November 15, 2002

Commentary

They’re Still A Bunch of Crooks!

By William Rivers Pitt

Amid the din of news stories on Tuesday about bin Laden tapes, Iraq nerve gas and Homeland Security deals, a man named William H. Webster quit his job. Webster had enjoyed a distinguished career to that point, having served as director of both the Central Intelligence Agency and the Federal Bureau of Investigation. Not long ago, he was hired to head the Public Company Accounting Oversight Board, a recent creation of the Security and Exchange Commission. This board had been commissioned to police the accounting community, and the business community by proxy, in the aftermath of the astounding Arthur Andersen scandal.

Problems arose when it came to light that Webster had served as head of the audit committee for a company named U.S. Technologies. Inc. U.S. Technologies currently stands accused of securities fraud, a charge enjoyed by a number of Arthur Andersen’s former corporate clients, including Enron and WorldCom. When Webster was nominated for the Oversight Board position on October 25th, two of the five S.E.C. commissioners tasked to approve his nomination voted against him, claiming he was unqualified. This was before they knew about U.S. Technologies. Webster admitted the connection one week after he was confirmed, and was hounded until his resignation this past Tuesday.

The fellow who nominated Webster for the position, and subsequently failed to disclose the U.S. Technologies connection to the approving commissioners, has also quit his job. Like Webster, S.E.C. chairman Harvey Pitt quit amid the grinding roar of other news stories. Pitt resigned on November 5th, the day of the midterm elections. In fact, the announcement of his resignation came as many of the heavy election returns were coming across the wires at CNN and MSNBC. The story rumbled for perhaps and hour and was swept aside.

Pitt was controversial from the moment he arrived at the S.E.C. Before accepting the chairmanship on August 4, 2001, he had served as a prominent attorney for the Big Five accounting firms, including Arthur Andersen. Many feared that the fox had been given the keys to the henhouse washroom. When the Enron/Arthur Andersen scandal erupted some four months later, Pitt found himself squarely in the middle of things. His was the agency mandated to watchdog the kind of fraud Enron perpetuated, as well as the kind of malfeasance Arthur Andersen tried to cover up when they shredded bales of Enron documents. The irony of it all is that, in his previous life as an attorney, Pitt would almost certainly have been part of the legal team defending Arthur Andersen against prosecution. Pitt flatly denied any conflict of interest and refused to recuse himself from the matter, hanging on grimly to his post until election night, when his well-timed resignation was lost amid the avalanche of election returns.

If a tree falls in the forest and the media refuses to report it, did it actually happen? Of course. Ask the tree. The double-barreled resignations of Pitt and Webster are an unmistakable sign that the corporate scandals which have dogged the administration and brutalized the stock market remain perched like the raven above George W. Bush’s door. The fact that compromised individuals like Pitt and Webster were entrusted with such important positions speaks volumes about the priorities and ultimate loyalties of the Bush White House.

It was widely reported after the Enron scandal broke that Pitt had, in fact, been chosen for his S.E.C. position by Enron CEO Kenneth Lay because of Pitt’s widely-known disdain for corporate regulations. Lay was Bush’s largest financial contributor, going all the way back to the days when Bush called the Texas Governor’s mansion home. Lay gave Bush the use of Enron corporate jets during the 2000 campaign and contributed $1.8 million to the Republicans during that race.

Why is this important? That tree fell in the forest a while ago, and the media got bored of it when war on Iraq was brought to the table. Now that the Republicans control Congress, won’t all of this be swept tidily under the rug? Don’t bet on it. The Republicans may control Congress, but they surely do not control the sovereign state of California, nor do they control its Attorney General, a Mr. Bill Lockyer. Lockyer is spearheading something called the Energy Task Force. This task force of 85 attorneys has been given a $9.7 million budget. Its purpose is to discover exactly how Ken Lay and Enron bilked California ratepayers out of $8.9 billion by rigging the electricity grid and energy trading markets during the 2000-2001 energy crisis. Currently, his group is sifting through 400 boxes of Enron documents and 400 fully stuffed computer disks for evidence. They have, to date, filed over 70 legal actions against Enron and its subsidiaries before the Federal Energy Regulatory Commission.

The Attorneys General of Washington State and Oregon are cooperating with Lockyer’s investigation, because California’s energy woes in 2000 and 2001 spilled into their states. Oregon suffered 40% increases in energy rates during the California crisis, and Washington saw the price per megawatt of energy spike from $30 to $3,000 at one point. Both states are conducting their own investigations into Enron and its subsidiaries.

Most interesting of all is the matter of Tim Belden. Mr. Belden was a top Enron energy trader out of Oregon who pleaded guilty in October to criminal manipulation of markets. Mr. Belden is cooperating with investigators, and the information he is divulging is expected to lead to other arrests, other prosecutions, and further investigations.

Mr. Pitt is gone, and Mr. Webster is gone. Daschle is no longer Majority leader, Gephardt has basically ceased to exist, and Congress belongs to the GOP. Bill Lockyer of California, however, holds the keys to the kingdom, and he is working nights. Tim Belden is there with him, singing like a bird.


(William Rivers Pitt is a teacher from Boston, MA. He is the author of two books - “War On Iraq” (with Scott Ritter) available now from Context Books,and “The Greatest Sedition is Silence,” available in April 2003 from Pluto Press.)

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