Washington -- Defunct energy giant Enron used the U.S. government to coerce
the World Bank and poor nations to grant concessions and resolve its
investment problems, according to documents and correspondence released by
the Treasury Department.
Enron, a bankrupt company that allegedly paid no taxes in the 15 years
before it went broke in 2001--despite earning billions of dollars in
declared profits--regularly and aggressively called on staff from Treasury,
the State Department, the office of the U.S. Trade Representative and the
World Bank to meet with foreign officials to favorably resolve its problems
and disputes with their governments.
The company collapsed at the end of 2001 with billions of dollars in debt
and facing accusations of accounting frauds.
The incidents, according to Treasury documents obtained by consumer groups
under the U.S. Freedom of Information Act, concerned its subsidiaries'
activities in countries including Argentina, India, Nigeria, the Dominican
Republic and Turkey.
Nations like India, Argentina and Mozambique have long publicly complained
that Enron was particularly heavy-handed in using the local U.S. embassy or
Washington to apply pressure if disputes were not resolved to its
The new documents, though heavily censored, are among the first concrete
evidence of how the highly controversial company managed to outdo other U.S.
firms in aggressively pulling strings in Washington.
What "sets Enron apart was that it was always willing to take things a
little further than everybody else," said Tyson Slocum, a research director
with Public Citizen, a U.S.-based consumer group.
"Enron, for its size, flexed an enormous amount of political muscle that
gave it tremendous access that a lot of other companies did not enjoy as
consistently. It just excelled at pushing its influence to a level more
advanced and a little higher than many of its competitors," he told IPS.
In India, for example, according to the documents, senior government
officials intervened with their Indian counterparts to settle a dispute over
the Dabhol power plant in Enron's favor.
Officials from Treasury, the State Department and even the National
Security Council were involved in resolving problems over the $3 billion
project on behalf of the U.S. firm.
The Indians were concerned that the project was not viable in the first
place, and that Enron had been accused of profiteering by charging power
prices that were at least three times higher than elsewhere in the country.
But in negotiations between India, Enron, and other agencies, "the
objective is to steer the discussion away from whether the (Dabhol) project
is in default or not," wrote Geetha Rao of the Treasury Department's India
Desk, in correspondence seen by IPS.
In another document, U.S. officials briefing then Secretary of Treasury
Paul O'Neil suggested that messages he deliver on a trip to India include,
"without a quick resolution of the Enron dispute, the financial relationship
between the U.S. and India would suffer as a result."
"Unless expeditiously resolved, (the Enron dispute) could affect India's
investment climate and hamper development of our bilateral economic and
political relations," said another "talking point" provided to O'Neil.
It continues: "The U.S. government hopes that a creative resolution can be
found to Dabhol so that we can focus without distraction on our growing
economic and political ties."
Enron even reportedly pushed administration officials to threaten foreign
governments with sanctions if their disputes could not be settled
advantageously. In 2001, the Financial Times newspaper said that company
executives threatened to have the United States impose sanctions on India.
The Dabhol plant, which is still 65 percent owned by Enron, was shut down
as the company went into bankruptcy and Indian lenders started court action
to recover loans.
The end results of lobbying efforts on behalf of Enron are unclear, but the
documents clearly show how the firm arm-twisted U.S. officials to intervene
on its behalf.
"To get a secretary of the Treasury to raise the issue of a specific
company's contractual dispute in high-level official diplomatic meetings is
not common," said Slocum, referring to O'Neil's trip to India.
Washington also intervened on Enron's behalf elsewhere.
Other documents show that in 2001 the company lobbied the government to
"exercise the influence of the United States in the World Bank" to persuade
the international lender, which often attaches economic policy conditions to
its credit, to intervene in economic policy in Turkey so that Enron's
investment there would be protected.
Both the World Bank and the International Monetary Fund had at the time
wanted to impose a deadline on offering guarantees for certain energy
projects in Turkey, some of which involved Enron.
A World Bank official told IPS on Thursday that the company's pressure
tactics did not work, and that the Bank went ahead and restricted guarantees
to the energy sector.
Similarly, in 2001 Enron sought help from "officials who are handling U.S.
foreign policy relations with Argentina," including the U.S. Trade
Representative, State Department officials and the Treasury, to resolve a
conflict with Argentina over a $500 million investment dispute with Enron's
water services subsidiary, Azurix.
The U.S. firm had complained that local authorities would not allow Azurix
to charge the high rates provided in the contract for its portable water and
wastewater services. Argentina finally agreed to buy back the project.
"These documents help explain how Enron used its money and connections to
distort government policies in a way that gave it a free rein to cheat
consumers," said Slocum.
Activists and watchdog groups have long decried the apparently open channels
between corporations and successive U.S. administrations, often established
through hefty election campaigns contributions.
According to the Washington-based Center for Responsive Politics, which
analyzes federal elections documents, from 1989 to 2002 Enron and its
employees gave nearly $6 million in individual, political and soft money
contributions to federal candidates and parties.
Three-quarters of the candidates were from the Republican Party of
President George W. Bush.
Enron was also a major donor to the election campaign of Bush and Vice
President Dick Cheney, while at least 15 high-ranking administration
officials owned stock in the energy company in 2001.
Activists say this cozy relationship between the U.S. government and
corporate executives leaves consumers and the poor at a disadvantage,
particularly in defenseless developing nations.
"That's the kind of corporate behavior that an organization like ours is
trying to change," said Nadia Martinez of the Institute of Policy Studies in
"It is when the U.S. government uses its influence to arm-twist to do things
that are favorable to the U.S. and its corporations, when it may or may not
be in line with the wishes of the people or the interests of the people in
that country," she added.
- 106 Money & Politics
- 185 Corruption