Enron's Final, Biggest Error

Enron's Final, Biggest Error
Daphne Wysham
The Houston Chronicle, 13 April 2002

The biggest error Enron made did not have to do with their dubious accounting practices. Nor did it have to do with the golden parachutes they offered their departing chief executive officers, nor with their theft of employees' pensions. The biggest mistake Enron made was doing all of this on US soil to Americans.

In fact, Enron has been behaving abominably around the world for nearly a decade. Throughout the time it operated in developing countries, the name Enron became synonymous with scandal as its shady deals with government officials became legendary. But, as the old adage goes, "What's good for General Motors is good for America". Working under this faulty premise, government officials, rather than hold Enron accountable for their actions abroad, willingly became the pawns of this now-fallen giant, until recently the country's seventh-largest corporation.

They assisted Enron as it marched into risky projects abroad. They opened up the coffers of taxpayer-backed institutions, providing
more than $4 billion in US government financing. US officials also persuaded their counterparts in international organizations to lend Enron their assistance. Enron obtained another $3 billion from other public sources, such as the World Bank, the European Investment Bank and the United Kingdom's export credit agencies. Ironically, they used these public agencies to advocate for the privatization of power and energy sectors around the world, a policy shift that helped them and other private multinationals enter into energy and power contracts in cash-poor developing countries globally.

Enron's overseas operations rewarded shareholders temporarily, but often punished the people and governments of foreign countries
with price hikes and blackouts worse than what California suffered in 2001, causing social unrest and riots that were sometimes brutally repressed. For example:

In the Dominican Republic, eight people were killed when police were brought in to quell riots after blackouts lasting up to 20 hours followed an Enron-initiated power price hike. Local citizens were further enraged by allegations that Enron and other foreign multinationals had purchased their public utility at a price almost $1 billion less than its actual value. The auditor: a local affiliate of Arthur Andersen.

In India, police hired by the power consortium of which Enron was a part beat nonviolent protesters who challenged the $30 billion
agreement - the largest deal in Indian history - struck between local politicians and Enron. Among those beaten were pregnant women and children dragged from their homes.

The president of Guatemala tried to dissolve the Congress and declare martial law after rioting followed an Enron-maneuvered price
hike.

In Panama, the government promised power rates would go down by 10 percent following Enron's takeover of a local power plant.
Instead, they rose by between 10 percent and 20 percent. Rioting followed suspicions of corruption and Enron's price hikes and power outages there, too.

In Colombia, two politicians resigned amid accusations that one was trying to push a cut-rate deal for Enron on the state-owned power company. These allegations of corruption will taint Colombia's upcoming elections this May.

While all this was occurring, the US government and other public agencies continued to advocate on Enron's behalf, threatening poor countries such as Mozambique with an end to aid if they did not accept Enron's bid on a natural gas field. So linked was Enron with the US government in many people's minds that they assumed, as the late Croatian strongman Franjo Tjudman did, that pleasing Enron meant pleasing the White House. For Tjudman, he hoped that compliance with an overpriced Enron contract might parlay into an array of political favors, from softer treatment at The Hague's War Crimes Tribunal to the entry of his country into the World Trade Organization.

It was only when Enron's scandals began to affect Americans that these same government officials and institutions began to hold the
corporation at arm's length. And it was only when Enron leadership revealed their greed on home turf that it became the biggest corporate scandal in recent US history.

Clearly, what's good for Enron is not good for America or for anyone else. Hopefully, Enron's demise will finally put to rest the old GM slogan and force us to come up with a new adage, one that puts the people of America - indeed, the people of the world - ahead of the interests of corporate America.

Copyright 2002 The Houston Chronicle