These posts are either "jump pages" for my weblog or posts-in-process that will eventually appear there. For what it's worth, here's an archive of these random bits. The picture to the left is by a famous comic book artist.
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I've been looking at your site regularly and enjoy your alerts regarding conspicuous media prostitution. I stopped watching TV news years ago because I got tired of watching blowdried heads read government press releases. I voted for Gore, but I have no illusions about Clinton/Gore's addiction to corporate money. I always treat my friends who voted for Nader with the utmost respect, as ideological comrades-in-arms. I'm writing to say: Please stick to what you're good at, which is rooting out media complicity with government policy. Give Ralph a rest, OK??? The response by his campaign manager was reasonable and civilized. I stopped reading your reply because the tone was so nasty.
All the best, Tom Moody
"Everyone is Outraged," by Paul Krugman, NY Times
Arthur Levitt, Bill Clinton's choice to head the Securities and Exchange Commission, crusaded for better policing of corporate accounting — though he was often stymied by the power of lobbyists. George W. Bush replaced him with Harvey Pitt, who promised a "kinder and gentler" S.E.C. Even after Enron, the Bush administration steadfastly opposed any significant accounting reforms. For example, it rejected calls from the likes of Warren Buffett to require deduction of the cost of executive stock options from reported profits.
But Mr. Bush and Mr. Pitt say they are outraged about
Representative Michael Oxley, the Republican chairman of the House Financial Services Committee, played a key role in passing a 1995 law (over Mr. Clinton's veto) that, by blocking investor lawsuits, may have opened the door for a wave of corporate crime. More recently, when Merrill Lynch admitted having pushed stocks that its analysts privately considered worthless, Mr. Oxley was furious — not because the company had misled investors, but because it had agreed to pay a fine, possibly setting a precedent. But he also says he is outraged about WorldCom.
Might this sudden outbreak of moral clarity have something to do with polls showing mounting public dismay over crooked corporations?
Still, even a poll-induced epiphany is welcome. But it probably isn't genuine. As the Web site dailyenron.com put it, last week "the foxes assured Americans that they are hot on the trail of those missing chickens."
The president's supposed anger was particularly hard to take seriously. As Chuck Lewis of the nonpartisan Center for Public Integrity delicately put it, Mr. Bush "has more familiarity with troubled energy companies and accounting irregularities than probably any previous chief executive." Mr. Lewis was referring to the saga of
My last column, describing techniques of corporate fraud, omitted one method also favored by Enron: the fictitious asset sale. Returning to the ice-cream store, what you do is sell your old delivery van to XYZ Corporation for an outlandish price, and claim the capital gain as a profit. But the transaction is a sham: XYZ Corporation is actually you under another name. Before investors figure this out, however, you can sell a lot of stock at artificially high prices.
Now to the story of Harken Energy, as reported in The Wall Street Journal on March 4. In 1989 Mr. Bush was on the board of directors and audit committee of Harken. He acquired that position, along with a lot of company stock, when Harken paid $2 million for Spectrum 7, a tiny, money-losing energy company with large debts of which Mr. Bush was C.E.O. Explaining what it was buying, Harken's founder said, "His name was George Bush."
Unfortunately, Harken was also losing money hand over fist. But in 1989 the company managed to hide most of those losses with the profits it reported from selling a subsidiary, Aloha Petroleum, at a high price. Who bought Aloha? A group of Harken insiders, who got most of the money for the purchase by borrowing from Harken itself. Eventually the Securities and Exchange Commission ruled that this was a phony transaction, and forced the company to restate its 1989 earnings.
But long before that ruling — though only a few weeks before bad news that could not be concealed caused Harken's shares to tumble — Mr. Bush sold off two-thirds of his stake, for $848,000. Just for the record, that's about four times bigger than the sale that has Martha Stewart in hot water. Oddly, though the law requires prompt disclosure of insider sales, he neglected to inform the S.E.C. about this transaction until 34 weeks had passed. An internal S.E.C. memorandum concluded that he had broken the law, but no charges were filed. This, everyone insists, had nothing to do with the fact that his father was president.
Given this history — and an equally interesting history involving Dick Cheney's tenure as C.E.O. of
And if some cynic should suggest that Mr. Bush's new anger over corporate fraud is less than sincere, I know how his spokesmen will react. They'll be outraged.
Part 2: 6/7/02
"O">n Tuesday, George W. Bush is scheduled to give a speech intended to put him in front of the growing national outrage over corporate malfeasance. He will sternly lecture Wall Street executives about ethics and will doubtless portray himself as a believer in old-fashioned business probity.
Yet this pose is surreal, given the way top officials like Secretary of the Army Thomas White, Dick Cheney and Mr. Bush himself acquired their wealth. As Joshua Green says in The Washington Monthly, in a must-read article written just before the administration suddenly became such an exponent of corporate ethics: "The `new tone' that George W. Bush brought to Washington isn't one of integrity, but of permissiveness. . . . In this administration, enriching oneself while one's business goes bust isn't necessarily frowned upon."
Unfortunately, the administration has so far gotten the press to focus on the least important question about Mr. Bush's business dealings: his failure to obey the law by promptly reporting his insider stock sales. It's true that Mr. Bush's story about that failure has suddenly changed, from "the dog ate my homework" to "my lawyer ate my homework — four times." But the administration hopes that a narrow focus on the reporting lapses will divert attention from the larger point: Mr. Bush profited personally from aggressive accounting identical to the recent scams that have shocked the nation.
In 1986, one would have had to consider Mr. Bush a failed businessman. He had run through millions of dollars of other people's money, with nothing to show for it but a company losing money and heavily burdened with debt. But he was rescued from failure when
Despite these connections, Harken did badly. But for a time it concealed its failure — sustaining its stock price, as it turned out, just long enough for Mr. Bush to sell most of his stake at a large profit — with an accounting trick identical to one of the main ploys used by
That's exactly what happened at Harken. A group of insiders, using money borrowed from Harken itself, paid an exorbitant price for a Harken subsidiary, Aloha Petroleum. That created a $10 million phantom profit, which hid three-quarters of the company's losses in 1989. White House aides have played down the significance of this maneuver, saying $10 million isn't much, compared with recent scandals. Indeed, it's a small fraction of the apparent profits
Oh, and Harken's fake profits were several dozen times as large as the Whitewater land deal — though only about one-seventh the cost of the Whitewater investigation.
Mr. Bush was on the company's audit committee, as well as on a special restructuring committee; back in 1994, another member of both committees, E. Stuart Watson, assured reporters that he and Mr. Bush were constantly made aware of the company's finances. If Mr. Bush didn't know about the Aloha maneuver, he was a very negligent director.
In any case, Mr. Bush certainly found out what his company had been up to when the Securities and Exchange Commission ordered it to restate its earnings. So he can't really be shocked over recent corporate scams. His own company pulled exactly the same tricks, to his considerable benefit. Of course, what really made Mr. Bush a rich man was the investment of his proceeds from Harken in the Texas Rangers — a step that is another, equally strange story.
The point is the contrast between image and reality. Mr. Bush portrays himself as a regular guy, someone ordinary Americans can identify with. But his personal fortune was built on privilege and insider dealings — and after his Harken sale, on large-scale corporate welfare. Some people have it easy.
Submitted to Media Whores Online:
In a piece that read like it was geared towards viewers of VH1, his new employer, Salon writer Jake Tapper recently trashed Al Gore's appearance at Lot 61, an arts & entertainment oriented Manhattan bar. He quotes large-tongued Kiss singer Gene Simmons very admiringly on how great Bush is and how irrelevant Gore is. Tapper is obviously really proud to have gotten this quote: he refers to it again later in the article. He appears to be offering it as evidence that the young and the hip don't like Gore, but the only problem is Simmons is just another aging redneck at this point. The article is incredibly snide; it's obvious that soon-to-be-tanking Salon is starting the cycle of Gore-bashing all over again. Of course, Gore's cogent criticisms of the disastrous Bush regime got swallowed up in all the bile.