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The Real Enron Scandal

Monday, 28 January 2002 12:00 AM

In 1992, Enron was one of the most popular contributors to Bill Clinton and the DNC. Enron was right next to Bill Clinton from his first days in the White House. In 1992, Enron donated $100,000 to Clinton's inauguration, and Enron's top exec, Ken Lay, stayed at the White House 11 times.

If the FBI, GAO or Congress wants to investigate billions of dollars lost to "corruption, collusion and nepotism," they need look no further than Bill Clinton.

Enron executives traveled with Secretary of Commerce Ron Brown in 1994 on trade missions to Russia, India, Indonesia and China, cutting U.S. taxpayer-financed deals in each country. In fact, Brown paid a great deal of attention to Enron. Indonesia was pressed by Clinton's secretary of commerce to accept Enron deals laced with corruption.

Enron's most twisted activities involve a 1994 trade trip to Indonesia with then-Commerce Secretary Brown. Immediately after traveling to Indonesia, Brown personally sought approval for Enron electric power plants sponsored by U.S. funding. The documents show that the Clinton administration knew the deals were also filled with kickbacks for Indonesian president Suharto.

According to a personal letter directed to the Indonesian minister for trade and industry, Brown assisted Enron by endorsing deals with the corrupt Suharto regime for two gas-fired power plants.

According to Enron, the natural gas for the project was to be provided through Pertamina, Indonesia's state-owned oil and gas company. Pertamina, however, stalled the project with excessive demands for higher gas prices.

"Enron power, a world-renowned private power developer, is in the final stages of negotiating two combined cycle, gas turbine power projects," wrote Brown in his 1995 letter.

"The first, a 500 MW plant in East Java, should begin commercial power generation by the end of 1997 if it can promptly negotiate a gas supply Memorandum of Understanding with Pertamina. The other project, a smaller plant in East Kalimantan, also awaits a gas supply agreement.

"I urge you to give full consideration to the proposals," concluded Brown to the Indonesian minister.

In addition, the Clinton administration enlisted the State Department to strong-arm the Indonesians to accept the power plant deal. In a March 1995 memo from the American Embassy in Jakarta, U.S. officials pressed the Indonesians to conclude the contracts for Enron.

"Enron Corp. continues to negotiate with the relevant authorities regarding availability and price of gas supply," states the Embassy memo. "Embassy continues to raise the issue of deregulation of the gas supply system with Pertamina."

In October 1995, Brown wrote Hartarto Sastrosurarto, Indonesia's coordinating minister for trade and industry, urging him to conclude the Enron power plant deal.

"I would like to bring to your attention a number of projects involving American companies which seem to be stalled, including several independent power projects. These projects include the Tarahan power project, which involves Southern Electric; the gas powered projects in East Java and East Kalimantan, which involves Enron," wrote Brown.

"Your support for prompt resolution of the remaining issues associated with each of these projects would be most appreciated," concluded Brown.

Perhaps one reason why the mainstream press has not paid much attention to this critical 1995 letter written by Ron Brown is the fact that Brown also lobbied hard on behalf of a major contract for Time-Warner with the corrupt Suharto regime.

On Nov. 18, 1996, Enron finally announced that the deal with Suharto was complete. According to Enron's public statement, the U.S.-led energy company had finally won the East Java power project.

"Enron is extremely pleased to reach this crucial step in this project," stated Enron chairman and CEO Kenneth L. Lay on the successful conclusion of the Java power deal.

"Enron's strong experience in developing natural gas-fired plants makes this project ideal for Enron, our partners and our customer."

All was not as it seemed inside the Indonesian power industry, however. In fact, U.S. government officials were keenly aware of the rampant corruption inside Indonesia's electric power producers and, in particular, the Enron power project.

In October 1998, U.S. Ambassador J. Stapleton Roy wrote a diplomatic cable that he had recently met with Indonesian Director General of Electricity Endro Utomo Notodisoerjo. According to the cable, the Indonesians were more than honest about the ongoing criminal activity.

"Commenting on corruption, collusion and nepotism (KKN), Endro said that in the past there was no separation between 'power' (not electric but former first family power) and business. 'All the IPP's have a relation with power, and it is still going on,' added Endro."

According to State Department documents, Enron was subject to corruption in the two power plant deals with the Suharto government. One State Department cable included an entire section titled "Dealing with Unwanted Partners."

"Unocal executives told resources officer that the firm is close to reaching a deal with its partner, PT Nusamba (controlled by former President Soeharto crony Bob Hasan) to sever ties in two production sharing contracts (PSC) in East Kalimantan and East Java," noted a State Department cable.

Curiously, many secrets still surround the Enron power plants. The U.S. State Department maintains that some information on the Indonesian power deals must remain classified. One partly blacked out cable from the State Department is titled "on power projects, corruption, draft laws."

The December 1998 cable, a discussion between U.S. Ambassador Roy and an individual whose name was withheld, states that the highly placed individual in the Indonesian government "stressed that solutions to the problem must be simple to convince 'the people' that corruption, collusion and nepotism ('KKN') are being dealt with properly.

"The draft oil and gas law is currently with the State Secretariat (Sekeng)," states the cable from Ambassador Roy.

"He expects it to be finalized this month and go before the Indonesian parliament (DPR) in January. He said that those that are not happy with the new law – including Pertamina, the Army and some members of the Indonesian parliament (DPR) – have 'vested interests' in the current system."

According to dozens of documents, the "vested" interest included bribes and kickbacks allocated to the Suharto family and its "crony" friends. In fact, the Department of Commerce allocated an entire category in its documentation called "first family involvement" to describe the bribes paid to Suharto.

By 1997 the Indonesian power plant deals collapsed due to the rampant corruption. As a result of the collapse, the U.S. government had to pay off millions in insurance claims by the U.S. corporations that lost money.

In 2000, the Multilateral Investment Guarantee Agency of the World Bank Group, another U.S. taxpayer-financed organization, noted that it had to pay insurance money to Enron for its Indonesian power plant failure.

"In June of this year, MIGA paid $15 million to Enron Java Power Co. for its investment in P.T. East Java Power Corporation in Indonesia," states the official release from the MIG World Bank.

"The venture was one of many suspended by the presidential decree of September 20, 1997, issued in response to the country's economic crisis."

There are several direct connections between Enron and Bill Clinton. A major part of U.S. taxpayer financing for Enron's Indonesian projects was obtained through the Export-Import bank (EXIM).

Several of the Indonesian projects listed in Commerce documents note that EXIM head Ken Brody worked closely with Commerce Secretary Brown on the U.S. government financing. The EXIM bank under Brody financed over $4 billion worth of gas deals for Enron.

Ken Brody is also a close friend of Clinton Treasury Secretary Robert Rubin. Rubin worked with Brody during his years at the investment firm Goldman Sachs. Enron is listed as one of 44 such companies with which Rubin had "significant contact" during his years at Goldman Sachs.

Despite the GAO requests for Bush documents, there are plenty of questions that need to be answered about the Clinton years. A study by the Center for Public Integrity shows that 187 companies participated in 14 Clinton-sponsored trade missions. Of those, 67 are known to have contributed money to the Democrats.

Between 1993 and 1994, 26 companies received support from the Overseas Private Investment Corp. and the Export-Import Bank totaling about $5 billion. According to the center's study, five corporations – Enron, U.S. West, GTE, McDonnell Douglas and Fluor – donated $563,000 to the Democrats and received at least $2.6 billion in contracts.

Moreover, the U.S. government was aware that insuring the false contracts inside Indonesia could push the Overseas Private Investment Corporation into bankruptcy.

"OPIC's combined exposure in Indonesia is close to USD 1 billion, or 5 percent of OPIC's global exposure, all in the electric power sector. As such, resolution of potential insurance claims and/or actions could result in 'an adverse material impact' on OPIC finances," notes a cable from the U.S. ambassador to Indonesia.

Yet, despite being faced with total financial failure due to huge losses, OPIC continued to back more power deals inside Indonesia. The Commerce documents note that during the Clinton years, Indonesian dictator Suharto contracted for 26 U.S. taxpayer-sponsored power projects while his impoverished nation could afford only one such plant.

Still, Enron did not limit its activities to the Export-Import Bank or OPIC. Enron also profited from the Clinton Department of Transportation through a corrupt Maritime finance program. Two power barges for export to Indonesia made by Enron Corp. were built through the DOT Maritime-funding program and backed by $50 million in taxpayer financing.

During the Clinton years the same taxpayer-sponsored Maritime program also tried to finance two dual-use cargo ships for the Chinese navy. The financing fell through only after it was revealed that the Chinese navy could also use the ships as part of an invasion armada pointed at Taiwan.

However, the Department of Transportation Maritime financing did manage to lend over $60 million to build a paddle-wheel steam boat/casino. Still another DOT Maritime deal landed millions in taxpayer-supported loans for two floating combination hotel-casino barges.

In August 1994, Brown led a trade mission to China and Hong Kong that included Enron. The mission also included major million-dollar DNC donors such as Loral CEO Bernard Schwartz and investment banker Sanford Robertson. Robertson admitted to the New York Post that he was invited solely because he supported Clinton with campaign money.

The telltale Post article was discovered in the files of Ron Brown along with a tight list of exclusive DNC donors. Another document that Ron Brown kept in his personal files listed Enron, Edison Mission Energy, California Energy, Hughes, AT&T, Federal Express, Sprint and Chrysler as donating money to the DNC.

The direct donation of money in exchange for favors is clearly documented. The Indonesian scam took the U.S. taxpayers and corporate investors for billions of dollars in lost funds. Company execs and U.S. government officials ignored the "corruption."

Documents obtained from the Clinton administration are filled with direct quotes and hard numbers detailing taxpayer monies that were paid as illegal bribes to a corrupt regime. The citizens of Indonesia and the United States were the victims of a massive crime. That crime has received no press attention and no investigation.

It may shock and surprise you that the demise of Enron started long before George W. Bush was elected. Enron's fall was due to "corruption" that started during the Clinton administration.

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In 1992, Enron was one of the most popular contributors to Bill Clinton and the DNC. Enron was right next to Bill Clinton from his first days in the White House. In 1992, Enron donated $100,000 to Clinton's inauguration, and Enron's top exec, Ken Lay, stayed at the...
Monday, 28 January 2002 12:00 AM
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