Enron tax havens, and Public Citizen's Take: PDF scenario on Enron's col

                       OH, and the Enron story you haven't heard: 

http://www.newmassmedia.com/nac.phtml?code=har&db=nac_fea&ref=18688 

                       The bankrupt energy trader Enron Corp., whose
collapse last year is said to 
                       be the worst corporate failure in history, has 2,832
subsidiaries, of which 
                       874 are registered in the Cayman Islands or other
tax and bank secrecy 
                       havens. 


                       Slocum notes that Enron's Byzantine corporate
structure is anything but 
                       typical. Dynergy, a rival energy trader which backed
out of a merger 
                       agreement with Enron last month, has just 12
subsidiaries, all registered in 
                       the United States, he says. ExxonMobil, with 147
separate subsidiaries, has 
                       fewer than a dozen domiciled in tax havens. 

                       The entire report, upon which this news item is
based can be downloaded 
                       here: 

                       "The Public Citizen report, released Dec. 21, has
received little notice. 
                       Titled "Blind Faith: How Deregulation and Enron's
Influence Over Government 
                       Looted Billions from Americans," it presents a
plausible thesis that is at 
                       odds with the received wisdom in the Enron collapse." 

                       PDF format: 

                       http://www.citizen.org/cmep/index.cfm 

                       -Cin

1.
FULL ARTICLE:
The Scoop: The Enron Story
You Haven't Heard 

There are more sides to the worst corporate failure
in history than you can imagine.

By Edward Ericson, Jr. 
Published 01/10/02 

The bankrupt energy trader Enron Corp., whose collapse last year is said to
be the
worst corporate failure in history, has 2,832 subsidiaries, of which 874
are registered in
the Cayman Islands or other tax and bank secrecy havens. 

"The sheer number of offshore subsidiaries ... provides the company with
tremendous
incentive to funnel large sums of cash into ... nations with few or no bank
disclosure
regulations," says a report from Ralph Nader's Public Citizen. This
corporate structure
"provides Enron with potentially thousands of phantom accounts to hide
money from
U.S. tax officials, California energy crisis investigators or creditors
during Enron's
bankruptcy filing." 

The report, issued late last year, calls for a congressional investigation
into Enron and
into the actions of Sen. Phil Gramm (R-Texas) and his wife Wendy Gramm, a
former
official of the Commodity Futures Trading Commission and now an Enron board
member. Both Gramms made or modified government rules in order to allow
Enron to
conceal its deals from regulators, the report says. And as a member of
Enron's Audit
Committee who was paid at least $915,000 by Enron since 1993, Wendy Gramm
-- who
holds a Ph.D. in economics -- knows where the money went. Last week Connecticut
Sen. Joe Lieberman announced that his Governmental Affairs Committee will
investigate the financial collapse of Enron Corp. with an eye toward
whether federal
agencies could have done more to protect investors. 

Enron, founded in 1985 as a gas pipeline company, grew into the nation's
seventh-largest corporation through an online energy trading system that
financial
analysts now say they did not understand. The company's finances collapsed this
autumn after it announced a restatement of profits and several off-the-books
partnerships. Enron's stock plunged from a high near $90 to about 50 cents,
while
thousands of employees have been stripped of their pensions and laid off. 

The Public Citizen report, released Dec. 21, has received little notice.
Titled "Blind
Faith: How Deregulation and Enron's Influence Over Government Looted
Billions from
Americans," it presents a plausible thesis that is at odds with the
received wisdom in
the Enron collapse. 

There are two standard stories about Enron: the first holds that Enron, while
expanding its energy trading, was actually losing money -- a fact it
concealed using
questionable "off the books" accounting practices. This is the version in
publications
ranging from the New York Times and Wall Street Journal to the populist website
called Corporate Watch. The second story, now gaining currency in the financial
press, says the collapse is no big deal. As Fortune magazine wrote for its
Dec. 24
issue, "not a single light flickered after Enron's implosion." So by
implication there's
no point in any lengthy investigations. 

These stories offer a powerful argument for complacency, which is why a 28-page
Public Citizen report, written by researcher Tyson Slocum, deserves a wider
hearing.
***The report asserts that Enron was not losing money, but stealing
billions of dollars
from California citizens while forcing on them 37 "rolling blackouts" after
Sen. Gramm
rammed through a law that allowed Enron's energy trading desk "to manipulate
supply" secretly.*** 

Gramm's bill, dealing with an obscure financial instrument called
over-the-counter
derivatives, was contrary to the recommendations of a Presidential
Commission which
included Treasury Secretary Robert Rubin and Federal Reserve Chairman Alan
Greenspan. Enron lobbied on behalf of the bill so heavily that Washington
insiders
called it "the Enron point." It had been stalled in the Senate when Gramm
renamed it
and tacked it to a must-sign bill in December 2000. Few noticed the new
provision,
which "took the buying and selling of electricity off the books," Slocum
says. Energy
trading migrated to Enrononline's secret exchange, where high prices were
concealed
from the Federal Energy Regulatory Commission (FERC). 

FERC had just recently announced that California electric prices were not
"just and
reasonable," key wording meant to signal the price gougers that the
reluctant agency
might cap electric prices. The newly invisible trades were thus beyond the
scrutiny of
FERC, and Enron's revenues quadrupled in the next quarter. 

But FERC imposed a price cap in June, leaving Enron with futures contracts
that cost
it money. So the corporation concealed those losses with fancy bookkeeping.
But the
profits Enron made before that had to go somewhere, and the offshore
accounts are
the most likely place to look. 

Slocum notes that Enron's Byzantine corporate structure is anything but
typical.
Dynergy, a rival energy trader which backed out of a merger agreement with
Enron last
month, has just 12 subsidiaries, all registered in the United States, he says.
ExxonMobil, with 147 separate subsidiaries, has fewer than a dozen
domiciled in tax
havens. 

Slocum admits he could be wrong. "I don't know all the facts because I
can't get to it --
but we need Congress to investigate," he says. "There were key members of
congress
and the Bush administration that assisted Enron in its ability to do this.
We need them
to tell us what they know. And it starts with Wendy Gramm." 

Or it may start with the discovery process in the bankruptcy court. 

Insurance companies that took a piece of Enron's action -- including The
Travelers
and the Hartford Insurance Group, are trying to avoid paying Enron-related
obligations. Like Slocum, the insurance companies suspect massive fraud. 

In early December, nine insurance companies, including Travelers and The
Hartford,
wrote J.P. Morgan Chase to inform the investment bank that they needed more
proof
of certain forward sales contracts' legitimacy before they would honor
surety bond
payments of more than $960 million, according to documents filed in federal
court in
New York. The insurers' letter claimed they have "received credible
information that, in
fact, there may never have been any ... contracts." 

The insurers have gone to court to force Enron to divulge detailed
information about
the alleged contracts, and J.P. Morgan and Enron have fought them. As of
New Year's
Day, according to the Wall Street Journal, only Travelers had not joined in
that court
battle, possibly in part because parent company CitiGroup and J.P Morgan
are Enron's
lead bankers. 

--Edward Ericson, Jr., got this week's Scoop.

http://www.newmassmedia.com/nac.phtml?code=har&db=nac_fea&ref=18688

2.
http://www.citizen.org/