Offering frequent news and analysis from the majestic Evergreen State and beyond, The Cascadia Advocate is the Northwest Progressive Institute's unconventional perspective on world, national, and local politics.

Sunday, January 29, 2006

"Fat Boy," "Death Star" and "Lucky Dub"

George Bush's spiritual brethren at Enron will finally go on trial. Jury selection begins tomorrow in a Houston federal court. The headliners were once Kenneth Lay, Jeff Skilling, and Rich Causey, but Causey, formerly Enron's top accountant, turned state's evidence. Attorneys for the other two tried unsuccessfully to get a further delay, saying a fair trial in Houston (remember "Enron Field") was not possible. Eighty percent of citizens there have a negative view of the gentlemen.

These are George Bush's fellow travellers, not only because "Kenny Boy" Lay and other Enron insiders were among his buddies and prime political backers, but more so because Enron-type fraud was Dubya's preferred MO. Tom DeLay and Jack Abramoff are into low-brow graft next to Bush and corporate cooking of the books.

One mode of corporate fraud, the "fictitious asset sale," was beneficial to both Bush and Enron. Company A sells its asset to Company B at an enormous price, adds the gains to profits, wows the market with the balance sheet, sells a lot of high priced stock, and hopes nobody finds out that Company B was just Company A under another name and the asset was worth a fraction of the sale price.

Details: The story was recounted by Paul Krugman in the July 2, 2002, NYT. In 1989 George had gotten on the board of Harken Energy when Harken bought his tiny, money-losing, highly indebted company Spectrum 7 for $2 million ("because his name was George Bush"). Harken was losing money too, but was able to hide its losses with profits generated by the sale of an asset, its subsidiary Aloha Petroleum. Eventually the SEC ruled the transaction to be phony because the purchasers of Aloha were simply a group of Harken insiders (who had, in fact, borrowed much of the money from Harken itself).

Before the stock tanked, Mr. Bush sold off two-thirds of his share, $848,000 worth, and in spite of insider trading laws requiring prompt disclosure, neglected to inform the SEC for 34 weeks. An internal SEC memorandum concluded that he had broken the law. No charges were filed. Daddy was president.

The rest of Bush's business career reeks as well. The proceeds from Harken were invested in the Texas Rangers baseball club, and after "an equally strange story," as Krugman puts it, George became a truly rich man.

So when we relive the Enron market-rigging scandal, think not only of "Fat Boy," "Death Star," and "Get Shorty," but also of "Lucky Dubya." They've all cost us dearly.

These and other stories from his NYT columns were collected in Krugman's best-selling book The Great Unraveling: Losing our Way in the New Century. Krugman is an object lesson in why economists speak of things with the term "relative." Today he is viewed by all as definitely on the left, but during the first part of his career the economist was so much in the center you might have called him "apolitical." It wasn't Krugman who changed position, it was the rest of the landscape that moved to the right.

Footnote: Son of Enron. The New York Stock Exchange welcomed Refco, a commodities broker, in August. Refco stock spiked 25 percent. In October its CEO Phillip Bennett was arrested for fraud when it was found that $430 million in debt had been kept off the books. A week later Refco filed for bankruptcy.

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