The Whistleblower #4
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The Whistleblower

The Whistleblower #4 - Feb 22, 2002

Preventing the next Enron. To properly address the Enron fiasco lawmakers need to get down to the roots of the crisis in corporate accountability that has led to this disaster. Here are three ideas:

1. We need a U.S. Department of Consumer Affairs and Corporate Accountability. We have federal agencies to protect worker interests (Labor), business interests (Commerce) and shareholder interests (SEC, sort of). Consumers need an agency that will advocate for their interests and keep an eye on corporate behavior.

2. We need a Whistleblower Act that will require employees to expose corporate fraud and will protect whistleblowers from retaliation. Just as the False Claims Act provides incentives for people who blow the whistle on those who try to defraud the government, there should be incentives for employees to expose corporate crime, and there should be penalties for those who know of financial fraud or other public dangers but don't report it.

3. We need Board of Directors Reform that will keep people who sit on the boards of corporations independent. Directors should receive no compensation from the company outside of their compensation as Director (e.g. no consulting fees).
We encourage readers to submit their own suggestions to

California utility regulators tell consumers: We quit. The California Public Utilities Commission (PUC) passed an unprecedented handover of regulatory authority to the unaccountable and obscure state Department of Water Resources (DWR), which is controlled by Cal. Gov. Davis, on Thursday. This marks a major policy shift, as the Commissioners defeated a similar proposal last year. At the time, PUC President Loretta Lynch (A Davis appointee) challenged the Governor's plan, saying: "The [plan] ties the PUC's hands and limits the (commission's) ability to protect the ratepayers in unprecedented ways." Commissioner Richard Bilas (an appointee of former governor Pete Wilson) said: "The ruling gives carte blanche to [the department] to do whatever they want to do." The DWR is responsible for short and long-term energy purchases that will force California taxpayers and ratepayers to pay $30 billion more for electricity in coming years than is considered reasonable, according to a recent FTCR study. An agency with a track record like that needs far more scrutiny, not far less, and FTCR will consider an appeal of the decision.

The Texas mirage. One of the reasons Enron was able to fall so fast was that there was less to the company than meets the eye; having few tangible assets, the virtual behemoth was built on complex commodities transactions, not to mention a good deal of hype. Army Secretary Thomas E. White, a former Enron executive, summed up this quality of Enron's energy trading operations: "We built [Enron Energy Services] from nothing." Secretary White should be called before Congress to explain more about his work at Enron and how the company made money out of nothing.

Deregulation: the rodent that will not die. Remember the arcade game in which you whack a mole on the head with a mallet only to have another little beast pop up next to it. So it is with the energy deregulation fanatics. They were beaten down by the California deregulation debacle, but they would pop back up. Then Enron, the market maker itself, was exposed as a fraud. And again, pop goes the weasel. Here's what one such ideologue wrote in an LA Times op-ed: "Even if the top leaders of Enron all go to jail…the electro-deregulatory trend will quietly continue, because nothing can stop an idea whose time has come." So last year's excuse --The problem is not deregulation, it's California -- has been amended to It's not deregulation, it's California… and Enron. In other words, despite all of the whacking, the energy industry will not let the deregulation beast die.


The Foundation for Taxpayer and Consumer Rights (FTCR) is a non-profit, non-partisan advocacy organization. For over a decade FTCR and its advocates have exposed and challenged injustices that betray the public trust. The Whistleblower newsletter addresses core issues of the corporate and governmental crises of today and blows the whistle on the brewing fiascos of tomorrow. FTCR does not take a position on candidates for any elected office.

For more information about FTCR's work, to DONATE, to join the fight, or to comment, visit our web site at 310-392-0522 xt.309.

© 2002 FTCR

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