The Koch Brothers are Acting Just Like Enron---Before the Bankruptcy

[McCamy Taylor]

Remember why we got stuck with Dumbya for eight years? Enron, W.’s biggest contributor and supporter was on the verge of bankruptcy. In order to save their house of cards, they needed to persuade the federal government to look the other way while they price gouged California. As in “California,” the response of former Vice-Chairman of Enron Energy Services and later Bush Secretary of War Thomas White when asked how his company planned to pull its butt out of the fire. Al Gore was 100% unlikely to aid Enron in this endeavor. So, the Gang of the Five at the Supreme Court, under the guidance of Scalia, a man with financial ties to the oil industry selected W. to be president. Karl Rove then selected Enron’s choice, Nora Brownwell to chair the Federal Energy Regulatory Commission. Her mission? Ask no question as Enron’s energy traders manipulated the market to drive electricity prices through the roof in the summer of 2001.

Four years after California's disastrous experiment with energy deregulation, Enron energy traders can be heard – on audiotapes obtained by CBS News – gloating and praising each other as they helped bring on, and cash-in on, the Western power crisis.

"He just f---s California," says one Enron employee. "He steals money from California to the tune of about a million."

"Will you rephrase that?" asks a second employee.

"OK, he, um, he arbitrages the California market to the tune of a million bucks or two a day," replies the first.

http://www.cbsnews.com/stories/2004/06/01/eveningnews/main620626.shtml

The plan might have worked—except for two things beyond W.’s control. First, a federal judge accused Enron of price gouging. And then, the Taliban (despite wining and dining and threats of a “carpet of bombs” from the Bush administration) refused to allow Enron to build a gas pipeline across Afghanistan.

In the late summer of 2001, seeing the writing on the wall, Jeff Skilling left Enron, precipitating questions about his company’s solvency. A couple of months later, the Democratic Senate refused to go along with the bailout of Enron which the Republican House and the White House had engineered. The bailout was disguised as an “economic stimulus” package that would give the supposedly solvent company an immediate retroactive rebate of taxes it had never paid. Hmm. Wonder what the Senate Democrats thought was so fishy about that? The bailout was scrapped by the Senate, Enron went under, Ken Lay died under suspicious circumstances, no Enron employee was offered a deal for testifying against superiors (such as Thomas “Enron” White), Iraq was invaded just before the FERC was scheduled to give its report which would show that Enron did indeed price gouge California while the FERC twiddled its thumbs----

You know the rest. Thousands of Americans and millions of Iraqis died to keep all those dark, dirty Enron secrets buried. California Gov. Gray Davis was recalled and Arnold was installed as governor of that state to stop the civil suit that threatened to expose the skeletons in Enron’s and the Bush administration’s closet. Shareholders lost billions and hard working Americans lost their pensions as the world’s “biggest” company went under.

So, what does this have to do with the Koch Brothers? Ask yourself, how do you know that the Koch Brothers are rich as sin. Because they tell you so? The Kochs control the nation’s second largest privately held company. That allows them to release no information about their finances. They could be lying about how much money they have---the way that Enron lied--- and no one would ever know.

One of the “signs” that Enron was not solvent was the company's willingness to do anything, even break the law, to keep up a stream of cash in order to maintain a charade of solvency. Financially flush companies will hesitate to break the law, for fear of being caught and losing what they have. Houses of cards like Enron have nothing to lose, so they break the law at every opportunity. Have the Koch Brothers demonstrated a willingness to break the law? You bet.

Koch Industries allegedly made improper payments to win business in 6 countries over 8 years (through 2008) — a potential violation of the Foreign Corrupt Practices Act. The company described them as ”activities constitute[ing] violations of criminal law.”
Koch Industries sold millions of dollars of oil refining equipment to Iran — even after President George W. Bush described the nation as a member of the ‘Axis of Evil.’ The company maintains these sales were legal at the time, and says it has since cut ties with the rogue nation.
Koch Industries allegedly stole 1.95 million barrels of crude oil pumped from federal lands by falsifying purchasing records, a Senate investigation found. Former workers testified to the “Koch Method,” described as trying “to cheat the producer out of crude oil,” my mis-measuring the oil.
The company allegedly ignored federal regulations for pipeline safety — resulting in the deaths of at least two people in a pipeline explosion in Lively, Texas in 1996.

http://www.rawstory.com/rs/2011/10/03/gop-mega-donor-koch-brothers-company-tied-to-global-criminal-misdeeds/

Does being on the verge of bankruptcy cause companies to cut back on their campaign contributions? Hell no! Enron made half of its total $5.8 million (pre- Citizens United, so every dollar really counted) contributions in the year prior to its bankruptcy, when its executives knew full well how bad the company was doing. Buying a president was supposed to be their ticket to financial solvency. They were going to price gouge California without interference from the feds (until a federal judge stepped in). They were going to make a sweet deal with Afghanistan (until federal diplomats failed to impress the Taliban.) If you had asked Ken Lay what the future held in store for his company in January, 2001, with Bush just sworn in, he would have said “Great things!” If asked whether or not his investment of $2.9 million had paid off, he would have said “You bet!”

http://www.cbsnews.com/stories/2002/01/12/politics/main324142.shtml

Today, the Koch Brothers have pledged a combined $60 million (post Citizen United so the dollars mean a lot less) to get Obama out of the White House and a paid political lackey in power. Why? Ideology? Give me a break. “Ideology” to a capitalist is “what makes me money.” The Kochs expect to make money under a Republican presidency. How?

Good question. In 2000, if we had bothered to look at the ways that Enron supposedly made money, they might have scratched our heads and said “I don’t get it. What do they actually do?”

If you examined the Koch Brothers business today, you would probably ask yourself the same thing. Study their business model, and you will discover that Koch “wealth”, like that of Blanche Dubois, depends upon the “kindness of strangers”, in this case, “strangers” being the government they pretend to despise. The Kochs make money from Georgia-Pacific---with the help of corporate welfare from the government which gives them trees from government owned land and builds the roads that allow them to get at the trees.

As Yasha Levine has reported, Koch exploits a number of government programs for profit. For instance, Georgia Pacific, a timber company subsidiary of Koch Industries, uses taxpayer money provided by the U.S. Forestry Service to provide their loggers with taxpayer-funded roads and access to virgin growth forests. “Logging companies such as Georgia-Pacific strip lands bare, destroy vast acreages and pay only a small fee to the federal government in proportion to what they take from the public,” according to the Institute for Public Accuracy. Levine also notes that Koch’s cattle ranching company, Matador Cattle Company, uses a New Deal program to profit off federal land for free.

http://thinkprogress.org/economy/2011/03/01/146847/charles-koch-welfare/

The Kochs made a bundle when W. hired them to fill up the nation’s strategic oil reserve---a resource he then refused to use, even when high oil prices were destroying the economy.

Koch Industries won massive government contracts using their close relationship with the Bush administration. The Bush administration, in a deal even conservatives alleged was a quid pro quo because of Koch’s campaign donations, handed Koch Industries a lucrative contract to supply the nation’s Strategic Petroleum Reserve with 8 million barrels of crude oil. The SPR deal, done initially in 2002, was renewed in 2004 by Bush administration officials. During the occupation of Iraq, Koch won significant contracts to buy Iraqi crude oil.

http://thinkprogress.org/economy/2011/03/01/146847/charles-koch-welfare/

Bushs’ refusal to use the strategic oil reserve facilitated the Koch Brothers other big Enron style profit making venture, its oil price speculation racket. Think Progress has a piece about the Koch Brothers lead the way in creating the “industry” of oil speculation, Here is a highlight.

2008: Rampant oil speculation spikes prices to unprecedented levels. As academics from the Peterson Institute, the James Baker Institute at Rice University, and others conclude, non-commercial speculators begin to dominate the market, forcing up prices. Although the evidence was abundant that speculators caused the massive price spikes during the summer of 2008, regulators were toothless to act. A bipartisan majority in the House overwhelmingly passed legislation to award powers to the CFTC to oversee rampant oil speculation, but Republican in the Senate — acting with help from Koch lobbyists — killed the bill, called the Energy Markets Emergency Act.

http://thinkprogress.org/report/koch-oil-speculation/

Be sure to read the whole article. I will wait.

Finished the Think Progress piece on the Kochs’ oil speculation racket? Now, ask yourself two things. One, do you think they have continued to make the same kind of money under the Obama administration, which actually dared to release oil from the strategic reserve, bring down oil prices unexpectedly? Yes, I know that the Kochs have attempted to portray themselves as big “winners”, boasting that they have stored up all that cheap government crude in supertankers and that they are just waiting to unload it when oil prices have been driven artificially high again (presumably as a result of another war of choice for oil, this time with Iran)---

Argus Media reports that Koch Industries has already shown interest in leasing super tankers for storage of crude in the Gulf of Mexico. The Economist points out that the small rebound in oil prices have already provided an incentive for oil traders to store, rather than refine, the oil: “If a trader was able to purchase West Texas Intermediate—the oil held in America’s Strategic Petroleum Reserve (SPR)—at the spot price on June 24th, they would already be sitting on a tidy profit.”

http://thinkprogress.org/green/2011/07/05/260732/oil-barons-may-store-spr-oil/

But how long can the Kochs sit on those tankers? Shell predicts that oil prices are going to go lower this year.

Oil prices could fall to $70 a barrel during 2012, from current levels above $110, as high volatility in the economy and energy markets becomes "a fact of life", Royal Dutch Shell executives said.

http://www.telegraph.co.uk/finance/oilprices/9057905/Oil-price-could-fall-to-70-in-2012-amid-volatility-Shell-warns.html

What do the Kochs have to fall back upon if their oil speculation racket goes belly up? Dixie-Cups? The herd of cattle they graze on federal government land? Maybe they could move back to Russia and drill some of that country’s oil. Recall that their scion could not make it big in the U.S., so he went to Communist Russia under Stalin, and the state paid him to drill for oil.

The Kochs’ business model is quite simple. The government shall provide---as long as the Kochs control the government. That was Ken Lay’s philosophy back in 2000, too.

Oh, and remember that gas pipeline across Afghanistan which was supposed to bring Enron back from the financial grave? Ther Kochs have their hopes pinned on another pipeline, one that almost certainly will not get built if Obama continues to be president.

Koch officials have denied having any financial stake in the pipeline, but Waxman has argued that Koch connections to the project merit further investigation. A Koch Industries subsidiary had filed official documents with the Canadian National Energy Board claiming "a direct and substantial interest" in the Keystone XL pipeline.

http://content.usatoday.com/communities/theoval/post/2012/02/keystone-xl-buffett-koch-brothers-/1?csp=34news

There you have it. Two shady companies that spend extraordinary amounts of money "buying" politicians, two companies that are serial lawbreakers, two companies whose finances are shrouded in secrecy, two companies that make money the "new fashioned way"---by manipulating markets. Two companies dependent upon the government for their profits----

Pardon me if I question the wisdom of financial analysts who swear that the Kochs are solvent. I remember another time, back in the late summer of 2001, when Wall Street said that Enron was doing just fine, but I could not help but wonder why Jeff Skilling was walking away from such a "prosperous" company.

[BlueToTheBone]

1. What an excellent, eye opening article

Thanks. This is why I read DU. And now that I'm looking at the model, I'm sure you're right...they are on the verge of insolvency and when that happens, yikes a bunch of other people are going to be hurt. Mainly the employees.

[izquierdista]

2. I can't rec this enough

You've done as good as than Matt Taibbi. To be better than Taibbi, you have to come up with a better visual than "giant vampire squid".

[targetpractice]

3. Awesome insight....

Thanks for this... I'll read it a few times, I'm sure!

[Demeter]

4. While I would really like to believe your thesis

and while it would be symmetrical and just if it were so,

I just haven't seen much evidence that the Kochs are running out of money. There are people who break laws just because they can, and that's what I think afflicts the Kochs. I doubt that they could walk in a straight line even if it were between two steel walls.

Now, if a whistleblower spilled the beans, and a real Justice Department picked them up and prosecuted...

The Kochs are public leeches, making laws to keep the competition out, and buying politicians to "overlook" their violations of those same laws. "Mutual Assured Destruction" and enough cash for walking around money keeps those politicians bought.

They are the Entitled. And they want everyone to know it.

[Initech]

5. Enron went bankrupt because their CEOs stole it all.

Are the Kochs planning the same?

[Bozita]

6. Convincingly argued. ... K&R

[backscatter712]

7. With the $100M they just pledged to the GOP against Obama...

They're going to receive a lot of fellatio from those in the Beltway...

[DCKit]

8. As usual, I'm in awe. nt

[JackRiddler]

9. K&R for keeping up the old DU tradition of actual research.

Let's keep this real work floating for a while above the random daily stuff.

[ProSense]

10. Frankly,

"The Koch Brothers are Acting Just Like Enron---Before the Bankruptcy"

...the Koch Brothers (and ALEC) are far more dangerous than Enron, and have gone way beyond that company's pre-bankruptcy actions.

Mitt Romney, the stealth tea party candidate
http://www.democraticunderground.com/1002265890

[JackRiddler]

13. Frankly, there is no distinction to be made, but if so, Enron's far the worse.

Everyone! If you haven't, you should watch the excellen tEnron documentary, "The Smartest Guys In the Room."
http://topdocumentaryfilms.com/enron-the-smartest-guys-in-the-room/

The examples of both the Kochs and Enron illustrate what happens when neoliberal principles predominate: Money becomes speech. Capital is allowed to commit any fraud and is celebrated and rewarded for it.

Both are examples of actors who acknowledge no moral limits and happily plunder society, even at the cost of destroying it. Understanding that is more important than a comparison of the relative damage done by each. But since you brought it up, let's have a look.

The Kochs have been wreaking their destruction since the days of the Powell memo in 1971, as part of a larger cabal of money-men behind the "conservative" (radical capitalist and Christianist) movements. Nowadays they are on a legislative and political rampage, at the height of their personal influence in part because these movements have peaked. The Kochs are exposed and forced to spend more money than ever to maintain their political campaigns.

Enron's shorter period of political and economic influence probably cannot be matched by any other entity for the sheer destructive innovation:

- lobbied aggressively and won a massive deregulation of markets

- thereupon practically invented the market for energy price fraud, price-gouging and arbitrage

- helped revolutionize accounting and banking fraud in a myriad of ways, setting up hundreds of offshore scam companies with the lead bankster entities like Citigroup as key participants (unindicted, as always)

In short, Enron was pathbreaking: a model.

Furthermore:

- probably the number one contributor to the candidacy of Bush in 2000 (what could match this for destructiveness?)

- provided free air support for the Bush side of the Florida 2000 election heist.

- key participants in the early-2001, still-classified Cheney energy meetings, where the neocon wars including Iraq were prepared

See here:

Eager to Tap Iraq’s Vast Oil Reserves, Industry Execs Suggested Invasion
http://pubrecord.org/nation/2430/eager-to-tap-iraqs-vast-oil-reserves-industry-execs-suggested-invasion/

And, as a final act, following the bankruptcy, exposure of the scam, demise of Arthur Anderson and Enron, and indictment of the Enron principals, investors in Enron who were at risk from California's plans to seize back some of the billions that Lay and Co. had ripped off bankrolled the destruction of Gov. Gray Davis and the recall that brought Schwarzenegger to office.

http://www.projectcensored.org/top-stories/articles/13-schwarzenegger-met-with-enrons-key-lay-before-the-california-recall/

Business as usual is the truly destructive force that guides Enron and the Kochs. Their corporate ventures in the energy economy do at least as much damage to the world as the political ventures they finance with the profits.

.

[ProSense]

14. I

"Frankly, there is no distinction to be made, but if so, Enron's far the worse."

...don't agree. When you look at the assault on gay, immigrant, women's and workers' rights across the country, from Arizona to Florida, that's directly correlated to Koch/ALEC.

The assault is personified by Governors Brewer, Kasich, Scott, Walker and others.

Enron was about greed, and energy was its focus. The Koch/ALEC machine has entrenched itself into the political and social fabric of the country. The only thing standing in its way is another election, and it has already raised $100 million to advance its cause. Its biggest obstacle is that the economic climate awoke the masses, and it was exposed by a determined blogosphere.

[JackRiddler]

16. Again, there is no moral distinction to be made, both are examples of the same phenomenon...

The neoliberal principles at work, allowing money as speech and the primacy of capital over any morality.

The Kochs have wrought enormous destruction since the 1970s. There is no reason to downplay the significance of what they have done and what they still do. So I don't.

Enron meanwhile was central in bringing the Bush regime to power and thus suspending whatever was left of democracy and the rule of law in this country, in addition to practicing many other innovative business frauds that have served as the model for a whole economy of plunder.

There is absolutely no need to make a moral distinction between these two entities. Yet you seem to want to trivialize Enron's enormous crimes. Why? Could it be that the Kochs are more easily characterized as right wing, while Enron is more obviously business as usual for capitalism under the neoliberal principles?

I refer readers back to my earlier post.

http://www.democraticunderground.com/?com=view_post&forum=1002&pid=267530

[ProSense]

17. I think

Again, there is no distinction to be made, both are examples of the same phenomenon...

The neoliberal principles at work, allowing money as speech and the primacy of capital over any morality. The Kochs have wrought enormous destruction since the 1970s. Enron was central in bringing the Bush regime to power and thus suspending whatever was left of democracy and the rule of law in this country, in addition to practicing many other innovative frauds that have served as the model for a whole economy of plunder. There is absolutely no need to make a distinction, and yours would seem to trivialize Enron's enormous crimes. Why? Could it be that Enron is more obviously business as usual for capitalism under the neoliberal principles?

...you have an active imagination. The fact that Enron was a destructive force is evident. That does not preclude me from making a determination that the Koch/ALEC machine has been more destructive and is still in operation.

[Initech]

21. The war for profit.

That's all Iraq was - and these leeches are eager to get their hands on the coin. IMO, I think the Kochs should be tried for treason.

[WillyT]

11. K & R !!!

:kick:

[madokie]

12. What can I say but WOW

[crazylikafox]

15. Excellent. Kick, kick, kick

even if they aren't running out of money, this is an excellent synopsis of how they operate & suck money out of the economy into their personal pockets

[raouldukelives]

18. K&R

Of course here in California to avoid Enron taking any heat we had to have Issa backed by the same evil doers advocate for an expensive recall election to oust Gray Davis and implant Schwarzenegger. Schwarzenegger and Ken Lay and the rest of the Wall St mafia collaborated to head off the plans to go after the 9 billion Enron stole that Davis was working on.
Those guys sure know how to rob people blind.
One of the myriad of reasons Wall St is evil incarnate and the prime deterrent against progressive ideals being realized in our country as well as the world. IMHO of course.

[glinda]

19. Excellent post!

[Hatchling]

20. Wow.

K&R and another wow!

[bbgrunt]

22. wow--great article. thanks for making it all hang together.

[JackRiddler]

23. Another kick & a call to DUers to honor original research posted on this site.

(Well, when it's as good as this, certainly.)

[JackRiddler]

24. Yeh.

[Generic Other]

25. Been awhile since I saw a DU post with so much meat

Thanks for reminding me of how we used to do things around here.