As we go to press, George W. Bush was scheduled to give a speech on his administration's newfound probity toward business wrongdoing. His spin doctors are trying to present him as the reincarnation of Teddy Roosevelt, but his actions so far are not encouraging. Bush shows no signs of clearing out an administration filled with people who succeeded in business by ignoring ethical boundaries, from Army Secretary Thomas White, the vice chairman of Enron Energy Services when it allegedly hid $500 million in losses and manipulated the California energy crisis, to Vice President Dick Cheney, who presided over the cooking of books at Halliburton (and also doing business with evildoer Iraq), White House counsel Alberto Gonzales, who was an attorney for Enron at Vinson & Elkins in Houston, and Securities and Exchange Commission Chairman Harvey Pitt, the former attorney for Andersen, KMPG and Merrill Lynch who started his term at the SEC by asking how he could make things easier for the securities industry.
Bush's own misdeeds as a director of Harken Energy are finally getting the attention of the mainstream press. As Paul Krugman wrote in the July 7 New York Times, Bush was a failed businessman in 1986 with a company losing money and heavily burdened with debt when he was rescued by Harken Energy, which bought his company at "an astonishingly high price" in return, one assumes, for Bush's connections to his father, who was then vice president. Those connections opened doors for Harken, particularly after W's father became president. But Harken still lost money, although it concealed its failure "just long enough for Mr. Bush to sell most of his stake at a large profit -- with an accounting trick identical to one of the main ploys used by Enron a decade later," Krugman wrote. A group of insiders, using money borrowed from Harken itself, paid an exorbitant price for a Harken subsidiary, Aloha Petroleum. That created a $10 million phantom profit, which hid three-quarters of the company's losses in 1989. (Yes, Arthur Andersen was the accountant.) Bush was on the company's audit committee, as well as on a special restructuring committee, so if he didn't spot the Aloha maneuver, he was at least "a very negligent director." Krugman added that Harken's fake profits were several dozen times as large as the Whitewater land deal -- though only about one-seventh the cost of the Whitewater investigation. His father's SEC ignored the staff recommendation and decided not to prosecute young George.
The White House assured us that Bush's failure to file disclosures of his stock trades in Harken Energy until eight months after the deadline amounted to nothing more than driving 60 in a 55-mile-per-hour zone. "That will surely bring good cheer to those Harken shareholders who were left holding the stock that Mr. Bush sold, with no insider's knowledge, of course, just before it tanked," the Times' Frank Rich noted July 6. Bush sold his stock in June 1990 for $4 a share. By year-end it was trading for a little over $1.
Bush has dodged responsibility, claiming first that the SEC lost his papers. Then he blamed Harken's lawyers. Now he says the matter has been "fully vetted," although he won't let the SEC release its file on him. The Center for Public Integrity (www.publici.org) reported in October 2000 that an internal SEC memorandum, prepared by the commission's enforcement division in April 1991, disclosed that Bush also had been tardy in reporting three other transactions involving stock in Harken. Despite the pattern of late disclosures, the SEC did not press charges against Bush. But the Dallas Morning News quoted a 1993 letter from the SEC to Bush's lawyer emphasizing that its decision "must in no way be construed as indicating that (Bush) has been exonerated."
Reforms that are needed, Rich wrote, include fully independent policing of accounting firms, the complete prohibition of conflicts of interest that encourage both accountants and stockbrokers to cut corners. "No off-balance-sheet or offshore entities, no shell corporations, no sham transactions," added Robert Morgenthau, the Manhattan district attorney, who is pursuing Enron more aggressively than the administration is. Arthur Levitt, Clinton's SEC chairman whose attempts at reform were undermined by opposition from Republicans and business Democrats like Sen. Joe Lieberman, would increase the legal liability for investment bankers, lawyers and accountants who aid, abet and also profit from corporate Ponzi schemes. And the SEC needs conflict-free commissioners. Pitt has pledged tough actions but he already has been meeting privately with Xerox and KPMG executives while their companies are under investigation. "It's like the mob's consigliere running the FBI," Marshall Wittmann, a reform-minded conservative Republican, told Rich.
CORPORATE ACCOUNTABILITY WISH LIST. Citizen Works, a group formed by Ralph Nader to fight corporate corruption and restore corporate accountability, held a press conference July 5 with representatives of Consumer Federation of America (CFA) and the Government Accountabilitiy Project at which the following actions were proposed to enforce existing laws and punish corporate lawbreakers:
1. Double the woefully underfunded SEC's present meager budget of about $430 million to enforce the laws and regulations in the coming year.
2. Enforce the 1934 Securities Exchange Act, which has several securities fraud provisions, including prohibitions on insider trading and nondisclosure.
3. Give corporate criminals real jail time. According to Fortune magazine, the few savings & loans crooks who went to prison got an average of 36.4 months. Car thieves who went to prison average 38 months. Burglars average 55.6 months. First-time drug offenders average 64.9 months.
4. Revoke professional licenses for lawyers and accountants who aid in fraud.
5. Ban firms that commit fraud from receiving government contracts.
6. Expand SEC disclosure standards to include environmental and social issues.
To improve corporate governance and strengthen shareholder rights, the group proposed:
1. Make sure independent boards are actually "independent" and not merely shills for management by creating tough standards for independence, including staff support and shareholder approval of pay.
2. Allow cumulative voting for shareholder resolutions and corporate board elections.
3. Ban all loans to company insiders.
4. Require that investors are given sufficient governance rights and remedies to assure that they control the corporations that they own.
Among 21 recommendations for legislative action (see www.citizenworks.org or call 202-265-6164 for more information) is a constitutional amendment to define only people as "persons" preventing powerful corporations ("artificial persons"), already given privileges and immunities denied human beings, from usurping rights designed to protect natural human beings. CFA also called for a tougher version of Sen. Paul Sarbane's accounting reform bill (S 2673).
FBI SLOW ON ANTHRAX CASE. The FBI can nab Muslim converts on thin pretexts that they might be planning to blow up dirty bombs but they cannot seem to make inroads against the man suspected of sending anthrax-tainted letters that were sent to two Democratic senators and media personalities that resulted in at least six deaths last fall. Laura Rozen of The American Prospect (www.prospect.org) reported June 27 on a suspect who from 1975 to 1978 served with the US Army Institute for Military Assistance, based at Fort Bragg, N.C., while simultaneously, according to his resume, serving in the Rhodesian Special Air Squadron (SAS) and Selous Scouts, the counterinsurgency force of the former white supremacist regime. He attended medical school in Rhodesia from 1978 to 1985, and then moved to South Africa, where he completed various military-medical assignments while obtaining three master's degrees, studying for a doctoral degree, and practicing in a South African clinic. He now lives in Frederick, Md., and had access to the US Army Medical Research Institute for Infectious Diseases (USAMRIID) until early March.
Nicholas Kristoff reported July 2 in the New York Times that the bureau has polygraphed a suspect, searched his home twice and interviewed him four times, but it has not placed him under surveillance or asked its outside handwriting expert to compare his writing to that on the anthrax letters. Kristoff calls the suspect "a true-blue American with close ties to the US Defense Department, the CIA and the American biodefense program." The suspect also reportedly has claimed that he participated in white supremacist armies in Rhodesia and South Africa. Coincidentally, the Rhodesian army was believed to have been the source for the biggest anthrax outbreak among humans ever recorded, the one that sickened more than 10,000 black farmers in 1978-80 in what is now known as Zimbabwe. "Could rogue elements of the American military have backed the Rhodesian Army in anthrax and cholera attacks against blacks?" Kristoff wonders. "... all else aside, who knew that the US Defense Department would pick an American who had served in the armed forces of two white-racist regimes to work in the American biodefense program with some of the world's deadliest germs?"
While the FBI struggles to find the anthrax killer, the agency did manage, after a 13-month investigation, to arrest 12 prostitutes in New Orleans, the Justice Department announced last month.
BUSH STEALS GORE'S SOUND BITE. For months journalists have questioned George W. Bush's oft-repeated laugh line that he promised during the 2000 presidential campaign that he would allow the federal budget to go into deficit only in times of war, recession or national emergency, but he never imagined he would "have a trifecta." Usually told to reliably Republican crowds, it never failed to get a laugh for Bush, but nobody could recall him actually saying any such thing during the campaign. Finally, the Washington Post's Glenn Kessler found a similar statement made to the Economic Club of Detroit in May 1998, not from Bush, but from Al Gore: "Barring an economic reversal, a national emergency, or a foreign crisis, we should balance the budget this year, next year, and every year." Gore repeated the line at least twice more, in speeches in June and November of that year.
DECLARATIONS OF INDEPENDENCE. Jesse Ventura is stepping down as governor of Minnesota, but Tim Penny stands a good chance of being elected as an Independence candidate in Ventura's footsteps. A poll by the Minneapolis Star Tribune released June 27 found a three-way deadlock, with Republican Tim Pawlenty leading with 26%, in a statistical tie with DFL candidate Roger Moe and Penny, a former DFL congressman, with 25% each. Green Party candidate Ken Pentel showed 5% support. (The same poll showed US Sen. Paul Wellstone leading Republican Norm Coleman 47-43%, with Green Party's Ed McGaa drawing 3% and only 5% undecided.)
In neighboring Wisconsin, where a bipartisan political corruption scandal has kept the Legislature from addressing a budget crunch and education problems, Libertarian Ed Thompson is polling at 11% in the race for governor. John Nichols of the Madison Capital Times notes Thompson's showing is better than Ventura was polling at a similar point in his successful 1998 race.
Meanwhile, Will Lester of the Associated Press noted July 2 that voter turnout for midterm election primaries could hit a record low this year if a trend from the first six months of 2002 holds up. The 16 states that had statewide primaries in both major parties averaged 16.2% of the voting-age population, down from 17.6% in 1998 and 33.2% in 1966, according to the nonpartisan Committee for the Study of the American Electorate (www.gspm.org/csae/).
'FREE TRADE' STALLS. Less than eight months after ministers agreed at the World Trade Organization's meeting in Doha, Qatar, to set aside their differences and launch a global trade liberalization round, the project is in danger of losing steam, Guy de Jonquieres and Frances Williams wrote in the June 19 Financial Times. Stalemate persists on politically contentious European Union demands to place environmental issues on the agenda -- a move most other countries view as protectionism. "These setbacks and slippages have chilled the warm afterglow created by the success of Doha. Many diplomats say the chances are rapidly receding of meeting the WTO's ambitious deadline of concluding the round by the end of 2004." But the biggest blow has been recent US decisions to raise sharply tariffs on steel imports and greatly increase agricultural subsidies in its new farm bill. "These measures have outraged other WTO members and cast a pall over the talks."
FAST TRACK STAYING ALIVE. A House Republican "rule" to instruct conferees on the embattled "Fast Track" bill passed the House again by just one vote on June 28 (216-215), encouraging globalization critics who noted that several R's who are committed against Fast Track voted for the rule on a party-line procedural vote. "Surprisingly, many of the textile guys who went the wrong way on us last year voted AGAINST the Rule -- because the infamous Jim Demint (R- S.C.) didn't get the textile deal he wanted," wrote Katie West of Public Citizen's Global Trade Watch. "Plus, the GOP enraged even the 'free-trade' Democrats by his partisan Napoleonesque manoeuvers ..." To urge your Congress member to oppose Fast Track, use the AFL-CIO's toll free number (877-611-0063) or if that doesn't work, try the Capitol switchboard at 202-224-3121.
'PRO-LIFE' D'S FIND NICHE. At the Texas Democratic Party Convention in El Paso, candidates are still expected to pledge support for a woman's right to abortion, but the Houston Chronicle's John Williams noted that Beaumont's Teresa Boudreaux, president of the Texas Democrats for Life, has been working 10 years to find a place in the party. This year her caucus attracted about 30 delegates. When she started, she said, Democrats often harassed the anti-abortion caucus, telling members they belonged in the other party. In recent years, Boudreaux said, fellow Democrats have become more tolerant. But a question Boudreaux often receives is why she doesn't join the Republican Party, whose members come closer to sharing her ideas on abortion. "It's an easy answer," she said. "I am pro-life, which means I also care about the issues that make for strong children, like health care, education and a clean environment. Republicans don't."
BLACK FARMERS SEIZE USDA OFFICE. Three hundred black farmers took over a US Department of Agriculture regional office in Brownsville, Tenn., July 1 to protest the agency's failure to process loan applications from growers who were counting on the money to plant this year's crops. In 1999, the USDA settled a class action lawsuit brought by African-American farmers who said they had been denied loans by regional bureaus when white farmers had not been. As of February, the agency had paid more than $615 million on slightly less than half of the 22,600 claims filed, according to statistics reported by the Washington Post. "We're at a point right now where we're all but extinct," said Tom Burrell, a Covington, Tenn., farmer and a member of the Black Farmers & Agriculturalists Association. In 1920, there were 925,000 black farmers, according to USDA and Census records. Today, there are about 15,000.
ENERGY: ADDRESS PEOPLE'S NEEDS. Members of Congress joined consumer, environmental and public interest groups June 19 to demand that House-Senate conferees on energy legislation not sell out the American public as proposed by House energy legislation, which offers nearly $34 billion in tax breaks and subsidies to wealthy and polluting oil, nuclear and coal companies. Rep. Nick Rahall, ranking Democrat on the House Committee on Resources, said Congress is struggling to find $7 billion dollars to fund education reform. It also needs between $350 and $700 billion for a Medicare prescription drug plan. Yet the House energy bill offers $2.6 billion to the nuclear industry, $5.8 billion to the coal industry, $5.8 billion to the private electric utility industry and $19.5 billion to the oil and gas industry. Auto manufacturers killed a Senate effort to boost fuel efficiency of sport utility vehicles and the bill does little to promote energy conservation or renewable energy sources. Meanwhile, the California Assembly took the lead July 2 as it passed legislation to regulate emissions of carbon dioxide, the main global warming pollutant. As the nation's largest market for automobiles, California may force US carmakers to produce more efficient cars and trucks, such as the electric/gas hybrid cars produced by Honda and Toyota which already get more than 50 mpg with very low pollution emissions.