The Real Deal About Enron (Part 6) – Interview
Mapping the Real Deal…
The Real Deal
About Enron
... an interview with Scoop Real Deal Columnist Catherine Austin Fitts
Part Six Of Seven Parts
By Daniel Armstrong*
Originally Published By Sanders Research Associates
[*Daniel Armstrong is a writer and novelist based
in Eugene, Oregon. Mr. Armstrong is a graduate of Princeton
University and attended the University of Oregon School of
Journalism.] (Click Here for Part One
In
Part One, we introduced Catherine Austin Fitts and
described some of her experiences in taking on the criminal
powers who lie behind the modern U.S. Governmental
apparatus. The Interview transcript follows in DA: Enron Vice Chairman J.
Clifford Baxter. CAF: These other witnesses are now
scared to death, and maybe we make the pretty girl witness a
hero and even get her a book contract. These operations get
sold and transferred quickly to the people who need to
coordinate the cover up. And meantime, the cash gets
recycled off shore and moved around as they buy time. Such
in-house investigations are perfect for buying time. It's
not surprising that under oath the chairman of the
Committee, William Powers, admitted in congressional
testimony that they took notes for all the testimony they
received from witnesses, then destroyed the notes, and
produced a highly controlled written report. DA: It's not
surprising? What do you mean? CAF: The Powers Committee
was SOP---and I will tell you how I learned that term. SOP
stands for "Standard Operating Procedure.'' When my company
was targeted regarding our work for cleaning up HUD programs
in a way that was bad for special interests, including
Harvard, and presumably, the big HUD contractors such as
LockheedMartin, DynCorp, JP MorganChase and Arthur
Anderson, we had several situations where the DOJ and their
investigators tried to falsify evidence or destroy evidence.
I was dealing with a criminal syndicate. DA: A fraternity
of good old boy government contractors who'd been bilking
the government for years. CAF: We got an affidavit
documenting the efforts to falsify---I mean pure criminal
falsification of evidence by the DOJ investigators---and we
took it to a court trustee and he looked at it and he said
that this was "SOP.'' I asked one of the retired HUD
Inspector General auditors, "What is SOP?'' He replied,
"That is standard operating procedure---when you have no
evidence of wrongdoing, you just try to frame an obstruction
of justice charge and that is how you get an indictment.'' I
also asked him why the investigators kept trying to spread
false rumors about my personal life, including to the
government employees and my employees when they interviewed
them. The retired auditor said something to the effect of
"when you don't have any facts to support an indictment, you
try to brand the person as personally undesirable, and that
is the fastest way to get an indictment from a DC grand
jury.'' DA: Just a straight setup to discredit you and
your company. When you came in and began to make HUD work
the way it was designed, that was screwing with the system.
For this, somebody set the DOJ to work on you. CAF: Well,
if I was to write a book called "How To Cover Up A Financial
Fraud,'' tactic #22 would be to get a white shoe commission,
appoint some serious, very respectable guy who is totally
naïve about what is really going on, make sure your ringer
like Winokur is on the committee, and do a report. DA: The
court appointed Atlanta lawyer Neal Batson to be the
examiner in Enron's bankruptcy. Apparently, he's hired
dozens of lawyers and consultants to seriously get into
Enron's paperwork. [18] Is this a real investigation or does
Batson qualify as the "white shoe commission'' you
mentioned? CAF: It's hard to determine at this point. We'll
have to watch that unfold. But in general, whether it takes
two weeks or two months---twelve months and counting in the
case of Enron---or two years, what it does is keeps
everybody busy. It burns up time and resources, it
complicates and muddles things. Properly handled, it can
even help control the information flow. During the time that
William Powers has got everybody busy and entertained,
you've got Arthur Andersen shredding the documents and
you're transferring the money laundering operation over to
the Swiss bank. So it's basically a holding action---you're
buying time while you do all the things you have to do to
destroy the money trail, so that you get to keep the cash.
It is very interesting to look at a chronology of the Powers
Committee investigation relative to the various efforts to
cover up the trail of documents and money, including
shredding of documents, transfer of assets and the
mysterious death of one of the most important witnesses. It
is quite possible that the Powers Committee was used by a
player like Pug Winokur to help design and orchestrate the
cover up. It is potentially a chance to review all the
evidence and question all the key witnesses very early on
and draw on high powered attorneys to help you figure out
the cover up under the guise of "getting to the bottom of
what happened.'' DA: When did you first notice Enron?
CAF: I started to look into Enron in the Summer of 2000
because I was looking for $3.3 trillion, which is missing at
federal agencies including HUD---agencies that are managed
in part by Pug and his pals. In 1996, a decision was made to
run a covert operation to get rid of all the honest people
working for or at HUD. This included getting rid of my
company and me. Keep in mind that the ultimate internal
financial control is to have honest people running things.
This is why they had to get rid of us. One of the reasons
that I know that the DOJ can take the seven steps we've
discussed is because they used them on us---even when we had
documentation proving that their own auditors and
investigators concluded that we were clean as a whistle.
DA: Are you saying this goes back to your software tool
Community Wizard and what was revealed simply by sorting out
HUD online records? Or is this something else? CAF: It
all blends together. At this point, however, I was doing the
research myself, and it turned out that the same group of
contractors who run HUD---where billions of dollars are now
missing, LockheedMartin, DynCorp, J.P. MorganChase, Arthur
Andersen, and Harvard turn up running or deeply involved in
Enron. Let's look at the list. There is Winokur, from
DynCorp, as well as a Lockheed board member, Frank Savage,
on the Enron finance committee and board. JP MorganChase is
an Enron creditor, Enron Online trading partner, and
investor in special purpose offshore entities. Arthur
Anderson is the auditor who is shredding documents and
cooking books, and Pug's partner Dudley Mecum is on the
board of DynCorp and on the board of Citigroup, another
Enron creditor and Enron Online trading partner. Harvard is
shorting the stock at the same time that Winokur who is a
Harvard Corporation member says he was not aware of problems
at Enron. And Robert Rubin, former Treasury Secretary, with
significant jurisdiction over HUD, federal credit and
banking, is now cochair of Citigroup and now has become a
member of Harvard Corporation within the week that Winokur's
resignation from Harvard Corporation is announced. DA:
Then you are clearly saying Enron was part of something much
larger. Something that you discovered more or less by
accident, by building placebased databases that brought
sunshine to HUD's mortgage and cash flows, neighborhood by
neighborhood. That opened a very big can of very dangerous
worms, resulting in the government's smear tactics to crush
you and your company. CAF: I wasn't a whistle blower. I
was successfully reengineering HUD portfolios at the
Federal Housing Administration, as I was hired and
instructed by the appropriate officials to do. It's just
that immediately after they fired us and key government
officials, a huge amount of money started disappearing from
the accounts of all these federal agencies---and it became
obvious by 2000. The General Accounting Office
and Inspector General reports and testimony document $59
billion of undocumented adjustments at HUD in fiscal 1999,
and $17 billion in fiscal 1998, and they refused to say how
much in fiscal 2000. DOD has over $3.3 trillion of
undocumented adjustments during the same three years. Donald
Rumsfeld has confirmed that $2.3 trillion was missing in one
year alone. It's incredible when you look at it up close.
The Department of Defense has failed to pro duce
independent audited financial statements since the
requirement went into effect in 1995. HUD's Inspector
General refused to certify HUD's fiscal 1999 financial
statements. Since both agencies have refused to explain
these undocumented adjustments in adequate detail for some
years and declined to report or make public undocumented
adjustments, we have no evidence to document that large
amounts of assets or money are not being stolen. So I was
trying to figure out how you could launder hundreds of
billions of dollars---stolen from the federal
government---starting in the fall of 1997, because that is
so much money that you can't just run it through a pizza
restaurant. You are talking about a huge amount of money and
you are talking about something that JP Morgan,
LockheedMartin, DynCorp and Arthur Anderson would have to
be part of. Then I notice that in the fall of 1997 there is
an explosion of revenues at Enron Online, and nobody can
explain where the revenues came from. They just say "it's
very complicated, it's derivatives, you know''. Well that's
ridiculous. In my experience, if you can't explain
something, then something is wrong. So I'm looking for the
missing money: there is over $3.3 trillion missing from
federal government agencies, starting at the exact same
time, and my big question is, "Is Enron or are some of its
special purpose entities part of the laundromat,'' and is
that why Congress is covering this up? DA: According
to Senators Kerry and Brown's report to the Committee on
Foreign Relations on the BCCI scandal, the BCCI "was made up
of multiple layers of entities, related to one another
through an impenetrable series of holding companies,
affiliates, subsidiaries, bankswithinbanks, insider
dealings and nominee relationships.''[19] If you change
that to corporationswithincorporations, would that also be
an accurate description of what Enron had become? CAF: I
feel like I am watching the same exact syndicates of
investors and the same process---IranContra, BCCI, whatever
you call it--- except this time it is not real estate
financed by S&L's, they have used stock and derivatives
financed by public and private pension funds. Meaning, the
consequences will be far more devastating to the health and
safety of average Americans. I believe our money is being
stolen. Whether it's our tax dollars, whether its our
pension fund money, whether it's the jobs that are being
lost or the countless other ways this kind of
"pumpanddump'' fraud drains our resources and the faith
and trust that are the basis of democracy in the United
States. The story of Enron has a meaning. The meaning is
that the federal government, the national media, the large
banks and Wall Street, accounting and law firms can not be
trusted to live by the standards of transparency, laws and
ethics necessary to support free markets or a democratic
republic. DA: The present Bush
Administration is honeycombed with Enron/Andersen
connections. US Trade Representative Robert Zoellick and
recently released presidential economic advisor Lawrence
Lindsay were on Enron's advisory council. Secretary of the Army Thomas White
is a former Enron executive, who reportedly made $50 million
of Enron stock sales and was overseer to Enron electricity
trading operations at the time of the California energy
market manipulation. Republican Party Chairman Marc Racicot
was Enron's chief lobbyist at Bracewell and Patterson.
Recently resigned Securities and Exchange Commission
Chairman Harvey Pitt came to Washington from the law firm
that represented Arthur Anderson. In his short tenure at the
SEC, he almost singlehandedly stalled congressional
legislation to reform the accounting industry with
inactivity and his controversial choice of William Webster
to head the new accounting oversight board. Comptroller
General David Walker, lead man for Congress's financial
investigation, was partner, board member, and global
managing director for Arthur Anderson until 1998. Enron CEO
Ken Lay is (was) a close friend of the President's father
and played an as yet undisclosed part in Vice President Dick
Cheney's National Energy Policy. Enron's also made large
political contributions to President George W. Bush and
Attorney General John Ashcroft. In light of all that you
said, about the S&L connections and the possibility of a DOJ
cover up, what do you make of the Bush/Enron/Andersen
management fraternity? Can we, in any way, imagine that
these relationships are incidental? CAF: No, Virginia, there is no
Santa Claus; but there is a syndicate. I dare say if Tony
Soprano was the Chairman of Enron's finance committee and
his cousin worked for the Senator lobbing easy questions to
the Soprano family members in front of the camera, we would
all instantly have a sense of how the business model worked.
There was a syndicate or "families'' that profited from
IranContra. As they profited, they bought political power.
How many members of the last and current Administration were
implicated or indicted, even convicted, on IranContra
related charges? The number is simply astonishing. Syndicate
members go in and out of syndicate operations, whether it is
laundering money generated by operations like Mena Arkansas
or pumpanddump frauds like Harken and Enron. As long as
crime pays, the various syndicate cartels and their members
will be funding or leading in government. Organized crime
today is a publicprivate partnership. It generates the
large cash flows that help determine who owns what and who
funds the campaigns. Ultimately, this is the process that
determines who is elected and appointed. What is
happening is obvious; the hard part is accepting that it has
been going on in front of us and we have not seen it or
failed to pay attention to the symptoms. What is happening
is in part a function of the power of digital computer tools
and relational database technology combined with
telecommunications and satellite technology. Most Americans
who are not involved with advanced technology do not
understand what is possible in terms of insider trading and
financial fraud with intelligence and surveillance tools
like PROMIS and Echelon. The hardest part to understand for
most people is that by taking care of our own business,
being honest, paying our taxes, trusting in the system,
believing a false media, and avoiding the hard questions, we
have played the patsy---even been the beneficiary of and
complicit in this worldwide organization. DA: This is
very disturbing and sad. Especially because of how many
people throughout the country got burned by the Enron
collapse. But I know from talking to you, that even after
seven very tough years of DOJ hassles, you remain very
positive, and that you feel you have found a way to surmount
these problems. Solari, Inc, your investment advisory firm
is really your answer to all of this. Perhaps, to sum up our
discussion, could you explain how the Solari concept might
help us? CAF: Enron, the dot.com fraud, the S&L scandals,
HUD, BCCI---these financial frauds are symptoms of a deeper
problem. In the Old Testament in the Bible, there is a
passage that says essentially, we have to take care of the
land, we have to take care of each other and we have to take
care of ourselves. What folks mean when they say that we
have a "nonsustainable economy'' is that we are not taking
care of the land, we are not taking care of each other and
we are not taking care of ourselves. It's that simple.
Another way to describe it is that we are destroying our
natural resources and environment and stealing from
taxpayers to support corporate growth and wealth in a manner
that is increasingly wasteful---it shrinks the pie. At the
heart of the matter is the fact that the current corporate
and bank model has a negative return on investment and so
does the American economy. We have kept the game going by
persuading the rest of the world to shift to dollars as
their reserve currency and to finance our continued and
ever-growing borrowing. This necessitates coercion and more
and more of it. I suspect that much of our foreign policy in
Latin America, the Middle East and Eurasia is not just the
importance of controlling global oil reserves as the
production curves peak, but to ensure that oil and other key
markets are traded in dollars. If the Middle East were to
shift to trading oil in the Euro, America would be in quite
a pickle. Ultimately we will have to confront the
inevitable. Rather than satisfying our "habit'' for more
capital consumption, we will be forced to reengineer our
fundamental economy to a much higher level of productivity.
So what do we do? Essentially, we have to reengineer our
economy from a negative return on investment to a positive
return on investment. At the heart of that is reengineering
government investment, credit and regulation by place. ENDNOTES: In the final part of this series, Part Seven, we conclude by
examining in more detail what we all can do to help the
financial system get out of the black hole that is now
synonymous with Enron.
Catherine Austin Fitts is the President of Solari, Inc. ( http://solari.com) and a former
Assistant Secretary of Housing – Federal Housing
Commissioner in Bush I. She is currently litigating with
Ervin and Associates (acting on behalf of the government )
and the Department of Housing and Urban Development. If you
would like to support her litigation efforts, you can
through Affero/ Venture Collective:
http://www.solari.com/vote.php ©opyright Daniel
Armstrong, March
2003 If my years working
on the clean up of BCCI and the S&L crisis taught me one
thing that I would communicate today to the shareholders,
retirees and employees who have been harmed, it is this:
people like those on the board of Enron absolutely make
money from insider trading, bid rigging and fraud, and they
do so with help from the highest levels.
-- Catherine Austin Fitts.
IMAGE: Enron
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CONTINUATION LINE: CAF: Pug is a key
player, but ultimately he is simply a member of a syndicate
that works together to make money. Financial
fraud---including insidertrading---is the most profitable
business on the planet. A fraud of this magnitude can buy a
lot of cooperation in any market. Perhaps we will come to
learn more about the syndicate as more links are discovered
between Enron, Tyco, Imclone, Global Crossing, WorldCom, and
other failed giants. Another player who is worth studying is
Jerry Hawke, the leading US bank regulator. He worked for
Robert Rubin as Jerry Hawke and friend Secretary of
Treasury, now, as we mentioned, cochair of Citibank and a
member of the Harvard Corporation. He also worked for Larry
Summers, Rubin's successor at the Treasury, who is now
President of Harvard. Jerry Hawke was promoted to
Comptroller of the Currency in 1998, which is the lead
regulator permitting all this offshore bank fraud to occur
uninterrupted by government regulation. But having Winokur
on the Power's Committee was like putting the fox in on the
early investigation--- just in time to review all the most
damning materials and the most damning employee testimony.
It's possible for a process like this to organize the
critical information necessary to perform the right
"surgery'' on Enron's institutional memory so that the cover
up design works. For example, this stuff gets shredded, this
witness dies mysteriously.
IMAGE: Cartoon – The
Dollarmatic THE STORY OF ENRON HAS A
MEANING. THE MEANING IS THAT THE FEDERAL GOVERNMENT, THE
NATIONAL MEDIA, THE LARGE BANKS AND WALL STREET, ACCOUNTING
AND LAW FIRMS CAN NOT BE TRUSTED TO LIVE BY THE STANDARDS OF
TRANSPARENCY, LAWS AND ETHICS NECESSARY TO SUPPORT FREE
MARKETS OR A DEMOCRATIC
REPUBLIC.
IMAGE: Thomas E.
White's Stock Sales – Click To Enlarge
Graphic: J.
Ward
AS LONG AS CRIME PAYS, THE VARIOUS SYNDICATE CARTELS AND
THEIR MEMBERS WILL BE FUNDING OR LEADING IN GOVERNMENT.
ORGANIZED CRIME TODAY IS A PUBLIC PRIVATE PARTNERSHIP. IT
GENERATES THE LARGE CASH FLOWS THAT HELP DETERMINE WHO OWNS
WHAT AND WHO FUNDS THE CAMPAIGNS. ULTIMATELY, THIS IS THE
PROCESS THAT DETERMINES WHO IS ELECTED AND APPOINTED.
18 New York Times, "Lawyer
Proves a Thorn for Enron Partners,'' David Barboza, Sept.
21, 2002
19 http://www.fas.org/irp/congress/1992_rpt/bcci/01exec.htm
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