Wednesday, 9 April 2003, 5:07 pm
Column: Catherine Austin Fitts
Mapping the Real Deal…
The Real Deal About Enron
… an interview with Scoop Real Deal Columnist Catherine Austin Fitts
Part Four Of Seven Parts
By Daniel Armstrong*
Originally Published By Sanders Research Associates
[*Daniel Armstrong is a writer and novelist based in Eugene, Oregon. Mr. Armstrong is a graduate of Princeton University and attended the University of Oregon School of Journalism.]
If my years working on the clean up of BCCI and the S&L crisis taught me one thing that I would communicate today to the shareholders, retirees and employees who have been harmed, it is this: people like those on the board of Enron absolutely make money from insider trading, bid rigging and fraud, and they do so with help from the highest levels.
— Catherine Austin Fitts.
IMAGE: Enron – Click Through To Original Article
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(Click Here for Part One)
(Click Here for Part Two)
(Click Here for Part Three)
In Part One, we introduced Catherine Austin Fitts and described some of her experiences in taking on the criminal powers who lie behind the modern U.S. Governmental apparatus. The Interview transcript follows in Part Two and Part Three
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IMAGE: Smug Pug The Cancer Man
another happy investor… ..”crime that pays is crime that stays!”
(Pug Cancer man)
(Continuation line…) CAF: I have been told that the congressional audit teams have preserved some settlement system records. However, I am skeptical. The proof is in the pudding. A year has passed. Where is the money? The failure to assert control of the records and money for this length of time can only be a cover up.
DA: By cover up, you mean a way to steal and launder money all at the same time?
CAF: You might say it that way. But a cover up is also a method to protect people and institutions—that is, to keep the pieces of the syndicate in place. For instance, it is my understanding, that PROMIS is managed for the Department of Justice by the military contractor DynCorp. Again the technology is important. The sophistication of surveillance and communication technology today is even beyond what Hollywood can imagine. And curiously enough, Herbert “Pug” Winokur, who was DynCorp’s Chairman and lead investor from 1989 to 1997, and who is still Chairman of DynCorp’s compensation committee, was the Chairman of Enron’s Finance Committee through all of Enron’s worst days—that is, until June 6th of 2002 when he resigned.
DA: Thus the exChairman of Enron’s Finance Committee has intimate connection to the DOJ’s most powerful tool for watching bank deposits and money flows.
CAF: It’s more than that. DynCorp is also the lead contractor for the DOJ Asset Forfeiture Fund. So if DOJ wanted to do a seizure of any assets in connection with Enron, presumably they would have to turn to Pug’s company to seize Pug’s assets as a fiduciary, an investor and an individual. Not surprisingly, we have one indication that seizures are not even on their radar screen. Very shortly after they neatly got Enron Online tucked away inside the Swiss mountain range—some very important news slips out of the Cayman Islands.
It is a press release from the Cayman Islands. Enron SEC filings indicate that there are approximately 700 Enron subsidiaries in the Cayman Islands. This is a huge number of subsidiaries for a company to have—in one of the great offshore money havens of the world. The government of the Cayman Islands says, in this press release, that it would be delighted to cooperate with U.S. investigators and prosecutors on an investigation of Enron, but as of this date they have not yet received a request for assistance From everything I can see, there has been no effort to assert control of the data about the money because there was no effort to identify and recapture stolen or fraudulently made company money. Never believe someone who says we need to take action to make sure that this does not happen again. The only way it will not happen again is if you get the money back this time. Remember, it’s all about the cash. Crime that pays is crime that continues.
IMAGE: Pug Winokur A Man Of His Times – Click To Enlarge
Graphic: J. Ward
DA: While in the instance of Hamilton Securities, here is a company doing something good for people, saving taxpayers money, whose work results in the agency effort winning Vice-President Gore’s Hammer Award for reengineering government, and the rug got pulled out from under you. What do they say, “No good deed goes unpunished.” For white-collar crime, it seems more like no bad deed goes without its reward.
CAF: Ouch! The sixth step in a competent investigation is you assert control of all the insider trading and personal cash where probable fraud exists, both onshore and offshore. Enforcement officials can also assert control of all the capital gains that were made on insider trading or probable insider trading. You do not need to have proof of fraud or an indictment or conviction to assert control over those stock market profits made by the Enron board and management and their affiliates or partners participating in insider trading fraud with them. You can freeze or seize the personal assets of current and former Enron employees and auditors and any other parties implicated in potential fraud. The DOJ communicated openly that they had the right to seize personal assets of Hamilton management, board members, and agents as a result of possible company fraud. Based on Enron confessions, it is hard to understand why there have been no seizures of the insider trading profits and personal assets of a number of key Enron management and board members as well as, potentially, its auditors and private attorneys. The idea that Ken Lay was paid $50 million a year to be oblivious to what was going on and that he sold over $100 million in stocks just at the right time and should be allowed to keep all this money because he is a good guy is financial, ethical and legal insanity. It is, however, a perfectly rational decision if the goal is to protect the syndicate’s winnings, key government officials, and operations that facilitated the fraud.
DA: The government has frozen $23 million from the personal assets of Michael Kopper and Andrew Fastow. [10] This is something. Or would you contend these are just the little guys taking the rap?
CAF: The management are all little guys. I’ll say it again, the big guys are the guys who have the cash that was laundered through Enron, stolen/liquidated out of Enron, or made in pumping and dumping Enron’s stock. The big guys are the “street,” the syndicate players. Harvard Endowment appears to be a candidate for investigation in this respect. Which leads us back to Mr. Winokur. He was a member of the Harvard Corporation which runs both the university and Harvard’s $18 billion endowment—one of the largest investors in the U.S. Winokur resigned from Harvard Corporation on April 5th, due to pressure from the stu dent group “Harvard Watch” for his connection to the Enron dealings. [11] Coincidently, two days later, Robert Rubin, Clinton’s Treasury Secretary and now on the board of Citigroup, was selected to fill the gap on Harvard Corporation’s board. [12] And recall that is was Rubin who placed a call to the Treasury to make a modest inquiry if anything could be done to save Enron. Just another courtesy among “friends,” you might say.
DA: According to “Harvard Watch,” Highfields Capital, the investment firm that manages part of Harvard’s endowment, sold 3.5 million Enron put options for an estimated $120 million profit. [13] And that was after the Harvard Business School wrote five studies praising Enron’s business model in the two years prior to the collapse. [14] More courtesy within the network?
CAF: Pump then dump. That is the way it works. During the S&L crisis, an investor would make money selling assets to a developer at 2 to100 times market value financed by an S&L. Then they would buy the assets back at 10 cents on the dollar after the crash. So they made money on the “pump” and then money on the “dump”. Meantime, if the feds needed a fall guy, they would have DOJ and the SEC go after the developer or the S&L CEO. The reality was that the bank regulators would never had allowed such things to go on if the investor and their investment syndicate had not been rigging the right laws and regulations and pushing regulator “indifference” or “incompetence” throughout. The developers and S&L CEO’s and management were the small time fraudsters or patsies. It was the quiet guys who made the big money behind the scenes who were the real bad guys. They got away scot free.
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Remarks of Harvard University President Lawrence H. Summers
Harvard College Fund Assembly Boston, Mass.
October 12, 2002
“Because, let me tell you, if war is too important to leave just to generals, science and technology are too important to leave just to scientists and technologists. And, though it gives me great pain to say, I will also concede that the economy is too important to leave just to economists.”
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As far as I’m concerned that is why Enron happened. The folks who made money on IranContra were able to rise to and consolidate control of the investment community, media, and government. Unfortunately, part of the reason this happens is that honest government enforcement career staff is put in the position of landing on Normandy Beach with water pistols. As an example, the SEC during the last administration, fought vigorously against the “street” on any number of accounting issues, and any number of “new financial structures” that obfuscated financial transactions. The underfunding of these efforts and the lack of serious political support play a significant part in allowing these kinds of fraud to happen.
DA: You link the S&L crisis with IranContra. Are you saying it’s the same network of people—or using that word again, the same syndicate that perpetrated IranContra also perpetrated the S&L meltdown?
CAF: Go back to the books and articles I mentioned earlier. The S&L Crisis was simply part of IranContra— an intentional systemic fraud. Our banking governance and regulatory structure did not work for a reason. The people in charge did not want them to—everyone involved made a lot of money, both in ripping off the S&L’s or HUD or the banks. Then they made money buying up the assets cheap after the crash. It was a pump and dump of the real estate market, with the S&L’s as the primary financial patsy that had to be refinanced out by the taxpayers. Very few got held responsible. The message was “crime pays.” Both the Clinton and Bush groups were IranContra winners.
DA: Clinton too? Is that why Clinton never brought up IranContra during the 1992 election?
CAF: Can you spell Mena, Arkansas?
DA: I’m sorry, Catherine, I just don’t want to believe this.
CAF: No one does. That’s how they got away with it. The seventh step in a legitimate investigation is you cancel federal government contracts, particularly sensitive ones, and seize payables and any other assets available where criminal behavior at the top of the organization indicates that the organization is a criminal enterprise. So I would ask: If Enron and Arthur Andersen by their own admission are guilty of criminal violations of destroying evidence, of cooking the books, and you have Enron board members saying that Arthur Andersen and the management lied, then on what basis should they not be immediately disbarred from doing business with the federal government?
DA: On March 15th of this year, the General Services Administration did prohibit new contracts with Enron for twelve months and with Arthur Andersen for the duration of the present indictment. [15]
CAF: Almost four months after Enron declared bankruptcy. Those contracts could have been cancelled with in the space of 24 hours—as soon as there was any evidence of wrongdoing. And cash that was owed under those contracts could also have been seized as an offset for a variety of things, whenever probable fraud is evident. Why should Enron be rewarded with government contracts after causing the fraudulent energy billing of Americans in the billions. Would you continue to hire and use a person or company who has just stolen your money? Of course not. It is interesting to note that Arthur Andersen spin-off Accenture has been hired by the Pentagon through IBM to sort out the defense department’s missing trillions.
ENDNOTES:
9 (Enron Fraud)
10 (Harvard Watch)
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In Part Five we learn more about the inimitable Pug Winokur and see his starring role in a Cartoon Strip.
(Click Here for Part Five)
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©opyright Daniel Armstrong, March 2003