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:
Weekend Edition
July 29, 2016
Friday - Sunday
Michael Hudson
Obama Said Hillary will Continue His Legacy and Indeed She Will!
Jeffrey St. Clair
She Stoops to Conquer: Notes From the Democratic Convention
Rob Urie
Long Live the Queen of Chaos
Ismael Hossein-Zadeh
Evolution of Capitalism, Escalation of Imperialism
Margot Kidder
My Fellow Americans: We Are Fools
Ralph Nader
Hillary’s Convention Con
Lewis Evans
Executing Children Won’t Save the Tiger or the Rhino
Vijay Prashad
The Iraq War: a Story of Deceit
Chris Odinet
It Wasn’t Just the Baton Rouge Police Who Killed Alton Sterling
Brian Cloughley
Could Trump be Good for Peace?
Patrick Timmons
Racism, Freedom of Expression and the Prohibition of Guns at Universities in Texas
Gary Leupp
The Coming Crisis in U.S.-Turkey Relations
Pepe Escobar
Is War Inevitable in the South China Sea?
Norman Pollack
Clinton Incorruptible: An Ideological Contrivance
Robert Fantina
The Time for Third Parties is Now!
Andre Vltchek
Like Trump, Hitler Also Liked His “Small People”
Serge Halimi
Provoking Russia
David Rovics
The Republicans and Democrats Have Now Switched Places
Andrew Stewart
Countering The Nader Baiter Mythology
Rev. William Alberts
“Law and Order:” Code words for White Lives Matter Most
Ron Jacobs
Something Besides Politics for Summer’s End
David Swanson
It’s Not the Economy, Stupid
Erwan Castel
A Faith that Lifts Barricades: The Ukraine Government Bows and the Ultra-Nationalists are Furious
Steve Horn
Did Industry Ties Lead Democratic Party Platform Committee to Nix Fracking Ban?
Robert Fisk
How to Understand the Beheading of a French Priest
Colin Todhunter
Sugar-Coated Lies: How The Food Lobby Destroys Health In The EU
Franklin Lamb
“Don’t Cry For Us Syria … The Truth is We Shall Never Leave You!”
Caoimhghin Ó Croidheáin
The Artistic Representation of War and Peace, Politics and the Global Crisis
Frederick B. Hudson
Well Fed, Bill?
Harvey Wasserman
NY Times Pushes Nukes While Claiming Renewables Fail to Fight Climate Change
Elliot Sperber
Pseudo-Democracy, Reparations, and Actual Democracy
Uri Avnery
The Orange Man: Trump and the Middle East
Marjorie Cohn
The Content of Trump’s Character
Missy Comley Beattie
Pick Your Poison
Kathleen Wallace
Feel the About Turn
Joseph Grosso
Serving The Grid: Urban Planning in New York
John Repp
Real Cooperation with Nations Is the Best Survival Tactic
Binoy Kampmark
The Scourge of Youth Detention: The Northern Territory, Torture, and Australia’s Detention Disease
Kim Nicolini
Rain the Color Blue with a Little Red In It
Cesar Chelala
Gang Violence Rages Across Central America
Phillip Kim et al.
Open Letter to Bernie Sanders from Former Campaign Staffers
Tom H. Hastings
Africa/America
Robert Koehler
Slavery, War and Presidential Politics
Charles R. Larson
Review: B. George’s “The Death of Rex Ndongo”
July 28, 2016
Paul Street
Politician Speak at the DNC
FacebookTwitterGoogle+RedditEmail