Posted on 28-2-2002
Endrun
Introduced by Alan Marston
Enron could easily be painted as an abberation, and the blame
pinned on a
few greedy, heartless individuals in its boardroom. Easily painted,
but not
hitting the spot. Everyone who has bought a bottle or a can
of anything
ever, is touched by Enron, because Enron is the quintessential
corporate
.... that got too big.
Anything can get too big and collapse, infact that is the way
of all
`successful' things. The painting we should be looking at is
on the wall,
along with the writing - there is a problem with the corporate
way, a
fundamental systemic problem that touches us all and which bowled
over
first Enron, now Williams and who knows how may to come and
how many has
beens. That problem is the machine mentality and it is crystallised
in the
heads of those whose philosophy underpins corporatism, accountants.
The
philosophy of our age is an absolute belief in numbers, the
ultimate
resting place of rational thought. A belief which nevertheless
has to live
in a universe and on a small planet that does not run-by-numbers.
The clash
between the bean-counter and the bean, between the corporate
tower and the
organic earth is felt everytime something doesn't go according
to `the
plan', and that's always. Its not that the corporate is necessarily
evil,
or those that work for it necessarily corrupt and/or incompetent
(though
they may be), its the system, it doesn't work, it diverts, it
twists, it
squeezes, it pushes and finally it kills.
Is there a way out. Yes, but its not a straight and narrow path.
Everyone
who wants to can ease there way out step by step, each one built
on raised
awareness and the courage to act accordingly, and alone. The
individual
won't change the system, it will collapse bit by bit of its
own momentum.
This is the age of individualism, that is its great gift, and
its curse,
use it how you will, because you can't turn away.
Enron 2
By Wayne Madsen
Special to CorpWatch, February 14, 2002 www.corpwatch.org
Last month, the Tulsa, Oklahoma-based Williams Companies, an
amalgamation
of energy companies and communications subsidiaries, announced
it might
face potential losses of as much as $100 million because of
deals it made
with Enron. However, a few weeks later, Williams was hit with
a class
action lawsuit from stockholders that claims the firm engaged
in the same
type of business practices and accounting "irregularities" that
bankrupted
Enron. Although Williams executives claimed the company was
simply a victim
of Enron, they were covering up the company's own Enron-like
activities
with tentacles stretching beyond Tulsa to the corridors of power
in
Washington, according to the suit.
Williams' financial mess could well be termed "Enron II." Like
Enron,
Williams saw their revenues and their stock plummet. In the
last 3 months
of 2001 Williams' lost $71 million in their communications subsidiary
alone
and the value of their communications stock fell from a high
of $61 per
share to just 67 cents.
Like Enron, Williams has been a large contributor to Republican
candidates.
According to the Federal Election Commission, during the 1999-2000
campaign
cycle, Williams and its corporate big wigs gave the GOP $98,425.
And, like
Enron, that money bought access. Williams' Chairman Keith Bailey,
now a
defendant in the shareholders class action suit, served on President-elect
Bush's transition team on education. Should Williams go the
same way as
Enron, more questions are likely to be asked in Washington about
the
securities and financial fraud thread that apparently runs through
members
of the Bush administration and its largest political supporters.
Williams' influence extends to Capitol Hill. The GOP quickly
echoed
Williams' public relations spin on the company's rapid losses.
On February
6, Steve Largent, the Republican Congressman from Tulsa and
candidate for
Governor of Oklahoma, told the House Commerce and Energy Committee
(on
which he sits) that Williams' $100 million fourth quarter loss
was caused
by "unmet obligations by Enron." Largent also complained that
Wall Street
was unfairly comparing companies like Williams to Enron, adding,
"this is a
guilt by association type mentality." Largent accepted $5,500
from Williams
in his last congressional race, according to the Center for
Responsive
Politics.
From Pipelines to Telecom
Like Enron, Williams is originally a natural gas pipeline company
that
figured it could make money in telecommunications. Williams
execs thought
they could make windfall profits by building a fiber optic network
along
the company's pipeline rights-of-way and leasing network services
to
telecommunications and Internet providers. Williams subsequently
spun off a
telecommunications subsidiary, Williams Communications Group.
Williams, convinced it could make millions in potential profits
from the
communications arena, began inflating the value of its stock
through
various partnerships. According to its own Securities and Exchange
Commission 10K filing, in 1999 Williams convinced SBC Communications
(previously Pacific Bell), Intel Corp, and the privatized Telefonos
de
Mexico (TELMEX) to invest in Williams Communications common
stock. Williams
Communications operating units, including one called Strategic
Investments,
began to "secure long-term, high-capacity commitments for traffic
on its
network," thereby boosting the value of its stock. The company
did this
despite investment house warnings that the market for such services
was
vapid. Williams' top management ignored warnings by market analysts
that
there was an "over-supply of fiber-optic capacity."
The complaint filed on behalf of Williams' shareholders by the
law firms
Morrel, West, Saffa, Craige & Hicks and Schatz & Nobel,
alleges that
Williams' top management ignored warnings by market analysts
that there was
an "over-supply of fiber-optic capacity" in the broadband market.
The
shareholder complaint states, "almost 100 million miles of optical
fiber --
more than enough to reach the sun -- were laid around the world"
at the
same time Williams' top management was hyping value of its fiber
network to
investors.
When the bottom dropped out of the fiber market, lenders refused
advance
money to fiber broadband service providers like Williams. However,
the
aggrieved Williams' shareholders claim the company "consistently
and
adamantly contended that [Williams Communications] was not being
adversely
affected by any over-capacity or over-supply conditions." However,
Williams
knew it was in deep financial trouble due to the communications
glut just
like every other company in the business, including Enron.
Williams' employees began to feel the pinch when Communications
President
and Chief Executive Officer Howard Janzen announced last June
that 500 job
cuts were "necessary as the company re-evaluated its costs."
A spokesperson
for the Northern Oklahoma AFL-CIO said the lay-offs were having
a
"devastating effect" on the Tulsa economy. The fact that Williams
Companies
is "not union-friendly" left fired employees with no protection
or
recourse, according to the AFL-CIO.
Williams' optimistic statements in the face of certain financial
losses
could have come from the playbook of former Enron Chairman Ken
Lay, who was
told similar tales to his investors and employees about his
own company.
And as was the case with Enron and its auditor Arthur Andersen,
Williams'
auditor, Ernst & Young, appears to have gone along with
the fancy footwork
and creative accounting practices of the top management. At
the very least,
Ernst and Young signed off on Williams' 10K SEC filing.
Hiding Debt
As the bottom dropped out of the fiber optics market, demand
in the natural
gas market was at an all time high. The shareholder lawsuit
alleges that in
order to protect itself from the communications losses, Williams
decided to
spin off its anemic subsidiary to remove from corporate balance
sheets its
"mounting losses and rising expenses. The suit alleges that
they did this
"before it was revealed that these costs and expenses were continuing
to
escalate beyond announced expectations, and before investors
came to
realize the true impaired condition of Williams communications."
Almost 100 million miles of optical fiber -- more than enough
to reach the
sun -- were laid around the world at the same time Williams'
top management
was hyping value of its fiber network to investors.
But in order to sell off its loss maker, Williams had to guarantee
$2.5
billion of the subsidiary's debt. The lawsuit maintains that
in
guaranteeing that debt Williams exposed its shareholders to
a huge
undisclosed financial liability. While Wall Street was being
rocked by
continuing revelations concerning fraud at Enron, Williams dealt
the market
another blow when, on January 29, it announced that it was delaying
the
release of its 2001 earnings report "pending an internal assessment
of
Williams' contingent obligations to Williams Communications."
The stock of
both companies fell precipitously.
Williams was given an opportunity to comment for this article
but it
declined. The company also refused to disclose when the release
of its 2001
earnings report would occur. A company spokesperson said, "In
the context
of what the article concerns, we cannot comment on the release
of the
report." Nevertheless, on February 6, without the benefit of
seeing its
2001 earnings, Wall Street analysts at Salomon Smith Barney
recommended
Williams Energy stock as a "buy." Congress and the Securities
and Exchange
Commission are currently investigating similar inflated recommendations
by
Wall Street analysts on Enron stock when all the financial indicators
were
pointing down.
Despite the ongoing revelations, Williams web site proclaims,
"Honest
relationships and trust are essential for long-term business
success. We
deal fairly in all our business relations." Similarly Enron's
2000 Annual
Report asserts: "We work with customers and prospects openly,
honestly and
sincerely. When we say we will do something, we will do it;
when we say we
cannot or will not do something, then we won't do it."
Following the disclosure that Enron was actually one huge Ponzi
scheme that
enriched the Texas friends of George W. Bush and pumped hundreds
of
thousands of dollars into the president's campaign coffers,
observers
wonder how many other such schemes are hiding behind the corporate
veil of
secret partnerships and off-the-books operations. Considering
Bush's oily
ties to Enron and Williams, the American people, like the unfortunate
shareholders of those two companies, deserve honest answers
to this and
other tough questions.
Wayne Madsen is a Washington-based journalist who covers intelligence,
national security, and foreign affairs. He is also a Senior
Fellow of the
Electronic Privacy Information Center (EPIC) in Washington,
DC and author
of "Genocide and Covert Operations in Africa 1993-1999" (Mellen
Press).
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