FacebookTwitterGoogle+RedditEmail

Enron’s Drip, Drip, Drip

by Russell Mokhiber And Robert Weissman

The collapse of Enron is a story far too rich to be reduced to a single story line.

But one crucial narrative is how a series of seemingly small and technical decisions purchased in Washington, D.C. eventually combined to enable Enron’s implosion — and how recent and evolving policy decisions are paving the way for future Enron-level disasters.

Consider the following: In 1995, the accounting industry’s powerful lobby muscled through Congress the Private Securities Litigation Reform Act. Under this accountants’ immunity law, it has become much harder to sue accounting companies for signing off on bad financial reviews, removing an important check on the accountants at Andersen and in the rest of the industry.

As accounting firms decided in the 1990s that they wanted to shed their stodgy image and solid profitability for the super-profitability of the high-flying financial hipster elite, conflicts of interest emerged between the firms’ audit function and the lucrative consulting business. To win and maintain consulting contracts, companies like Andersen have an incentive to go easy when they are auditing companies like Enron. Former Securities and Exchange Commission (SEC) Arthur Levitt sought to impose a regulatory prohibition on firms working as auditors and consultants for the same clients. But the accounting industry’s money blotted out his prudent proposal, as Congress made it clear it expected no such regulatory prohibition to be put in place.

In 1997, Enron obtained from the SEC an exemption from a law that would have prevented the company’s foreign operations from shifting debt off their books and barred executives from investing in partnerships affiliated with the company, according to the New York Times. If Enron had not finagled this exemption, negotiated for Enron by a former director of the investment management division at the SEC, the company would have been prohibited from engaging in many of the financial shenanigans that led to its collapse.

Drip. Drip. Drip. Thus did a series of small regulatory and deregulatory actions and non-actions — of which this is only a small sampling — erode the law-and-order barriers to the commission of Enron and Andersen’s corporate crime and abuse.

The Enron revelations have not stopped this steady dribble.

Case in point: In late December of this past year, the Bush administration struck from the books a regulation that had considerable potential to deter corporate crime.

In a Christmas mini-coup, the administration repealed an anti-scofflaw rule that would have given federal contracting officials authority to deny contracts to repeat law-breaking corporations.

The contractor responsibility rule had been enacted following a tortuous process. Then-Vice President Al Gore floated the idea in 1997. A concerted campaign against the proposal led the administration to keep it on hold until 1999, when the Clinton White House formally issued clarifying rules to put the proposal into effect. Another corporate outcry led to it being put back on ice. Finally, the Clinton administration included the anti-scofflaw rule in the raft of regulations issued in its final days.

The rule went into effect on January 19, 2001. The Bush administration suspended implementation on January 20. The Christmas coup — repealing the rule altogether — was the last chapter in the defeat of the rule.

The Chamber of Commerce applauded the repeal of the rule, which it had, spectacularly, denigrated as “blacklisting.” In the fanciful scenario spun by Randel Johnson, Chamber vice president for labor and employee benefits, under the anti-scofflaw rule, “government agents could have wielded virtually unlimited power.”

Although Johnson and the business opponents of the anti-scofflaw rule wildly exaggerated the potential scope of the rule, the rule’s common sense direction that government contracting officers should exercise caution before contracting with recidivist corporations would have exerted some deterrent effect on corporate law-breaking.

And the rule did pose a threat to more than a few corporations. Multinational Monitor magazine found that nine of the top 100 corporate criminals of the 1990s were among the 200 largest federal government contractors in 1998, and that of the 50 largest defense and non-defense contractor, 20 had received more than 10 “serious” citations from the Occupational Safety and Health Administration. The General Accounting Office (GAO), the congressional research agency, has found that 261 federal contractors, receiving more than $38 billion in federal government business in fiscal year 1994, received penalties of at least $15,000 for violating OSHA regulations, and that 80 federal contractors, receiving more than $23 billion in federal government business in fiscal year 1993, had violated the National Labor Relations Act.

For some large companies, the prospect of endangering government contracts would have been sufficient to prod them to greater respect for the law. But the administration’s concern for law-and-order or individual responsibility evidently does not extend to corporations.

Sometime in the future, when another Enron-scale corporate debacle breaks into the front pages, it will be possible to look back to December 2001, and point to the repeal of the contractor responsibility rule as an enabler of the corporate criminals.

Drip. Drip. Drip.

Russell Mokhiber is editor of the Washington, Corporate Crime Reporter. Robert Weissman is editor of the Washington, Multinational Monitor <>. They are co-authors of Corporate Predators: The Hunt for MegaProfits and the Attack on Democracy (Monroe, Maine: Common Courage Press, 1999.

Russell Mokhiber is the editor of the Corporate Crime Reporter..

More articles by:

CounterPunch Magazine

minimag-edit

bernie-the-sandernistas-cover-344x550

zen economics

Weekend Edition
March 24, 2017
Friday - Sunday
Michael Hudson
Trump is Obama’s Legacy: Will this Break up the Democratic Party?
Eric Draitser
Donald Trump and the Triumph of White Identity Politics
Jeffrey St. Clair
Roaming Charges: Nothing Was Delivered
Andrew Levine
Ryan’s Choice
Joshua Frank
Global Coal in Freefall, Tar Sands Development Drying Up (Bad News for Keystone XL)
Anthony DiMaggio
Ditching the “Deep State”: The Rise of a New Conspiracy Theory in American Politics
Rob Urie
Boris and Natasha Visit Fantasy Island
John Wight
London and the Dreary Ritual of Terrorist Attacks
Paul Buhle
The CIA and the Intellectuals…Again
David Rosen
Why Did Trump Target Transgender Youth?
Vijay Prashad
Inventing Enemies
Ben Debney
Outrage From the Imperial Playbook
M. Shadee Malaklou
An Open Letter to Duke University’s Class of 2007, About Your Open Letter to Stephen Miller
Michael J. Sainato
Bernie Sanders’ Economic Advisor Shreds Trumponomics
Lawrence Davidson
Moral Failure at the UN
Pete Dolack
World Bank Declares Itself Above the Law
Nicola Perugini - Neve Gordon
Israel’s Human Rights Spies
Patrick Cockburn
From Paris to London: Another City, Another Attack
Ralph Nader
Reason and Justice Address Realities
Ramzy Baroud
‘Decolonizing the Mind’: Using Hollywood Celebrities to Validate Islam
Colin Todhunter
Monsanto in India: The Sacred and the Profane
Louisa Willcox
Grizzlies Under the Endangered Species Act: How Have They Fared?
Norman Pollack
Militarization of American Fascism: Trump the Usurper
Pepe Escobar
North Korea: The Real Serious Options on the Table
Brian Cloughley
“These Things Are Done”: Eavesdropping on Trump
Sheldon Richman
You Can’t Blame Trump’s Military Budget on NATO
Carol Wolman
Trump vs the People: a Psychiatrist’s Analysis
Stanley L. Cohen
The White House . . . Denial and Cover-ups
Kollibri terre Sonnenblume
Marines to Kill Desert Tortoises
Farhang Jahanpour
America’s Woes, Europe’s Responsibilities
Joseph Natoli
March Madness Outside the Basketball Court
Bill Willers
Volunteerism; Charisma; the Ivy League Stranglehold: a Very Brief Trilogy
Bruce Mastron
Slaughtered Arabs Don’t Count
Ayesha Khan
The Headscarf is Not an Islamic Compulsion
Pauline Murphy
Unburied Truth: Exposing the Church’s Iron Chains on Ireland
Ron Jacobs
Music is Love, Music is Politics
Christopher Brauchli
Prisoners as Captive Customers
Robert Koehler
The Mosque That Disappeared
Franklin Lamb
Update from Madaya
Dan Bacher
Federal Scientists Find Delta Tunnels Plan Will Devastate Salmon
Barbara Nimri Aziz
The Gig Economy: Which Side Are You On?
Louis Proyect
What Caused the Holodomor?
Max Mastellone
Seeking Left Unity Through a Definition of Progressivism
Charles R. Larson
Review: David Bellos’s “Novel of the Century: the Extraordinary Adventure of Les Misérables”
David Yearsley
Ear of Darkness: the Soundtracks of Steve Bannon’s Films
FacebookTwitterGoogle+RedditEmail