World: Enron's Tactics Overseas Criticized

By almost any measure, Mozambique is a country to be pitied. The average resident lives to age 47. Ten million Mozambicans have no access to safe drinking water. The country routinely suffers droughts,
typhoons and floods. Civil war in the '80s left the landscape dotted with land mines.

Life is so dismal in the African country that even international development experts familiar with the United States' promotion of U.S. businesses were stunned in 1995 when the Clinton administration gave Mozambique an ultimatum: If the Enron pipeline project there fell through, the United States would withdraw its humanitarian aid.

Mozambique protested, saying the deal would force the country to take on too much risk, but eventually renegotiated and gave in.

That scenario played out repeatedly on the world stage in the past decade as Enron emerged as the dominant force in the energy industry. While Enron built a reputation as a savvy deal maker and charitable giver in the United States, it has long been perceived quite differently abroad.

The Houston-based conglomerate was routinely accused of cutthroat negotiating tactics and was involved in environmental disasters and human rights controversies. Beyond that, if negotiations turned sour, company executives sent distress calls to powerful politicians.

"Enron was willing to fight hard to get a deal favorable to them, whatever the consequences to the country," said Louis Wells, a Harvard Business School professor who has studied the company's international endeavors.

After Enron became the largest corporate bankruptcy in U.S. history, most news reports focused on employees who lost their livelihoods or investors left with worthless stock. For international business experts, that's only half the Enron story.

"One thing that struck us is that the damage they've done elsewhere has had a disproportionately small amount of attention to it," said David Hall, director of the Public Services International Research Unit at the University of Greenwich in London.

Enron is not the first company to take advantage of a struggling country, and other U.S.-based multinational corporations, including ExxonMobil and Nike, have come under international criticism. Enron was different only in the scope of its excesses, said Joshua Karliner, executive director of
CorpWatch, a nonprofit group opposed to corporate globalization.

"It's not like Enron was an aberration," Karliner said, "but Enron was a leader."

Enron, however, said its international reputation has suffered because of critics who have selectively spotlighted a few problems. Many critics, a spokesman said, don't comprehend the difficulties of doing
business in developing countries or fundamentally disagree with Enron being there.

"It's difficult. It's lengthy. It's sometimes contentious," said John Ambler, vice president of international public relations for Enron. "There are a whole range of groups opposed to it."

View From Home

On April 9, 1999, Enron Chief Executive Kenneth Lay received the Marco Polo Award.

Each year, the Friends of the China Foundation bestows the award, named after the Venetian explorer who promoted friendship and trade between China and the West.

However, not all international observers view Enron's efforts abroad as beneficial to developing countries. Enron has faced criticism for its environmental and safety policies, particularly in an ongoing controversy in South America.

In Bolivia, Enron joined with Royal Dutch-Shell and Transredes, the country's hydrocarbon transport company, to install a pipeline to Brazil that would cut a swath through the largest intact part of the Chiquitano tropical forest.

Environmental groups such as Amazon Watch asked the U.S. taxpayer-funded Overseas Private Investment Corp. to drop its $200 million financing of the project, saying alternative routes would be less harmful.

The situation worsened on Jan. 31, 2000, when the pipeline burst and dumped 10,000 gallons of oil and gasoline into surrounding cropland and the Desaguadero River, the lifeline of several native tribes.

Since the spill, Enron has spent many months attempting to mitigate the damage and has paid out substantial amounts in compensation, Ambler said.

"It obviously was a very unfortunate incident," he said. "All we can do is work as much as possible to minimize and eliminate risk."

Enron also made headlines in Latin America after a 1996 pipeline accident in Puerto Rico.

After people in the area complained for weeks about the odor of gas, a commercial building in the San Juan shopping district of Rio Piedras burst into flames on Nov. 21, 1996. Thirty-three people were killed and about 70 were injured. The cause probably was a propane gas leak from a pipeline belonging to
a wholly owned Enron Corp. subsidiary, according to findings issued by the National Transportation Safety Board.

The agency also found that Enron had known since 1985 that the gas company's operations did not comply with pipeline safety requirements but did not fix it.

Enron executives said company policy forbids them from commenting on the San Juan incident because it is still in litigation.

Playing Tough

Enron wanted other countries to come away from the negotiating table with two impressions: that it was willing to be ruthless in making a deal and that it had friends in high places.

"One of the quotes from Enron leadership that caused significant alarm in Europe and elsewhere was that Enron liked their employees to wake up at 3 o'clock in the morning, sweating with anxiety," Hall said. "When senior execs are saying that publicly, they want people to have that image."

In an article published by Harvard Business School, Rebecca Mark, head of the Enron Development Corp., was quoted as saying: "We are bringing a market mentality and spreading the privatization gospel in countries that desperately need this kind of thinking. We are in the business of doing deals. This deal
mentality is central to what we do."

For developing countries struggling simply to get power or water to rural areas, Enron's strategies could be interpreted as callous and one-sided, international development experts say.

AMP Section Name:Corruption
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