Enron Expert Slocum Explains Collapse
Ties to Bush Administration Discussed by Research Director for Public CitizenBy Tom Kilpatrick
Scandal, electricity, economics, accusations of lying, predictions of imminent government resignations, and hints of improper corporate ties at a certain university down the road -- these were the topics on hand Thursday night at a talk where the air was charged and the tension palpable.
An estimated 70 people showed up for “Enron’s Collapse: What happened, why, and what you can do about it,” an MIT Greens-sponsored talk with guest speaker Tyson Slocum, Research Director for Public Citizen, a watchdog organization founded by Ralph Nader. Nader ran for president on the Green Party ticket in 2000.
Enron collapse raised questions
The fall of Enron, recently the seventh-largest corporation in the United States, has been one of shocking surprise and great implications. In November 2001, it announced for the first time that it was in serious financial trouble, after two years of amazing success. It sought a merger with Dynegy, another energy company. The merger fell through and Enron declared bankruptcy, sending shock waves through America’s financial world. Several financial companies, like J.P. Morgan, lost hundreds of millions of dollars in lines of credit.
Furthermore, in fall 2001 Enron’s executives froze the stock of Enron employees. This caused thousands of employees to lose significant portions of their 401(k) retirement funds, since the funds were dominated by Enron stock. Many are left with only a fraction of what they had. How did such a large, successful corporation fail so fast?
Slocum explains Enron model
Slocum has been investigating Enron’s practices since last summer, when his research on the California energy crisis pointed him toward the energy trading business. With months of research under his belt, he was thrust into the public eye when Enron collapsed in December.
Slocum began his talk by explaining Enron’s business model. He said Enron exploited the deregulation of the energy futures market in states like California to gain control of electricity, despite not owning any power plants. In its contracts with actual electricity producers, Enron bought futures, or the rights to electricity that would be produced at a future date. Once it got control of a big enough share of energy in a certain geographic area, it gained the power to set the price of electricity.
Slocum’s research has focused on how Enron’s influence in government allowed its business model to work. Enron was a disproportionate donator to members of government at all levels, Slocum said; at one point in the late 1990s they were the biggest corp orate contributor in the country. Senator Phil Gramm (R-Texas) and his wife Wendy are Slocum’s two big targets, due to Phil Gramm’s intense legislative efforts on Enron’s behalf and Wendy Gramm’s former role on in the Commodity Futures Trading Commission and subsequent position on Enron’s board of directors. “What it really illustrates is that campaign contributions buy you access,” Slocum said.
Ties to Bush discussed in talk
One reason Enron’s collapse has been so much in the national headlines is that many members of President George W. Bush’s cabinet, including Vice President Dick Cheney and Bush himself, have close ties to Enron and its former president, Kenneth Lay. Slocum even predicted the resignation of a key Bush cabinet member in the next few weeks.
“Secretary of the Army Thomas White is going down,” Slocum said. He said that White, who was in charge of an entire division of Enron, knew about some of the illegal practices in which Enron was involved.
About an hour into Slocum’s talk members of the audience began asking questions. It appeared that most were in agreement with Slocum’s position, though there was at least one notable dissenter. One distraught septuagenarian voiced the opinion that California itself was largely at fault for its energy crisis because its citizens wasted electricity and built no power plants in the 1990s.
“Forced conservation is not a good thing,” Slocum replied. He added that California built 11 power plants in the 1990s, which the dissenter said was false.
Slocum looked at the rest of the audience and said, “I love it when people call me a liar because then I can just show them the document.”
Harvard might have Enron ties
Toward the end of the talk, Slocum hinted that members of the Harvard Administration may be involved with some “shady” dealings with Enron and its operations in Argentina. He referred any interested members of the audience to a Web site,