Wednesday February 6 6:58 AM ET
America Too Patriotic, Says Norman Mailer
LONDON (Reuters) - Influential American writer Norman Mailer has criticized the ``patriotic fever'' gripping the United States following the Sept. 11 attacks.
``What happened on Sept. 11 was horrific, but this patriotic fever can go too far,'' Britain's Daily Telegraph quoted Mailer, 79, as saying Wednesday.
``America has an almost obscene infatuation with itself. Has there ever been a big powerful country that is as patriotic as America?'' Mailer asked in an interview.
``You'd really think we were some poor little republic, and that if one person lost his religion for one hour, the whole thing would crumble. America is the real religion in this country.''
Mailer, renowned for his macho image and stabbing the second of his six wives 40 years ago, said America's right wing had benefited from the attacks on Sept. 11.
``The right wing benefited so much from Sept. 11 that, if I were still a conspiratorialist, I would believe they'd done it,'' he said.
Mailer is widely recognized as pioneering the genre known as New Journalism, where writers such as Tom Wolfe, Hunter S. Thompson and Joan Didion blurred the distinction between fact and fiction and peppered prose with their own opinions.
Mailer's best known works include ``The Executioner's Song'' and ``The Armies of the Night.''
Friday, February 08, 2002
Trilateral 'axis' to challenge US presence
From Iftikhar Gilani
NEW DELHI–In a significant development, India, China and Russia have agreed to form a trilateral “axis” to challenge US presence close to their borders.
Stepping clear of calling it an “axis” or a “block”, an official spokesperson of India’s External Affairs Ministry Nirupama Rao here confirmed that the visiting Russian Foreign Minister Igor Ivanov had mooted such a proposal during his meeting with Indian leaders.
She said India has agreed to the Russian proposal for frequent meetings between Delhi, Moscow and Beijing to coordinate a common position among the three on important international issues. She, however, refused to call it an “axis” or a “block” directed against any country. She repeatedly emphasised that the arrangement will involve an informal consultation between the three important Asian nations to exchange views and fight global terrorism menace.
Igor Ivanov, who was here on a two-day visit left for Kabul Monday afternoon. Besides holding talks with External Affairs Minister Jaswant Singh, Ivanov here met Defence Minister George Fernandes. Russian Deputy Prime Minister Ilya Klabnov is also arriving here Tuesday on a four-day visit to carry forward the proposal of “trilateral axis”. He will also sign several agreement including a defence protocol with Indian leaders.
Weary of presence of American troops close to their borders, jittery Russia, China and India are moving closer to give a clear signal to Washington that if need be, the three together could pose a challenge. A few days ago at an informal get-together of editors of national Hindi dailies, Prime Minister Atal Behari Vajpayee had opened his heart by voicing concern at the presence of American troops in Pakistan.
Former Russian Prime Minister Yevgeny Primakov had floated the proposal for the trilateral axis three years ago. But, it was shot down by China, since the proposal had come soon after the May nuclear tests and India’s relations with China were strained.
Sources in the Indian External Affairs Ministry here told The Nation that this time Russia has dusted the axis proposal at the instance of China. The presence of US troops in the region has become a source of worry for China. At this juncture, he said, it suits Beijing to join the Russia-proposed trilateral axis. He said the issue had been discussed when Chinese Premier Zhu Rongji was here last month.
Earlier, External Affairs Minister Jaswant Singh had agreed that the three countries should coordinate positions on issues of mutual benefit, but made it clear that it should not be described as an axis or bloc.
India’s diplomatic balancing act is aimed at ensuring that its new friend, the US, does not misunderstand the move. Till recently, it had played down the axis proposal. But there seems to have been a slight shift in its position this time, mainly for two reasons. One, the Russians are keen on the axis and Singh does not want to disappoint India’s “time-tested” ally. Second, and perhaps a more important one, stems from the successful visit of Chinese Prime Minister Zhu Rongji last month.
Indian officials here believed that China might have second thoughts on its relations with Pakistan as a result of Pervez Musharraf cosying up to the US and allowing its troops to use Pakistani territory. India has decided it would be better to engage with China and Russia on issues that may be important and beneficial for Delhi.
In a joint statement issued Sunday evening, India and Russia asked Pakistan to take “sustained, irreversible steps” to end cross-border terrorism and create a conducive atmosphere for resumption of dialogue in accordance with the Simla Agreement and the Lahore Declaration.
While Russia extended full support to the Indian position mandating resumption of Indo-Pak dialogue on the basis of concrete steps by Pakistan on the ground, Ivanov said he emphasised the need for “settlement of regional conflicts”. Ivanov mentioned West Asia and Iraq and Singh spoke of Afghanistan and terrorism.
Official sources here also said that during his one-hour-long meeting on Monday with Fernandes, Ivanov discussed military cooperation. They said Russian Deputy Prime Minister Ilya Klebanov would follow up the discussions with talks on sale and lease of nuclear-powered submarines and long-range bombers to India during his visit.
The stand-off on the Indo-Pak border and India’s request for emergency supply of spares and arms also figured prominently in the talks between Fernandes and Ivanov. Fernandes briefed the Russian Minister on the troop mobilization on the border.
The Ivanov-Fernandes meeting comes in the backdrop of the presence of a high-level Russian delegation in the Capital which is working on a Defence Protocol on Moscow’s offer to New Delhi for a joint programme for development of futuristic weapons systems. The protocol is due to be signed on Wednesday.
According to sources, Russia has already made a formal offer to India to join its project for development of a fifth-generation fighter jet.
The two nations interacted on development of the Sukhoi Su-30MK1 multi-role fighter for the Indian Air Force, have a joint venture for production of the Brahmos-PJ-10 anti-ship cruise missile, and are jointly developing the Ilyushin-IL-214/MTA multi-role transport plane. Sources said Russia is building three Krivak-class stealth frigates for the Indian navy and is to supply advanced weapon systems for India’s stealth frigate Project 17.
From Iftikhar Gilani
NEW DELHI–In a significant development, India, China and Russia have agreed to form a trilateral “axis” to challenge US presence close to their borders.
Stepping clear of calling it an “axis” or a “block”, an official spokesperson of India’s External Affairs Ministry Nirupama Rao here confirmed that the visiting Russian Foreign Minister Igor Ivanov had mooted such a proposal during his meeting with Indian leaders.
She said India has agreed to the Russian proposal for frequent meetings between Delhi, Moscow and Beijing to coordinate a common position among the three on important international issues. She, however, refused to call it an “axis” or a “block” directed against any country. She repeatedly emphasised that the arrangement will involve an informal consultation between the three important Asian nations to exchange views and fight global terrorism menace.
Igor Ivanov, who was here on a two-day visit left for Kabul Monday afternoon. Besides holding talks with External Affairs Minister Jaswant Singh, Ivanov here met Defence Minister George Fernandes. Russian Deputy Prime Minister Ilya Klabnov is also arriving here Tuesday on a four-day visit to carry forward the proposal of “trilateral axis”. He will also sign several agreement including a defence protocol with Indian leaders.
Weary of presence of American troops close to their borders, jittery Russia, China and India are moving closer to give a clear signal to Washington that if need be, the three together could pose a challenge. A few days ago at an informal get-together of editors of national Hindi dailies, Prime Minister Atal Behari Vajpayee had opened his heart by voicing concern at the presence of American troops in Pakistan.
Former Russian Prime Minister Yevgeny Primakov had floated the proposal for the trilateral axis three years ago. But, it was shot down by China, since the proposal had come soon after the May nuclear tests and India’s relations with China were strained.
Sources in the Indian External Affairs Ministry here told The Nation that this time Russia has dusted the axis proposal at the instance of China. The presence of US troops in the region has become a source of worry for China. At this juncture, he said, it suits Beijing to join the Russia-proposed trilateral axis. He said the issue had been discussed when Chinese Premier Zhu Rongji was here last month.
Earlier, External Affairs Minister Jaswant Singh had agreed that the three countries should coordinate positions on issues of mutual benefit, but made it clear that it should not be described as an axis or bloc.
India’s diplomatic balancing act is aimed at ensuring that its new friend, the US, does not misunderstand the move. Till recently, it had played down the axis proposal. But there seems to have been a slight shift in its position this time, mainly for two reasons. One, the Russians are keen on the axis and Singh does not want to disappoint India’s “time-tested” ally. Second, and perhaps a more important one, stems from the successful visit of Chinese Prime Minister Zhu Rongji last month.
Indian officials here believed that China might have second thoughts on its relations with Pakistan as a result of Pervez Musharraf cosying up to the US and allowing its troops to use Pakistani territory. India has decided it would be better to engage with China and Russia on issues that may be important and beneficial for Delhi.
In a joint statement issued Sunday evening, India and Russia asked Pakistan to take “sustained, irreversible steps” to end cross-border terrorism and create a conducive atmosphere for resumption of dialogue in accordance with the Simla Agreement and the Lahore Declaration.
While Russia extended full support to the Indian position mandating resumption of Indo-Pak dialogue on the basis of concrete steps by Pakistan on the ground, Ivanov said he emphasised the need for “settlement of regional conflicts”. Ivanov mentioned West Asia and Iraq and Singh spoke of Afghanistan and terrorism.
Official sources here also said that during his one-hour-long meeting on Monday with Fernandes, Ivanov discussed military cooperation. They said Russian Deputy Prime Minister Ilya Klebanov would follow up the discussions with talks on sale and lease of nuclear-powered submarines and long-range bombers to India during his visit.
The stand-off on the Indo-Pak border and India’s request for emergency supply of spares and arms also figured prominently in the talks between Fernandes and Ivanov. Fernandes briefed the Russian Minister on the troop mobilization on the border.
The Ivanov-Fernandes meeting comes in the backdrop of the presence of a high-level Russian delegation in the Capital which is working on a Defence Protocol on Moscow’s offer to New Delhi for a joint programme for development of futuristic weapons systems. The protocol is due to be signed on Wednesday.
According to sources, Russia has already made a formal offer to India to join its project for development of a fifth-generation fighter jet.
The two nations interacted on development of the Sukhoi Su-30MK1 multi-role fighter for the Indian Air Force, have a joint venture for production of the Brahmos-PJ-10 anti-ship cruise missile, and are jointly developing the Ilyushin-IL-214/MTA multi-role transport plane. Sources said Russia is building three Krivak-class stealth frigates for the Indian navy and is to supply advanced weapon systems for India’s stealth frigate Project 17.
Mightiest military force in history leaves all in its wake
By Ruprt Cornwell in Washington
08 February 2002
Patriotic, applause-drenched occasions have become routine since 11 September. And what President Bush actually said the other day superficially sounded pretty routine too, as he made the easiest sales pitch imaginable in America – the Pentagon's military budget.
"We will not stop until the threat of global terrorism has been destroyed," he told cheering US servicemen at Eglin Air Force Base in Florida, weighing in again against what he terms the "axis of evil", a description Europe denounces as simplistic nonsense. "The message has been made clear to the enemy. It has been made clear to the world. It is being delivered by the finest military ever assembled, the United States military."
But the facts behind the flag-waving are anything but routine. The relative quality of the US fighting man may be a matter of debate. America now accounts for 36 per cent of global defence spending – a share the historian Paul Kennedy, author of The Rise and Fall of the Great Powers, has pointed out, is the largest portion of global defence spending seen by a single country. Not even the Roman Empire could claim so much.
To put things into perspective, the $48bn (£34bn) increase in the Pentagon's fiscal 2003 budget is close to one and a half times as much as the entire annual defence spending of Britain or France. America's defence spending now exceeds the 15 next-largest military budgets combined.
And if anything this gap is growing. In recession-bound Europe the pressures are to cut, not expand, defence expenditure. Russia, traditionally the second-biggest spender, is desperate to divert resources into other areas. Many of the other big spenders, such as Taiwan and Saudi Arabia, are virtual client states of America, buying American weapons.
Meanwhile the US continues to widen its superiority in electronic warfare, in precision-guided munitions and in the unmanned drones that are becoming weapons platforms in their own right.
The imbalance between America and the rest of its allies is raising dark questions for Nato. At last weekend's Wehrkunde meeting of defence officials in Munich, two questions underlay the complaints about America's perceived unilateralism and aversion to prior consultations with its allies: can the Alliance function without America, and does America need Nato in any case?
Afghanistan illustrated the dilemma perfectly. On paper there was a "coalition"; in practice only Britain, Australia and Canada made any meaningful contribution. Washington drew two lessons from the Kosovo war: that air power can win wars; and that you do not run wars by committee.
Mr Kennedy argued that the decline of great powers – Spain, France, Britain and most recently the Soviet Union – was due to military overstretch, and the taking on of commitments that simply could not be sustained or financed. But on both scores, America looks safe.
It maintains scores of bases overseas, and thanks to 12 – soon to be 13 – aircraft carrier groups can project power almost immediately to any corner of the globe. But it is not an imperial power in the old sense, occupying great tracts of territory as did Britain or the Soviet Union. Indeed, as Afghanistan shows, America does not want overseas entanglement. Get in, win the war, then get out and let others provide the permanent peace-keepers, runs the new Bush doctrine.
And as Donald Rumsfeld, the Defence Secretary, pointed out this week, "$379bn (£270bn) is a great deal of money, but it accounts only for 3.3 per cent of GDP." America's 2003 budget is in deficit but only by 1 per cent of GDP – virtuous by European standards.
All this is happening as America continues to pour tens of billions of dollars into vast, baroque weapons programmes – the new stealth F-22 fighter, the Comanche helicopter, and the uprated F/A-18E/F fighter, not to mention missile defence. These weapons are of little relevance for the crushing of the "axis of evil" whose three members, Iran, Iraq and North Korea, have a combined military budget of just $12bn.
Of course Afghanistan was a push-over, a poor, war-ruined country pummelled at will by its opponent in a military mismatch equivalent to Manchester United playing a pick-up village football team. Future foes, perhaps Iraq, will not be so swiftly overcome. China will undoubtedly become a more important military player. But for the foreseeable future the world must live with a Pax Americana, enforced by the mightiest military in history.
By Ruprt Cornwell in Washington
08 February 2002
Patriotic, applause-drenched occasions have become routine since 11 September. And what President Bush actually said the other day superficially sounded pretty routine too, as he made the easiest sales pitch imaginable in America – the Pentagon's military budget.
"We will not stop until the threat of global terrorism has been destroyed," he told cheering US servicemen at Eglin Air Force Base in Florida, weighing in again against what he terms the "axis of evil", a description Europe denounces as simplistic nonsense. "The message has been made clear to the enemy. It has been made clear to the world. It is being delivered by the finest military ever assembled, the United States military."
But the facts behind the flag-waving are anything but routine. The relative quality of the US fighting man may be a matter of debate. America now accounts for 36 per cent of global defence spending – a share the historian Paul Kennedy, author of The Rise and Fall of the Great Powers, has pointed out, is the largest portion of global defence spending seen by a single country. Not even the Roman Empire could claim so much.
To put things into perspective, the $48bn (£34bn) increase in the Pentagon's fiscal 2003 budget is close to one and a half times as much as the entire annual defence spending of Britain or France. America's defence spending now exceeds the 15 next-largest military budgets combined.
And if anything this gap is growing. In recession-bound Europe the pressures are to cut, not expand, defence expenditure. Russia, traditionally the second-biggest spender, is desperate to divert resources into other areas. Many of the other big spenders, such as Taiwan and Saudi Arabia, are virtual client states of America, buying American weapons.
Meanwhile the US continues to widen its superiority in electronic warfare, in precision-guided munitions and in the unmanned drones that are becoming weapons platforms in their own right.
The imbalance between America and the rest of its allies is raising dark questions for Nato. At last weekend's Wehrkunde meeting of defence officials in Munich, two questions underlay the complaints about America's perceived unilateralism and aversion to prior consultations with its allies: can the Alliance function without America, and does America need Nato in any case?
Afghanistan illustrated the dilemma perfectly. On paper there was a "coalition"; in practice only Britain, Australia and Canada made any meaningful contribution. Washington drew two lessons from the Kosovo war: that air power can win wars; and that you do not run wars by committee.
Mr Kennedy argued that the decline of great powers – Spain, France, Britain and most recently the Soviet Union – was due to military overstretch, and the taking on of commitments that simply could not be sustained or financed. But on both scores, America looks safe.
It maintains scores of bases overseas, and thanks to 12 – soon to be 13 – aircraft carrier groups can project power almost immediately to any corner of the globe. But it is not an imperial power in the old sense, occupying great tracts of territory as did Britain or the Soviet Union. Indeed, as Afghanistan shows, America does not want overseas entanglement. Get in, win the war, then get out and let others provide the permanent peace-keepers, runs the new Bush doctrine.
And as Donald Rumsfeld, the Defence Secretary, pointed out this week, "$379bn (£270bn) is a great deal of money, but it accounts only for 3.3 per cent of GDP." America's 2003 budget is in deficit but only by 1 per cent of GDP – virtuous by European standards.
All this is happening as America continues to pour tens of billions of dollars into vast, baroque weapons programmes – the new stealth F-22 fighter, the Comanche helicopter, and the uprated F/A-18E/F fighter, not to mention missile defence. These weapons are of little relevance for the crushing of the "axis of evil" whose three members, Iran, Iraq and North Korea, have a combined military budget of just $12bn.
Of course Afghanistan was a push-over, a poor, war-ruined country pummelled at will by its opponent in a military mismatch equivalent to Manchester United playing a pick-up village football team. Future foes, perhaps Iraq, will not be so swiftly overcome. China will undoubtedly become a more important military player. But for the foreseeable future the world must live with a Pax Americana, enforced by the mightiest military in history.
Cheney goes from asset to albatross
02/04/02
Two things stand out as President Bush ends his first year in office, and both are surprises, one pleasant, the other not so.
The first, of course, is Bush's emergence in the wake of the World Trade Center attack as a forthright manager of the Free World's response to terrorism, even an unexpectedly articulate one, as his State of the Union message demonstrated. The second, alas, is the decline -- in both importance and as a political asset -- of Vice President Dick Cheney.
Until just five months ago, Cheney was widely seen as the senior partner in the Bush administration, the old pro who'd take a rookie president by the hand and lead him safely through the Washington minefield. It was not an unwarranted assessment.
Cheney's selection as Bush's running mate, while a bit of a letdown when first announced, proved an inspired choice in the campaign. He lent weight and authority to the team, substance to a presidential nominee who seemed superficial, and he came off a clear winner in his vice presidential debate with Democratic Sen. Joseph Lieberman.
He had credentials. He'd been chief of staff in the Ford White House 25 years earlier and defense secretary during the Gulf War. He'd pick up the ball if Bush dropped it.
All that has changed since Sept. 11. While Cheney seemed to vanish into the White House woodwork -- the joke was "Who'll be found first, Cheney or bin Laden?" -- Bush has moved to center stage, nationally and around the globe. No longer does he share the spotlight with Cheney as he did for many of his first days on the job.
It couldn't be any other way, really. No one, here or overseas, would settle for less than the commander in chief as out-front leader of an effort Bush himself labeled a war -- one that would project U.S. power across the globe and require commitments from other nations. Only the President himself would do.
But Cheney's decline involves more. Once an indisputable asset, the vice president is now a potential liability. His problem: He's the poster boy for the claims that this administration is far too cozy with corporate America, a patsy for the boys in the boardroom, even the bad boys from Enron.
Cheney's corporate connections and bias toward big business are well-established. Even in his time as a conservative Wyoming congressman, he was deemed a lock to vote for almost anything corporate America wanted, especially the extraction industry -- oil, gas, mining. The connection deepened in his post-Washington years when he became a top executive for Halliburton, a Texas oil firm. It was while working for Halliburton that Cheney agreed to lead the vice president search that wound up selecting him.
That background alone was enough to raise Democratic hackles when Bush put Cheney in charge of closed-door deliberations to develop a new national energy policy. Bush, it seemed, was about to hand a bonanza to his oil business buddies, with Cheney, an old Texas oil hand himself, cutting up the cake. Then along came Enron, the icing on the cake.
A demonstrably crooked company -- it cooked the books -- Enron and its bosses had a ringside seat at the energy deliberations, and Congress, even some Republicans, wants to know who said what to whom when the doors were closed.
Trouble is, Cheney won't tell. With Bush's blessing, he has refused to turn over any information about the sessions, prompting the General Accounting Office, Congress' watchdog, to announce it will sue for at least some information -- who participated, for example, and how often -- if not for meeting minutes.
It's a battle with constitutional and political implications. The White House argues that a Congress poking its nose into such executive branch decision-making violates the separation of powers principle and that no one will talk to the White House if its confidences are later exposed.
Both are good points. But Congress has an oversight responsibility that can clash with this notion of all-inclusive executive privilege. Bill Clinton turned over such information to Congress regularly. And some of the same congressional Republicans who defend the Cheney stonewall were just as insistent that Hillary Clinton turn over documents from her closed-door health reform deliberations.
It's an issue for the courts and one that Bush could win. But from a political standpoint, it's a likely loser.
With critical congressional elections on tap in November and the fragile economy an issue, Bush and Republicans need to distance themselves a bit from business. It won't be easy. Democrats have failed so far to tie the Enron tin can to the GOP tail, but Cheney's stonewalling on energy deliberations gives them enough ammunition to keep the issue alive. He's the liability they love.
John Farmer is The Star-Ledger's national political correspondent.
02/04/02
Two things stand out as President Bush ends his first year in office, and both are surprises, one pleasant, the other not so.
The first, of course, is Bush's emergence in the wake of the World Trade Center attack as a forthright manager of the Free World's response to terrorism, even an unexpectedly articulate one, as his State of the Union message demonstrated. The second, alas, is the decline -- in both importance and as a political asset -- of Vice President Dick Cheney.
Until just five months ago, Cheney was widely seen as the senior partner in the Bush administration, the old pro who'd take a rookie president by the hand and lead him safely through the Washington minefield. It was not an unwarranted assessment.
Cheney's selection as Bush's running mate, while a bit of a letdown when first announced, proved an inspired choice in the campaign. He lent weight and authority to the team, substance to a presidential nominee who seemed superficial, and he came off a clear winner in his vice presidential debate with Democratic Sen. Joseph Lieberman.
He had credentials. He'd been chief of staff in the Ford White House 25 years earlier and defense secretary during the Gulf War. He'd pick up the ball if Bush dropped it.
All that has changed since Sept. 11. While Cheney seemed to vanish into the White House woodwork -- the joke was "Who'll be found first, Cheney or bin Laden?" -- Bush has moved to center stage, nationally and around the globe. No longer does he share the spotlight with Cheney as he did for many of his first days on the job.
It couldn't be any other way, really. No one, here or overseas, would settle for less than the commander in chief as out-front leader of an effort Bush himself labeled a war -- one that would project U.S. power across the globe and require commitments from other nations. Only the President himself would do.
But Cheney's decline involves more. Once an indisputable asset, the vice president is now a potential liability. His problem: He's the poster boy for the claims that this administration is far too cozy with corporate America, a patsy for the boys in the boardroom, even the bad boys from Enron.
Cheney's corporate connections and bias toward big business are well-established. Even in his time as a conservative Wyoming congressman, he was deemed a lock to vote for almost anything corporate America wanted, especially the extraction industry -- oil, gas, mining. The connection deepened in his post-Washington years when he became a top executive for Halliburton, a Texas oil firm. It was while working for Halliburton that Cheney agreed to lead the vice president search that wound up selecting him.
That background alone was enough to raise Democratic hackles when Bush put Cheney in charge of closed-door deliberations to develop a new national energy policy. Bush, it seemed, was about to hand a bonanza to his oil business buddies, with Cheney, an old Texas oil hand himself, cutting up the cake. Then along came Enron, the icing on the cake.
A demonstrably crooked company -- it cooked the books -- Enron and its bosses had a ringside seat at the energy deliberations, and Congress, even some Republicans, wants to know who said what to whom when the doors were closed.
Trouble is, Cheney won't tell. With Bush's blessing, he has refused to turn over any information about the sessions, prompting the General Accounting Office, Congress' watchdog, to announce it will sue for at least some information -- who participated, for example, and how often -- if not for meeting minutes.
It's a battle with constitutional and political implications. The White House argues that a Congress poking its nose into such executive branch decision-making violates the separation of powers principle and that no one will talk to the White House if its confidences are later exposed.
Both are good points. But Congress has an oversight responsibility that can clash with this notion of all-inclusive executive privilege. Bill Clinton turned over such information to Congress regularly. And some of the same congressional Republicans who defend the Cheney stonewall were just as insistent that Hillary Clinton turn over documents from her closed-door health reform deliberations.
It's an issue for the courts and one that Bush could win. But from a political standpoint, it's a likely loser.
With critical congressional elections on tap in November and the fragile economy an issue, Bush and Republicans need to distance themselves a bit from business. It won't be easy. Democrats have failed so far to tie the Enron tin can to the GOP tail, but Cheney's stonewalling on energy deliberations gives them enough ammunition to keep the issue alive. He's the liability they love.
John Farmer is The Star-Ledger's national political correspondent.
Tuesday, February 05, 2002
Giuliani's Paper Play
Irks Some Historians
Rudy documents out of city hands
By JOANNE WASSERMAN
Daily News City Hall Bureau
When former Mayor Rudy Giuliani trucked his City Hall papers to a private Queens warehouse last month, he took a step no other mayor ever has taken.
Rudy Giuliani
Backed by an unprecedented agreement signed a week before he left office, Giuliani carted away more than 2,000 boxes of memos, pictures and phone logs — material that other modern-day mayors have handed over directly to the city — and placed them in a state-of-the-art storage facility at his own expense.
While the agreement says the city "retains ownership" and "ultimate control" over the boxes' contents, it also grants Giuliani the right to withhold from the public any document he considers of "personal interest."
That agreement has put the papers at the center of an angry debate, with historians, scholars and media organizations charging that the former mayor circumvented the City Charter in an effort to craft his image as he sees fit.
Giuliani's supporters insist he is saving the taxpayers money by paying for a job that underfunded city archivists can't handle — an argument somewhat supported by the uneven condition of some other mayoral archives reviewed by the Daily News.
But where some see good intentions, others see a clear attempt to thwart laws and traditions that for decades have granted the city — not its mayors — the power to choose what is public and what is private.
"It's something that shouldn't have been done," said John Manbeck, chairman of the city Archives Advisory Board, which will meet Feb. 13 to discuss what to recommend regarding Giuliani's papers. "We have eight years of documents that are not accessible."
Added Mike Wallace, the Pulitzer Prize-winning historian of New York City, "People are outraged over what Giuliani did. This guy walked off with papers that never should have left City Hall."
Petition Campaign
Records from ex-Mayor Rudy Giuliani's administration have been moved to private Fortress warehouse in Long Island City, Queens.
Wallace has mounted an Internet campaign featuring a petition that's received more than 880 signatures, calling on Mayor Bloomberg to terminate the contract between Giuliani and the city. Wallace and a group of archivists will hold a City Hall press conference tomorrow to present the petition to the mayor.
So far, Bloomberg has let the contract stand, saying recently, "Anything that makes it more difficult to get information is unfortunate, but some of these documents are documents that the mayor has a right to have.
"It is perfectly legal, if I understand it," he added. "We have a right to get the documents back, and you can get them under the Freedom of Information Law."
The News found that the city does not require freedom-of-information requests to see materials from any of six previous mayors, including Fiorello LaGuardia and David Dinkins. The records are public and can be accessed by filling out a simple form — and information is not edited or blacked out.
"We are not the FBI," said one Municipal Archives staffer.
Charter Regulations
Under the City Charter, the Municipal Archives has been designated to receive all city records "in connection with the transaction of official city business."
Deciding what's "official city business" has been somewhat subjective. Using guidelines created by Eugene Bockman — the first commissioner of the Department of Records and Information Services — city archivists have broadly interpreted the provision, keeping virtually all papers in the public record.
Richard Lieberman, director of the LaGuardia and Wagner archives, helped decide what was public for three mayors: LaGuardia, Robert Wagner and Ed Koch.
When the LaGuardia and Wagner archives at LaGuardia Community College raised money and catalogued Koch's mayoral papers, neither Koch nor his agents played any role in determining what should be part of the public record.
"We never went to him for any decision about what was public or private," Lieberman said. "The decision was made by us and the city."
He said that even when the brain X-rays from Koch's August 1987 stroke were found in the files, archivists decided to keep the medical records public.
Papers considered private are generally from nonmayoral years and from mayoral campaigns, Lieberman said.
In Koch's case, those papers labeled private will be made public after historian Jonathan Soffer, who is writing a biography of the former mayor, is done with them, officials said.
Since he left office, Giuliani set up the Rudolph W. Giuliani Center for Urban Affairs, a nonprofit corporation established to raise money and care for his papers.
Saul Cohen, a close friend of Giuliani's and president of the center, said last week he had hired the Winthrop Group, a private archival consulting firm, to oversee the papers.
He bristled at those who suggest Giuliani did something wrong.
"I went out and retained the finest group of private archivists, who are subject to a strict code of ethics," said Cohen, a lawyer. "If that leaves people unhappy, --- 'em."
Trade Center Files, Tapes
The treasure trove of Giuliani documents includes World Trade Center files, 6,000 files of photographs and negatives, audio tapes of cabinet meetings, e-mails and telephone logs.
The document transfer to the Fortress, a private facility in Long Island City, was reported by The News last month.
As required in the agreement, Cohen said the city received a 15-page plan from the Winthrop Group yesterday detailing how it will work with the city to catalogue the documents.
"[City officials] are the ones who are going to set the standards," he said of the Winthrop Group. "No one from the [Giuliani] Center has shown any interest in looking at the documents. The [Winthrop] archivists are going to work with the city. It's all very professional."
The archival work is expected to cost more than $1 million, which will be raised privately, Cohen said.
Still, the agreement provides Giuliani with far greater control over the papers than other mayors have enjoyed. That power flows mainly from a clause in the agreement that states:
"Whenever [Giuliani] has a personal interest or right in a document separate and apart from the interests and rights of the city, his approval shall be required before any document may be released or disclosed by the center to the public.
"Such approval," the agreement adds, "shall be in addition to, and not in lieu of, the approval of the city."
The agreement also says the center "may not destroy any document without the prior written approval of the city."
Contents Unknown
Still, some are concerned that Giuliani or his hired archivists could remove or destroy documents that they decide are unflattering to him — and no one from the city would ever know.
In the past, when city archivists received mayoral papers, they created a "finding index" that broadly lists what is in the documents. But Giuliani's documents were moved before any index could be created, leaving the city to take his word that the papers are complete.
"The city has no control," said Idilio Gracia-Pena, who was the city's archives director for 12 years. "[The city] doesn't know what [Giuliani] has, so they won't know what they'll get back."
Cohen insisted the Winthrop archivists "know what private documents are" and repeated that they would not destroy any papers without discussion with city officials.
He also insisted the city's municipal archives are not up to the task.
In a report prepared for Cohen, the Winthrop Group found the city's Department of Records had an "inability to meet accepted archival processing standards" and that mayoral records "are stored in a sub-basement ... which lacks consistent environmental controls ... [and] is subject to flooding and water damage."
However, historians and scholars who use the city's archives insist the records are not in any danger.
"I've been to the municipal archives hundreds of times over the last 20 years, and you can eat off the floors," Lieberman, the archivist, said. "I would gladly take anybody on a tour of the sub-basement and show the pristine, temperature-controlled conditions."
Cohen insisted Giuliani is in a different league from the other mayors and that his documents deserve different treatment than the city archives can provide.
"These people have a narrow view of who [Giuliani] is," said Cohen. "He is beyond a New York City mayor — he is of national interest.
"The man is a national hero," Cohen continued. "His record is of national importance, and that interest has to be preserved."
Giuliani's Paper Play
Irks Some Historians
Rudy documents out of city hands
By JOANNE WASSERMAN
Daily News City Hall Bureau
When former Mayor Rudy Giuliani trucked his City Hall papers to a private Queens warehouse last month, he took a step no other mayor ever has taken.
Rudy Giuliani
Backed by an unprecedented agreement signed a week before he left office, Giuliani carted away more than 2,000 boxes of memos, pictures and phone logs — material that other modern-day mayors have handed over directly to the city — and placed them in a state-of-the-art storage facility at his own expense.
While the agreement says the city "retains ownership" and "ultimate control" over the boxes' contents, it also grants Giuliani the right to withhold from the public any document he considers of "personal interest."
That agreement has put the papers at the center of an angry debate, with historians, scholars and media organizations charging that the former mayor circumvented the City Charter in an effort to craft his image as he sees fit.
Giuliani's supporters insist he is saving the taxpayers money by paying for a job that underfunded city archivists can't handle — an argument somewhat supported by the uneven condition of some other mayoral archives reviewed by the Daily News.
But where some see good intentions, others see a clear attempt to thwart laws and traditions that for decades have granted the city — not its mayors — the power to choose what is public and what is private.
"It's something that shouldn't have been done," said John Manbeck, chairman of the city Archives Advisory Board, which will meet Feb. 13 to discuss what to recommend regarding Giuliani's papers. "We have eight years of documents that are not accessible."
Added Mike Wallace, the Pulitzer Prize-winning historian of New York City, "People are outraged over what Giuliani did. This guy walked off with papers that never should have left City Hall."
Petition Campaign
Records from ex-Mayor Rudy Giuliani's administration have been moved to private Fortress warehouse in Long Island City, Queens.
Wallace has mounted an Internet campaign featuring a petition that's received more than 880 signatures, calling on Mayor Bloomberg to terminate the contract between Giuliani and the city. Wallace and a group of archivists will hold a City Hall press conference tomorrow to present the petition to the mayor.
So far, Bloomberg has let the contract stand, saying recently, "Anything that makes it more difficult to get information is unfortunate, but some of these documents are documents that the mayor has a right to have.
"It is perfectly legal, if I understand it," he added. "We have a right to get the documents back, and you can get them under the Freedom of Information Law."
The News found that the city does not require freedom-of-information requests to see materials from any of six previous mayors, including Fiorello LaGuardia and David Dinkins. The records are public and can be accessed by filling out a simple form — and information is not edited or blacked out.
"We are not the FBI," said one Municipal Archives staffer.
Charter Regulations
Under the City Charter, the Municipal Archives has been designated to receive all city records "in connection with the transaction of official city business."
Deciding what's "official city business" has been somewhat subjective. Using guidelines created by Eugene Bockman — the first commissioner of the Department of Records and Information Services — city archivists have broadly interpreted the provision, keeping virtually all papers in the public record.
Richard Lieberman, director of the LaGuardia and Wagner archives, helped decide what was public for three mayors: LaGuardia, Robert Wagner and Ed Koch.
When the LaGuardia and Wagner archives at LaGuardia Community College raised money and catalogued Koch's mayoral papers, neither Koch nor his agents played any role in determining what should be part of the public record.
"We never went to him for any decision about what was public or private," Lieberman said. "The decision was made by us and the city."
He said that even when the brain X-rays from Koch's August 1987 stroke were found in the files, archivists decided to keep the medical records public.
Papers considered private are generally from nonmayoral years and from mayoral campaigns, Lieberman said.
In Koch's case, those papers labeled private will be made public after historian Jonathan Soffer, who is writing a biography of the former mayor, is done with them, officials said.
Since he left office, Giuliani set up the Rudolph W. Giuliani Center for Urban Affairs, a nonprofit corporation established to raise money and care for his papers.
Saul Cohen, a close friend of Giuliani's and president of the center, said last week he had hired the Winthrop Group, a private archival consulting firm, to oversee the papers.
He bristled at those who suggest Giuliani did something wrong.
"I went out and retained the finest group of private archivists, who are subject to a strict code of ethics," said Cohen, a lawyer. "If that leaves people unhappy, --- 'em."
Trade Center Files, Tapes
The treasure trove of Giuliani documents includes World Trade Center files, 6,000 files of photographs and negatives, audio tapes of cabinet meetings, e-mails and telephone logs.
The document transfer to the Fortress, a private facility in Long Island City, was reported by The News last month.
As required in the agreement, Cohen said the city received a 15-page plan from the Winthrop Group yesterday detailing how it will work with the city to catalogue the documents.
"[City officials] are the ones who are going to set the standards," he said of the Winthrop Group. "No one from the [Giuliani] Center has shown any interest in looking at the documents. The [Winthrop] archivists are going to work with the city. It's all very professional."
The archival work is expected to cost more than $1 million, which will be raised privately, Cohen said.
Still, the agreement provides Giuliani with far greater control over the papers than other mayors have enjoyed. That power flows mainly from a clause in the agreement that states:
"Whenever [Giuliani] has a personal interest or right in a document separate and apart from the interests and rights of the city, his approval shall be required before any document may be released or disclosed by the center to the public.
"Such approval," the agreement adds, "shall be in addition to, and not in lieu of, the approval of the city."
The agreement also says the center "may not destroy any document without the prior written approval of the city."
Contents Unknown
Still, some are concerned that Giuliani or his hired archivists could remove or destroy documents that they decide are unflattering to him — and no one from the city would ever know.
In the past, when city archivists received mayoral papers, they created a "finding index" that broadly lists what is in the documents. But Giuliani's documents were moved before any index could be created, leaving the city to take his word that the papers are complete.
"The city has no control," said Idilio Gracia-Pena, who was the city's archives director for 12 years. "[The city] doesn't know what [Giuliani] has, so they won't know what they'll get back."
Cohen insisted the Winthrop archivists "know what private documents are" and repeated that they would not destroy any papers without discussion with city officials.
He also insisted the city's municipal archives are not up to the task.
In a report prepared for Cohen, the Winthrop Group found the city's Department of Records had an "inability to meet accepted archival processing standards" and that mayoral records "are stored in a sub-basement ... which lacks consistent environmental controls ... [and] is subject to flooding and water damage."
However, historians and scholars who use the city's archives insist the records are not in any danger.
"I've been to the municipal archives hundreds of times over the last 20 years, and you can eat off the floors," Lieberman, the archivist, said. "I would gladly take anybody on a tour of the sub-basement and show the pristine, temperature-controlled conditions."
Cohen insisted Giuliani is in a different league from the other mayors and that his documents deserve different treatment than the city archives can provide.
"These people have a narrow view of who [Giuliani] is," said Cohen. "He is beyond a New York City mayor — he is of national interest.
"The man is a national hero," Cohen continued. "His record is of national importance, and that interest has to be preserved."
Treasury's O'Neill, Senator Byrd Trade Barbs
Thu Feb 7, 3:00 PM ET
By Glenn Somerville
WASHINGTON (Reuters) - A routine Senate hearing took a strange twist on Thursday when an infuriated Treasury Secretary Paul O'Neill traded barbs with Democratic Sen. Robert Byrd, the longest-serving member of U.S. Congress, over who grew up poorer.
Photos
Reuters Photo
But when asked later about a report that there were tears in his eyes during the heated exchange with the 84-year-old West Virginia Senator, O'Neill shot back: "That was fire."
The spat began when Byrd took offense to a cartoon in the Bush administration's 2003 budget document, released on Monday, showing Gulliver tied down by Lilliputians, which the West Virginia senator said implied the interests of ordinary people were too minor to warrant consideration.
The silver-haired Byrd, renowned for his insistence that the White House show respect for Congress, then snapped: "I've been here for 50 years (and) we're here to represent the interests of the people."
Byrd labeled the cartoon's inclusion in the glossy, photo-filled, flag-emblazoned budget document -- a departure from the usual plain-paper, plain-cover plan the White House usually produces -- "nonsense" and added: "A lot of us were here before you. You're not Alexander Hamilton."
Hamilton was the first secretary of the U.S. Treasury, who served from 1789 until 1795 and who established basic economic policy for the United States.
O'Neill, a wealthy former industrialist, was clearly agitated by Byrd's manner and fired back: "I've dedicated my life to doing what I can to getting rid of rules that limit human potential and I'm not going to stop."
Sitting ramrod straight at the witness desk, O'Neill rejected any implication that he lacked empathy for ordinary working Americans and said his own beginnings were humble.
A LADDER WITHOUT RUNGS
"I started my life in a house without water or electricity so I don't cede the high moral ground to you of knowing what life was like in a ditch," O'Neill said in a tightly controlled voice.
Byrd was swift with a riposte. "I started out in life without any rungs in the bottom of the ladder...I've had that experience and I can stand toe-to-toe with you," he said.
The West Virginia Senator then threw in a reference to an early controversy involving O'Neill, who initially resisted putting his huge personal stock holdings into a trust when he was appointed Treasury secretary but eventually did so.
"I haven't walked in any corporate boardrooms. I haven't had to turn millions of dollars into trust accounts -- I wish I had those millions of dollars." Byrd said.
"I grew up in a coal-miner's home and I married a coal-miner's daughter, so I hope you don't want to start down this road and talk about our backgrounds and how far back we came from," he added.
NOT THE FIRST TIME
Even after the normal committee business resumed, the touchiness between O'Neill and Byrd occasionally flared.
As Sen. Gordon Smith (R-Ore), led O'Neill through a series of gentle questions and said he hoped the Treasury secretary hadn't felt "demeaned," he noted that O'Neill clearly didn't need the job.
Byrd quickly interjected. "I don't need to serve here either. I could retire and get more money," he said tartly.
The exchange came at the start of O'Neill's fourth appearance on Capitol Hill this week to discuss and defend the Bush budget proposals, but it was by far the liveliest. Veterans of the Senate Budget Committee took it in stride, though, especially Sen. Byrd's participation in it.
"He's skewered witnesses before," a Senate aide said afterward. "This is not a first."
Nor is it the first tense moment between Byrd and the Treasury secretary, whose fondness for plain speaking has landed him in hot water with Congress before.
During a Senate Budget panel hearing last March, Byrd, a vocal guardian of Senate etiquette, took O'Neill sharply to task for interrupting Michigan Sen. Debbie Stabenow, a Democrat, as she questioned the Treasury chief about Bush's tax-cut plan.
Thu Feb 7, 3:00 PM ET
By Glenn Somerville
WASHINGTON (Reuters) - A routine Senate hearing took a strange twist on Thursday when an infuriated Treasury Secretary Paul O'Neill traded barbs with Democratic Sen. Robert Byrd, the longest-serving member of U.S. Congress, over who grew up poorer.
Photos
Reuters Photo
But when asked later about a report that there were tears in his eyes during the heated exchange with the 84-year-old West Virginia Senator, O'Neill shot back: "That was fire."
The spat began when Byrd took offense to a cartoon in the Bush administration's 2003 budget document, released on Monday, showing Gulliver tied down by Lilliputians, which the West Virginia senator said implied the interests of ordinary people were too minor to warrant consideration.
The silver-haired Byrd, renowned for his insistence that the White House show respect for Congress, then snapped: "I've been here for 50 years (and) we're here to represent the interests of the people."
Byrd labeled the cartoon's inclusion in the glossy, photo-filled, flag-emblazoned budget document -- a departure from the usual plain-paper, plain-cover plan the White House usually produces -- "nonsense" and added: "A lot of us were here before you. You're not Alexander Hamilton."
Hamilton was the first secretary of the U.S. Treasury, who served from 1789 until 1795 and who established basic economic policy for the United States.
O'Neill, a wealthy former industrialist, was clearly agitated by Byrd's manner and fired back: "I've dedicated my life to doing what I can to getting rid of rules that limit human potential and I'm not going to stop."
Sitting ramrod straight at the witness desk, O'Neill rejected any implication that he lacked empathy for ordinary working Americans and said his own beginnings were humble.
A LADDER WITHOUT RUNGS
"I started my life in a house without water or electricity so I don't cede the high moral ground to you of knowing what life was like in a ditch," O'Neill said in a tightly controlled voice.
Byrd was swift with a riposte. "I started out in life without any rungs in the bottom of the ladder...I've had that experience and I can stand toe-to-toe with you," he said.
The West Virginia Senator then threw in a reference to an early controversy involving O'Neill, who initially resisted putting his huge personal stock holdings into a trust when he was appointed Treasury secretary but eventually did so.
"I haven't walked in any corporate boardrooms. I haven't had to turn millions of dollars into trust accounts -- I wish I had those millions of dollars." Byrd said.
"I grew up in a coal-miner's home and I married a coal-miner's daughter, so I hope you don't want to start down this road and talk about our backgrounds and how far back we came from," he added.
NOT THE FIRST TIME
Even after the normal committee business resumed, the touchiness between O'Neill and Byrd occasionally flared.
As Sen. Gordon Smith (R-Ore), led O'Neill through a series of gentle questions and said he hoped the Treasury secretary hadn't felt "demeaned," he noted that O'Neill clearly didn't need the job.
Byrd quickly interjected. "I don't need to serve here either. I could retire and get more money," he said tartly.
The exchange came at the start of O'Neill's fourth appearance on Capitol Hill this week to discuss and defend the Bush budget proposals, but it was by far the liveliest. Veterans of the Senate Budget Committee took it in stride, though, especially Sen. Byrd's participation in it.
"He's skewered witnesses before," a Senate aide said afterward. "This is not a first."
Nor is it the first tense moment between Byrd and the Treasury secretary, whose fondness for plain speaking has landed him in hot water with Congress before.
During a Senate Budget panel hearing last March, Byrd, a vocal guardian of Senate etiquette, took O'Neill sharply to task for interrupting Michigan Sen. Debbie Stabenow, a Democrat, as she questioned the Treasury chief about Bush's tax-cut plan.
MIDDLE EAST: RIFT BETWEEN USA AND EU
As Ariel Sharon tries to convince George Bush that Arafat is a spent force, the European union disagrees with Washington’s Middle East policy.
Ariel Sharon has two main objectives on his visit to Washington: to bulldoze George Bush, as his forces bulldoze Palestinian homes, to ostracise Yasser Arafat as a pariah and to gain a promise from the USA that Hezbollah will be considered as a terrorist organisation.
Sharon has met in recent days with Ahmad Qorei (also known as Abu Alaa) and Mahmmud Abbas (known as Abu Mazen), although without success, as he tries to divide the Palestinian cause and to find a successor to Yasser Arafat. The choice of these two Palestinian leaders is not by chance. On the subject of his succession, Yasser Arafat declared to the Palestinian daily Al-Ittihad and the weekly Al-Mussawar, that “According to the law, it is the head of legislative power who will lead the Palestine Authority for 60 days until a new leader is elected”. Ahmad Qorei is the President of the Palestinian legislative council and Mahmmud Abbas is Secretary-General of the executive committee of the PLO.
The Israeli Defence Minister, Ben-Eliezer, in a meeting with Kofi Annan on Tuesday, said that “I do not see that there is any way for us to continue working with Arafat, while he is compromised with a position which faces the past and not the future”.
Reiterating Sharon’s stance against Hezbollah, he claimed “Hezbollah is one of the most aggressive and dramatic terrorist organisations in the world. As you have already heard, Al-Qaeda is infiltrating Hezbollah in the Lebanon and if they start working together, it will not be good for the freedom of the world”.
This position will further highlight the strain on relations between Washington and Iran, after George Bush’s “axis of evil” speech in the State of the Union speech. Israel points out that Iran supplied Hezbollah recently with 8,000 katiushka rockets and shipped 50 tonnes of arms to this faction on the ship Katrina A, intercepted in the Mediterranean.
Sharon declared to the New York Times recently that “Iran wants the destruction of the State of Israel and the elimination of the Jewish people. For this reason, it was very important that president Bush should have named Iran as a sponsor of terrorism”.
The Israeli government and George Bush may be walking hand in hand, but this position is not adopted by all. Miguel Angel Moratinos, the European Union Middle East envoy, recently visited Arafat in his virtual prison at Ramallah in a show of solidarity, while the French Foreign Minister, Hubert Vedrine, stated that “The Europeans are unanimous in not supporting the policy of the White House for the Middle East”.
Even within the United States, there is support for Arafat. William Burns, the US special envoy for the Middle East, declared in Cairo that “Our position is very clear: President Arafat is the elected leader of the Palestinian people and we shall continue to work with the Palestine Authority”.
US Secretary of State Colin Powell was presented with a dossier drawn up by the Palestine Authority, in which was shown that the Palestine Authority has arrested 195 extremist militants, has closed down 79 suspicious organisations, has frozen 56 bank accounts, closed 15 munitions factories and has ended extremist prayers at Mosques.
Sharon, however, the self-proclaimed man of peace, currently under investigation in Brussels for crimes against humanity, due to his involvement in the massacres at Sabra and Chatila, 1982, in the Lebanon, continues to disbelieve that Arafat is making a serious attempt to achieve peace.
His arrogant visit to the Esplanade of the Mosques on September 2000 sparked off the Intifada which has caused over 1,000 deaths. Accepting the Tenet (EU) and Mitchell (USA) plans, but imposing conditions which made them impracticable, such as “total calm” before negotiations, while Israeli troops carried out brutal acts of aggression against Palestinians, makes it clear that he is the one who is not making serious efforts to achieve peace.
While the Palestinian lands are occupied, while their houses are demolished, while their children are shot in the eyes with rubber bullets, while their pregnant women are left to die in the streets with laughing Israeli soldiers looking on, while their lands are expropriated and while they are attacked by the vicious colonies, the kamikaze attacks will continue.
The answer is very simple and it does not reside at the White House, but rather in Tel Aviv.
Timothy BANCROFT-HINCHEY
PRAVDA.Ru
As Ariel Sharon tries to convince George Bush that Arafat is a spent force, the European union disagrees with Washington’s Middle East policy.
Ariel Sharon has two main objectives on his visit to Washington: to bulldoze George Bush, as his forces bulldoze Palestinian homes, to ostracise Yasser Arafat as a pariah and to gain a promise from the USA that Hezbollah will be considered as a terrorist organisation.
Sharon has met in recent days with Ahmad Qorei (also known as Abu Alaa) and Mahmmud Abbas (known as Abu Mazen), although without success, as he tries to divide the Palestinian cause and to find a successor to Yasser Arafat. The choice of these two Palestinian leaders is not by chance. On the subject of his succession, Yasser Arafat declared to the Palestinian daily Al-Ittihad and the weekly Al-Mussawar, that “According to the law, it is the head of legislative power who will lead the Palestine Authority for 60 days until a new leader is elected”. Ahmad Qorei is the President of the Palestinian legislative council and Mahmmud Abbas is Secretary-General of the executive committee of the PLO.
The Israeli Defence Minister, Ben-Eliezer, in a meeting with Kofi Annan on Tuesday, said that “I do not see that there is any way for us to continue working with Arafat, while he is compromised with a position which faces the past and not the future”.
Reiterating Sharon’s stance against Hezbollah, he claimed “Hezbollah is one of the most aggressive and dramatic terrorist organisations in the world. As you have already heard, Al-Qaeda is infiltrating Hezbollah in the Lebanon and if they start working together, it will not be good for the freedom of the world”.
This position will further highlight the strain on relations between Washington and Iran, after George Bush’s “axis of evil” speech in the State of the Union speech. Israel points out that Iran supplied Hezbollah recently with 8,000 katiushka rockets and shipped 50 tonnes of arms to this faction on the ship Katrina A, intercepted in the Mediterranean.
Sharon declared to the New York Times recently that “Iran wants the destruction of the State of Israel and the elimination of the Jewish people. For this reason, it was very important that president Bush should have named Iran as a sponsor of terrorism”.
The Israeli government and George Bush may be walking hand in hand, but this position is not adopted by all. Miguel Angel Moratinos, the European Union Middle East envoy, recently visited Arafat in his virtual prison at Ramallah in a show of solidarity, while the French Foreign Minister, Hubert Vedrine, stated that “The Europeans are unanimous in not supporting the policy of the White House for the Middle East”.
Even within the United States, there is support for Arafat. William Burns, the US special envoy for the Middle East, declared in Cairo that “Our position is very clear: President Arafat is the elected leader of the Palestinian people and we shall continue to work with the Palestine Authority”.
US Secretary of State Colin Powell was presented with a dossier drawn up by the Palestine Authority, in which was shown that the Palestine Authority has arrested 195 extremist militants, has closed down 79 suspicious organisations, has frozen 56 bank accounts, closed 15 munitions factories and has ended extremist prayers at Mosques.
Sharon, however, the self-proclaimed man of peace, currently under investigation in Brussels for crimes against humanity, due to his involvement in the massacres at Sabra and Chatila, 1982, in the Lebanon, continues to disbelieve that Arafat is making a serious attempt to achieve peace.
His arrogant visit to the Esplanade of the Mosques on September 2000 sparked off the Intifada which has caused over 1,000 deaths. Accepting the Tenet (EU) and Mitchell (USA) plans, but imposing conditions which made them impracticable, such as “total calm” before negotiations, while Israeli troops carried out brutal acts of aggression against Palestinians, makes it clear that he is the one who is not making serious efforts to achieve peace.
While the Palestinian lands are occupied, while their houses are demolished, while their children are shot in the eyes with rubber bullets, while their pregnant women are left to die in the streets with laughing Israeli soldiers looking on, while their lands are expropriated and while they are attacked by the vicious colonies, the kamikaze attacks will continue.
The answer is very simple and it does not reside at the White House, but rather in Tel Aviv.
Timothy BANCROFT-HINCHEY
PRAVDA.Ru
Enron's fall ripples into other firms
Wall Street is skittish about businesses far from Houston.
By Ron Scherer | Staff writer of The Christian Science Monitor
NEW YORK - To see how deeply Enron's demise is rippling across the nation, just look at what's happened to Atlanta-based Mirant.
The company, which provides electricity across the nation, had big plans. It would expand or build new power plants in places like Wyandot, Mich.; West Haverstraw, N.Y.; and Danville, Va.
But, now, the debt-rating agencies are looking at such spending with a magnifying glass. So last week, Mirant shelved the plans and arranged to send the turbines to warehouses to collect dust for a few years.
Indeed, from Wall Street to Main Street, the Enron saga has spread well beyond Houston and is costing both jobs and money. Energy providers such as Mirant are scaling back their spending. At the same time, investors are looking more deeply into the balance sheets of other companies - many of them in businesses completely unrelated to Enron.
The nation continued to be reminded of those concerns yesterday as top Enron executives testified before the House Energy and Commerce investigations subcommittee. Chairman James Greenwood of Pennsylvania said Enron's downfall "required the complicity of far more than a few bad apples."
The result: Wall Street skittishness that has removed more than $230 billion in market capitalization since Enron declared bankruptcy on Dec. 2nd. That's a 2.3 percent drop in the value of the Wilshire 5000, a very broad index of stocks. One securities analyst says the nation has suddenly developed a case of "Enronitis."
The Enron affair is hitting the economy at a particularly vulnerable moment. The economy is in the process of stabilizing. Since the events of Sept. 11, the stock market has moved higher, giving consumers and investors a greater sense of confidence. Now, economist John Puchalla of Moody's Investors Service says, "there is a risk in terms of the confidence factor."
Confidence has been pummeled in large part because of worries over accounting standards. Investors are concerned that the green-eye-shade types are allowing companies to manipulate earnings statements.
Confidence falls
"There are questions about what effect it will have if accountants become more conservative in terms of what they are willing to say is acceptable - a lot of companies may not be able to show the earnings gains they would have," says Dick McCabe, a market analyst at Merrill Lynch & Co. in New York.
It's not unusual for the stock market to come up with issues, especially when investor confidence is vulnerable, says Lynn Yturri, an equity fund manager for Banc One Investment Management Group in Columbus, Ohio. Last year, the market swooned over worries about terrorism and profit problems.
"Issues come up and get magnified," says Mr. Yturri. "Now, the market is probably overreacting - in the case of financial reporting, the industry tweaks the rules when it finds loopholes or the public interest has changed and needs more information."
The market's concerns, however, are costing companies real money. For example, on Tuesday, Tyco, which has been on an acquisition binge for years, announced it would begin using a $5.9 billion back-up line of bank credit instead of borrowing money more cheaply via commercial paper.
Only last week, The Wall Street Journal reported that Tyco had made about 250 acquisitions worth about $4.5 billion, but had not revealed them to shareholders. The company hotly denied that it had misled anyone. "As far as I can tell, they are sticking to the letter of the law, but they are pushing the accounting standards to their limits," says Ed Ketz, an associate professor of accounting at the Smeal College of Business at Penn State University.
Aggressive accounting is causing the rating agencies to look more closely at many companies in the same business as Enron, says Paul Joskow, a professor of economics at MIT in Cambridge, Mass. This is leading many of the companies to cancel or defer expansion plans.
Caution ahead
Take Mirant, for example. An energy company that sells electricity across state lines, it had plans to spend $5.9 billion over the next two years to meet this growing market. However, Moody's rating service recently downgraded the company's bonds to "junk" status from investment grade. Since the company also trades electric futures - the same kind Enron did - it needs a good crediting rating.
"As your credit rating declines, you have to post more and more collateral to back up your business," says Chuck Griffin, a spokesman.
Faced with the new scrutiny by the rating agencies, Mirant decided to back off from its spending plans. "There are new expectations we are trying to meet," says Mr. Griffin.
The cancellation or deferral of spending is spilling over to manufacturers of the equipment, such as General Electric and Siemens. Earl Nye, chairman of TXU, a big Dallas-based energy company, estimates new orders for equipment have been pared by about 33 percent. "It's not all due to Enron, part of it is the market cycle we've just been through a period of rapid expansion," explains Mr. Nye, who also chairs the Edison Electric Institute.
Nonetheless, in Atlanta, General Electric Corporation's Power Systems division says its order books are full for 2002, and it anticipates a good year in 2003. However, most of those orders were placed before the collapse of Enron. Now, Dennis Murphy, a spokesman for GE, says some customers are shifting orders around. And, the company is reviewing its workforce needs.
Wall Street is skittish about businesses far from Houston.
By Ron Scherer | Staff writer of The Christian Science Monitor
NEW YORK - To see how deeply Enron's demise is rippling across the nation, just look at what's happened to Atlanta-based Mirant.
The company, which provides electricity across the nation, had big plans. It would expand or build new power plants in places like Wyandot, Mich.; West Haverstraw, N.Y.; and Danville, Va.
But, now, the debt-rating agencies are looking at such spending with a magnifying glass. So last week, Mirant shelved the plans and arranged to send the turbines to warehouses to collect dust for a few years.
Indeed, from Wall Street to Main Street, the Enron saga has spread well beyond Houston and is costing both jobs and money. Energy providers such as Mirant are scaling back their spending. At the same time, investors are looking more deeply into the balance sheets of other companies - many of them in businesses completely unrelated to Enron.
The nation continued to be reminded of those concerns yesterday as top Enron executives testified before the House Energy and Commerce investigations subcommittee. Chairman James Greenwood of Pennsylvania said Enron's downfall "required the complicity of far more than a few bad apples."
The result: Wall Street skittishness that has removed more than $230 billion in market capitalization since Enron declared bankruptcy on Dec. 2nd. That's a 2.3 percent drop in the value of the Wilshire 5000, a very broad index of stocks. One securities analyst says the nation has suddenly developed a case of "Enronitis."
The Enron affair is hitting the economy at a particularly vulnerable moment. The economy is in the process of stabilizing. Since the events of Sept. 11, the stock market has moved higher, giving consumers and investors a greater sense of confidence. Now, economist John Puchalla of Moody's Investors Service says, "there is a risk in terms of the confidence factor."
Confidence has been pummeled in large part because of worries over accounting standards. Investors are concerned that the green-eye-shade types are allowing companies to manipulate earnings statements.
Confidence falls
"There are questions about what effect it will have if accountants become more conservative in terms of what they are willing to say is acceptable - a lot of companies may not be able to show the earnings gains they would have," says Dick McCabe, a market analyst at Merrill Lynch & Co. in New York.
It's not unusual for the stock market to come up with issues, especially when investor confidence is vulnerable, says Lynn Yturri, an equity fund manager for Banc One Investment Management Group in Columbus, Ohio. Last year, the market swooned over worries about terrorism and profit problems.
"Issues come up and get magnified," says Mr. Yturri. "Now, the market is probably overreacting - in the case of financial reporting, the industry tweaks the rules when it finds loopholes or the public interest has changed and needs more information."
The market's concerns, however, are costing companies real money. For example, on Tuesday, Tyco, which has been on an acquisition binge for years, announced it would begin using a $5.9 billion back-up line of bank credit instead of borrowing money more cheaply via commercial paper.
Only last week, The Wall Street Journal reported that Tyco had made about 250 acquisitions worth about $4.5 billion, but had not revealed them to shareholders. The company hotly denied that it had misled anyone. "As far as I can tell, they are sticking to the letter of the law, but they are pushing the accounting standards to their limits," says Ed Ketz, an associate professor of accounting at the Smeal College of Business at Penn State University.
Aggressive accounting is causing the rating agencies to look more closely at many companies in the same business as Enron, says Paul Joskow, a professor of economics at MIT in Cambridge, Mass. This is leading many of the companies to cancel or defer expansion plans.
Caution ahead
Take Mirant, for example. An energy company that sells electricity across state lines, it had plans to spend $5.9 billion over the next two years to meet this growing market. However, Moody's rating service recently downgraded the company's bonds to "junk" status from investment grade. Since the company also trades electric futures - the same kind Enron did - it needs a good crediting rating.
"As your credit rating declines, you have to post more and more collateral to back up your business," says Chuck Griffin, a spokesman.
Faced with the new scrutiny by the rating agencies, Mirant decided to back off from its spending plans. "There are new expectations we are trying to meet," says Mr. Griffin.
The cancellation or deferral of spending is spilling over to manufacturers of the equipment, such as General Electric and Siemens. Earl Nye, chairman of TXU, a big Dallas-based energy company, estimates new orders for equipment have been pared by about 33 percent. "It's not all due to Enron, part of it is the market cycle we've just been through a period of rapid expansion," explains Mr. Nye, who also chairs the Edison Electric Institute.
Nonetheless, in Atlanta, General Electric Corporation's Power Systems division says its order books are full for 2002, and it anticipates a good year in 2003. However, most of those orders were placed before the collapse of Enron. Now, Dennis Murphy, a spokesman for GE, says some customers are shifting orders around. And, the company is reviewing its workforce needs.
February 8, 2002
Testimony of Enron Executives Is Contradictory
By STEPHEN LABATON and RICHARD A. OPPEL Jr.
ASHINGTON, Feb. 7 — Lawmakers heard sharply conflicting testimony today from Enron (news/quote)'s former chief executive, Jeffrey K. Skilling, who portrayed himself as ignorant of the company's questionable practices, and other executives who said Mr. Skilling received numerous and specific warnings that Enron's off-the-books partnerships were improper.
Mr. Skilling's testimony, met by hostile questioning and harsh skepticism from lawmakers, followed a parade of current and former Enron executives who invoked their Fifth Amendment rights against compelled self-incrimination rather than explain the partnerships at the center of the company's collapse in December.
The refusal to testify by Andrew S. Fastow, Enron's former chief financial officer, and three other executives opened a hearing before the oversight subcommittee of the House Energy and Commerce Committee that provided a rich tableau of the far-reaching consequences of Enron's collapse.
The room was packed with angry former employees in search of answers, battalions of newly retained criminal defense lawyers with their white-collar clients, scores of reporters and photographers and an aggressive panel of Republican and Democratic lawmakers.
Democrats and Republicans alike said they found Mr. Skilling's testimony hard to believe, and they confronted him in one of the most pointed and memorable exchanges since eight top tobacco executives were questioned in April 1994.
Mr. Skilling said, for instance, that he had no recollection of a meeting described by two directors who said that Mr. Fastow told the company's board that Mr. Skilling would approve the partnership deals. He also disputed the accounts of others who said they had warned him about the propriety of the partnerships.
"On the day I left, on Aug. 14, I believed the company was in strong financial condition," Mr. Skilling said. "I wasn't there when it came unstuck."
"This was a very large corporation," he said at another point. "It would be impossible" to know everything going on.
No one on the committee seemed to believe the testimony.
"You are employing the Sergeant Schultz defense of `I see nothing, I hear nothing,' " said Representative Edward J. Markey, Democrat of Massachusetts, referring to a character in the 1960's television series "Hogan's Heroes."
Representative Clifford B. Stearns, Republican of Florida, recited conflicting evidence and testimony and then glared at Mr. Skilling as he said, "You are practicing plausible deniability."
Representative Bart Stupak, Democrat of Michigan, said: "Earlier witnesses put it that you were intense, hands on. From what I've heard from your testimony today, you don't know what was going on."
Mr. Fastow ultimately made $30 million from the partnerships, which investigators say were used to conceal debt and unprofitable investments from Enron's shareholders. He has emerged as a major figure in investigations by the Justice Department and Securities and Exchange Commission. They are examining whether executives committed fraud or engaged in illegal insider-trading when they sold millions of shares of stock as the company crumbled.
Jeffrey McMahon, Enron's new president, and Jordan Mintz, a senior Enron lawyer, described a corporate climate in which anyone who tried to challenge Mr. Fastow's deal-making faced the prospect of being reassigned or losing a bonus.
Mr. McMahon described several occasions in which, while serving as Enron's treasurer, he challenged the partnerships only to incur sharp criticism from his boss, Mr. Fastow.
In one episode, Mr. McMahon said that after he warned executives at Merrill Lynch (news/quote) that it would be a conflict of interest for them to invest in Mr. Fastow's partnerships, Mr. Fastow confronted him.
"He told me that I was jeopardizing the LJM2 fund-raising exercise," Mr. McMahon said, referring to one of the partnerships.
In another incident, Mr. McMahon testified that he had warned Mr. Skilling as early as March 2000 that one partnership involved self-dealing and conflicts of interest and needed to be changed.
According to talking points he prepared for the March meeting, Mr. McMahon was concerned that "Mr. Fastow wears two hats."
"I find myself negotiating with Andy on Enron matters and am pressured to do a deal that I do not believe is in the best interests of the shareholders," he wrote in the talking points.
At the March meeting, Mr. McMahon said, he told Mr. Skilling that the "situation had gotten to basically a point that was just untenable." He said Mr. Skilling replied that he "understood my concerns and he would remedy the situation."
Two weeks after the meeting, Mr. McMahon said, Mr. Fastow summoned him into his office.
"He indicated that he was unsure at this point in time whether we could continue to work together because he said that `you should assume everything you say to Mr. Skilling gets to me,' " Mr. McMahon recalled.
A short time later, Mr. McMahon was replaced as treasurer by Ben F. Glisan Jr. According to an investigation by Enron's board, Mr. Glisan put $5,800 in one of the partnerships organized by Mr. Fastow and two months later was given $1 million.
"The message was, Go get another job because you can't work with us, you're messing our deals," said Representative Billy Tauzin, the Louisiana Republican who heads the Energy and Commerce Committee.
Mr. Skilling recalled the March 2000 meeting differently. He said Mr. McMahon was primarily concerned about whether his compensation would be affected by the tension with Mr. Fastow.
Mr. Mintz said that when he raised questions about the partnerships last year, Richard B. Buy, the chief risk officer and Richard A. Causey, the chief accounting officer, warned him that Mr. Skilling would be unlikely to challenge Mr. Fastow's deals.
"Both Ricks shared with me that Jeff was very fond of Andy, don't go there," Mr. Mintz said.
Mr. Buy and Mr. Causey refused to answer the questions of the lawmakers, citing their Fifth Amendment rights. The fourth witness to refuse to testify was Michael J. Kopper, who worked closely with Mr. Fastow and drew at least $10 million from the partnerships. All four men invoked their Fifth Amendment rights in response to questions by Representative James C. Greenwood, the Pennsylvania Republican who heads the subcommittee.
Two company directors who did testify, Robert K. Jaedicke, and Herbert S. Winokur Jr., said they had been told that Mr. Skilling reviewed the transactions of some partnerships.
Mr. Skilling, the chief executive for six months until last August, repeatedly denied that. He and two board members maintained that they were unaware of the details of the partnership deals.
Mr. Skilling described a board meeting in October 2000 in Palm Beach, Fla. Minutes of the meeting show that Mr. Fastow said Mr. Skilling approved partnership deals. Mr. Skilling said he had no recollection of the comments and had been distracted because the power had gone out.
"The room was dark, quite frankly, and people were walking in and out of the meeting," Mr. Skilling said.
"You never heard Mr. Fastow say that you would approve all these transactions?" Mr. Tauzin asked.
Mr. Skilling said, "I don't recall."
Mr. Tauzin persisted, saying, "You just don't recall?"
Mr. Skilling said, "I do not recall."
Mr. Skilling said that he thought Mr. Fastow would earn only as much as $5 million over five years from his dealings with the partnerships and that he had no knowledge of the actual amount Mr. Fastow ultimately made.
In this, Mr. Skilling's account drew support from testimony by Mr. Mintz, who said Mr. Fastow told him "if Jeff ever knew how much he made" from one of the larger transactions, "he'd have no choice but to shut down LJM."
Mr. Tauzin also suggested that Congressional investigators might soon begin examining the role of some Wall Street firms in Enron's rise. He said he found it interesting that some firms, notably Merrill Lynch and First Union, were given underwriting business from Enron in exchange for investing in some of the partnerships.
In one of the hearing's poignant moments, Mr. Skilling said he had spent three hours with J. Clifford Baxter a few days before he died. Mr. Baxter, a former Enron vice chairman, died three weeks ago. The authorities say he committed suicide.
In an opening statement, Mr. Skilling described Mr. Baxter as his best friend.
Pressed gingerly by Representative Stearns to describe what they discussed in their final meeting, Mr. Skilling paused and then slowly went on. He said Mr. Baxter was depressed about the lawsuits he and Enron faced from investors and the press accounts that Mr. Skilling said were only "one-third" accurate.
"He was angry at the plaintiffs' lawyers who were coming after him," Mr. Skilling said. "He said: `Jeff, the thing that really gets me is it's like this. It's a beautiful day in Houston, Texas. You've got a hose. You're out watering your lawn. All your neighbors are outside talking. And suddenly the guy that lives next to you crashes out the door and he says, "I hear you're a child molester." And then he turns back to his house and walks inside.' "
"He said, `They're calling us child molesters,' " Mr. Skilling said. "He said, `That will never wash off.' "
But some lawmakers skeptical of that account asked Mr. Skilling about other comments attributed to Mr. Baxter long before he died — when he had questioned the partnerships.
And Mr. Mintz offered a different account of Mr. Baxter's troubles. Mr. Mintz said he had lunch with Mr. Baxter about a month before Mr. Baxter resigned from Enron last May.
"He expressed bewilderment about why the board was allowing this to happen and why they were allowing Andy to do it," Mr. Mintz said.
Copyright 2002 The New York Times Company | Privacy Information
Testimony of Enron Executives Is Contradictory
By STEPHEN LABATON and RICHARD A. OPPEL Jr.
ASHINGTON, Feb. 7 — Lawmakers heard sharply conflicting testimony today from Enron (news/quote)'s former chief executive, Jeffrey K. Skilling, who portrayed himself as ignorant of the company's questionable practices, and other executives who said Mr. Skilling received numerous and specific warnings that Enron's off-the-books partnerships were improper.
Mr. Skilling's testimony, met by hostile questioning and harsh skepticism from lawmakers, followed a parade of current and former Enron executives who invoked their Fifth Amendment rights against compelled self-incrimination rather than explain the partnerships at the center of the company's collapse in December.
The refusal to testify by Andrew S. Fastow, Enron's former chief financial officer, and three other executives opened a hearing before the oversight subcommittee of the House Energy and Commerce Committee that provided a rich tableau of the far-reaching consequences of Enron's collapse.
The room was packed with angry former employees in search of answers, battalions of newly retained criminal defense lawyers with their white-collar clients, scores of reporters and photographers and an aggressive panel of Republican and Democratic lawmakers.
Democrats and Republicans alike said they found Mr. Skilling's testimony hard to believe, and they confronted him in one of the most pointed and memorable exchanges since eight top tobacco executives were questioned in April 1994.
Mr. Skilling said, for instance, that he had no recollection of a meeting described by two directors who said that Mr. Fastow told the company's board that Mr. Skilling would approve the partnership deals. He also disputed the accounts of others who said they had warned him about the propriety of the partnerships.
"On the day I left, on Aug. 14, I believed the company was in strong financial condition," Mr. Skilling said. "I wasn't there when it came unstuck."
"This was a very large corporation," he said at another point. "It would be impossible" to know everything going on.
No one on the committee seemed to believe the testimony.
"You are employing the Sergeant Schultz defense of `I see nothing, I hear nothing,' " said Representative Edward J. Markey, Democrat of Massachusetts, referring to a character in the 1960's television series "Hogan's Heroes."
Representative Clifford B. Stearns, Republican of Florida, recited conflicting evidence and testimony and then glared at Mr. Skilling as he said, "You are practicing plausible deniability."
Representative Bart Stupak, Democrat of Michigan, said: "Earlier witnesses put it that you were intense, hands on. From what I've heard from your testimony today, you don't know what was going on."
Mr. Fastow ultimately made $30 million from the partnerships, which investigators say were used to conceal debt and unprofitable investments from Enron's shareholders. He has emerged as a major figure in investigations by the Justice Department and Securities and Exchange Commission. They are examining whether executives committed fraud or engaged in illegal insider-trading when they sold millions of shares of stock as the company crumbled.
Jeffrey McMahon, Enron's new president, and Jordan Mintz, a senior Enron lawyer, described a corporate climate in which anyone who tried to challenge Mr. Fastow's deal-making faced the prospect of being reassigned or losing a bonus.
Mr. McMahon described several occasions in which, while serving as Enron's treasurer, he challenged the partnerships only to incur sharp criticism from his boss, Mr. Fastow.
In one episode, Mr. McMahon said that after he warned executives at Merrill Lynch (news/quote) that it would be a conflict of interest for them to invest in Mr. Fastow's partnerships, Mr. Fastow confronted him.
"He told me that I was jeopardizing the LJM2 fund-raising exercise," Mr. McMahon said, referring to one of the partnerships.
In another incident, Mr. McMahon testified that he had warned Mr. Skilling as early as March 2000 that one partnership involved self-dealing and conflicts of interest and needed to be changed.
According to talking points he prepared for the March meeting, Mr. McMahon was concerned that "Mr. Fastow wears two hats."
"I find myself negotiating with Andy on Enron matters and am pressured to do a deal that I do not believe is in the best interests of the shareholders," he wrote in the talking points.
At the March meeting, Mr. McMahon said, he told Mr. Skilling that the "situation had gotten to basically a point that was just untenable." He said Mr. Skilling replied that he "understood my concerns and he would remedy the situation."
Two weeks after the meeting, Mr. McMahon said, Mr. Fastow summoned him into his office.
"He indicated that he was unsure at this point in time whether we could continue to work together because he said that `you should assume everything you say to Mr. Skilling gets to me,' " Mr. McMahon recalled.
A short time later, Mr. McMahon was replaced as treasurer by Ben F. Glisan Jr. According to an investigation by Enron's board, Mr. Glisan put $5,800 in one of the partnerships organized by Mr. Fastow and two months later was given $1 million.
"The message was, Go get another job because you can't work with us, you're messing our deals," said Representative Billy Tauzin, the Louisiana Republican who heads the Energy and Commerce Committee.
Mr. Skilling recalled the March 2000 meeting differently. He said Mr. McMahon was primarily concerned about whether his compensation would be affected by the tension with Mr. Fastow.
Mr. Mintz said that when he raised questions about the partnerships last year, Richard B. Buy, the chief risk officer and Richard A. Causey, the chief accounting officer, warned him that Mr. Skilling would be unlikely to challenge Mr. Fastow's deals.
"Both Ricks shared with me that Jeff was very fond of Andy, don't go there," Mr. Mintz said.
Mr. Buy and Mr. Causey refused to answer the questions of the lawmakers, citing their Fifth Amendment rights. The fourth witness to refuse to testify was Michael J. Kopper, who worked closely with Mr. Fastow and drew at least $10 million from the partnerships. All four men invoked their Fifth Amendment rights in response to questions by Representative James C. Greenwood, the Pennsylvania Republican who heads the subcommittee.
Two company directors who did testify, Robert K. Jaedicke, and Herbert S. Winokur Jr., said they had been told that Mr. Skilling reviewed the transactions of some partnerships.
Mr. Skilling, the chief executive for six months until last August, repeatedly denied that. He and two board members maintained that they were unaware of the details of the partnership deals.
Mr. Skilling described a board meeting in October 2000 in Palm Beach, Fla. Minutes of the meeting show that Mr. Fastow said Mr. Skilling approved partnership deals. Mr. Skilling said he had no recollection of the comments and had been distracted because the power had gone out.
"The room was dark, quite frankly, and people were walking in and out of the meeting," Mr. Skilling said.
"You never heard Mr. Fastow say that you would approve all these transactions?" Mr. Tauzin asked.
Mr. Skilling said, "I don't recall."
Mr. Tauzin persisted, saying, "You just don't recall?"
Mr. Skilling said, "I do not recall."
Mr. Skilling said that he thought Mr. Fastow would earn only as much as $5 million over five years from his dealings with the partnerships and that he had no knowledge of the actual amount Mr. Fastow ultimately made.
In this, Mr. Skilling's account drew support from testimony by Mr. Mintz, who said Mr. Fastow told him "if Jeff ever knew how much he made" from one of the larger transactions, "he'd have no choice but to shut down LJM."
Mr. Tauzin also suggested that Congressional investigators might soon begin examining the role of some Wall Street firms in Enron's rise. He said he found it interesting that some firms, notably Merrill Lynch and First Union, were given underwriting business from Enron in exchange for investing in some of the partnerships.
In one of the hearing's poignant moments, Mr. Skilling said he had spent three hours with J. Clifford Baxter a few days before he died. Mr. Baxter, a former Enron vice chairman, died three weeks ago. The authorities say he committed suicide.
In an opening statement, Mr. Skilling described Mr. Baxter as his best friend.
Pressed gingerly by Representative Stearns to describe what they discussed in their final meeting, Mr. Skilling paused and then slowly went on. He said Mr. Baxter was depressed about the lawsuits he and Enron faced from investors and the press accounts that Mr. Skilling said were only "one-third" accurate.
"He was angry at the plaintiffs' lawyers who were coming after him," Mr. Skilling said. "He said: `Jeff, the thing that really gets me is it's like this. It's a beautiful day in Houston, Texas. You've got a hose. You're out watering your lawn. All your neighbors are outside talking. And suddenly the guy that lives next to you crashes out the door and he says, "I hear you're a child molester." And then he turns back to his house and walks inside.' "
"He said, `They're calling us child molesters,' " Mr. Skilling said. "He said, `That will never wash off.' "
But some lawmakers skeptical of that account asked Mr. Skilling about other comments attributed to Mr. Baxter long before he died — when he had questioned the partnerships.
And Mr. Mintz offered a different account of Mr. Baxter's troubles. Mr. Mintz said he had lunch with Mr. Baxter about a month before Mr. Baxter resigned from Enron last May.
"He expressed bewilderment about why the board was allowing this to happen and why they were allowing Andy to do it," Mr. Mintz said.
Copyright 2002 The New York Times Company | Privacy Information
Paris dispatch
--------------------------------------------------------------------------------
France rocks America's boat
The French foreign minister has blasted Washington's new world view, saying it reduces everything to the war on terrorism, writes Jon Henley
Jon Henley
Thursday February 7, 2002
The Guardian
It wasn't the first time and it will no doubt not be the last. But this week France's foreign minister - never one to dodge an argument, especially where America is concerned - was speaking for most of a continent in describing Washington's new world view as "simplistic".
In a full-frontal assault on the Bush administration's post-September 11 foreign policy, Hubert Védrine told French radio that Europe "is threatened today by a new simplism which consists in reducing everything to the war on terrorism. We cannot accept that idea. You have got to tackle the root causes, the situations, poverty, injustice".
Returning to a thesis he has propounded for most of the past year, the minister said Washington was approaching foreign policy "unilaterally, without consulting anyone, based on their interpretation and on their interests", and added: "It presents a problem because it is not our vision of the world, it is not our vision of international relations."
Mr Védrine's comments may be the harshest yet from the old continent, but they came amid genuine and mounting concern across Europe at the implications of President George Bush's controversial state of the union speech last week, in which he named Iran, Iraq and North Korea as sponsors of terrorism in an "axis of evil".
While the European Union fully backed the US-led campaign in Afghanistan, senior Spanish, German and French officials have all voiced their concern this week at the prospect of the war against terror being unilaterally widened.
While the EU undoubtedly shares US fears about Iran acquiring nuclear weapons and about its support for anti-Israel groups, it remains highly dubious about the charge that Iran exports global terror or has links with Osama bin Laden's al-Qaida network.
Europe sees trade and cooperation, as well as support for the reform process and for opposition moderates, as the best way forward in Iran, the Spanish foreign minister, Josep Pique, said this week.
There is also concern in Europe that the aggressive US rhetoric could presage an attack on Iraq. Germany's deputy foreign minister, Ludger Volmer, said bluntly that Washington should not try to tar Baghdad with charges of terrorism in order to settle old scores.
It was left to Mr Védrine, however, to deliver the more general condemnation of US foreign policy. He is no stranger to the task: the French foreign minister has in the past attacked Washington's "new high-handed unilateralism" and strongly criticised the Bush administration's decisions to abandon the Kyoto accord on global warming and to pursue a missile defence scheme.
This time last year, he called the joint American and British air strikes on Baghdad "pointless", saying almost every other country in the world had expressed their "disapproval, criticism, doubt and disquiet" and that the world community wanted Washington to provide a "redefinition of the policy on Iraq", not more bombs.
But this time around France - often out on a limb in its frequent criticism of what the French like to call "American economic and cultural hegemony" - finds itself in the unusual position of not being alone.
Summing up Europe's concern at the Bush administration's new world view, the French defence minister, Alain Richard, said the EU's conception of world peace and its approach to resolving crises was simply "not that of the US".
Mr Bush's "axis of evil" certainly poses problems to international security, he said, but it was only one of a number of risks including the Middle East conflict. In a remark many European leaders might now share but only a Frenchman would voice, he described Mr Bush's apparent objective as "the exercise of political domination - purely and simply because he has the biggest boat".
Guardian Unlimited © Guardian Newspapers Limited 2002
--------------------------------------------------------------------------------
France rocks America's boat
The French foreign minister has blasted Washington's new world view, saying it reduces everything to the war on terrorism, writes Jon Henley
Jon Henley
Thursday February 7, 2002
The Guardian
It wasn't the first time and it will no doubt not be the last. But this week France's foreign minister - never one to dodge an argument, especially where America is concerned - was speaking for most of a continent in describing Washington's new world view as "simplistic".
In a full-frontal assault on the Bush administration's post-September 11 foreign policy, Hubert Védrine told French radio that Europe "is threatened today by a new simplism which consists in reducing everything to the war on terrorism. We cannot accept that idea. You have got to tackle the root causes, the situations, poverty, injustice".
Returning to a thesis he has propounded for most of the past year, the minister said Washington was approaching foreign policy "unilaterally, without consulting anyone, based on their interpretation and on their interests", and added: "It presents a problem because it is not our vision of the world, it is not our vision of international relations."
Mr Védrine's comments may be the harshest yet from the old continent, but they came amid genuine and mounting concern across Europe at the implications of President George Bush's controversial state of the union speech last week, in which he named Iran, Iraq and North Korea as sponsors of terrorism in an "axis of evil".
While the European Union fully backed the US-led campaign in Afghanistan, senior Spanish, German and French officials have all voiced their concern this week at the prospect of the war against terror being unilaterally widened.
While the EU undoubtedly shares US fears about Iran acquiring nuclear weapons and about its support for anti-Israel groups, it remains highly dubious about the charge that Iran exports global terror or has links with Osama bin Laden's al-Qaida network.
Europe sees trade and cooperation, as well as support for the reform process and for opposition moderates, as the best way forward in Iran, the Spanish foreign minister, Josep Pique, said this week.
There is also concern in Europe that the aggressive US rhetoric could presage an attack on Iraq. Germany's deputy foreign minister, Ludger Volmer, said bluntly that Washington should not try to tar Baghdad with charges of terrorism in order to settle old scores.
It was left to Mr Védrine, however, to deliver the more general condemnation of US foreign policy. He is no stranger to the task: the French foreign minister has in the past attacked Washington's "new high-handed unilateralism" and strongly criticised the Bush administration's decisions to abandon the Kyoto accord on global warming and to pursue a missile defence scheme.
This time last year, he called the joint American and British air strikes on Baghdad "pointless", saying almost every other country in the world had expressed their "disapproval, criticism, doubt and disquiet" and that the world community wanted Washington to provide a "redefinition of the policy on Iraq", not more bombs.
But this time around France - often out on a limb in its frequent criticism of what the French like to call "American economic and cultural hegemony" - finds itself in the unusual position of not being alone.
Summing up Europe's concern at the Bush administration's new world view, the French defence minister, Alain Richard, said the EU's conception of world peace and its approach to resolving crises was simply "not that of the US".
Mr Bush's "axis of evil" certainly poses problems to international security, he said, but it was only one of a number of risks including the Middle East conflict. In a remark many European leaders might now share but only a Frenchman would voice, he described Mr Bush's apparent objective as "the exercise of political domination - purely and simply because he has the biggest boat".
Guardian Unlimited © Guardian Newspapers Limited 2002
Thursday, February 07, 2002
Singapore shows folly of security-first society
--------------------------------------------------------------------------------
By Stephen Wrage and Sean Fahey
Originally published February 6, 2002
SINGAPORE WAS the first state to find and break up an al-Qaida cell -- another win for the tiny Southeast Asian power that is famous for valuing order above liberty and for putting the interests of the community ahead of the rights of the individual.
Should the United States be following Singapore's lead and sacrificing civil liberties to fight terrorism? In Singapore, they know how to keep tabs on radical elements. It is a tight little island city-state with fewer people than metropolitan Washington. It houses everyone in massive Housing Development Board blocks with a watcher in each building.
Singapore requires everyone to carry an ID card with a photograph and fingerprints. It controls the media so every foreign publication is censored and every domestic publication is produced by Singapore Press Holdings, which is run by the government. It controls all broadcasting and cable, outlaws all satellite dishes and allows Internet access only through government-controlled providers.
Justice is certain and swift. There are no jury trials. The courts look very much like the military tribunals Attorney General John Ashcroft has created. The authorities aren't shy about doling out the death penalty (340 people were hanged in the 1990s) and they cane for petty crime (3,200 people in a recent year).
Under the Internal Security Act, Singapore can lock up anyone without trial for infinitely renewable two-year terms. To quote one Singaporean who recently spoke cautiously to The New York Times: "Don't use my name. You should know how Singapore is run. It is run by the Internal Security Department. Your fingerprints are on your identity card. If you do something, you are caught."
Singapore is a country serious about dealing with crime and seems ideally equipped to fight terrorism. Perhaps it's time we set about copying their methods.
But wait. How exactly did the al-Qaida cell come to light? Was it sharp surveillance combined with clever police work? Were the Singaporean authorities alert, hot on the trail and on top of things? Did their wiretaps pick up signs of scheming? Had they deftly infiltrated the radicals?
In fact, they were presented with videotape found by U.S. troops in the rubble of a house in Afghanistan. The tape, which had been made in Singapore, described in detail the operations of the cell. It included a helpful voiceover in English by one of the conspirators laying out his plan and identifying clearly the sites to be bombed and the techniques to be used.
It did not require much sleuthing.
The Singaporean authorities first confessed to being "stunned" that terrorists had been operating for years in their tiny, thoroughly policed city-state. For several weeks they suppressed news of the origin of the videotape. Finally they put out the word that they uncovered the terrorists entirely on their own. The tape arrived four days after they rounded up the suspects, they now say. It was "very useful corroboration," they declare, "but by then we had it all wrapped up."
It turns out there were actually three cells. The conspirators had been planning attacks since 1997, and the chief plotter had gone to Afghanistan for training as long ago as 1993. All of the 15 arrested had presumably undergone Singapore's compulsory military training and six were still serving in Singapore's military reserves.
Enough, then, of the Singapore model of state-of-the-art surveillance and intrusion. Judging by this bit of police work, it is a bad bargain to trade away one's privacy and one's liberties for Singapore-style "security."
Even if we could recast the United States to be a hyper-controlled state like Singapore, even if we instituted compulsory ID cards with fingerprints and photos, even if we sanitized our society to the point of sterility until littering was a major crime and those who failed to flush public toilets were legally charged and publicly shamed, even if we had the additional advantages of tiny size and a compliant, intimidated population, al-Qaida cells still might operate for years undetected.
Better to live resolutely with the threat of terrorism than to dwell timidly in the delusion that the government will keep us safe if we hand over our rights.
Stephen Wrage and Sean Fahey teach in the political science department at the U.S. Naval Academy.
Copyright © 2002, The Baltimore Sun
--------------------------------------------------------------------------------
By Stephen Wrage and Sean Fahey
Originally published February 6, 2002
SINGAPORE WAS the first state to find and break up an al-Qaida cell -- another win for the tiny Southeast Asian power that is famous for valuing order above liberty and for putting the interests of the community ahead of the rights of the individual.
Should the United States be following Singapore's lead and sacrificing civil liberties to fight terrorism? In Singapore, they know how to keep tabs on radical elements. It is a tight little island city-state with fewer people than metropolitan Washington. It houses everyone in massive Housing Development Board blocks with a watcher in each building.
Singapore requires everyone to carry an ID card with a photograph and fingerprints. It controls the media so every foreign publication is censored and every domestic publication is produced by Singapore Press Holdings, which is run by the government. It controls all broadcasting and cable, outlaws all satellite dishes and allows Internet access only through government-controlled providers.
Justice is certain and swift. There are no jury trials. The courts look very much like the military tribunals Attorney General John Ashcroft has created. The authorities aren't shy about doling out the death penalty (340 people were hanged in the 1990s) and they cane for petty crime (3,200 people in a recent year).
Under the Internal Security Act, Singapore can lock up anyone without trial for infinitely renewable two-year terms. To quote one Singaporean who recently spoke cautiously to The New York Times: "Don't use my name. You should know how Singapore is run. It is run by the Internal Security Department. Your fingerprints are on your identity card. If you do something, you are caught."
Singapore is a country serious about dealing with crime and seems ideally equipped to fight terrorism. Perhaps it's time we set about copying their methods.
But wait. How exactly did the al-Qaida cell come to light? Was it sharp surveillance combined with clever police work? Were the Singaporean authorities alert, hot on the trail and on top of things? Did their wiretaps pick up signs of scheming? Had they deftly infiltrated the radicals?
In fact, they were presented with videotape found by U.S. troops in the rubble of a house in Afghanistan. The tape, which had been made in Singapore, described in detail the operations of the cell. It included a helpful voiceover in English by one of the conspirators laying out his plan and identifying clearly the sites to be bombed and the techniques to be used.
It did not require much sleuthing.
The Singaporean authorities first confessed to being "stunned" that terrorists had been operating for years in their tiny, thoroughly policed city-state. For several weeks they suppressed news of the origin of the videotape. Finally they put out the word that they uncovered the terrorists entirely on their own. The tape arrived four days after they rounded up the suspects, they now say. It was "very useful corroboration," they declare, "but by then we had it all wrapped up."
It turns out there were actually three cells. The conspirators had been planning attacks since 1997, and the chief plotter had gone to Afghanistan for training as long ago as 1993. All of the 15 arrested had presumably undergone Singapore's compulsory military training and six were still serving in Singapore's military reserves.
Enough, then, of the Singapore model of state-of-the-art surveillance and intrusion. Judging by this bit of police work, it is a bad bargain to trade away one's privacy and one's liberties for Singapore-style "security."
Even if we could recast the United States to be a hyper-controlled state like Singapore, even if we instituted compulsory ID cards with fingerprints and photos, even if we sanitized our society to the point of sterility until littering was a major crime and those who failed to flush public toilets were legally charged and publicly shamed, even if we had the additional advantages of tiny size and a compliant, intimidated population, al-Qaida cells still might operate for years undetected.
Better to live resolutely with the threat of terrorism than to dwell timidly in the delusion that the government will keep us safe if we hand over our rights.
Stephen Wrage and Sean Fahey teach in the political science department at the U.S. Naval Academy.
Copyright © 2002, The Baltimore Sun
February 5, 2002
Pension Chiefs Want Head of the S.E.C. to Withdraw
By LESLIE WAYNE
ASHINGTON, Feb. 4 — Managers for pension funds that lost $1.5 billion from their Enron (news/quote) investments called on the chairman of the Securities and Exchange Commission, Harvey L. Pitt, today to recuse himself from all decisions that affect Enron and its auditor, Arthur Andersen, a former client.
Officials from the Council of Institutional Investors, which represents 250 funds, also expressed concern at a news briefing this morning about the Bush administration's intention to fill two of the vacant seats on the five-member S.E.C. with two representatives of the accounting industry, Paul Atkins, a partner in PricewaterhouseCoopers, and Cynthia Glassman of Ernst & Young.
The council members manage $2 trillion in pension assets for public and university employees. The organization has a history of shareholder activism, and many members are suing Enron.
Before being appointed to the S.E.C., Mr. Pitt was a well-known lawyer in Washington who had all the Big Five accounting firms, including Andersen, as clients. He also represented the American Institute of Certified Public Accountants, the trade and self-regulatory group.
The fund managers said Mr. Pitt was too close to the accounting industry and could not objectively investigate Enron and its auditor. The group has also criticized a proposal by Mr. Pitt to change the regulation of accounting as too favorable to the industry.
"One of the people who lobbied the hardest against auditor independence is now the chairman of the S.E.C.," a lawyer for the New Hampshire Retirement System, Alan Cleveland, said. "Now two of the five commissioners will be from the industry. No more will the accounting industry have to do end runs around the S.E.C. They will be the S.E.C."
A spokeswoman for the S.E.C., Christi Harlan, said Mr. Pitt fell under government guidelines that prohibited him from dealing with Enron and Andersen matters for a year after taking office, in his case in August. Ms. Harlan said that the S.E.C. investigation into Enron might take more than a year to complete and that Mr. Pitt would be free to participate in decisions that affect the companies at the end of his first year as chairman, in six months.
"We are under the one-year rule," Ms. Harlan said. "Beyond that, we are not making any decisions one way or another."
Beyond their criticism of Mr. Pitt, members of the pension group used the Enron debacle to renew their calls for a series of reforms to make corporations more accountable to shareholders. In addition, one council member, the A.F.L.-C.I.O. pension fund, called on the S.E.C. to investigate whether Enron's directors should be allowed to join other corporate boards.
In a letter to the S.E.C., the union fund, which held 3.1 million Enron shares, said the Enron failure "demonstrates the Enron directors' substantial unfitness" to oversee a corporation.
"The burden now lays," the letter said, "on each individual director to demonstrate why they should not be barred."
The letter was also sent to many of the 20 other corporations where those directors sit on boards, including Lockheed Martin, Motorola (news/quote) and Owens Corning (news/quote).
"Investors in those public corporations where these individuals continue to serve as directors," the letter continued, "cannot assume that they have an effective fiduciary safeguarding their interests."
The associate general counsel for the union, Damon A. Silvers, said that the letters were sent to the companies about two weeks ago, but that there had been no response.
Among the council's other proposals are greater auditor independence from the corporations whose financial statements they review, more outside directors and fewer insiders on boards and eliminating financial conflicts among directors.
"We want Enron to be a catalyst for reforms that are broad and deep," George Philip, executive director of the New York State Teacher's Retirement System, said. "It is not enough to hold hearings or tweak existing regulations. It is our members who bear the largest losses from corporate and accounting fraud."
Copyright 2002 The New York Times Company | Privacy Information
Pension Chiefs Want Head of the S.E.C. to Withdraw
By LESLIE WAYNE
ASHINGTON, Feb. 4 — Managers for pension funds that lost $1.5 billion from their Enron (news/quote) investments called on the chairman of the Securities and Exchange Commission, Harvey L. Pitt, today to recuse himself from all decisions that affect Enron and its auditor, Arthur Andersen, a former client.
Officials from the Council of Institutional Investors, which represents 250 funds, also expressed concern at a news briefing this morning about the Bush administration's intention to fill two of the vacant seats on the five-member S.E.C. with two representatives of the accounting industry, Paul Atkins, a partner in PricewaterhouseCoopers, and Cynthia Glassman of Ernst & Young.
The council members manage $2 trillion in pension assets for public and university employees. The organization has a history of shareholder activism, and many members are suing Enron.
Before being appointed to the S.E.C., Mr. Pitt was a well-known lawyer in Washington who had all the Big Five accounting firms, including Andersen, as clients. He also represented the American Institute of Certified Public Accountants, the trade and self-regulatory group.
The fund managers said Mr. Pitt was too close to the accounting industry and could not objectively investigate Enron and its auditor. The group has also criticized a proposal by Mr. Pitt to change the regulation of accounting as too favorable to the industry.
"One of the people who lobbied the hardest against auditor independence is now the chairman of the S.E.C.," a lawyer for the New Hampshire Retirement System, Alan Cleveland, said. "Now two of the five commissioners will be from the industry. No more will the accounting industry have to do end runs around the S.E.C. They will be the S.E.C."
A spokeswoman for the S.E.C., Christi Harlan, said Mr. Pitt fell under government guidelines that prohibited him from dealing with Enron and Andersen matters for a year after taking office, in his case in August. Ms. Harlan said that the S.E.C. investigation into Enron might take more than a year to complete and that Mr. Pitt would be free to participate in decisions that affect the companies at the end of his first year as chairman, in six months.
"We are under the one-year rule," Ms. Harlan said. "Beyond that, we are not making any decisions one way or another."
Beyond their criticism of Mr. Pitt, members of the pension group used the Enron debacle to renew their calls for a series of reforms to make corporations more accountable to shareholders. In addition, one council member, the A.F.L.-C.I.O. pension fund, called on the S.E.C. to investigate whether Enron's directors should be allowed to join other corporate boards.
In a letter to the S.E.C., the union fund, which held 3.1 million Enron shares, said the Enron failure "demonstrates the Enron directors' substantial unfitness" to oversee a corporation.
"The burden now lays," the letter said, "on each individual director to demonstrate why they should not be barred."
The letter was also sent to many of the 20 other corporations where those directors sit on boards, including Lockheed Martin, Motorola (news/quote) and Owens Corning (news/quote).
"Investors in those public corporations where these individuals continue to serve as directors," the letter continued, "cannot assume that they have an effective fiduciary safeguarding their interests."
The associate general counsel for the union, Damon A. Silvers, said that the letters were sent to the companies about two weeks ago, but that there had been no response.
Among the council's other proposals are greater auditor independence from the corporations whose financial statements they review, more outside directors and fewer insiders on boards and eliminating financial conflicts among directors.
"We want Enron to be a catalyst for reforms that are broad and deep," George Philip, executive director of the New York State Teacher's Retirement System, said. "It is not enough to hold hearings or tweak existing regulations. It is our members who bear the largest losses from corporate and accounting fraud."
Copyright 2002 The New York Times Company | Privacy Information
French anger at US policy on Israel
Jon Henley in Paris and Matthew Engel in Washington
Thursday February 7, 2002
The Guardian
The gulf between the US and Europe over Washington's foreign policy widened yesterday when France's foreign minister delivered an outspoken attack on America's support for Israel.
In the hardest-hitting European assault yet on Washington's world view, Hubert Védrine said US support for the hardline Israeli prime minister, Ariel Sharon, was "mistaken" and "dangerously simplistic".
Mr Védrine said Europeans were "unanimous in not supporting the Middle East policy of the White House" and thought it was a "mistake to blindly accept the policy of pure repression" conducted by Mr Sharon.
President George Bush, who is to receive Mr Sharon in Washington today, has said it is up to the Palestinian leader, Yasser Arafat, to do "a better job" to end what he calls the terror being inflicted on Israel.
Mr Védrine said France was instead backing a proposal with its EU allies for a formal Israeli acknowledgement of the need for a Palestinian state and elections in the Palestinian territories that would give the winner a mandate to negotiate peace.
The minister's attack comes amid a chorus of dismay in Europe at Mr Bush's state of the union speech last week in which he named Iran, Iraq and North Korea as sponsors of terrorism in an "axis of evil".
Mr Védrine said that Europeans "are friends of the United States and will remain so". But, he added: "We are threatened today by a new simplism which consists in reducing everything to the war on terrorism. We cannot accept that idea. You have got to tackle the root causes, the situations, poverty, injustice."
He said US rhetoric was confirmation that the Bush administration approached foreign policy "unilaterally, without consulting anyone, based on their interpretation and on their interests".
The EU's foreign policy chief, Javier Solana, has conceded that there was a possible link between Iran and the Palestinian Authority in the form of a shipload of weapons intercepted by Israel last month in the Red sea.
But EU officials say they will resist any US attempt to make an enemy of Iran in the widening war on terrorism. Europe believes trade, cooperation and support for the reform process and opposition moderates is the best way forward for Iran.
Diplomats said that while the EU broadly shared US concerns about Iran acquiring nuclear weapons and about its support for anti-Israel groups including Hizbollah, Hamas and Islamic Jihad, it remains dubious about Washington's charges that Iran exports global terror or has links with Osama bin Laden's al-Qaida network.
Yesterday the US secretary of state, Colin Powell, accused Tehran of trying to destabilise the new Afghan government and of "unhelpful activities" in the area.
"We can demonstrate to them that it is not in their interest to destabilise the government that they helped to create," he said. But he was convinced talks with Iranian leaders were still possible.
Jon Henley in Paris and Matthew Engel in Washington
Thursday February 7, 2002
The Guardian
The gulf between the US and Europe over Washington's foreign policy widened yesterday when France's foreign minister delivered an outspoken attack on America's support for Israel.
In the hardest-hitting European assault yet on Washington's world view, Hubert Védrine said US support for the hardline Israeli prime minister, Ariel Sharon, was "mistaken" and "dangerously simplistic".
Mr Védrine said Europeans were "unanimous in not supporting the Middle East policy of the White House" and thought it was a "mistake to blindly accept the policy of pure repression" conducted by Mr Sharon.
President George Bush, who is to receive Mr Sharon in Washington today, has said it is up to the Palestinian leader, Yasser Arafat, to do "a better job" to end what he calls the terror being inflicted on Israel.
Mr Védrine said France was instead backing a proposal with its EU allies for a formal Israeli acknowledgement of the need for a Palestinian state and elections in the Palestinian territories that would give the winner a mandate to negotiate peace.
The minister's attack comes amid a chorus of dismay in Europe at Mr Bush's state of the union speech last week in which he named Iran, Iraq and North Korea as sponsors of terrorism in an "axis of evil".
Mr Védrine said that Europeans "are friends of the United States and will remain so". But, he added: "We are threatened today by a new simplism which consists in reducing everything to the war on terrorism. We cannot accept that idea. You have got to tackle the root causes, the situations, poverty, injustice."
He said US rhetoric was confirmation that the Bush administration approached foreign policy "unilaterally, without consulting anyone, based on their interpretation and on their interests".
The EU's foreign policy chief, Javier Solana, has conceded that there was a possible link between Iran and the Palestinian Authority in the form of a shipload of weapons intercepted by Israel last month in the Red sea.
But EU officials say they will resist any US attempt to make an enemy of Iran in the widening war on terrorism. Europe believes trade, cooperation and support for the reform process and opposition moderates is the best way forward for Iran.
Diplomats said that while the EU broadly shared US concerns about Iran acquiring nuclear weapons and about its support for anti-Israel groups including Hizbollah, Hamas and Islamic Jihad, it remains dubious about Washington's charges that Iran exports global terror or has links with Osama bin Laden's al-Qaida network.
Yesterday the US secretary of state, Colin Powell, accused Tehran of trying to destabilise the new Afghan government and of "unhelpful activities" in the area.
"We can demonstrate to them that it is not in their interest to destabilise the government that they helped to create," he said. But he was convinced talks with Iranian leaders were still possible.
Wednesday, February 06, 2002
CounterPunch
The Strange Career of Frank Carlucci
By Francis Schor
In the past few months there has been a rash of media reports on the Carlyle Group, a private equity investment group with billions of dollars of assets in the defense industry and a roster of directors and consultants which includes not only well-known Reagan and Bush appointees but also international figures like John Major, the former Prime Minister of Great Britain, and Fidel Ramos, the former President of the Philippines.
The Chairman of the Carlyle Group, Frank Carlucci, was not only a former Secretary of Defense in the Reagan Administration, but a Deputy Director of the CIA during the Carter Administration. In fact, Carlucci's career in Washington provides some insight into the intersection between foreign and domestic policy in the Cold War years. Moreover, Carlucci's particular trajectory through the government and into private industry reveals much about the meaning and influence of the military-industrial complex in the past and continuing policies of the United States at home and abroad.
A critical part of Carlucci's career was spent as a foreign service officer during the 1950's and 1960's in such hot spots as the Congo and Brazil. He capped that foreign service career with a stint as Ambassador to Portugal from 1974-77, a key time in the history and development of the Portuguese revolution. Carlucci's navigation through these conflictual moments helps to situate the nuances of US cold war policies not only in these specific countries, but throughout the world.
As the Second Secretary in the US Embassy in the Congo during the time of the reign and consequent assassination of Patrice Lumumba, Carlucci was intimately involved in the US efforts to overthrow Lumumba's government. In the recent cinematic reconstruction of the life and times of the Congo's first elected prime minister, Lumumba by Haitian director, Raoul Peck, Carlucci is depicted as being part of a meeting of US, Belgian, and Congo officials plotting the murder of Lumumba. Claiming that this particular meeting was fabricated by the filmmaker, Carlucci did admit at a Washington premier of the film that US policy towards the Lumumba government was a bit "too strident."
The fact that CIA station chief Lawrence Devlin was under direct instructions from Secretary of State Dulles to seek the immediate removal of Lumumba is part of the historical record. There is even evidence to suggest that the actual hit on Lumumba came from the White House at Eisenhower's suggestion. In fact, there was an assassin hired by the US government, equipped with chemical weapons from Ft. Detrick, to use against Lumumba.
When Lumumba was captured in December 1960 after fleeing from house arrest by a former supporter and later vicious dictator of the Congo, Colonel Joseph Mobutu, the CIA probably helped to arrange for Lumumba's transfer to Katanga province where Katangan and Belgian henchman murdered Lumumba and disposed of his body.
Meanwhile, Carlucci was attempting to placate Lumumba supporters and draw them into a new coalition government. In the confusions that ensued, Carlucci found himself under house arrest and at odds with Clare Timberlake, the US Ambassador to the Congo who did not favor any involvement with Lumumba supporters. Fortunately for Carlucci, Timberlake was relieved of his ambassadorial post and replaced by Kennedy appointees whose liberal politics allowed for certain compromises with indigenous forces in Africa who might still serve the anti-communist alliance while facilitating US economic interests in the region.
Although Carlucci wasn't around for the mess that followed in the wake of UN intervention and the continuing zigs and zags of US policy in the Congo, he did wind up in Brazil in time for the overthrow of the Goulart government. The CIA and State Department were actively engaged in funneling money to opponents of Goulart and setting the stage for the eventual military coup in March and April of 1964.
Beyond his populist policies that threatened nationalization of US subsidies, Goulart was seen by Washington as "soft on communism" and "pro-Castro," indictments enough to spell his doom and put in place right-wing military dictators who would outlaw any political or union dissent for years. As a consequence of the military coup and its entrenchment, Carlucci gained a reputation as a "tough-guy" with the American Defense Attaché in Brazil, Colonel Vernon Walters.
By the end of the 1960s Carlucci had returned to Washington to become part of Nixon Administration, going from the Office of Economic Opportunity in 1969-71 to the Office of Management and Budget in 1971-72. He then was appointed Under Secretary of Health, Education, and Welfare from 1972-74. Among the other key members of these departments of domestic pacification were Caspar Weinberger, who was a Carlucci mentor, and Donald Rumsfeld, a former college buddy and wrestling mate from Princeton. Both Weinberger and Rumsfeld would later become, as would Carlucci, Secretaries of Defense. The bureaucratic imperatives honed in these cabinet positions would further underscore the primacy of military Keynesianism in governmental policy.
After so many positions as an underling and gray bureaucrat, Carlucci burst onto the explosive stage of post-revolutionary Portugal as Ambassador. With the approval of CIA Deputy Director Vernon Walters and Henry Kissinger, Carlucci began immediately to ferret out potential communist sympathizers among the left-leaning young military officers who helped foment the revolutionary coup in Portugal in 1974.
However, unlike Kissinger, Carlucci was willing to work with Socialist Mario Soares not out of any sympathy for Soares' politics, but because from Carlucci's perspective Soares was the "only game in town" to prevent the most militant leftists from assuming power in Portugal. Carlucci managed to convince President Ford of his approach by working directly through Rumsfeld who was, at the time, the White House chief of staff. Carlucci's pay-off came when Soares won the Presidency in 1976, cementing ties with NATO and instituting IMF approved austerity measures.
Such successful machinations in Portugal earned Carlucci a position as Deputy Director of the CIA in the Carter Administration from 1978-1981. When insurgent forces in Iran and Nicaragua in 1979 toppled the Shah and Somoza dictatorships, Carlucci and the CIA had little ability to control the upheavals even though there were various clandestine efforts to thwart the revolutionary forces in these countries. On the other hand, the CIA certainly played a significant role in sponsoring anti-Soviet Mujaheddin, perhaps even suckering the Soviets into their disastrous campaign in Afghanistan.
Carlucci then made the transition to a procurer of new weapons as Deputy Secretary of Defense in the Reagan Administration under Caspar Weinberger from 1981-83. During this time, in response to wide-spread criticism of Pentagon waste and mismanagement, Carlucci developed proposals (known as the "Carlucci Reforms") to rationalize the process of weapons procurement. However, Carlucci's policies did not lower costs. They did, apparently, offer new start-up companies the opportunity to get involved in DoD pork, something that the Carlyle Group would take advantage of later on.
After a brief departure into the world of private business at Sears World Trade from 1983-86, Carlucci returned to become first an Assistant to the President for National Security Affairs in 1987. He then went on to become Secretary of Defense later than year until his resignation in 1989 when he went to work for the Carlyle Group.
As Secretary of Defense he worked closely with the Joint Chiefs of Staff and particularly the Chairman, Admiral William Crowe, Jr. (Crowe is now a chief stock-holder of the parent company of BioPort, the recently FDA approved monopoly holder of an anthrax vaccine. The Carlyle Group also apparently has stock holdings in Crowe's company.) While overseeing some cutbacks in the DoD, particularly military bases in the US, Carlucci was committed to expanding certain military appropriations in the area of new technology as a way of strengthening the US national security state and expanding NATO. Although willing to compromise with Congress on the Strategic Defense Initiative (encountering in the process a rebuke from Reagan), Carlucci maintained a determined stance of US supremacy in nuclear arms and nuclear-war-fighting capability.
While outside of government in the 1990's, Carlucci managed to circulate on the boards of various think-tanks, e.g. the RAND Corporation, and help promulgate reports on national security and defense that urged increases in defense spending and the use of US military might. Nonetheless, he, along with other former Secretaries of Defense, opposed sending ground troops to Bosnia, perhaps because there were no long-term prospects for security or economic advancements.
Certainly, Carlucci's tenure at the Carlyle Group has resulted in an expanded portfolio of defense industries. Among the defense industries that Carlyle holds is United Defense, a maker of missile launch systems for the US Navy. However, Carlyle's reach under Carlucci has expanded into a variety of new technologies in defense and non-defense industries, such as global communications.
For example, Carlyle is keen on cleaning up hazardous materials at military bases and nuclear waste. Buying firms not yet publicly traded that deal with such services, such as Duratek and EG&G, allows Carlyle to position these firms for government contracts and then cash in when they are publicly traded. Such influence-peddling is certainly not new to former government officials who use their ties to past and present administrations for private benefit.
Carlucci, of course, insists that he does not importune or lobby his old buddy Don Rumsfeld. Nonetheless, the money trail from Carlyle's portfolio to Rumsfeld's office at the Pentagon is pretty evident. In one major decision by Rumsfeld, revealed by New York Times columnist Paul Krugman, United Defense's 70-ton Crusader artillery system was saved from a potential budget cut. Surely, the proposed massive increase in spending for the Pentagon by the Bush Administration will benefit the Carlyle Group.
What has seemed most egregious to inquiring journalists and public interest groups has been Carlyle's consultants, like former President Bush, whose ties to ruling elites in Saudi Arabia (including the Bin Laden family) and South Korea have resulted in lucrative holdings and investments in these countries for Carlyle. As noted by the executive director of the Center for Public Integrity: "(Former President) George Bush is getting money from private interests that have business before the government...And, in a really peculiar way, George W. Bush could, some day, benefit financially from his own administration's decisions, through his father's investments." In fact, George W. benefited in the past from Carlyle by being put on the board of a Carlyle investment, Caterair, an airline-catering company during his Texas business career days.
Similar to the Enron situation, the Bush family and others have enriched their careers and political fortunes with their ties to the Carlyle Group. However, this is a scandal that still hasn't gained the attention and measures necessary to prevent its scandalous continuance.
Carlyle's cozy relationship with DoD insiders and other power-brokers is part of Carlucci's effective management of Carlyle. The global reach of Carlyle, while often hidden behind the veil of private investments, moreover is indicative of Carlucci's own experience with US imperial and military policies.
Like the subject of C. Vann Woodward's seminal study of racial oppression and exploitation in the South, The Strange Career of Jim Crow, Carlucci's "strange" career is representative of significant other pathological imperatives in US political culture. The residual effects and on-going commitments to imperialism and militarism in US society feed such opportunistic careerists as Frank Carlucci.
Until there is a massive movement to dismantle all of the institutions and ideas that sustain US imperialism and militarism, Frank Carlucci and his ilk will continue to profit and prosper at the expense of the well-being and very lives of people here and abroad.
The Strange Career of Frank Carlucci
By Francis Schor
In the past few months there has been a rash of media reports on the Carlyle Group, a private equity investment group with billions of dollars of assets in the defense industry and a roster of directors and consultants which includes not only well-known Reagan and Bush appointees but also international figures like John Major, the former Prime Minister of Great Britain, and Fidel Ramos, the former President of the Philippines.
The Chairman of the Carlyle Group, Frank Carlucci, was not only a former Secretary of Defense in the Reagan Administration, but a Deputy Director of the CIA during the Carter Administration. In fact, Carlucci's career in Washington provides some insight into the intersection between foreign and domestic policy in the Cold War years. Moreover, Carlucci's particular trajectory through the government and into private industry reveals much about the meaning and influence of the military-industrial complex in the past and continuing policies of the United States at home and abroad.
A critical part of Carlucci's career was spent as a foreign service officer during the 1950's and 1960's in such hot spots as the Congo and Brazil. He capped that foreign service career with a stint as Ambassador to Portugal from 1974-77, a key time in the history and development of the Portuguese revolution. Carlucci's navigation through these conflictual moments helps to situate the nuances of US cold war policies not only in these specific countries, but throughout the world.
As the Second Secretary in the US Embassy in the Congo during the time of the reign and consequent assassination of Patrice Lumumba, Carlucci was intimately involved in the US efforts to overthrow Lumumba's government. In the recent cinematic reconstruction of the life and times of the Congo's first elected prime minister, Lumumba by Haitian director, Raoul Peck, Carlucci is depicted as being part of a meeting of US, Belgian, and Congo officials plotting the murder of Lumumba. Claiming that this particular meeting was fabricated by the filmmaker, Carlucci did admit at a Washington premier of the film that US policy towards the Lumumba government was a bit "too strident."
The fact that CIA station chief Lawrence Devlin was under direct instructions from Secretary of State Dulles to seek the immediate removal of Lumumba is part of the historical record. There is even evidence to suggest that the actual hit on Lumumba came from the White House at Eisenhower's suggestion. In fact, there was an assassin hired by the US government, equipped with chemical weapons from Ft. Detrick, to use against Lumumba.
When Lumumba was captured in December 1960 after fleeing from house arrest by a former supporter and later vicious dictator of the Congo, Colonel Joseph Mobutu, the CIA probably helped to arrange for Lumumba's transfer to Katanga province where Katangan and Belgian henchman murdered Lumumba and disposed of his body.
Meanwhile, Carlucci was attempting to placate Lumumba supporters and draw them into a new coalition government. In the confusions that ensued, Carlucci found himself under house arrest and at odds with Clare Timberlake, the US Ambassador to the Congo who did not favor any involvement with Lumumba supporters. Fortunately for Carlucci, Timberlake was relieved of his ambassadorial post and replaced by Kennedy appointees whose liberal politics allowed for certain compromises with indigenous forces in Africa who might still serve the anti-communist alliance while facilitating US economic interests in the region.
Although Carlucci wasn't around for the mess that followed in the wake of UN intervention and the continuing zigs and zags of US policy in the Congo, he did wind up in Brazil in time for the overthrow of the Goulart government. The CIA and State Department were actively engaged in funneling money to opponents of Goulart and setting the stage for the eventual military coup in March and April of 1964.
Beyond his populist policies that threatened nationalization of US subsidies, Goulart was seen by Washington as "soft on communism" and "pro-Castro," indictments enough to spell his doom and put in place right-wing military dictators who would outlaw any political or union dissent for years. As a consequence of the military coup and its entrenchment, Carlucci gained a reputation as a "tough-guy" with the American Defense Attaché in Brazil, Colonel Vernon Walters.
By the end of the 1960s Carlucci had returned to Washington to become part of Nixon Administration, going from the Office of Economic Opportunity in 1969-71 to the Office of Management and Budget in 1971-72. He then was appointed Under Secretary of Health, Education, and Welfare from 1972-74. Among the other key members of these departments of domestic pacification were Caspar Weinberger, who was a Carlucci mentor, and Donald Rumsfeld, a former college buddy and wrestling mate from Princeton. Both Weinberger and Rumsfeld would later become, as would Carlucci, Secretaries of Defense. The bureaucratic imperatives honed in these cabinet positions would further underscore the primacy of military Keynesianism in governmental policy.
After so many positions as an underling and gray bureaucrat, Carlucci burst onto the explosive stage of post-revolutionary Portugal as Ambassador. With the approval of CIA Deputy Director Vernon Walters and Henry Kissinger, Carlucci began immediately to ferret out potential communist sympathizers among the left-leaning young military officers who helped foment the revolutionary coup in Portugal in 1974.
However, unlike Kissinger, Carlucci was willing to work with Socialist Mario Soares not out of any sympathy for Soares' politics, but because from Carlucci's perspective Soares was the "only game in town" to prevent the most militant leftists from assuming power in Portugal. Carlucci managed to convince President Ford of his approach by working directly through Rumsfeld who was, at the time, the White House chief of staff. Carlucci's pay-off came when Soares won the Presidency in 1976, cementing ties with NATO and instituting IMF approved austerity measures.
Such successful machinations in Portugal earned Carlucci a position as Deputy Director of the CIA in the Carter Administration from 1978-1981. When insurgent forces in Iran and Nicaragua in 1979 toppled the Shah and Somoza dictatorships, Carlucci and the CIA had little ability to control the upheavals even though there were various clandestine efforts to thwart the revolutionary forces in these countries. On the other hand, the CIA certainly played a significant role in sponsoring anti-Soviet Mujaheddin, perhaps even suckering the Soviets into their disastrous campaign in Afghanistan.
Carlucci then made the transition to a procurer of new weapons as Deputy Secretary of Defense in the Reagan Administration under Caspar Weinberger from 1981-83. During this time, in response to wide-spread criticism of Pentagon waste and mismanagement, Carlucci developed proposals (known as the "Carlucci Reforms") to rationalize the process of weapons procurement. However, Carlucci's policies did not lower costs. They did, apparently, offer new start-up companies the opportunity to get involved in DoD pork, something that the Carlyle Group would take advantage of later on.
After a brief departure into the world of private business at Sears World Trade from 1983-86, Carlucci returned to become first an Assistant to the President for National Security Affairs in 1987. He then went on to become Secretary of Defense later than year until his resignation in 1989 when he went to work for the Carlyle Group.
As Secretary of Defense he worked closely with the Joint Chiefs of Staff and particularly the Chairman, Admiral William Crowe, Jr. (Crowe is now a chief stock-holder of the parent company of BioPort, the recently FDA approved monopoly holder of an anthrax vaccine. The Carlyle Group also apparently has stock holdings in Crowe's company.) While overseeing some cutbacks in the DoD, particularly military bases in the US, Carlucci was committed to expanding certain military appropriations in the area of new technology as a way of strengthening the US national security state and expanding NATO. Although willing to compromise with Congress on the Strategic Defense Initiative (encountering in the process a rebuke from Reagan), Carlucci maintained a determined stance of US supremacy in nuclear arms and nuclear-war-fighting capability.
While outside of government in the 1990's, Carlucci managed to circulate on the boards of various think-tanks, e.g. the RAND Corporation, and help promulgate reports on national security and defense that urged increases in defense spending and the use of US military might. Nonetheless, he, along with other former Secretaries of Defense, opposed sending ground troops to Bosnia, perhaps because there were no long-term prospects for security or economic advancements.
Certainly, Carlucci's tenure at the Carlyle Group has resulted in an expanded portfolio of defense industries. Among the defense industries that Carlyle holds is United Defense, a maker of missile launch systems for the US Navy. However, Carlyle's reach under Carlucci has expanded into a variety of new technologies in defense and non-defense industries, such as global communications.
For example, Carlyle is keen on cleaning up hazardous materials at military bases and nuclear waste. Buying firms not yet publicly traded that deal with such services, such as Duratek and EG&G, allows Carlyle to position these firms for government contracts and then cash in when they are publicly traded. Such influence-peddling is certainly not new to former government officials who use their ties to past and present administrations for private benefit.
Carlucci, of course, insists that he does not importune or lobby his old buddy Don Rumsfeld. Nonetheless, the money trail from Carlyle's portfolio to Rumsfeld's office at the Pentagon is pretty evident. In one major decision by Rumsfeld, revealed by New York Times columnist Paul Krugman, United Defense's 70-ton Crusader artillery system was saved from a potential budget cut. Surely, the proposed massive increase in spending for the Pentagon by the Bush Administration will benefit the Carlyle Group.
What has seemed most egregious to inquiring journalists and public interest groups has been Carlyle's consultants, like former President Bush, whose ties to ruling elites in Saudi Arabia (including the Bin Laden family) and South Korea have resulted in lucrative holdings and investments in these countries for Carlyle. As noted by the executive director of the Center for Public Integrity: "(Former President) George Bush is getting money from private interests that have business before the government...And, in a really peculiar way, George W. Bush could, some day, benefit financially from his own administration's decisions, through his father's investments." In fact, George W. benefited in the past from Carlyle by being put on the board of a Carlyle investment, Caterair, an airline-catering company during his Texas business career days.
Similar to the Enron situation, the Bush family and others have enriched their careers and political fortunes with their ties to the Carlyle Group. However, this is a scandal that still hasn't gained the attention and measures necessary to prevent its scandalous continuance.
Carlyle's cozy relationship with DoD insiders and other power-brokers is part of Carlucci's effective management of Carlyle. The global reach of Carlyle, while often hidden behind the veil of private investments, moreover is indicative of Carlucci's own experience with US imperial and military policies.
Like the subject of C. Vann Woodward's seminal study of racial oppression and exploitation in the South, The Strange Career of Jim Crow, Carlucci's "strange" career is representative of significant other pathological imperatives in US political culture. The residual effects and on-going commitments to imperialism and militarism in US society feed such opportunistic careerists as Frank Carlucci.
Until there is a massive movement to dismantle all of the institutions and ideas that sustain US imperialism and militarism, Frank Carlucci and his ilk will continue to profit and prosper at the expense of the well-being and very lives of people here and abroad.
Feb. 6, 2002, 1:05PM
Congressman: 'Substantial evidence'
of lawbreaking at Enron found
Houston Chronicle News Services
WASHINGTON - Congressional investigators have uncovered "substantial evidence of illegal activity" by the now-bankrupt Enron Corp. and its management, Rep. Billy Tauzin, chairman of the House Energy and Commerce Committee, said today.
"This activity served to deceive the public about Enron's financial condition," Tauzin, a Louisiana Republican, said in prepared remarks opening a hearing to probe the collapse of the former energy giant and the actions by its auditor Andersen.
Enron's auditor "knew or should have discovered the fraudulent nature" of certain transactions with outside partnerships managed by former Enron Chief Financial Officer Andrew Fastow, he said.
"We have found that Enron's financial statements violated numerous existing accounting rules," Tauzin said.
His statements came as subpoenas multiplied and hearings mushroomed in Congress' investigation into the collapse of Enron, a once-powerful company transformed into a symbol of corporate failure.
Associated Press file
Labor Secretary Elaine Chao.
In another congressional hearing on the Enron collapse, meanwhile, Labor Secretary Elaine Chao today said that President Bush's proposal to revamp pension laws would strengthen retirement account protections for millions of workers.
Lawmakers also said changes were needed but they expressed differing views on how to best protect workers.
Bush is asking Congress give workers greater flexibility to diversify their company savings accounts, aiming to prevent another Enron-style wipeout of workers' savings. Thousands of Enron employees lost their retirement savings as the company stock plummeted during a period when they were barred from selling it from their investment accounts.
Speaking at a hearing by the House Committee on Education and the Workforce, Chao said the Bush plan would not limit the amount of time employees are barred from making changes in their accounts while plan administrators are being switched, but she said the plan encourages employers to keep that period short.
"We must strengthen the confidence of the American work force that their retirement savings are secure," Chao testified.
Although some changes in pension laws are needed, the system is not irreparably broken and is a great success story, Chao said.
Bush's plan also would require employers to give workers quarterly statements with detailed information on their accounts and their rights to diversify holdings, Chao noted. Employees would be allowed to sell company stock contributed by their employer to their 401(k) after a three-year period.
Rep. John Boehner, R-Ohio, the committee's chairman, said the Enron debacle "has provided tragic confirmation of the need for modernization of America's pension laws."
However, he cautioned, Congress shouldn't go too far and make changes that would discourage employers from continuing to contribute company stock.
Across the Capitol, the Senate Judiciary Committee heard testimony from legal and labor experts on how to prevent similar scandals. Proposals included requiring more disclosure from accountants and capping the amount of money that bankrupt corporations can shield from creditors.
Such changes would require vast revisions to bankruptcy and other laws, and there was disagreement early in the hearing over how best to do that. "You can't legislate against greed, but you can stop greed from succeeding," said Sen. Patrick Leahy, D-Vt., the panel's chairman.
Washington state Attorney General Christine Gregoire told the panel that Enron's conduct amounted to "a perfect storm" that rained financial loss and fraud on thousands of investors.
"They assumed the seventh largest company in America was playing by the rules," Gregoire said. "In the end, they found themselves ripped off just like the naive person who lost money in a pyramid scheme."
At the hearing on pension law changes, Rep. George Miller of California, the committee's senior Democrat, said the Enron case shows how workers' retirement savings can be jeopardized if employees' rights and protections are inadequate. "Today's outdated pension rules are putting employee nest eggs at risk," he said.
On Tuesday, Sen. Joseph Lieberman, D-Conn., announced plans to issue a subpoena to get information about bonuses paid to Enron executives in the run-up to its Dec. 2 bankruptcy filing. "The thought of employees sustaining huge losses while executives were able to sell stock for millions is infuriating," Lieberman said.
Enron executives said employees were frozen out of their accounts for 11 trading days while the company switched 401(k) plan administrators.
Chao disclosed today that Enron stock apparently was trading around $14 a share when the lockout began last fall and dropped to about $10 at the end of it.
As the lockout period approached and Enron's stock continued to plummet, Enron managers considered delaying the switch and the lockout period so employees would not be frozen out of their accounts.
"We considered postponing, but found it was not feasible to notify more than 20,000 participants in a timely fashion," Mikie Rath, Enron's benefits manager, told the Senate Governmental Affairs Committee on Tuesday.
Enron's stock peaked at $82 a share on Jan. 26, 2001. It was selling for $15.40 at the close of trading on Oct. 26, the day the lockout began, and had fallen to $9.98 on Nov. 13, the day it ended.
Reuters News Service and Associated Press contributed to this report.
Congressman: 'Substantial evidence'
of lawbreaking at Enron found
Houston Chronicle News Services
WASHINGTON - Congressional investigators have uncovered "substantial evidence of illegal activity" by the now-bankrupt Enron Corp. and its management, Rep. Billy Tauzin, chairman of the House Energy and Commerce Committee, said today.
"This activity served to deceive the public about Enron's financial condition," Tauzin, a Louisiana Republican, said in prepared remarks opening a hearing to probe the collapse of the former energy giant and the actions by its auditor Andersen.
Enron's auditor "knew or should have discovered the fraudulent nature" of certain transactions with outside partnerships managed by former Enron Chief Financial Officer Andrew Fastow, he said.
"We have found that Enron's financial statements violated numerous existing accounting rules," Tauzin said.
His statements came as subpoenas multiplied and hearings mushroomed in Congress' investigation into the collapse of Enron, a once-powerful company transformed into a symbol of corporate failure.
Associated Press file
Labor Secretary Elaine Chao.
In another congressional hearing on the Enron collapse, meanwhile, Labor Secretary Elaine Chao today said that President Bush's proposal to revamp pension laws would strengthen retirement account protections for millions of workers.
Lawmakers also said changes were needed but they expressed differing views on how to best protect workers.
Bush is asking Congress give workers greater flexibility to diversify their company savings accounts, aiming to prevent another Enron-style wipeout of workers' savings. Thousands of Enron employees lost their retirement savings as the company stock plummeted during a period when they were barred from selling it from their investment accounts.
Speaking at a hearing by the House Committee on Education and the Workforce, Chao said the Bush plan would not limit the amount of time employees are barred from making changes in their accounts while plan administrators are being switched, but she said the plan encourages employers to keep that period short.
"We must strengthen the confidence of the American work force that their retirement savings are secure," Chao testified.
Although some changes in pension laws are needed, the system is not irreparably broken and is a great success story, Chao said.
Bush's plan also would require employers to give workers quarterly statements with detailed information on their accounts and their rights to diversify holdings, Chao noted. Employees would be allowed to sell company stock contributed by their employer to their 401(k) after a three-year period.
Rep. John Boehner, R-Ohio, the committee's chairman, said the Enron debacle "has provided tragic confirmation of the need for modernization of America's pension laws."
However, he cautioned, Congress shouldn't go too far and make changes that would discourage employers from continuing to contribute company stock.
Across the Capitol, the Senate Judiciary Committee heard testimony from legal and labor experts on how to prevent similar scandals. Proposals included requiring more disclosure from accountants and capping the amount of money that bankrupt corporations can shield from creditors.
Such changes would require vast revisions to bankruptcy and other laws, and there was disagreement early in the hearing over how best to do that. "You can't legislate against greed, but you can stop greed from succeeding," said Sen. Patrick Leahy, D-Vt., the panel's chairman.
Washington state Attorney General Christine Gregoire told the panel that Enron's conduct amounted to "a perfect storm" that rained financial loss and fraud on thousands of investors.
"They assumed the seventh largest company in America was playing by the rules," Gregoire said. "In the end, they found themselves ripped off just like the naive person who lost money in a pyramid scheme."
At the hearing on pension law changes, Rep. George Miller of California, the committee's senior Democrat, said the Enron case shows how workers' retirement savings can be jeopardized if employees' rights and protections are inadequate. "Today's outdated pension rules are putting employee nest eggs at risk," he said.
On Tuesday, Sen. Joseph Lieberman, D-Conn., announced plans to issue a subpoena to get information about bonuses paid to Enron executives in the run-up to its Dec. 2 bankruptcy filing. "The thought of employees sustaining huge losses while executives were able to sell stock for millions is infuriating," Lieberman said.
Enron executives said employees were frozen out of their accounts for 11 trading days while the company switched 401(k) plan administrators.
Chao disclosed today that Enron stock apparently was trading around $14 a share when the lockout began last fall and dropped to about $10 at the end of it.
As the lockout period approached and Enron's stock continued to plummet, Enron managers considered delaying the switch and the lockout period so employees would not be frozen out of their accounts.
"We considered postponing, but found it was not feasible to notify more than 20,000 participants in a timely fashion," Mikie Rath, Enron's benefits manager, told the Senate Governmental Affairs Committee on Tuesday.
Enron's stock peaked at $82 a share on Jan. 26, 2001. It was selling for $15.40 at the close of trading on Oct. 26, the day the lockout began, and had fallen to $9.98 on Nov. 13, the day it ended.
Reuters News Service and Associated Press contributed to this report.
Club For Growth Controversy
The man behind those national "Club for Growth" ads, attacking Senator Tom Daschle, had an unexpected welcome to Sioux Falls this morning... one he tried to avoid.
Stephen Moore was here to drum up local support from two dozen notable republicans. What he didn't expect, was a group of farmers, waiting to challenge his ideas.
Ultra-conservative and republican-funded "Club For Growth" is running half million dollars in ads attacking Daschle, saying he's the one man who stands in the way of President Bush's fight for lower taxes and more jobs.
Club For Growth has referred to farmers as welfare recipients - that's not sitting well with some.
A sign on the door says "Compass Care" is meeting in this conference room. It's actually Stephen Moore talking with local republicans. These farmers weren't invited, but hope to sit in anyway.
Larry Green, a Fulda, MN farmer says, "Just to let Mr. Moore know we're hard working people out here. We're not welfare recipients."
They've seen the ads and want answers.
Green says, "They're putting a lot of untruths out there about farmers."
"Yes, would there be a chance to talk to Mr. Moore out here for a minute?" asks Green.
The farmers even brought a gift basket for Moore to help him understand what South Dakota's about.
Ron Foster, a Brookings County farmer says, "I've got a book, potato chips, I've got honey and cheese."
Green says, "He's from out east and I think he needs to be educated a little bit."
While the farmers wait for two hours, republican lawmaker Matt McCaulley, candidate for governor Steve Kirby and Roger Hunt who's running for U-S House all leave. Minutes later, Moore slips out a side door, avoiding the farmers.
Flandreau Craig Severtson says, "I think that's self-evident that they're doing things behind closed doors and it's not the right way."
Club For Growth's President Stephen Moore says, "I didn't have 20 mintues to talk to them but I wasn't avoiding them."
Moore held a press conference later in the day and says Daschle took his welfare comments out of context.
Moore says, "When I was talking about welfare for farmers, I was talking about welfare for these huge agri-business that collect the vast bulk of these dollars."
Farmers, big or small, argue if they were paid a fair price at market, they wouldn't need government subsidies to survive.
Moore says his push for local members was very successful and hopes to have 500 South Dakota members by year's end.
DeeAnn Tiede
© 2002 KELO-TV. All Rights Reserved.
The man behind those national "Club for Growth" ads, attacking Senator Tom Daschle, had an unexpected welcome to Sioux Falls this morning... one he tried to avoid.
Stephen Moore was here to drum up local support from two dozen notable republicans. What he didn't expect, was a group of farmers, waiting to challenge his ideas.
Ultra-conservative and republican-funded "Club For Growth" is running half million dollars in ads attacking Daschle, saying he's the one man who stands in the way of President Bush's fight for lower taxes and more jobs.
Club For Growth has referred to farmers as welfare recipients - that's not sitting well with some.
A sign on the door says "Compass Care" is meeting in this conference room. It's actually Stephen Moore talking with local republicans. These farmers weren't invited, but hope to sit in anyway.
Larry Green, a Fulda, MN farmer says, "Just to let Mr. Moore know we're hard working people out here. We're not welfare recipients."
They've seen the ads and want answers.
Green says, "They're putting a lot of untruths out there about farmers."
"Yes, would there be a chance to talk to Mr. Moore out here for a minute?" asks Green.
The farmers even brought a gift basket for Moore to help him understand what South Dakota's about.
Ron Foster, a Brookings County farmer says, "I've got a book, potato chips, I've got honey and cheese."
Green says, "He's from out east and I think he needs to be educated a little bit."
While the farmers wait for two hours, republican lawmaker Matt McCaulley, candidate for governor Steve Kirby and Roger Hunt who's running for U-S House all leave. Minutes later, Moore slips out a side door, avoiding the farmers.
Flandreau Craig Severtson says, "I think that's self-evident that they're doing things behind closed doors and it's not the right way."
Club For Growth's President Stephen Moore says, "I didn't have 20 mintues to talk to them but I wasn't avoiding them."
Moore held a press conference later in the day and says Daschle took his welfare comments out of context.
Moore says, "When I was talking about welfare for farmers, I was talking about welfare for these huge agri-business that collect the vast bulk of these dollars."
Farmers, big or small, argue if they were paid a fair price at market, they wouldn't need government subsidies to survive.
Moore says his push for local members was very successful and hopes to have 500 South Dakota members by year's end.
DeeAnn Tiede
© 2002 KELO-TV. All Rights Reserved.
The predictable awfulness of the Bush Republicans
George Bush's new $2.3 trillion budget will have Roosevelt and Truman turning in their graves, writes William Keegan
William Keegan
Tuesday February 5, 2002
The Guardian
Some of my best friends are Americans. My father spent five happy years in the States during the 1930s and I was brought up to be pro-American.
"We shouldn't have won the war without them - and look what the Marshall plan did for Europe afterwards," was his consistent refrain. But in my father's book there was a strong distinction between Democrats and Republicans.
And, in due course, during my own association with the US, I came to realise that much of what was best in American values stemmed from the good work of those East Coast "liberals" who became such a favourite target for the Reagan Revivalists of the 1980s.
When George Bush came to town to reclaim the Republican crown that his father had lost to Bill Clinton, we wishy-washy liberals feared the worst. Clinton had worked hard to put the US government's finances on a sound footing, but George Bush and his merry men took one look at the result, rubbed their hands, and cried "tax cuts for us and our friends".
Then came the recession and the predictable downward revision to the fantastical forecasts of endless deficits stretching far into the future. Then came September 11 2001.
In their innocence the British prime minister, Tony Blair, and far too many other naive observers, thought that, after the tragedy, they might see something of a, to coin a phrase, "kinder, gentler America".
Well, there have been a number of episodes recently (that don't need spelling out) to disabuse people of this illusion. And the latest is undoubtedly the $2.13 trillion (£1.5 trillion) budget the president sent to Congress yesterday.
The largest and most significant element in this is the $1.7 trillion tax cut which is predominantly directed at the rich - in the immortal words of a past World Bank official - "at the sort of people who are wondering whether to install a fifth bathroom in their fourth home".
What about the third world whose poverty is linked by most observers to the kind of situation that breeds the terrorism Washington wishes to fight? Forget it.
Pleas for more foreign aid fall on deaf American ears. Why? In order to fund the tax cuts for the rich in somewhat less plentiful budgetary circumstances, the White House wishes to cut back on Medicaid and government retraining programmes.
There is something wonderfully predictable about the awfulness of the Bush Republicans. Oh, and by the way, the increase in the defence programme at $48bn will be roughly equivalent to the entire industrial country aid programme to the third world.
Roosevelt and Truman must be turning in their graves. A new generation of American liberals has new struggle on its hands. Good luck to them.
· William Keegan is the Observer's economics editor.
George Bush's new $2.3 trillion budget will have Roosevelt and Truman turning in their graves, writes William Keegan
William Keegan
Tuesday February 5, 2002
The Guardian
Some of my best friends are Americans. My father spent five happy years in the States during the 1930s and I was brought up to be pro-American.
"We shouldn't have won the war without them - and look what the Marshall plan did for Europe afterwards," was his consistent refrain. But in my father's book there was a strong distinction between Democrats and Republicans.
And, in due course, during my own association with the US, I came to realise that much of what was best in American values stemmed from the good work of those East Coast "liberals" who became such a favourite target for the Reagan Revivalists of the 1980s.
When George Bush came to town to reclaim the Republican crown that his father had lost to Bill Clinton, we wishy-washy liberals feared the worst. Clinton had worked hard to put the US government's finances on a sound footing, but George Bush and his merry men took one look at the result, rubbed their hands, and cried "tax cuts for us and our friends".
Then came the recession and the predictable downward revision to the fantastical forecasts of endless deficits stretching far into the future. Then came September 11 2001.
In their innocence the British prime minister, Tony Blair, and far too many other naive observers, thought that, after the tragedy, they might see something of a, to coin a phrase, "kinder, gentler America".
Well, there have been a number of episodes recently (that don't need spelling out) to disabuse people of this illusion. And the latest is undoubtedly the $2.13 trillion (£1.5 trillion) budget the president sent to Congress yesterday.
The largest and most significant element in this is the $1.7 trillion tax cut which is predominantly directed at the rich - in the immortal words of a past World Bank official - "at the sort of people who are wondering whether to install a fifth bathroom in their fourth home".
What about the third world whose poverty is linked by most observers to the kind of situation that breeds the terrorism Washington wishes to fight? Forget it.
Pleas for more foreign aid fall on deaf American ears. Why? In order to fund the tax cuts for the rich in somewhat less plentiful budgetary circumstances, the White House wishes to cut back on Medicaid and government retraining programmes.
There is something wonderfully predictable about the awfulness of the Bush Republicans. Oh, and by the way, the increase in the defence programme at $48bn will be roughly equivalent to the entire industrial country aid programme to the third world.
Roosevelt and Truman must be turning in their graves. A new generation of American liberals has new struggle on its hands. Good luck to them.
· William Keegan is the Observer's economics editor.
HoustonChronicle.com -- http://www.HoustonChronicle.com | Section: Viewpoints, Outlook
Feb. 1, 2002, 9:41PM
Enron's leaders still don't get it
The issue is ethics and they showed none
By J. TIMOTHY McMAHON
We are drowning in the details of the Enron debacle: SEC, FASB, EBITDA, AICPA, SPVs, mark-to-market accounting, off-balance sheet financing, an impotent internal audit committee, a board of directors that is missing in action, national energy policy, accepted auditing principles, fox-in-the-hen-house accounting operations, tax havens, document shredding, political favors, executive privilege, corporate governance, 401(k) regulations, aggressive accounting, misguided analysts, hedging operations, details of deregulation, corporate citizenship and more. The upcoming congressional hearings will surely generate a blizzard of additional details.
Are these details important? Of course. Will they help us understand what happened? Yes. Will the eventual consequences guarantee no Enrons in the future? Of course not.
Enron leaders often chided the uninitiated that they didn't get "it" -- unconstrained deregulation and the Enron method of operation. Well, obviously, Ken Lay, Jeffrey Skilling, Greg Fastow, et al are the ones who didn't get the most important "it."
What happened, and its causes, really is quite simple, in spite of the swirling details. Much of what was done was "wrong." A CBS poll of average citizens denounced Enron's actions 20 to one. But some legal eagles, aggressive accountants, finance wizards and other business experts continue to tell us that, well, you know, many of the "wrong" actions are technically OK because they are not illegal.
There is no legal statute, government regulation or agency rule that tells us we should return a lost wallet when we happen upon it. Does that mean it is right to keep it? Of course not. Despite all the complexities, this is how simple the Enron fiasco is. The behaviors were wrong. It has to do with ethics.
Why do some companies do what's right while others do what's wrong? Why did BP decide and announce, much to the chagrin of many politicians and businesses, that it would, contrary to the conventional wisdom, be able to meet the clean air standards in Texas? Why did 3M pull Scotchguard, with $500 million in annual sales, from the shelves? Why does Ben & Jerry's donate 7.5 percent of pre-tax profit and have social good as part of their mission statement? Why is Johnson & Johnson still the standard for corporate conduct for the way the Tylenol murders crises was handled? There are many more examples. The answer is the real "it" -- leadership, values and organization culture.
Although no one has owned up to it, responsibility for the Enron tragedy rests at the feet of the leadership -- top management and the board of directors. This fact is inescapable. What was done was wrong and technical loopholes carry no weight here. It is really that clear. Leadership, and its reflection in organization culture and processes, is the cause of the disaster. Yet again we are reminded that the "soft stuff" really is the hard core. And it will be this soft stuff that will be the strongest deterrent to future Enrons.
While the leadership issues here are multifaceted, the most predominant is the very real danger of narcissistic leaders. The arrogance of Enron's top leaders is well-known and well-documented-- Lay, Skilling and Fastow easily fit in the narcissistic category. Amazingly, I have yet to read or hear disagreement with this observation.
Narcissistic leaders, driven to attain power and recognition, are, according to noted anthropologist and psychoanalyst Michael Macoby, characterized by both very good and very bad attributes. On the positive side, these leaders often have great vision resulting in important transformations. Their vision is realized because these leaders have the skills to accumulate significant numbers of highly motivated and committed followers. These "productive narcissists" differ from "unproductive narcissists" who, lacking self-awareness and any restraints, have illusions of grandeur and attribute failures to external factors, never to themselves.
These out-of- control narcissistic leaders are poor listeners and often overreact to what they perceive as criticism. Warnings of questionable practices were repeatedly ignored by Enron leadership and several stock analysts experienced the rash reactions of Skilling to their simple requests for information.
Narcissistic leaders also are not very good learners, as they much prefer to convert others to their way of thinking. The Economist documented an occasion when Lay was singing the praises of Drexel Burnham Lambert and its star, Michael Milken who, he claimed, was simply "innovative and aggressive." But the arrogant Drexel collapsed and Milken ended up in jail. It appears that an important lesson was missed here.
Narcissistic leaders are ruthless competitors. Winning, in terms of stated earnings and stock price, was really the only goal for Enron. The "take no prisoners attitude" is well known; and winning big and fast was at the core of Enron's culture. Reward systems encouraged this short-term view. Progressively better quarterly earnings and higher stock prices would be attained -- obviously, in any way possible.
This ruthless, relentless, competitive philosophy and behavior is reflected in the culture of organizations led by narcissistic leaders. These organizations are characterized by arrogance and intense internal competition, much of which is dysfunctional. These are also well-known attributes of Enron.
Finally, these narcissistic leaders lack empathy. They rarely have any regrets and can easily direct down-sizing , layoffs, destructive cost-cutting and other related initiatives -- actions which are gut-wrenching for other leaders. I have yet to hear or read one word of regret from either Skilling Fastow -- no sign of empathy for employees who lost their jobs and retirement funds or for others who experienced staggering financial losses.
"Unproductive" narcissistic leaders, who have low self-awareness and are left unchecked (by the board of directors in this case), can lead to the self-destruction of the organization. When one or two narcissistic leaders cause an entire organization the size of Enron to self-destruct the message is frightening: a similar fate potentially exists for other companies.
The flip side of this depressing information is found in a recent Harvard Business Review article about great corporate leaders. Jim Collin's five-year study identified four characteristics of exemplary, role-model corporate leaders:
1) They have an intense desire to build an outstanding company that benefits all stakeholders.
2) They are humble and modest.
3) They shine the light on others, not themselves, when the company is successful.
4) They shine the light on themselves when things go badly and they accept responsibility for it.
The good news here is that leaders can learn to get their egos under control. It is possible for all leaders to learn to be better listeners, better learners and more empathetic; in short, it is possible to develop more emotional intelligence, the stuff of true success.
The implications here are not only relevant but should have a sense of urgency for all leaders. Honest and fearless self-assessments are in order. Leaders with narcissistic tendencies should have highly trusted colleagues who can supply honest feedback and keep them grounded. Were Enron's escapades in water, broadband, Dabhol, paper and pulp, and metals sound business ventures? Or were they simply grand schemes, illusions?
Some leaders may learn that it is time to embark on career counseling or a serious personal-development program. If you are a leader, no matter what your organization level, consider this information. If you know a leader who needs this information, see that they receive it in a caring and professional manner. If appropriate, the time to act is now -- it may be more important than all of us can imagine.
McMahon is professor of management at the Bauer College of Business at the University of Houston. He can be e-mailed at tmcmahon@uh.edu
Feb. 1, 2002, 9:41PM
Enron's leaders still don't get it
The issue is ethics and they showed none
By J. TIMOTHY McMAHON
We are drowning in the details of the Enron debacle: SEC, FASB, EBITDA, AICPA, SPVs, mark-to-market accounting, off-balance sheet financing, an impotent internal audit committee, a board of directors that is missing in action, national energy policy, accepted auditing principles, fox-in-the-hen-house accounting operations, tax havens, document shredding, political favors, executive privilege, corporate governance, 401(k) regulations, aggressive accounting, misguided analysts, hedging operations, details of deregulation, corporate citizenship and more. The upcoming congressional hearings will surely generate a blizzard of additional details.
Are these details important? Of course. Will they help us understand what happened? Yes. Will the eventual consequences guarantee no Enrons in the future? Of course not.
Enron leaders often chided the uninitiated that they didn't get "it" -- unconstrained deregulation and the Enron method of operation. Well, obviously, Ken Lay, Jeffrey Skilling, Greg Fastow, et al are the ones who didn't get the most important "it."
What happened, and its causes, really is quite simple, in spite of the swirling details. Much of what was done was "wrong." A CBS poll of average citizens denounced Enron's actions 20 to one. But some legal eagles, aggressive accountants, finance wizards and other business experts continue to tell us that, well, you know, many of the "wrong" actions are technically OK because they are not illegal.
There is no legal statute, government regulation or agency rule that tells us we should return a lost wallet when we happen upon it. Does that mean it is right to keep it? Of course not. Despite all the complexities, this is how simple the Enron fiasco is. The behaviors were wrong. It has to do with ethics.
Why do some companies do what's right while others do what's wrong? Why did BP decide and announce, much to the chagrin of many politicians and businesses, that it would, contrary to the conventional wisdom, be able to meet the clean air standards in Texas? Why did 3M pull Scotchguard, with $500 million in annual sales, from the shelves? Why does Ben & Jerry's donate 7.5 percent of pre-tax profit and have social good as part of their mission statement? Why is Johnson & Johnson still the standard for corporate conduct for the way the Tylenol murders crises was handled? There are many more examples. The answer is the real "it" -- leadership, values and organization culture.
Although no one has owned up to it, responsibility for the Enron tragedy rests at the feet of the leadership -- top management and the board of directors. This fact is inescapable. What was done was wrong and technical loopholes carry no weight here. It is really that clear. Leadership, and its reflection in organization culture and processes, is the cause of the disaster. Yet again we are reminded that the "soft stuff" really is the hard core. And it will be this soft stuff that will be the strongest deterrent to future Enrons.
While the leadership issues here are multifaceted, the most predominant is the very real danger of narcissistic leaders. The arrogance of Enron's top leaders is well-known and well-documented-- Lay, Skilling and Fastow easily fit in the narcissistic category. Amazingly, I have yet to read or hear disagreement with this observation.
Narcissistic leaders, driven to attain power and recognition, are, according to noted anthropologist and psychoanalyst Michael Macoby, characterized by both very good and very bad attributes. On the positive side, these leaders often have great vision resulting in important transformations. Their vision is realized because these leaders have the skills to accumulate significant numbers of highly motivated and committed followers. These "productive narcissists" differ from "unproductive narcissists" who, lacking self-awareness and any restraints, have illusions of grandeur and attribute failures to external factors, never to themselves.
These out-of- control narcissistic leaders are poor listeners and often overreact to what they perceive as criticism. Warnings of questionable practices were repeatedly ignored by Enron leadership and several stock analysts experienced the rash reactions of Skilling to their simple requests for information.
Narcissistic leaders also are not very good learners, as they much prefer to convert others to their way of thinking. The Economist documented an occasion when Lay was singing the praises of Drexel Burnham Lambert and its star, Michael Milken who, he claimed, was simply "innovative and aggressive." But the arrogant Drexel collapsed and Milken ended up in jail. It appears that an important lesson was missed here.
Narcissistic leaders are ruthless competitors. Winning, in terms of stated earnings and stock price, was really the only goal for Enron. The "take no prisoners attitude" is well known; and winning big and fast was at the core of Enron's culture. Reward systems encouraged this short-term view. Progressively better quarterly earnings and higher stock prices would be attained -- obviously, in any way possible.
This ruthless, relentless, competitive philosophy and behavior is reflected in the culture of organizations led by narcissistic leaders. These organizations are characterized by arrogance and intense internal competition, much of which is dysfunctional. These are also well-known attributes of Enron.
Finally, these narcissistic leaders lack empathy. They rarely have any regrets and can easily direct down-sizing , layoffs, destructive cost-cutting and other related initiatives -- actions which are gut-wrenching for other leaders. I have yet to hear or read one word of regret from either Skilling Fastow -- no sign of empathy for employees who lost their jobs and retirement funds or for others who experienced staggering financial losses.
"Unproductive" narcissistic leaders, who have low self-awareness and are left unchecked (by the board of directors in this case), can lead to the self-destruction of the organization. When one or two narcissistic leaders cause an entire organization the size of Enron to self-destruct the message is frightening: a similar fate potentially exists for other companies.
The flip side of this depressing information is found in a recent Harvard Business Review article about great corporate leaders. Jim Collin's five-year study identified four characteristics of exemplary, role-model corporate leaders:
1) They have an intense desire to build an outstanding company that benefits all stakeholders.
2) They are humble and modest.
3) They shine the light on others, not themselves, when the company is successful.
4) They shine the light on themselves when things go badly and they accept responsibility for it.
The good news here is that leaders can learn to get their egos under control. It is possible for all leaders to learn to be better listeners, better learners and more empathetic; in short, it is possible to develop more emotional intelligence, the stuff of true success.
The implications here are not only relevant but should have a sense of urgency for all leaders. Honest and fearless self-assessments are in order. Leaders with narcissistic tendencies should have highly trusted colleagues who can supply honest feedback and keep them grounded. Were Enron's escapades in water, broadband, Dabhol, paper and pulp, and metals sound business ventures? Or were they simply grand schemes, illusions?
Some leaders may learn that it is time to embark on career counseling or a serious personal-development program. If you are a leader, no matter what your organization level, consider this information. If you know a leader who needs this information, see that they receive it in a caring and professional manner. If appropriate, the time to act is now -- it may be more important than all of us can imagine.
McMahon is professor of management at the Bauer College of Business at the University of Houston. He can be e-mailed at tmcmahon@uh.edu
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