Posted on 1-6-2003
Object
Lesson In Corporate America
By Emad Mekay, Inter Press Service, Friday 30 May 2003
WASHINGTON - Defunct energy giant Enron used the U.S.
government to coerce the World Bank and poor nations to grant
concessions and resolve its investment problems, according to
documents and correspondence released by the Treasury Department.
Enron, a bankrupt company that allegedly paid no taxes
in the 15 years before it went broke in 2001--despite earning
billions of dollars in declared profits--regularly and aggressively
called on staff from Treasury, the State Department, the office
of the U.S. Trade Representative and the World Bank to meet
with foreign officials to favorably resolve its problems and
disputes with their governments. The company collapsed at the
end of 2001 with billions of dollars in debt and facing accusations
of accounting frauds.
The incidents, according to Treasury documents obtained
by consumer groups under the U.S. Freedom of Information Act,
concerned its subsidiaries' activities in countries including
Argentina, India, Nigeria, the Dominican Republic and Turkey.
Nations like India, Argentina and Mozambique have long publicly
complained that Enron was particularly heavy-handed in using
the local U.S. embassy or Washington to apply pressure if disputes
were not resolved to its satisfaction. The new documents, though
heavily censored, are among the first concrete evidence of how
the highly controversial company managed to outdo other U.S.
firms in aggressively pulling strings in Washington. What
"sets Enron apart was that it was always willing to take
things a little further than everybody else," said Tyson
Slocum, a research director with Public Citizen, a U.S.-based
consumer group. "Enron, for its size, flexed an enormous
amount of political muscle that gave it tremendous access that
a lot of other companies did not enjoy as consistently. It just
excelled at pushing its influence to a level more advanced and
a little higher than many of its competitors," he told
IPS.
In India, for example, according to the documents, senior
government officials intervened with their Indian counterparts
to settle a dispute over the Dabhol power plant in Enron's favor.
Officials from Treasury, the State Department and even the National
Security Council were involved in resolving problems over the
$3 billion project on behalf of the U.S. firm. The Indians were
concerned that the project was not viable in the first place,
and that Enron had been accused of profiteering by charging
power prices that were at least three times higher than elsewhere
in the country. But in negotiations between India, Enron, and
other agencies, "the objective is to steer the discussion
away from whether the (Dabhol) project is in default or not,"
wrote Geetha Rao of the Treasury Department's India Desk, in
correspondence seen by IPS. In another document, U.S. officials
briefing then Secretary of Treasury Paul O'Neil suggested that
messages he deliver on a trip to India include, "without
a quick resolution of the Enron dispute, the financial relationship
between the U.S. and India would suffer as a result." "Unless
expeditiously resolved, (the Enron dispute) could affect India's
investment climate and hamper development of our bilateral economic
and political relations," said another "talking point"
provided to O'Neil. It continues: "The U.S. government
hopes that a creative resolution can be found to Dabhol so that
we can focus without distraction on our growing economic and
political ties."
Enron even reportedly pushed administration officials
to threaten foreign governments with sanctions if their disputes
could not be settled advantageously. In 2001, the Financial
Times newspaper said that company executives threatened to have
the United States impose sanctions on India. The Dabhol plant,
which is still 65 percent owned by Enron, was shut down as the
company went into bankruptcy and Indian lenders started court
action to recover loans. The end results of lobbying efforts
on behalf of Enron are unclear, but the documents clearly show
how the firm arm-twisted U.S. officials to intervene on its
behalf. "To get a secretary of the Treasury to raise
the issue of a specific company's contractual dispute in high-level
official diplomatic meetings is not common," said Slocum,
referring to O'Neil's trip to India.
Washington also intervened on Enron's behalf elsewhere.
Other documents show that in 2001 the company lobbied the government
to "exercise the influence of the United States in the
World Bank" to persuade the international lender, which
often attaches economic policy conditions to its credit, to
intervene in economic policy in Turkey so that Enron's investment
there would be protected. Both the World Bank and the International
Monetary Fund had at the time wanted to impose a deadline on
offering guarantees for certain energy projects in Turkey, some
of which involved Enron. A World Bank official told IPS
on Thursday that the company's pressure tactics did not work,
and that the Bank went ahead and restricted guarantees to the
energy sector.
Similarly, in 2001 Enron sought help from "officials
who are handling U.S. foreign policy relations with Argentina,"
including the U.S. Trade Representative, State Department officials
and the Treasury, to resolve a conflict with Argentina over
a $500 million investment dispute with Enron's water services
subsidiary, Azurix. The U.S. firm had complained that local
authorities would not allow Azurix to charge the high rates
provided in the contract for its portable water and wastewater
services. Argentina finally agreed to buy back the project.
"These documents help explain how Enron used its money
and connections to distort government policies in a way that
gave it a free rein to cheat consumers," said Slocum. Activists
and watchdog groups have long decried the apparently open channels
between corporations and successive U.S. administrations, often
established through hefty election campaigns contributions.
According to the Washington-based Center for Responsive
Politics, which analyzes federal elections documents, from 1989
to 2002 Enron and its employees gave nearly $6 million in individual,
political and soft money contributions to federal candidates
and parties. Three-quarters of the candidates were from the
Republican Party of President George W. Bush.
Enron was also a major donor to the election campaign
of Bush and Vice President Dick Cheney, while at least 15 high-ranking
administration officials owned stock in the energy company in
2001. Activists say this cozy relationship between the U.S.
government and corporate executives leaves consumers and the
poor at a disadvantage, particularly in defenseless developing
nations. "That's the kind of corporate behavior that an
organization like ours is trying to change," said Nadia
Martinez of the Institute of Policy Studies in Washington. "It
is when the U.S. government uses its influence to arm-twist
to do things that are favorable to the U.S. and its corporations,
when it may or may not be in line with the wishes of the people
or the interests of the people in that country," she added.
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