The Whistleblower #6
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The Whistleblower

The Whistleblower #6 - Feb 27, 2002

The Matrix: Enron's political strategy at home and abroad. Not only did Enron pioneer the unproductive art of energy trading, the company also made a science of injecting itself into the legislative process whenever it served the bottom line. According to the Washington Post, Enron's lobbyist-accountants relied on a computer system known as the "Matrix," which apparently used a form of cost-benefit analysis to determine which proposed regulations it would be worthwhile to shoot down. If a proposed rule change was projected to be costly to the company, lobbyists would be dispatched to give the many politicians on the Enron dole their marching orders.

Enron's "matrix" probably would have shown that the use of physical violence against its opponents would not be a worthwhile form of influence in this country. But apparently the company got a different result when it entered India's relatively lax law enforcement into the equation. According to Human Rights Watch, law enforcement personnel who were on the payroll of Dabhol Power Corporation, an Enron subsidiary, systematically attacked opponents of Enron's Dabhol, India power plant. These Enron "contractors" reportedly dragged the wife of a vocal activist out of her bathroom and into the street, beating her with batons. Congressional investigators should look into Enron's overseas activities as part of the inquiry into the company's misdeeds. Those who knew of such abuses but failed to intervene, including U.S. officials, should be held accountable.

S.E.C.: It's the Pitts. The Securities and Exchange Commission is meant to be a watchdog for investors, with the duty of ensuring corporate responsibility in the area of finance. Formed in the wake of the stock market crash of 1929, one of the SEC's first Chairmen, William Douglas said: "We are the investor's advocate." But can we expect this sort of regulatory zeal from the current SEC chair, Harvey Pitt, the man who defended insider trader Ivan Boesky, among other clients, against the very agency Pitt now heads? Pitt's actions so far show that he is the proverbial fox standing guard at the chicken coop. For example, according to the New York Times, the SEC recently told the National Association of Securities Dealers (NASD) to shelve a lawsuit it was going to file against an NASD member who engaged in illegal anti-investor behavior. Further, Pitt's accounting reform proposals favor private sector "peer review" rather than strong accountability that could restore public confidence in corporations and the firms that audit them.

Insurers give shareholders short shrift. Faced with the very real possibility of having to shell out massive amounts of dough to cover Enron's directors and officers against the cost of lawsuits, insurance companies are trying to bail out of the insurance policies sold to Enron execs. It has been reported that Royal Insurance Company of America and St. Paul Mercury Insurance Company have asked the bankruptcy judge to nullify the insurance policies. Expectations are that, if these companies are successful, Enron's other nine insurers will follow the lead. If that happens, Enron shareholders will have to recover their losses from the smaller pockets of Enron executives and directors themselves. The insurers allege that they were duped, raising the question of why these professional risk experts never questioned the liabilities they took on at Enron. That's the insurers' fault and they should not be allowed to duck out this responsibility.
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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.
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2002 FTCR



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