What does the California energy crisis, Enron, IBP Inc., Chicago Mercantile Exchange Commodity Futures Trading Commission, State Farm Ins. Co., ADM, the U.S. Senate and George W. Bush have in common?
Dr. Wendy Lee Gramm
"People of the same trade seldom meet together even for merriment and diversion but the conversation ends in a conspiracy against the public or in some contrivance to raise prices." -- Adam Smith, Wealth of Nations
As the nation watches with some foreboding the current unfolding energy crisis in California there is both concern and suspicions as to who is behind the crisis and who is profiting from the crisis.
As J.A. Savage, a senior correspondent for the independent weekly California Energy Markets, recently pointed out in a Jan. 3 AlterNet essay:
"Greed, indeed, is the underlying cause of California's energy crisis. It's a lot of other things too, but the comet-struck electric disintegration in the last few weeks are the embers of a decade of money grubbing. Tracing the electric system's collapse from today backwards, greed plays the major role at every step."
Noting that "at the same time greed from investors in companies that generate power selling into the wholesale market ... also coincident was the greed of investors in the utilities' parent corporations" as "the greedy parent companies milked utilities for billions over the last few years."
Yet, as the debate goes on within the Federal Energy Regulatory Commission over how to punish the use of "market power" by sellers of high-priced electricity to California with the state utilities, which buy it, wanting a broad definition of such power, out-of-state generators, who sell it, think it should be defined only in "extreme circumstances."
And as the Associated Press' Jonathan Salant reports "one of the biggest beneficiaries of the California power crisis is a Texas energy conglomerate that more than any other single company has helped bankroll President Bush's political career. Enron Corp. of Houston is among a handful of a new generation of independent electric power brokers and producers that have reaped giant revenue increases from California's power shortages and higher natural gas prices nationwide.
"The new president's rejection of price controls to hold down soaring electricity costs in the Golden State reflects the views of Enron, the largest wholesaler of electricity and largest owner of natural gas pipelines in
North America," Salant points out.
The company and its employees have given more than anyone else to Bush's two campaigns for governor, his unsuccessful House campaign in 1978 and last year's race for the White House, according to the watchdog Center for Public Integrity.
Enron and its employees gave $113,800 to Bush's presidential campaign, his 10th most generous contributor; $250,000 to the Republican National Convention host committee; and $300,000 to the Presidential Inauguration Committee. Enron Chief Executive Officer Kenneth Lay, who raised more than $100,000 for Bush's campaign, is a member of the president's energy transition team and attended his economic summit.
But Enron's ties to Bush have much deeper roots than just energy policy and those ties are personified in the person of one Dr. Wendy Lee Gramm, a member of Enron's board of directors.
Gramm, the wife of Texas Republican conservative US Senator Phil Gramm, served as chairman of the US Commodity Futures Trading Commission from 1988-1993, was administrator for Information and Regulatory Affairs at the Office of Management and Budget from 1985-1988, the executive director of the Presidential Task Force on Regulatory Relief, and director of the Federal Trade Commission's Bureau of Economics.
Gramm currently serves as a member of the boards of directors, in addition to Enron, of the Independent Women's Forum; the International Republican Institute; Invesco Funds, and State Farm Insurance Companies, the largest single public stockholder of Archer Daniels Midland (ADM).
Until December 1999 she was board member of the Chicago Mercantile Exchange, where cattle futures are traded. She is presently an active board member of IBP Inc., the nation's largest meatpacker and mostly recently served on the company's special committee that examined buyout offers from DLJ Merchant Banking Partners III and affiliated funds and other investors which included ADM and certain IBP management employees, Smithfield Foods and Tyson Foods.
She is also chairman of the board of the Texas Public Policy Foundation, the creation of Dr. James Leininger who has used his enormous wealth to create a conglomerate of a half-dozen influential foundations and think tanks whose pro-business policy positions have become the basis of key Texas legislative initiatives, including tort reform and school vouchers.
Leininger, 55, also has created numerous political action committees, which he has employed so effectively that he has been nicknamed the "Daddy Warbucks" of the Texas Republican Party. The largest single political donor in the state, Leininger helped to engineer the Republican takeover of the legislature and governor's mansion. In the 1998 election cycle alone, Leininger and his family spent more than $4 million to finance think tanks and political campaigns, according to the Texas Freedom Network, a nonprofit group established to counter the religious right, and reports filed with the Federal Election Commission.
Bush's ties to Leininger are strong. Leininger has given Bush's campaigns $83,750 over the years. While only 73 on the list of Bush's all-time career patrons, his ranking, according to the Network, belies the support that Leininger has given Bush over his political career through his various organizations.
"In 1992, while cutting his political teeth, Bush sat on the board of advisers of Leininger's flagship think tank, the Texas Public Policy Foundation, which churns out conservative policy positions and is modeled after the influential Heritage Foundation in Washington. Bush also spoke at the foundation's 10th anniversary event in January 1999."
Calling attention to the fact that large numbers of companies involved in manufacturing animal feed are not complying with regulations meant to prevent the emergence of the dreaded "mad cow" disease, the US Food and Drug Administration (FDA) has said much more needs to be done to ensure that "mad cow" disease does not arise in this country.
While emphasizing the need for such action Dr. Stephen Sundlof, director of the Center for Veterinary Medicine at the FDA, told the New York Times 'Sandra Blakeslee that despite the widespread failure of companies to follow the regulations it does not mean that the American food supply is unsafe.
FDA regulations mandate that feed manufacturers and companies that render slaughtered animals into useful products generally may not feed mammals to cud-chewing animals, or ruminants, which can carry mad cow disease. Manufacturers must also have a system to prevent ruminant products from being commingled with other rendered material like that from chicken, fish or pork and all companies must keep records of where their products originated and where they were sold.
Recently released results Blakeslee reports, however, demonstrate that more than three years after the imposition of the regulations, different segments of the feed industry show varying levels of compliance.
In light of this FDA report a little-noticed story that emerged during the Archer Daniels Midland lysine price-fixing scandal takes on added significance.
When Mark Whitacre, who served as a corporate mole for the FBI and brought the Department of Justice's attention to the scandal, was interviewed by FBI agents Michael D. Bassett and Anthony P. D'Angelo in a Sept. 5, 1999 meeting, following the department's procedure, the agents prepared an FBI-302, dictated the following day and transcribed on Sept. 7, totaling 16 pages.
On page 15 the agents wrote:
"Whitacre advised that ADM has illegally disposed of genetic organisms by adding the organisms to corn glutten (sic) feed. The organisms are in liquid form and are sprayed on the corn glutten feed rather than disposed of as required by the Environmental Protection Agency (EPA). The liquid spray also added weight to the feed. Whitacre advised that Jerry Weigel and Jim Randall oversee this activity." Weigel was ADM's head nutritionist at ADM Biochem and Randall was the corporate president and overseer of plant process and operations.
No action, however, has been taken on Whitacre's revelation. In an Oct. 15, 1999, letter from David Hoech, founder of the ADM Stockholder's Watch Committee, to US Attorney General Janet Reno, the company stockholder activist expresses shock that the Department of Justice had chosen "to overlook" such activities "leaving the Andreas crime boss, Dwayne [Dwayne O. Andreas, the then CEO and chairman of ADM's board], intact to continue to destroy American agriculture."
"The creed of greed of the Andreas crime family," Hoech charged, "found it more economical to export the poisonous waste rather than build a treatment facility."
Hoech called Reno's attention to the remarks of a French farmer Philippe Huesele, a member of the Agro-Brie-Champagne farmer's cooperative in northeastern France. On a summer tour of the Central Illinois farm belt Huesele remarked that the European public still equates traditional farming practices with quality, largely because of "mad cow" disease among British cattle herds several years ago. The Europeans blame American feed for the disease, he said. They mistrust large corporations.
It was the British scientists who isolated animal feed contaminated with meat and bone meal from cattle and other slaughtered animals as the probable cause for BSE (bovine spongiform encephalopathies or "mad cow" disease) and hypothesized that humans who ate contaminated meat had contracted the fatal CJD (Creutzfeldt Jakob Disease -- BSE's human equivalent).
"As a shareholder and American citizen," Hoech's letter continues, "I demand to know why the public safety is compromised to protect the Andreas crime family. Our overseas customers don't trust our regulatory departments in this administration and most of all don't trust the Justice Department who lets corporate criminals such as ADM run amok destroying what took our ancestors decades to build."
"Do we know that ADM feed shipped to Europe caused the 'mad-cow' disease?" the letter asks. "No, we don't, but the Europeans said it was caused by feed containing a prion. The genetic organisms mixed with the feed is a dead protein which is a prion that was found in all the feed which the diseased cows consumed."
A prion (pronounced PREE-on) is a deformed protein identified by biologist Stanley Prusiner as the likely infectious agent responsible for causing and transmitting transmissible spongiform encephalopathies (BSE). The word "prion" is a hybrid of "protein" and "infectious."
In a subsequent lawsuit, filed by a Missouri farmer Rodger Moberly and several other Missouri cattlemen, the focus was on a substance known as free gossypol, which is derived from crushing cottonseed and used in ADM's animal feed known as 39% Protein Quanah Special. As Nicholas E. Hollis, president of the Agribusiness Council (ABC) explains, "free gossypol can be toxic to calves and even larger cattle if ingested in sufficient qualities. Often gossypol sickens an animal, slowing down its ability to gain weight."
The plaintiffs' claims were enhanced by an affidavit from Whitacre, ADM's former head of its BioProducts Division, who stated that ADM knew about free gossypol's effects and intentionally sold it to enhance profits. The affidavit also repeated the charge concerning ADM's spraying biomass residues on its corn gluten feed.
Knowing that these charges would constitute serious fraud if proven the plaintiff's lawyers were prepared to depose CEO Andreas, his son Michael and James Randall, who was the company's president. In ADM's lysine price fixing case the government granted immunity to both Dwayne Andreas and Randall.
In the Missouri suit, ADM, however, decided to avoid such a confrontation and settled out of court, offering the plaintiff $105,000 -- roughly double the amount initially requested.
Interestingly, in the preparing of the Missouri case ADM called upon experts from the nearby University of Illinois to challenge the plaintiffs' veterinarians who had treated the dying animals. As Hollis points out, ADM over the years had funneled millions of dollars in grants to the university's College of Agriculture.
"Truth can be difficult to tease out strand by strand in these cases," Hollis adds, "but ADM's credibility plunged when its top nutritionist 'Dr.' Gerrald Weigel, lied about his academic credentials under oath -- he had no Ph. D.
Oklahoma State University toxicologist Dr. Sandra Morgan has noted concern for gossypol as a potential sterility agent in an article which also states "there is concern for the effects of gossypol on humans because gossypol is a biologically active compound and because gossypol in the food chain may ultimately lead to its consumption by humans."
"If we are to regain confidence in the overwhelming majority of our food companies and their honest suppliers," Hollis adds, "isn't it time we stop ignoring the lessons of Moberly v. ADM and get the truth out about the Supermarkup to the World?"
A.V. Krebs operates the Corporate Agribusiness Research Project, P.O. Box 2201, Everett, WA 98203-0201, email firstname.lastname@example.org; www.ea1.com/CARP.