged about WorldCom.
Representative Michael Oxley, the Republican chairman of the House Financial Services Committee, played a key role in passing a 1995 law (over Mr. Clinton's veto) that, by blocking investor lawsuits, may have opened the door for a wave of corporate crime. More recently, when Merrill Lynch admitted having pushed stocks that its analysts privately considered worthless, Mr. Oxley was furious - not because the company had misled investors, but because it had agreed to pay a fine, possibly setting a precedent. But he also says he is outraged about WorldCom.
Might this sudden outbreak of moral clarity have something to do with polls showing mounting public dismay over crooked corporations?
Still, even a poll-induced epiphany is welcome. But it probably isn't genuine. As the Web site dailyenron.com put it, last week "the foxes assured Americans that they are hot on the trail of those missing chickens."
The president's supposed anger was particularly hard to take seriously. As Chuck Lewis of the nonpartisan Center for Public Integrity delicately put it, Mr. Bush "has more familiarity with troubled energy companies and accounting irregularities than probably any previous chief executive." Mr. Lewis was referring to the saga of Harken Energy, which now truly deserves a public airing.
My last column, describing techniques of corporate fraud, omitted one method also favored by Enron: the fictitious asset sale. Returning to the ice-cream store, what you do is sell your old delivery van to XYZ Corporation for an outlandish price, and claim the capital gain as a profit. But the transaction is a sham: XYZ Corporation is actually you under another name. Before investors figure this out, however, you can sell a lot of stock at artificially high prices.
Now to the story of Harken Energy, as reported in The Wall Street Journal on March 4. In 1989 Mr. Bush was on the board of directors and audit committee of Harken. He acquired that position, along with a lot of company stock, when Harken paid $2 million for Spectrum 7, a tiny, money-losing energy company with large debts of which Mr. Bush was C.E.O. Explaining what it was buying, Harken's founder said, "His name was George Bush."
Unfortunately, Harken was also losing money hand over fist. But in 1989 the company managed to hide most of those losses with the profits it reported from selling a subsidiary, Aloha Petroleum, at a high price. Who bought Aloha? A group of Harken insiders, who got most of the money for the purchase by borrowing from Harken itself. Eventually the Securities and Exchange Commission ruled that this was a phony transaction, and forced the company to restate its 1989 earnings.
But long before that ruling - though only a few weeks before bad news that could not be concealed caused Harken's shares to tumble - Mr. Bush sold off two-thirds of his stake, for $848,000. Just for the record, that's about four times bigger than the sale that has Martha Stewart in hot water. Oddly, though the law requires prompt disclosure of insider sales, he neglected to inform the S.E.C. about this transaction until 34 weeks had passed. An internal S.E.C. memorandum concluded that he had broken the law, but no charges were filed. This, everyone insists, had nothing to do with the fact that his father was president.
Given this history - and an equally interesting history involving Dick Cheney's tenure as C.E.O. of Halliburton - you could say that this administration is uniquely well qualified to chase after corporate evildoers. After all, Mr. Bush and Mr. Cheney have firsthand experience of the subject.
And if some cynic should suggest that Mr. Bush's new anger over corporate fraud is less than sincere, I know how his spokesmen will react. They'll be outraged.
Succeeding in Business
By PAUL KRUGMAN
New York Times, July 7, 2002
On Tuesday, George W. Bush is scheduled to give a speech intended to put him in front of the growing national outrage over corporate malfeasance. He will sternly lecture Wall Street executives about ethics and will doubtless portray himself as a believer in old-fashioned business probity.
Yet this pose is surreal, given the way top officials like Secretary of the Army Thomas White, Dick Cheney and Mr. Bush himself acquired their wealth. As Joshua Green says in The Washington Monthly, in a must-read article written just before the administration suddenly became such an exponent of corporate ethics: "The `new tone' that George W. Bush brought to Washington isn't one of integrity, but of permissiveness. . . . In this administration, enriching oneself while one's business goes bust isn't necessarily frowned upon."
Unfortunately, the administration has so far gotten the press to focus on the least important question about Mr. Bush's business dealings: his failure to obey the law by promptly reporting his insider stock sales. It's true that Mr. Bush's story about that failure has suddenly changed, from "the dog ate my homework" to "my lawyer ate my homework - four times." But the administration hopes that a narrow focus on the reporting lapses will divert attention from the larger point: Mr. Bush profited personally from aggressive accounting identical to the recent scams that have shocked the nation.
In 1986, one would have had to consider Mr. Bush a failed businessman. He had run through millions of dollars of other people's money, with nothing to show for it but a company losing money and heavily burdened with debt. But he was rescued from failure when Harken Energy bought his company at an astonishingly high price. There is no question that Harken was basically paying for Mr. Bush's connections.
Despite these connections, Harken did badly. But for a time it concealed its failure - sustaining its stock price, as it turned out, just long enough for Mr. Bush to sell most of his stake at a large profit - with an accounting trick identical to one of the main ploys used by Enron a decade later. (Yes, Arthur Andersen was the accountant.) As I explained in my previous column, the ploy works as follows: corporate insiders create a front organization that seems independent but is really under their control. This front buys some of the firm's assets at unrealistically high prices, creating a phantom profit that inflates the stock price, allowing the executives to cash in their stock.
That's exactly what happened at Harken. A group of insiders, using money borrowed from Harken itself, paid an exorbitant price for a Harken subsidiary, Aloha Petroleum. That created a $10 million phantom profit, which hid three-quarters of the company's losses in 1989. White House aides have played down the significance of this maneuver, saying $10 million isn't much, compared with recent scandals. Indeed, it's a small fraction of the apparent profits Halliburton created through a sudden change in accounting procedures during Dick Cheney's tenure as chief executive. But for Harken's stock price - and hence for Mr. Bush's personal wealth - this accounting trickery made all the difference.
Oh, and Harken's fake profits were several dozen times as large as the Whitewater land deal - though only about one-seventh the cost of the Whitewater investigation.
Mr. Bush was on the company's audit committee, as well as on a special restructuring committee; back in 1994, another member of both committees, E. Stuart Watson, assured reporters that he and Mr. Bush were constantly made aware of the company's finances. If Mr. Bush didn't know about the Aloha maneuver, he was a very negligent director.
In any case, Mr. Bush certainly found out what his company had been up to when the Securities and Exchange Commission ordered it to restate its earnings. So he can't really be shocked over recent corporate scams. His own company pulled exactly the same tricks, to his considerable benefit. Of course, what really made Mr. Bush a rich man was the investment of his proceeds from Harken in the Texas Rangers - a step that is another, equally strange story.
The point is the contrast between image and reality. Mr. Bush portrays himself as a regular guy, someone ordinary Americans can identify with. But his personal fortune was built on privilege and insider dealings - and after his Harken sale, on large-scale corporate welfare. Some people have it easy.
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