Still Preying on the Third World

The great humorist PG Wodehouse had a theory that if you approached any rich individuals from behind, tapped them on the shoulder, and murmured ‘I know your guilty secret’ they would probably faint. Not from guilt, you understand, but from the knowledge that somebody had Found Them Out. There is a bit of post-Enron fainting being done at the moment, but not as much as there should be, because many evil rich people are still walking the streets (well, laughing their heads off behind ten foot walls surrounding their luxurious country estates), with mega-millions stashed away in tax-havens, while the people they swindled are looking at their pensions, such as they are, and wondering if they can afford to pay the next grocery bill.

Two evil people who will shortly be going to spend more time with their guilty secrets are Andrew and Lea Fastow, although Mrs Fastow won’t be spending too long in her cell, as hubby is doing a deal that will reduce her well-deserved sentence. He’s good at doing deals, of course, because he was chief accountant for the corruption-riddled, morally-challenged Enron company, and this is probably one of the first legal arrangements he’s made in many a year, although it’s pretty shoddy and shabby at that. The problem with Enron’s shenanigans is that they were not only illegal but extremely complicated. As the Christian Science Monitor had it : “With 180 adversary proceedings, six dozen civil lawsuits, and almost 30 people charged with crimes, the case against Enron is enormous — and enormously difficult.” So anything that helps the proceedings along a bit — like Fastow singing like a bird and fingering the rest of the as-yet-unindicted alleged crooks — is welcome, even if it means wifie doing only a few weeks for tax evasion rather than years for fiddling the books. This is what happens when you’re a big fish. Mind you, if you or I had done anything on the scale of the Fastows we would have been in the slammer in a Wall Street heartbeat, with no chance of release, never mind making a sweetheart deal with the Feds.

What brought me to think about the whole sordid Enron affair was not so much the Fastow fandangos, or even the fact that the former chief accountant, Richard Causey, has just been arraigned for engaging “in a wide-ranging scheme, through a variety of devices, to deceive the investing public about the true performance and profitability of Enron’s businesses by manipulating Enron’s publicly reported financial results and making false and misleading public representations about Enron’s financial results and the performance of its various business units.” Rather it was the news that a pair of righteous corporations, upholders of all that is great and good in deregulation and globalisation, have refused to submit to jurisdiction of a foreign court, in spite of being heavily involved financially in the country concerned.

The country is India, and the enterprise that General Electric and Bechtel are involved in is a power station in a place called Dabhol in the State of Maharashtra. They were partners with the sleazy Enron company whose former CEOs, Kenneth Lay and Jeffrey Skilling, remain uncharged for any of their activities, which may, of course, have been perfectly legal. (Lay’s pension is $900,000 a year – that’s the amount we know about ; Skilling made $66 million from a nicely-timed sale of stock before his company went belly-up. Even if, eventually, he does twenty years in the big house it works out at over sixty thousand dollars a week in compensation. In a letter to the Houston Chronicle a former Enron employee, Kathleen Salerno, wrote “On November 30 [2001], we were given the right to move Enron’s matching funds for our retirement savings plans from Enron stock to another fund. My account amounted to $46.01. [A] friend with almost twenty years service had $102.”)

Before we look at the Dabhol debacle, here is an anecdote about Skilling, who at the height of his power in Enron was an arrogant bully whose claim to membership of the human race is tenuous. When he was at Harvard Business School a professor (later a Republican Congressman) asked his class what the CEO of an organisation should do if he realised his company was producing something that might be dangerous to consumers. Skilling’s answer was “I’d keep making and selling the product. My job as a businessman is to be a profit center and to maximize return to the shareholders. It’s the government’s job to step in if a product is dangerous.” This sums up his personal morality and that of Enron, and a lot of other corporations, too. With fetid jungle mentalities like that in control there is little wonder the commercial world is a filthy, rotten place in which the grossly amoral prosper at the expense of their dupes, puppets and pawns.

And prosperity was what Enron intended for itself at Dabhol, which was all set to be the neatest rip-off perpetrated by globalisation on a developing country. It began in 1992 when the Indian government, after much encouragement from the International Monetary Fund, decided to deregulate and privatise as much as it could manage without upsetting too many people. In fact this didn’t amount to all that much in terms of India’s GDP, but it was significant in that it signalled a final wrenching-away from the old socialised, centralised, almost Sovietised, style of business management that had obtained for decades. But the whole Dabhol deal stank to high heaven, right from the word Go.

If the scheme had been completed according to Enron’s plan it would have been “the largest independent natural gas-based private power project in the world”. It would also have been an obscenely large earner for Lay, Skilling, Fastow and the rest of the scum at the top of Enron’s stinking cauldron.

The wheeze was this : Enron and General Electric and Bechtel (why do I get a cold shiver up and down my spine when I see or write ‘Bechtel’?) between them would invest 3 billion dollars in Dabhol and get their money back in less than three years. The government of Maharashtra was involved, poor patsies, seemingly as co-investors, having bought Enron shares, but mainly as payers. Because even if there was no need for the electricity generated by the Dabhol plant, or consumers could not pay the absurd price demanded for the product, the government would have to pay for it. It was a flat rate, and in dollars, of course, so no matter the fluctuations in international exchange rates, Enron (80 percent), GE (10) and Bechtel (10) would get theirs in Green Big Ones. The real attraction was that after three years everything would be pure profit (except for India, natch), and over the next decade from 1995, when the plant was supposed to become operational, the takings would be over 20 billion dollars for the Lays, Skillings and Fastows of corporate enterprise.

One fascinating aspect of the scam was that Enron insisted on contract confidentiality on the grounds that India was “as yet unused to the phenomenon of privatisation”, making it vital to maintain secrecy because competitors might be able to see what terms were on offer. The problem with this reasoning is that there were no competitors. It was a one-horse race. Enron’s bosses didn’t want anyone to see what was going on because they were taking an entire country for a ride.

The World bank smelled a rat, and refused to make loans, but the US government was right behind Enron and its Dabhol venture, with every bit of diplomatic clout it could wield. Frank Wisner was US ambassador in India 1994-1997 and pushed the Dabhol project hard. Kenneth Lay visited him in Delhi, and Wisner joined the board of Enron three months after he left India. His successor was Richard Celeste who in 2001 told an audience of Indian businessmen in Bombay (now Mumbai, the capital of Maharashtra, and the business centre of India) that the Enron project was “tottering on the brink of turning into a major disappointment” which “regrettably feeds the concern among American businessmen that India remains a less-than-desirable destination for their investment dollars”. You have to laugh, really, knowing that Celeste is now “a senior adviser to a number of international businesses”. One wonders if he knew that Enron had only a few months to go before its loathsome and deceitful business practices would destroy the lives of countless employees and investors. Not his, of course.

Celeste’s successor as ambassador was the man who has done more to foster distrust between India and Pakistan than any other diplomat in recent history. Not only that, he was loathed by his entire embassy and was subject of an official State Department investigation into his capacity to manage personal relations. Naturally, he was a supporter of Enron. Stand forward the abrasive bully, Robert D Blackwill, he who was never reluctant during his time as ambassador in Delhi to try to drive a wedge between nuclear-armed Pakistan and India whenever it seemed that relations might be improving. But so far as Enron was concerned, Blackwill never drove anything that wasn’t intended to benefit that great corporation. Entirely to the contrary. Here is Blackwill on 21 November 2001 in answer to a question at the Foreign Correspondents’ Club in Delhi about Enron’s crooked deals : “The problem Enron has had in India will continue to cast a very dark shadow on foreign investments in India.” Well, now, that was certainly true. Because the government of Maharashtra had realised it was being conned and ripped-off and had suspended the grossly unfair arrangement and sent the matter to the courts. These same courts, you will recollect, whose national jurisdiction the global corporations General Electric and Bechtel now refuse to acknowledge.

Blackwill referred to the necessity for India abiding by the “sanctity of contract”, which is about the sickest phrase expressed by any Washington mouthpiece in the context of Enron’s criminal activities. Then he replied to another question by saying “I will confine myself to quoting my dear friend Condoleezza Rice . . .”

Here was a country being conned out of 20 billion dollars and it was being ordered by the American ambassador to adhere to the letter of the law concerning a contract entered into with a company run by very strange people. It isn’t surprising, really, because Blackwill (supposedly a career diplomat with no political bias — who donated to the Bush campaign) told the Council on Foreign Relations on 31 July 2000 that : “Governor (now president) Bush and the Republican Party are devoted to free trade while the Democratic Party has substantial elements which are deeply protectionist.” Just the person, wouldn’t you think, to represent the entire American people abroad? What a pathetic, grovelling creep.

And now the failed diplomat Blackwill, who left India last year to the relief of his entire embassy and not a few others in Delhi, has been given a post in the National Security Council in Washington, courtesy of its chief. Who is that? Oh, didn’t you know? It’s “my dear friend Condoleeza Rice”. Condoleezza Rice was a Director of Chevron Oil from 1991 until January 15, 2001, during which time she had an oil tanker named after her. Her name was removed from the bow and stern of the ship at about the same time Enron was going down the drain and Blackwill was going up it, like a slimy, flea-ridden rat after rotten cheese. (It was the Texas company, Dynegy, part-owned by Chevron, that tried to buy Enron when its share price got down in single figures. The deal fell through and Enron finally collapsed.)

The Dabhol deal was not only flawed morally so far as ripping off India was concerned. It was immoral in its entire approach, from bribing individuals in the first stages of the scam to encouraging intimidation and beating of those who protested against the environmental disaster that was about to take place. But Enron sorted that out by paying the local police force to beat up protestors. Here is Human Rights Watch on the subject : “As a result of our research, HRW believes that the Dabhol Power Corporation – and its parent companies Enron, General Electric, and Bechtel – are complicit in human rights violations by the Maharashtra state government. Human Rights Watch does not take a position on the persistent and pervasive allegations of corruption that surround Enron’s establishment in Maharashtra and its way of doing business there. But, as described above, Enron’s local entity, the Dabhol Power Corporation, benefited directly from an official policy of suppressing dissent through misuse of the law, harassment of anti-Enron protest leaders and prominent environmental activists, and police practices ranging from arbitrary to brutal.”

During the 2000 Presidential campaign the Center for Public Integrity identified Enron as the single largest patron of George Bush’s political career. He used Enron’s fleet of aircraft and was given $774,100 by Enron management and the company, which had also supported his governorship of Texas. There was no way Bush would ever raise a finger to investigate human rights violations or any other violations of decency by Enron, and in this he is aped by the 71 senators and 187 members of the House of Representatives who received money from Enron between 1989 and 2001. The creepy US Attorney General, John Ashcroft, got $50k of Enron money for his unsuccessful Senate bid, and the White House economic adviser, Lawrence Lindsay, was an Enron consultant.

At least 15 Bush senior people had Enron stock, including Rumsfeld, Rove, and Trade Representative Robert Zoellick who also received $50k a year for being a consultant to Enron’s advisory board. Senate recipients of Enron largesse who received the greatest amounts were Texas Republicans Hutchison and Gramm with about $100k each, while Gramm’s wife, in a neat twist, in her last days as chairwoman of the Commodity Futures Trading Commission pushed through a key regulatory exemption that benefited Enron. Five weeks later she took a seat on Enron’s board on which she served on the audit committee which oversaw (or was supposed to oversee) the financial workings of the corporation. For this she was paid “between $915,000 and $1.85 million in stocks and dividends, as much as $50,000 in annual salary, and $176,000 in attendance fees”, according to a report by Public Citizen (<>).

‘Keep it in the family’ seemed to be the motto, and the family of Enron was enormous, spread wide, and linked by ties closer than blood or even political allegiance (for there were plenty of Democrats with their snouts in the trough). The family was linked by greed, and support for the Enron corporation was demanded and given on the basis of loyalty. In the case of Dabhol, however, the Enron fixers overreached themselves, and although there was plenty of family support throughout Texas and especially in Washington they failed to complete the Indian con job according to plan. India eventually showed it wasn’t going to be dictated to by a bunch of chancers like Enron, but unfortunately it has no power when giant global corporations simply refuse to accept Indian jurisdiction. The Business Standard (Delhi) reported the Solicitor-general of India, Harish Salve, observing that “[the]Dabhol Power Company has been incorporated under the Companies Act, 1956, and its assets are in India. Why should any case pertaining to it be heard in New York courts?” One can draw one’s own conclusions about that particular question, but the tactics employed by GE and Bechtel should come as no surprise. Risibly they “demanded $650 million each for restarting the plant. Moreover, they had alleged before an international arbitration forum that they were victims of malicious prosecution in Indian courts and had demanded compensation.”

The Alice in Wonderland aspects of the case are marked in one of the latest developments in which an “arbitration tribunal in Washington has ordered the Overseas Private Investment Corporation (OPIC), the US government agency, to pay claims of $28.57 million each to Bechtel Power Corporation and GE as political risk cover for the two parties’ investments in the Dabhol Power Company (DPC). The tribunal has also unanimously ruled that “total expropriation has taken place in violation of international law” by the Indian government. This arbitration award cannot be challenged . . .” Well, now, there appears to be little wonder why these companies prefer US jurisdiction over their little problems, especially when any award made by a US tribunal cannot be challenged by anyone in the world.

The message for developing countries is clear : beware of seemingly lucrative deals offered by global companies, because even if they don’t collapse in a screaming bankrupt heap you won’t get anything like your fair share. Moreover, don’t expect commercial objectivity or morality from Washington. Poland, for example, is falling into the honey-trap and is warmly embracing ‘investment’ but it would be well-advised to read all the small print and hire some hard-nosed international lawyers, because the rip-off merchants didn’t all go away when Enron went under. There are plenty of them still out there, like beady-eyed sharks waiting for an opportunity. When tempted to sign away your rights for a seemingly quick profit, remember Dabhol.

BRIAN CLOUGHLEY writes about defense issues for CounterPunch, the Nation (Pakistan), the Daily Times of Pakistan and other international publications. His writings are collected on his website:

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Brian Cloughley writes about foreign policy and military affairs. He lives in Voutenay sur Cure, France.