FacebookTwitterGoogle+RedditEmail

The Enron Sage Continues

by Dean Baker

Enron is the gift that keep on giving. For those of us who warned of the excesses of corporate power, Enron provides a vivid example of every abuse imaginable, and more.

In the latest episode, the public got the details of Enron’s strategy to manipulate California’s deregulated electricity market. As one of the economists who had warned that power companies like Enron could be gaming the system, I was not surprised to have my suspicions confirmed. But, I must confess to being impressed by the sophistication of their schemes.

I had assumed that most price manipulations took relatively mundane forms– for example, leaving a power plant offline for extended maintenance during a power shortage. It doesn’t take a genius to realize that this could keep electricity prices high. And it requires nothing more than not paying the repair crews to work weekends and evenings.

But Enron was a beacon of the new economy. Its managers weren’t interested in such an old-fashioned simplistic approach. Instead, they devised sophisticated trading strategies, with code names like “Get Shorty,” “Fat Boy,” and “Death Star.”

The Death Star strategy involved sending electricity over transmission lines that Enron knew were already operating at capacity. The agency managing the lines would then pay Enron to divert its electricity to some other part of the power grid. After pulling this one off a few times, the Enron crew realized that they actually didn’t even need any electricity to sell. They just had to threaten to sell it in order to collect tens of millions of dollars in fees that were ultimately paid by California’s consumers and taxpayers.

This high tech price manipulation is just the latest in Enron’s long-list of corporate crimes. Since we’re now about 8 months into the scandal, it’s worth recounting some of the highlights.

Enron hid billions of dollars of corporate debt off its balance sheets, by assigning the debt to subsidiaries. Enron inflated its profits by trading in its own stock. Enron used offshore tax havens to almost completely avoid paying income taxes over the last decade. Some top Enron officials made fortunes by creating companies that profited from their dealings with Enron. Enron forced its workers to keep their retirement money in the company stock as Enron was plunging into bankruptcy — and the top executives were selling their own stock. Enron paid off officials in developing nations to allow it to carry through environmentally harmful projects. Enron paid off everyone in sight in the United States — politicians, news commentators, and academics — to try to win their support.

In addition, Enron showed us what a corporate board of directors, consisting of highly respected individuals, does to earn its money (several hundred thousand annually in pay and stock options): nothing. And Enron showed us that Arthur Anderson, one of the most highly respected accounting firms in the world, was perfectly willing to be an accomplice in Enron’s <crimes.When> the deal got exposed, Anderson responded by putting the shredding machine in high gear.

The Enron scandal displays a level of corruption and contempt for consumers, shareholders, the general public and its own workers, that even the most cynical among us would not have believed. And it is all in broad daylight, now that the Enron crew’s “Death Star” strategy, to really stick it to California’s consumers, has been exposed.

But all this sleaze and crime, which reveals so much about corporate America, raises a serious question, “are they going to get off?” This question is troublesome, because it’s not clear that the axis of evil, Kenneth Lay, Andrew Fastow, and Jeffrey Skilling (Enron’s top execs), will ever really be held accountable for their crimes. Sure, these folks will face charges and public embarrassment, but will they go to jail for what they have done?

Remember, this is not a petty burglary we’re talking about. There are tens of billions of dollars at stake (i.e. millions of petty burglaries or car thefts) — money taken from consumers, taxpayers, shareholders, and the retirement accounts of Enron’s loyal employees.

In spite of the enormity of the crimes, at the end of the day, those most responsible will probably still be walking the streets. In fact, even if they are forced to pay large fines, they’ll probably still end up far richer than most of us could ever imagine.

If this proves true, the lesson is quite disturbing: corporate crime pays, even when you get caught.

Dean Baker is the Co-Director of the Center for Economic and Policy Research. He is the author of Social Security: the Phony Crisis, with Mark Weisbrot.

Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University.

More articles by:

CounterPunch Magazine

minimag-edit

bernie-the-sandernistas-cover-344x550

zen economics

December 08, 2016
John W. Whitehead
Power to the People: John Lennon’s Legacy Lives On
Mike Whitney
Rolling Back the Empire: Washington’s Proxy-Army Faces Decisive Defeat in Aleppo
Ellen Brown
“We’ll Look at Everything:” More Thoughts on Trump’s $1 Trillion Infrastructure Plan
John Stauber
The Rise and Fall of Obamacare: Will the Inside Story Ever be Told?
Ted Rall
Ameri-Splaining
Michael J. Sainato
Mainstream Media Continues Absolving Itself From Clinton, Trump Election Failures
Ralph Nader – Mark Green
Divest or Face Impeachment: an Open Letter to Donald Trump
Gareth Porter
US Airstrikes on Syrian Troops: Report Data Undermine Claim of “Mistake”
Martha Burke
What Trumponomics Means for Women
Ramzy Baroud
Fatah, Hold Your Applause: Palestinian Body Politic Rotten to the Core
Steve Horn
Jeff Sessions, Trump’s Attorney General Pick, Introduced First Bill Exempting Fracking from Drinking Water Rules
Joe Ware
The Big Shift: Why Banks Need to Stop Investing Our Money Into Fossil Fuels
Juliana Barnet
On the Ground at Standing Rock
Franklin Lamb
Aleppo Update: An Inspiring Return to the Bombed Out National Museum
Steve Kelly
Hidden Harmony: on the Perfection of Forests
December 07, 2016
Michael Schwalbe
What We Talk About When We Talk About Class
Karl Grossman
The Next Frontier: Trump and Space Weapons
Kenneth Surin
On Being Caught Speeding in Rural America
Chris Floyd
In Like Flynn: Blowback for Filth-Peddling Fascists
Serge Halimi
Trump, the Know-Nothing Victor
Paul DeRienzo
Flynn Flam: Neocon Ex-General to Be Trump’s National Security Advisor
Binoy Kampmark
Troubled Waters: Trump, Taiwan and Beijing
Tom Clifford
Trump and China: a Note From Beijing
Arnold August
Fidel’s Legacy to the World on Theory and Practice
Dave Lindorff
Is Trump’s Idea To Fix a ‘Rigged System’ by Appointing Crooks Who’ve Played It?
John Kirk
Cuba After Fidel
Jess Guh
Repeal of Affordable Care Act is Politics Playing with the Wellbeing of Americans
Eric Sommer
Team Trump: a Government of Generals and Billionaires
Lawrence Davidson
U.S. Reactions to the Death of Fidel Castro
John Garvey - Noel Ignatiev
Abolitionism: a Study Guide
Clancy Sigal
Caution: Conspiracy Theory Ahead!
December 06, 2016
Anthony DiMaggio
Post-Fact Politics: Reviewing the History of Fake News and Propaganda
Richard Moser
Standing Rock: Challenge to the Establishment, School for the Social Movements
Behrooz Ghamari Tabrizi
Warmongering 99 – Common Sense 0: the Senate’s Unanimous Renewal of Iran Sanctions Act
Norman Solomon
Media Complicity is Key to Blacklisting Websites
Michael J. Sainato
Elizabeth Warren’s Shameful Exploitation of Standing Rock Victory
David Rosen
State Power and Terror: From Wounded Knee to Standing Rock
Kim Ives
Deconstructing Another Right-Wing Victory in Haiti
Nile Bowie
South Korea’s Presidency On A Knife-Edge
Mateo Pimentel
Some Notes and a Song for Standing Rock
CJ Hopkins
Manufacturing Normality
Bill Fletcher Jr – Bob Wing
Fighting Back Against the White Revolt of 2016
Peter Lee
Is America Ready for a War on White Privilege?
Pepe Escobar
The Rules of the (Trump) Game
W. T. Whitney
No Peace Yet in Colombia Despite War’s End
FacebookTwitterGoogle+RedditEmail