A Lesson in Greed
From William Lucy, Secretary-Treasurer
Imagine this: In only three days, a $70-billion energy giant, number seven among the Fortune 500, originator of energy deregulation and great influence on our national energy policy, plummeted to its death. It left in its wake the destroyed hopes, dreams and security of everyday Americans who were its loyal employees and trusting stockholders. The company, of course, is Enron, and the story of how it became the largest corporate bankruptcy in U.S. history provides a vital lesson in corporate greed.
Losers and winners
Not only did as many as 4,500 employees in Houston lose their jobs, they also lost their pensions. Their employer strongly encouraged investing 401(k) plans in company stock. Then, despite falling profits, Enron "locked down" the employee retirement-savings plan for administrative changes. This meant employees couldn't trade Enron stock from Oct. 27-Nov. 13, while executives cashed in hundreds of millions of dollars. Employees under 50 were unable to trade even without a lockdown.
Many outside of Enron also lost pension money. In fact, AFL-CIO-affiliated union pension plans lost about $250 million. Retirees suffered, too. One testified at a Senate hearing that she retired with $700,000 worth of the company's stock but now gets only a $63-per-month Social Security check. In addition, employees have been temporarily left without health insurance because Enron failed to complete the necessary COBRA paperwork! All that while high-level executives received $100 million in bonuses.
Those who profited through stock sales included former Enron executive Thomas E. White, secretary of the Army. Enron Director, Wendy L. Gramm, wife of Sen. Phil Gramm (R-Texas) made almost $300,000. Former Enron CEO Ken Lay cleared $101 million. And the top 12 Enron officials sold shares totaling $986 million.
Where it all began
No doubt about it, the House of Enron was built on greed. It promoted deregulation of wholesale gas markets, which allowed large customers to buy direct from suppliers and did nothing for anyone else. It promoted trading of natural gas futures, which allowed customers to lock in a price for gas it would actually buy at a later date. Next came deregulating electricity, which led to the energy crises in California. Other states such as Maryland and Illinois are slated to deregulate energy, and Texas and Virginia already have — new disasters in the making? So Enron defrauded not only employees and stockholders but also consumers.
Time for truth
Many questions about the Enron collapse have yet to be answered. For example, after Lay talked to Treasury Sec. Paul H. O'Neill and Commerce Sec. Donald L. Evans about the company's instability, why didn't the federal government act to protect Enron workers and pensioners? How has the company kept more than $1 billion in debt off the books since 1997? Why did employees from the independent auditing firm of Arthur Andersen destroy Enron-related documents? Why did employees invest so much of their 401(k)s in company stock?
Systematically defrauding shareholders and workers is no laughing matter — except perhaps to those who profited outrageously. It appears these actions might very well fall into the category of high crimes and misdemeanors.
Seeking justice
In fact, the Justice Department has begun a criminal investigation. At press time, 11 congressional inquiries of the Enron scandal are under way. The Securities and Exchange Commission and Labor Department have launched others.
This is a colossal example of unadulterated, self-serving corporate greed, and it calls for a speedy but thorough, nonpartisan investigation. In addition, we encourage the U.S. Treasury to institute tough regulations protecting investors. We also encourage Congress to re-regulate utilities. Those measures will come too late for the victims of Enron, but could prevent others from being hurt in another Big Business scam.
AFSCME has always been on record in support of responsible energy policies, including campaigning for fair energy prices and fighting for consumers against the excesses of big, profitable energy companies. We will not stop speaking out now — especially in light of the Enron fiasco.
