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Enron the Complete Perspective

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Submitted By maleki01
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Enron---The Complete Perspective

Introduction
Ken lay founded Enron almost fifteen years ago and the foundation which was laid in a Houston town is now almost a $100 billion a year corporation. Top ten in the Fortune 500 list it runs in the same league as International Business Machines Corp. and AT&T Corp. Like all Multi National Corps. Enron has subsidiaries in India, China Philippines, a water company in Britain, pulp mills in Canada and gas pipelines across North America and South America.
But the real power lies in the Houston area where it is the leading supplier for electricity and natural gas. As it rose to power it had plans to enter the fiber-optic cable, TV advertising time and wood pulp and steel market. Further, it also had political interest in the nation and like all MNC's lobbied behind its candidates in this case being Bush, who is now President. This seemed to pave the way for Enron's success and put it in a prime position for pulling the strings of power. Now, however, suddenly the power dynamics have changed. From being the top Corporation in the US and the world it is now fighting to retain its stock value.
Assets have been pledged to the bank, creditors are scrambling for blood and company lawyers planned to file for bankruptcy. Most of the customers that Enron boasted off have long gone. From the point of creating power it has come down to the mercies of those in power. The company had approximately 21,000 employees all in dire straits as their future and savings was in the Enron stocks. With the employees mutual fund and investment companies too have lost millions in this disaster.
The sudden demise of a seemingly successful venture is creating questions that will be answered by the Securities and Exchange Commission, which is appointing auditors for the investigation of the failure of Enron. The management made to many bad investments but the question raised is, could the power dynamics that led to its downfall, have been controlled if the Federal Government had been more vigilant. [1]

Scenario and Dynamics
The Enron company as a MNC had a large amount of pull with different people around the nation and the contribution of $2 million it made to the Republican Presidential campaign allowed it to have considerable clout in the political and social scenario. Still, republicans claim that the company contributed to the Democrats as well, showing that they are not ready to take a fall for their supporter or pull it out with some influence. The Democrats too have an opinion of the situation and on the whole it will have considerable impact on the legislatures involved.
Enron Corp., fallout on the nation's $300 billion-a-year utility industry is still unclear but there has been little if any impact on energy prices and supplies. Where Enron's doom has impacted is over the debate at the federal and state levels over utility deregulation. Enron was the champion of deregulation, and now both sides of the debate have seized upon the company's failure to make their case. Enron's bankruptcy "shows there is a need for oversight'' of deregulated energy markets, said Kristy Holley, Georgia's consumer utility counsel. Holley is a member of a blue-ribbon task force named by Gov. Roy Barnes to assess Georgia's 3-year-old deregulation of natural gas.
But advocates of deregulation say the demise of Enron has proved that competitive wholesale energy markets are strong enough to carry on despite the Enron aftershocks. Enron's failure is "emphatically not an impediment to the development of competitive markets,'' said Pat Wood, chairman of the Federal Energy Regulatory Commission. Increased competition is considered the backbone of deregulation. [2]

Economic Fraud and Political Parties
Enron has acknowledged since 1997 it has overstated its earnings by more than a half-billion dollars, which inflated its stock price and gave its creditors a false impression of the company's financial well-being. In the third quarter of 2001, Enron disclosed a $638 million loss, and the lies that had kept it afloat were exposed. Republicans Enron gave out huge amounts of money to the Republican Party, Republican National Committee and the Heritage Foundation. Enron has been connected with this administration, as closely as any company has been with any administration in recent memory. It was the largest donor to President Bush's 2000 campaign, contributing over $220,000. Its chairman, Kenneth Lay, raised over $100,000 for Bush's inauguration alone. If any corporation could be considered close to the administration, it would be Enron. For this reason, several congressmen, including Rep. Henry Waxman (D-Calif.) and Sen. Joe Biden (D-Del.) have quickly shifted into scandal mode, hoping to turn the Enron collapse into the Whitewater of the Bush administration.
Before the company's implosion, its representatives discussed the situation with Cabinet officials. Lay called Commerce Secretary Don Evans in late October to talk to Evans about the impending crash. Evans told Treasury Secretary Paul O'Neill what he had learned. So at least two high-ranking Cabinet secretaries had advance word about Enron. Sensing a potential abuse of government power on the administration' s part, Biden declared on NBC "if there was any involvement because of the incredible help the Bush campaign got from Enron ... it will be devastating." [3]
The administration decided to do nothing to save Enron from bankruptcy. Peter Fisher, O'Neill's undersecretary, denied a request to call bond-rating agencies and ask them not to downgrade Enron's credit rating.
Democrats determined to tie Bush to Enron's failure one way or another. Around the same time Biden was threatening to raise hell if the administration had intervened, Waxman announced that the real scandal was the administration's lack of intervention. Since O'Neill and Evans knew ahead of time that the company was headed for ruin, he argued, they should have preemptively done something on behalf of Enron's employees and stockholders. [4]
Lieberman and Sen. John McCain, an Arizona Republican, said on CBS' "Face the Nation" the administration may have been right in not intervening to try to save Enron. But they said the government's response _ as well as earlier federal monitoring of its business practices _ may have been hampered by the energy company's freewheeling flow of campaign contributions.
"We're all tainted by the millions and millions of dollars that were contributed by Enron executives, which ... creates the appearance of impropriety," said McCain, a longtime voice for campaign finance reform. McCain acknowledged getting dlrs 9,500 in Enron contributions in two Senate campaigns. Lieberman, who said he received dlrs 1,000 from Enron in his 1994 Senate campaign, said one focus of his committee's investigation will be "whether any of the influence" from Enron money affected the administration' s handling of the Enron collapse, or oversight by federal agencies.
On the other hand Republicans state that Enron Corp. donated $420,000 to Democrats over a three-year period while heavily lobbying the Clinton administration to expedite passage of a 1997 global warming treaty that would have dramatically increased the firm's sales of natural gas.
Federal and confidential corporate records show that after donating thousands of dollars in soft money and PAC donations beginning in 1995, Enron received easy access to President Clinton and Vice President Al Gore. In one meeting, Enron Chairman Kenneth L. Lay met Mr. Clinton and Mr. Gore in the Oval Office, during which the Enron boss was asked for input on a pending international energy conference in Kyoto, Japan. [5]
President Bush and members of his Cabinet were put on the defensive by questions about their close ties to Enron executives, but Bush administration officials apparently didn't intervene as the company was failing. Democrats in Congress also got campaign donations from the company and its leaders, and Bill Clinton's administration also helped the company. A major political flap could erupt, but Republican and Democratic links to Enron could make it like the savings and loan crisis: hard to pin the problem on any party.

Lobbying
Elected officials and party faithful have made three arguments why the collapse of the well-connected company would not sway voters in November's midterm elections. The controversy is corporate, not political; the Democrats also have uncomfortable ties to the company. The Democratic scandalmongers may face a voter backlash as Republicans did during the impeachment-tinged election of 1998.
"Enron is a metaphor for the Republican administration: cooking the books, covering up, the top guys taking their money off the table and leaving the working folks holding the bag," said DNC Chairman Terence McAuliffe. "I am going to challenge [RNC Chairman Marc] Racicot to join me in lobbying for campaign finance reform." Racicot, elected RNC chairman in Austin, made the same point: The Enron matter is business, not politics.
Thomas "Mack" McLarty, former chief of staff to President Bill Clinton, lobbied for Enron, as did former Gore aides Jack Quinn and Greg Simon and Clinton treasury and regulatory officials. In 1993, Vice President Al Gore attended a fundraiser chaired by Lay for a Senate candidate, and in 1996 Clinton invited Lay to the White House to honor him as a "corporate citizen."
Enron also cultivated relationships with Democrats, however. Lay played golf in Vail, Colo., with President Bill Clinton, and Enron gave hundreds of thousands of dollars to Democratic campaign committees and Democrats in the House and Senate, including Sen. Charles E. Schumer (N.Y.) and Rep. Martin Frost (Tex.), the ranking minority member on the House Rules Committee. Advocates of campaign finance reform say the Enron case vividly illustrates the ties between politics and big money, though it's unclear that the company's political operations were radically different from others for whom political contributions have become a routine cost of doing business.
Almost from its start in 1985 as a gas pipeline company, Enron needed help in Washington, and it got it in a series of actions by Congress and the Federal Energy Regulatory Commission (FERC) that undermined the traditional monopoly of utility companies over power plants and transmission lines.
The company's lobbying team expanded along with its political spending. It outgrew the two-person operation that existed in 1989 and began to reflect Enron's interest in everything from pipeline safety and derivatives trading to Overseas Private Investment Corp. loan guarantees. By last year, its lobbying expenses exceeded $2 million a year and covered a raft of big-name consultants, such as former Montana governor Marc F. Racicot, the new Republican National Committee chairman, and former top aides to House Majority Leader Richard K. Armey (R-Tex.) and House Majority Whip Tom DeLay (R-Tex.) [6]

Conclusion From all the above facts and presentations there is a clear view of the situation. Enron began to accumulate power through the political machinations of the Republican and democratic groups and pulled the right strings so that the legislatures that would benefit it would go through. Though not exactly overtly corrupt the situation is the corner of the slippery slope argument where the administrations may suffer. From a government friend it has quickly been abandoned and this has created a scenario of problems. The lobbying parties, the democrats and the republicans and all the other dynamic forces in the Enron scandal merely point out to the need of changing the political structure. The Enron collapse was unpredictable at least for the publics at large, that the management and the administration had its own ulterior motive to protect are also secondary facets in the play. However, the fact remains that Enron is not an exception and unless the scenario is changed, there will be other such collapses. It is all a matter of the power structure and who needs what---when.

Sources
Steven Pearlstein and Peter Behr Washington Post Staff Writers, At Enron, the Fall Came Quickly; Complexity, Partnerships Kept Problems From Public View. , The Washington Post, 12-02-2001, pp A01.

MATTHEW C. QUINN, Staff, Enron collapse heats up debate Deregulation focus: Foes, supporters of increased competition both gain ammunition.. , The Atlanta Journal and Constitution, 12-12-2001, pp D1.

Susan Cornwell, U.S. senators flay silent Lay over Enron. , The Toronto Star, 02-13-2002.

Al Martin Choking on the Enron Pretzel a/k/a Clueless in Guantanamo ©2000, 2001 Al Martin Raw http://www.almartinraw.com/column47.html

H. JOSEF HEBERT, Associated Press Writer, Cabinet members say they didn't inform Bush about Enron calls for help. , AP Worldstream, 01-14-2002.

Kevin Drawbaugh and Susan Cornwell, Lobbyists, pols abandon Enron's ship after collapse. , Reuters Business Report, 01-04-2002.

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