Forget about seeing Ken Lay in an orange prison jumpsuit. However pleasurable it will be to see the ranks of corporate and (hopefully) government officials in jail for their crimes in assisting the looting of Enron investors and workers' pensions, that is only the tip of the iceberg.
The real Enron scandals are the public policies that let it happen and which made most of Enron's actions perfectly legal, policies used everyday by almost every other large multinational. If anything good is coming out of the scandal, it is the daily education on these misguided policies and a chance to organize to stop Bush from furthering the rightwing corporate agenda that made Enron possible.
Bush may not be impeached over the scandal, but his policies should be. Enron shows the fundamental flaws in pro-corporate polices promoting social security privatization, corporate tax breaks, tort "reform" and bankruptcy changes he has been trying to pass.
Social Security Privatization: The looting of Enron pensions to benefit insider investors shows the fundamental idiocy of proposals to create the possibility that retirees could end up with nothing in their retirement. With Enron's failure, 15,000 employees lost $1.3 billion out of their 401(k) savings; the saving grace is that they will still qualify for the guaranteed monthly Social Security check when they retire.
It is bad enough that companies have been using 401(k) plans as a substitute for company-funded pension funds across the country -- the percentage of workers with pensions guaranteeing monthly payments has dropped to just 7% nationwide. Enron shows the dangers of allowing the corporate stock manipulators to get their hands on the trillions of dollars in the social security trust fund. The story of Enron employees having their 401(k) assets frozen in increasingly worthless Enron stock, even as insiders at the company cashed out over $1 billion in stock, is just a miniature of the whole stock bubble. In the broader economy, an estimated $4 trillion in investment value melted away in the year after the stock market peaked in 2000, often with insiders cashing out at the expense of smaller investers. Michael Perkins, a founding editor of the Internet business magazine Red Herring, flatly declared that the "high-tech financial bubble represented the greatest-ever legal transfer of wealth -- from retail investors to insiders." Small investors had traded in investments in their community for the ephemeral promise of this new global Internet El Dorado.
The lessons of Enron should make Americans less likely to make the catastrophic mistake of entrusting trillions of dollars of the Social Security trust fund to the stock market manipulators.
Corporate law and tax havens: The minute the word of 700 Enron "Cayman Island subsidiaries" hit the news, people had a pretty good idea that the story could only get worse. Hand-in-hand with stock manipulation is the global corporate shell game of international subsidiaries and tax havens allowing companies to manipulate their books to deceive investors and cheat on taxes. Because it allows firms to hide profits in tax-free accounts, the tiny Cayman Islands have 530 commercial banks with assets of more than $800 billion, equivalent to about a fifth of all US deposits nationwide.
As Manhattan District Attorney Robert Morgenthau testified in Congress last summer even before the Enron scandal unfolded, the money is not down in the Cayman Islands "because of the sunshine and the beaches. To be blunt, it is there because those who put it there want a free ride -- depositors, investors, banks and businessmen want to avoid or evade laws, regulations and taxes in their home countries." It is estimated that US corporations manage to evade over $20 billion a year in corporate taxes owed to the US government through these manipulations, allowing companies like Enron to avoid paying any corporate taxes in most years.
The Bush administration has been opposing legislation to crack down on these off-shore tax havens, but there now may be a chance in Congress to override that opposition and finally force these companies to pay the taxes they owe -- which would be a nice change from Bush's tax cut handouts to his corporate backers like Enron.
Tort Reform: The heroes of the Enron story will likely be the much abused trial lawyers, often denounced by Bush as he's defended the wonders of leaving corporations unmolested by pesky accountability to investors or their workers. It's the trial lawyers who will have to try to figure out how to make the insider executives and auditors, who looted Enron for their own private profit, cough up the cash to pay back some of the losses suffered by Enron investors and employees. Unfortunately, because of laws passed in the last few years, their jobs will be a lot tougher.
Back in 1995, a top priority of Gingrich's Contract on America was passing corporate-backed limits on investor accountability. Backed by big companies and auditing firms, legislation passed that year shielded executives from liability from making wild promises about financial performance of their firms. It also weakened the liability of auditors and accountants for their participation in dubious market projections. This all helped feed insider speculation and self-interested financial projections that fed the stock bubble in the end of the decade.
Unfortunately, one of the central figures in passing the 1995 law was the top lawyer-lobbyist for the accounting industry, Harvey Pitt, who Bush last year appointed to be the head of the Securities and Exchange Commission (SEC), supposedly the watchdog over the industry. The real crime in the Enron debacle is that those who made the company's crimes possible are the ones supposedly writing policy to prevent repeat disasters.
Bankruptcy: Even if Enron executives are sued, they may be able to take advantage of manipulations of the bankruptcy code available to rich defendants in places like Texas, where someone like Ken Lay can convert his assets into a 100-acre estate, declare bankruptcy and live in the lap of luxury while stiffing those whose lives he destroyed. A proposed bankruptcy bill backed by the Bush administration would stiffen the pressure on poor creditors facing bankruptcy, but the GOP-led House and White House have fought heartily to preserve the so-called "homestead" exemption for rich bankruptees. Corporate bankruptcy has often been a tool over the years for rich investors to loot companies and stiff the employees left with bankrupt pensions; Enron is just continuing a long tradition.
Some see Enron as another scandal to look for a "smoking gun" to impeach a president. But that is too limited a goal, as all such personalistic political battles tend to be. The smoking gun is in plain view. It's the pro-corporate policies of deregulation and speculation that have devastated tens of thousands of lives at Enron and millions more in the US and around the world. We don't need to impeach a person; we need to impeach and remove those policies.
Nathan Newman is a longtime union and community activist, a national vice president of the National Lawyers Guild and author of the forthcoming book Net Loss on Internet policy and economic inequality. Email nathan@newman.org or see www.nathannewman.org.