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Enron

Wednesday, Jan 16, 2002 8:30 PM UTC

Enron’s California smoking gun

Did the Bush administration do the disgraced company's bidding during the state's electricity crisis?

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Remember the California energy crisis? As the implications of the collapse of Enron spiral ever wider, increasing attention is being paid to the close connections between the White House and the Texas energy trader. So far, there has been no evidence that Bush officials tried to stave off the Enron disaster. But the real smoking gun for Enron could be its role in the California energy deregulation debacle.

Vice President Cheney has already admitted that he and Enron CEO Ken Lay discussed the California situation in some of their six meetings last year, leading some critics to believe that Bush’s hands-off policy toward the Golden State’s energy meltdown was adopted at the bidding of Enron, whose profits soared during the crisis. Lay was also instrumental in replacing the chairman of the federal commission that regulates energy issues with his own nominee, after the original chairman refused to kowtow to Enron’s wishes on electricity deregulation. A California state Senate committee is currently calling for depositions of Enron and Arthur Andersen officials to find out if the former energy giant or its auditors willfully destroyed documents that were under subpoena from the committee. And an ongoing criminal investigation by California Attorney General Bill Lockyer is still looking into allegations that energy producers and traders, including Enron, artificially manipulated the price of energy to profit off of California’s poorly constructed energy deregulation plan.

Enron officials once took pains to note that California’s problems could not be blamed on energy producers but on California’s partially deregulated market, which they said didn’t go far enough. But it’s now becoming apparent that Enron was as responsible as anyone for the shape of that deregulation plan. As the Enron mess continues to heat up, California could prove to be the company’s biggest political embarrassment.

The fast-moving story took another twist on Tuesday, when Joe Dunn, a California state senator chairing a committee conducting an investigation into possible price gouging, noted that Arthur Andersen, Enron’s accountant, may have destroyed documents that had already been subpoenaed by the California Legislature.

“We are requesting subpoenas to Enron and Arthur Andersen,” Dunn said. “There is significant concern at this point in time that the documents that were destroyed by Arthur Andersen may have been embraced in the subpoena that was served upon Enron last June. The media reports are that those documents that were destroyed were destroyed in September or October, last fall. That would have been after the legislative subpoena was served upon Enron. If those documents were willfully destroyed after they were subpoenaed, that is very, very serious.”

Dunn is hoping to call high-ranking Enron and Arthur Andersen officials before his committee for depositions later this year. He says his committee is not looking into filing criminal or civil charges against any company. His committee, Dunn says, is simply looking into “how we got into an energy crisis and whether any legislative fixes are necessary.” And that process involves a hard look at Enron.

“The real questions,” says Dunn, “and this is an enormous task to unravel, is what role Enron had in 1) driving up the price of a given megawatt, even though they were not the final seller; and 2) What role did Enron play in the shuffling of megawatts for the purpose of creating artificial shortage on the distribution lines.”

But getting Enron to cooperate has not been easy. In fact, Dunn characterized the company’s response as “disgusting. Enron has been the worst of all market participants with respect to their cooperation with our committee, and that’s been true from the very beginning. They were the one and only holdout of producing documents to the committee.” Dunn says it was only when Enron realized that the Legislature had the votes to pass a resolution holding Enron in contempt and threatened them with fines of $1 million per day that they handed over the documents.

Even then, Dunn says, Enron continued to give the committee the runaround. He says the company produced about 50 boxes of documents that were “woefully inadequate.” His committee will be reviewing Enron’s compliance in a public hearing sometime in the next couple of weeks, and Dunn says he is “cautiously pessimistic about avoiding further contempt hearings against Enron.”

Meanwhile, Attorney General Bill Lockyer is still investigating allegations that energy producers and traders, including Enron, manipulated prices. “This investigation has been open for over a year, and it is still ongoing,” said Lockyer spokeswoman Sandra Michioku. “There are some questions about pricing practices, and unfair business practices by many energy companies.” Michioku said the attorney general’s office was still “at least weeks away” from wrapping up the investigation.

And to complete the California-Enron trifecta, Rep. Henry Waxman, D-Calif., said recent revelations by Vice President Cheney seem to indicate that Cheney took marching orders about how to handle the California crisis directly from Lay.

In his response to Cheney, Waxman said Cheney’s timeline “raises additional questions about the extent to which Enron may have influenced the administration’s energy policies.”

Enron spokeswoman Karen Denne says the company has cooperated and will continue to cooperate “with all inquiries and investigations.” It’s going to be busy.

Enron was involved in California from the beginning of the state’s move to deregulate its electricity system. The company was a key voice calling for the federal legislation that set the various deregulation plans in motion. That law, known as the Energy Policy Act of 1992, was one of President George H.W. Bush’s final acts as president.

California was among the first states to jump on the deregulation bandwagon. At the tail end of a crippling recession, companies were leaving the state in droves, complaining that the price of doing business there was too high. That cost included high taxes, and among the highest energy costs in the nation.

In its zeal to deregulate, California set up a poorly designed system, deregulating the wholesale side of the energy market, while leaving price caps in place on the retail side. So wholesale prices skyrocketed for the utilities buying power from the producers, while at the same time, the utilities were prevented from passing the spike to ratepayers.

Lenny Goldberg, lobbyist for the Utility Reform Network (TURN), says Enron played a key role in setting up California’s broken marketplace. “Unlike the market in Pennsylvania, which is transparent and works, Enron was pushing for a pretty murky, nontransparent, easily gameable market. They wanted much less authority and power in the [Independent System Operator], so it would be much easier to manipulate the market.”

The ISO was designed to be a central command station coordinating the scheduling for the delivery of power so that everyone would get the power they needed. But Goldberg says Enron’s insistence that the coordination be conducted essentially in private helped energy producers artificially manipulate the market.

During hearings before the Public Utilities Commission, as the state was crafting its deregulation plan, Enron argued for establishing a separate power exchange, or PX, to serve as a sort of clearinghouse, a place where competitive forces would lower the price of power for California electricity consumers.

“Their argument was that you don’t want utility-like people running a market,” says John Rozsa, an aide to Sen. Steve Peace, who played a key role in the Legislature’s first attempts at electricity deregulation. “It gave them the ability to arbitrage between markets, and that’s what their business was. What Enron really wanted was a dark market — contracts that were not subject to any regulatory scrutiny.”

Though it is unclear just how much Enron made off the California energy crisis, a hint comes from the company’s stock price during the spring of 2000. During the second quarter of 2001, the peak of the California crisis, the company reported earnings of $404 million (45 cents per share) compared with $289 million (34 cents) a year earlier, an increase of nearly 40 percent. The previous quarter, Enron reported a 34 percent increase in quarterly profit.

Goldberg says Enron’s biggest profits in California may have come from a spike in natural gas prices during the state’s energy crisis. “I don’t know. Ask Arthur Andersen whether Enron made any money on the California market,” he quipped.

Now, congressional Democrats are calling on Dick Cheney to clarify just how influential Enron was in shaping the administration’s hands-off approach to the California crisis.

While the state was in the midst of rolling blackouts and soaring wholesale energy prices — prices that many argue were artificially manipulated by Enron and other energy producers and traders — the White House refused to intervene as Enron and power plant owners cashed in.

But throughout the California meltdown, Enron continually downplayed its role. “California is a very, very small percentage of our profitability,” Enron spokesman Mark Palmer told the San Franicsco Chronicle last year.

Indeed, when California Gov. Gray Davis asked the Federal Energy Regulatory Commission (FERC) to reimburse California consumers to the tune of $8.9 billion for what he says were artificially high energy prices, Enron was far down on the list of companies the state wanted money from.

“I don’t think anyone would dispute the statement that they made significant profit off the situation we found ourselves in the past year, year and a half,” Joe Dunn said of Enron. “They like to describe themselves as a minor player in the California energy market, and as evidence of that they cite that they were only 10 percent of the final sales of electricity through the ISO. That’s an interesting statistic, but that’s not the whole picture. Enron was probably the most significant trader; the trading of a given megawatt may go through 15 different owners before it’s ultimately sold through the ISO.”

Last summer, California lawmakers, led by Gray Davis, lobbied the FERC to place price caps on energy prices in California. But the administration, in the person of Vice President Dick Cheney, refused to step in.

On April 18, Cheney told the Los Angeles Times, “California is looked on by many folks as a classic example of the kinds of problems that arise when you do use price caps,” referring to the caps on retail energy prices under the state’s deregulation plan, put in place to protect California consumers.

When asked about regulating wholesale energy prices in California, Cheney said, “I don’t see that as a possibility … Any package you can wrap it in, any fancy rhetoric you can prop it up with, it does not solve the problem.”

Cheney’s comments came just one day after the vice president met with Lay to discuss energy policy. In his letter to Waxman Cheney says that while he and Lay never discussed Enron’s looming financial woes, they did talk about California.

“The vice president met with Mr. Kenneth L. Lay, chairman and chief executive officer of the Enron Corporation,” the letter states. “The meeting occurred on April 17, 2001, and lasted for about a half-hour. They discussed energy policy matters, including the energy crisis in California, and did not discuss information concerning the financial position of the Enron Corporation.”

Enron has long been seen as a way for Democrats — particularly in California — to score political points against the Bush administration. Even before the company’s bankruptcy, it had become a sort of shorthand for Democrats wanting to paint an administration that was propped up by big contributions from the energy industry in exchange for federal policy that would not interfere with their profits.

In his State of the State address last year, Davis, who himself received $10,000 in campaign contributions from Enron, blamed “out-of-state profiteers” for manipulating California energy prices and “holding California hostage.” Lockyer was a bit less tactful, saying, “I would love to personally escort Lay to an 8-by-10 cell that he could share with a tattooed dude who says, ‘Hi, my name is Spike, honey.’”

After Cheney’s refusal to intervene in the California crisis, Sen. Dianne Feinstein, D-Calif., said the administration was doing the energy industry’s bidding at the expense of California energy users. “It was very disappointing,” she says. “He spoke about letting the free market work and drilling in Alaska. That’s not going to help California in the short term. We need price caps until we’re able to fix this very broken market … There seems to be no interest in really wanting to understand the California situation.”

But Davis spokesman Steve Maviglio said the governor did not think that the Lay meeting directly influenced Cheney’s or Bush’s decision to take a hands-off approach in California. “I think we always thought it was philosophical to begin with,” he said. “Cheney and Lay seem to have the same philosophical bent about markets, so it wasn’t a real shocker.”

Davis spoke to Lay repeatedly throughout the California crisis, “because he had the president’s ear,” on energy issues, according to Maviglio. But Lay, like the administration, argued against the FERC bailing out California. “In California, when the shit hit the fan, they were very vocal in their support for deregulation” of the retail side of the energy market, he said.

Lay and Enron clearly enjoyed immense influence in the new Bush White House. Lay reportedly had a large say in who would head the FERC, the agency that regulated Lay’s company. Lay was adamant in getting an FERC chairman who supported Enron’s plan to provide “open access” to state retail power markets. The reluctance of Curtis Hebert, a Republican who briefly became chairman after Bush’s election, to support the plan was reportedly part of the reason that Lay, and Bush, dumped the Clinton appointee.

In an interview on PBS’s “Frontline,” Hebert was asked about his relationship with Lay and the White House.

“Mr. Lay made no secret with us about his close relationship with the president and the White House and so on. We’ve been told that he in fact says things like, ‘I’ll help you with what you need politically, let’s say, staying on as chairman of the FERC, if you’ll go along with me on this policy issue.’ Did that ever happen?” asked the interviewer.

“I would never make that trade,” Hebert responded.

“Did he ever propose such a trade?”

“I would just say that I would never make such a trade.”

“Our sources tell us that in fact he offered to talk to the president on your behalf if you would go along with what he wanted.”

“I don’t think there’s any doubt he would be a much stronger supporter of mine if I … were willing to do what he would want me to do.”

Weeks later, Bush replaced Hebert with Texan Patrick Henry Wood, with Lay’s blessing.

Two weeks later, bowing to immense political pressure by the state’s worsening crisis, the FERC adopted a limited price cap plan to provide some relief to Californians. But those caps did not go far enough, according to consumer advocates.

“They were mitigations,” says Doug Heller, consumer advocate for the Foundation for Taxpayer and Consumer Rights. “But they still capped prices at a higher level than was reasonable. There were ways around it, but at least it was something.”

Soon after the price caps took hold, the state entered into long-term contracts with other energy prices, and after a cooler-than-expected summer, the energy crisis subsided.

But, Heller says, the damage had already been done. “Before the energy crisis, the average price, or the average peak price, was about $30 per megawatt hour. The contracts Davis signed range from $100 to $150 per hour for the next two years, then slowly drop over 10 years into the $60 range. But thanks to this gouging, the state is still now paying about five times the pre-deregulated price and 10 years out, will still be paying about twice the price of energy before deregulation.”

Anthony York is Salon's Washington correspondent. More Anthony York.

Monday, Jun 28, 2010 8:29 PM UTC

The Wall Street Journal’s Freudian tweet

The newspaper declares Enron-inspired Sarbanes-Oxley law struck down by Supreme Court. Er, not so fast

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The Wall Street Journal has never made any attempt to hide its antipathy for Sarbanes-Oxley, the Enron/Worldcom-inspired law that attempted to increase oversight on public company accounting. The Journal’s position is that the law imposed costs on businesses that hurt the overall economy. Since this is the Journal’s editorial position on any legislation that tries to rein in the business world, no one was ever required to take their rantings too seriously (even though, it is true, Sarbanes-Oxley has resulted in compliance costs that can be challenging for smaller public firms).

So perhaps that explains why the Wall Street Journal’s flagship Twitter feed (as pointed out by Felix Salmon) jumped the gun this morning, reporting via a tweet practically dripping with glee that Sarbanes-Oxley had finally been vanquished!

BREAKING: Supreme Court strikes down Sarbanes-Oxley, the landmark anti-fraud law. Much more to come at http://wsj.com

Except, as the Journal and other publications soon reported, the court did no such thing. The court struck down a part of Sarbanes-Oxley that had to with the president’s power to fire members of the Public Company Oversight Accounting Board, the regulatory body set up by Sarbanes-Oxley to watch over the accounting firms that audit public companies.

Currently, members of the PCOAB can only be fired “for cause.” The court ruled that this violated the Constitution’s “separation of powers” principles. Now the president will be able to fire the overseers “at will.”

Critics of Sarbanes-Oxley had hoped that the court would use this flaw to throw out the entire law. But that’s not happening. The law stands. The proper tweet should have been “Supreme Court strikes down minor part of Sarbanes-Oxley; law remains in effect.”

Maybe it was an honest error — albeit retweeted around the world at near the speed of light. Or maybe it was an unintentional revelation of the deepest hopes and desires of the Wall Street Journal’s shell-shocked editorial core — the subconscious revealed in 140 characters or less. With just days to go before a new avalanche of financial sector regulation becomes law, the Journal saw one bright spot in the advancing gloom — Sarbanes-Oxley would be no more! And the paper (or a Twitter-feed monitoring intern) got a little excited. Hey, no worries, it’s happened to the best of us.

But the least the paper could do would be a follow-up, one-word tweet: Ooops! Any self-respecting blogger would have felt that much responsibility. But the Journal blithely tweeted forward, gradually approaching the truth, with nary a look back. Tut tut.

UPDATE: The man behind the mistaken tweet, Zach Seward, comes admirably clean in Felix Salmon’s comments.

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Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21. More Andrew Leonard.

Thursday, May 6, 2010 4:01 PM UTC

Jack Abramoff, Eliot Spitzer: A tale of two swindlers

What connects the disgraced N.Y. governor and the jailed D.C. lobbyist? Oscar-winner Alex Gibney explains

By Former New York governor Eliot Spitzer speaks at the Reuters Global Financial Regulation Summit 2010 in New York April 28, 2010. REUTERS/Brendan McDermid (UNITED STATES - Tags: BUSINESS HEADSHOT)(Credit: © Brendan Mcdermid / Reuters)

What do the following have in common: Imprisoned Washington lobbyist Jack Abramoff, disgraced ex-New York Gov. Eliot Spitzer, the collapse of Enron, the Bush administration’s torture policies, the late gonzo journalist Hunter S. Thompson? Before we go chasing some thread of thematic continuity — and we could definitely do that — let’s observe the emotional connection. All of those people and things provoke or embody big, visceral reactions: shock, outrage, disgust, amazement.

The other thing they have in common, of course, is Alex Gibney, who has made movies about all those subjects, including the Oscar-winner “Taxi to the Dark Side,” the box-office breakthrough “Enron: The Smartest Guys in the Room” and “Gonzo: The Life and Work of Dr. Hunter S. Thompson,” which wasn’t a big hit but strikes me as a key work in understanding what Gibney is up to. He thrives on those oversize emotions mentioned above, channeling them into intentionally ambiguous pop documentaries that inhabit a nuanced middle ground between journalism and entertainment.

As he would be the first to admit, Gibney’s films depend on the work of old-school investigative journalists, those lumbering sauropods who take months or years to reach their destinations. His particular genius lies in taking their facts and figures, their reams of insider testimony, and spinning them into compelling on-screen yarns, loaded with archival news footage, goofy animations and special effects, dramatic re-creations and comic-relief moments. Yet if Gibney’s films are a long way from the purist cinema-vérité documentary tradition, they’re closer in spirit to old-fashioned muckraking than to the clown-prince pranksterism of Michael Moore. (Gibney’s voice can be heard in his films, both literally and figuratively, but he never appears as a character.)

Even by Gibney’s prolific standards, 2010 is shaping up as a bonanza, or perhaps an unmanageable pileup. When I met him recently at the New York offices of Magnolia Pictures, we were officially talking about his explosive, hilarious and eye-opening Abramoff film, “Casino Jack and the United States of Money,” which Magnolia releases in theaters this week. But Gibney also had — count ‘em — three other new movies premiering in the Tribeca Film Festival, at least if you count his section of the anthology documentary “Freakonomics,” adapted from Stephen Dubner and Steven Levitt’s bestselling books. (Other co-directors of that film are Seth Gordon, Eugene Jarecki, Morgan Spurlock and the “Jesus Camp” duo, Heidi Ewing and Rachel Grady.)

Gibney also unveiled a sneak preview of his as-yet-untitled Eliot Spitzer documentary at Tribeca, along with “My Trip to Al-Qaeda,” a film based on journalist and author Lawrence Wright’s solo theater piece about his quest to find the roots of Islamic terrorism. (That film will play on HBO, and perhaps also receive limited theatrical release. The commercial fate of the Spitzer film remains undecided.)

“Casino Jack” veritably revels in the rollicking, stranger-than-fiction details of the Abramoff scandal, in which a brilliant and charismatic lobbyist pimped out much of the United States Congress to big-money corporate clients, along the way defrauding Indian tribes, the territorial government of the Mariana Islands and other easy marks. Beyond that, though, Gibney is fascinated by the scandal’s larger implications — and it’s there that we begin to see the conceptual thread that ties his films together. Abramoff was no rogue out to enrich himself (although he did that too) but a committed right-wing ideologue who permanently changed the rules of the game in Washington. He embraced and embodied that old gag about the Golden Rule: Those who have the gold make the rules.

As always, Gibney was a cheerful, upbeat conversationalist in person. He’s a film buff who stays busy at festivals catching other people’s work, and in an interview context he delivers concise, on-message sound bites, not dark, philosophical jeremiads. Still, as I told him, I sense a pattern here, whether or not it’s entirely conscious: Gibney is documenting the not-so-slow and not-so-gradual demolition of the American dream, the interlinked vision of freedom, democracy and capitalism that has been so influential in the recent history of the world, and now seems to be in potentially terminal decay.

So, Alex, we’re here to talk about “Casino Jack and the United States of Money,” but you’ve got two other films that are either complete or almost complete. And then there’s “Freakonomics,” which you directed part of. I think you should write some kind of self-help book on how to get stuff done. Are you one of those people who’s incredibly organized?

Man, that would make everybody who knows me howl with laughter. I may be the world’s most disorganized person. But I do put in the hours. I should probably join Filmmakers Anonymous. Stop me before I say yes again!

You know, you could look at your films and describe them as miscellaneous. Generally you’re taking the work of journalists and adapting it for the screen. But when I look at them, I see a congressional corruption scandal, a major corporate scandal, a disgraced politician and a dead journalist who spent his life excoriating the stupidity and corruption he saw around him. Is there a pattern?

Maybe if you see it, you’ll let me know. [Laughter.] There are clearly certain things that interest me, and I seem to go there. But a pattern? I don’t know.

Well, if I were a graduate student trying to write a thesis about you, I might suggest that these are all aspects of the decline of America since 1980 — the legacy of the Reagan revolution and the triumph of conservatism in American politics.

Well, there’s a theme in that. I think that’s the big story. Now we’re seeing that the net result of the Reagan revolution was the Wall Street meltdown. Take away all the rules and regulations, and what do you get? Meltdown. So I think that’s a theme.

But the other thing that’s increasingly interesting for me is human behavior. What makes people do the strange things they do? How do good people go bad? How do people abuse power? Those are big things for me.

You’re showing your movie about Eliot Spitzer at Tribeca, but it has no title yet and we’ve all been asked not to write about it. So I take it you don’t think it’s ready to roll?

I’m taking my cue on the Spitzer film from what happened with “Casino Jack” at Sundance. We thought it was finished. But seeing it with an audience, who weren’t my friends or anything, you learn things about how it plays. So we made it a lot shorter, we took at some narration, we just shifted stuff around. I would say the Spitzer film is largely finished, and now we’ll see how people respond. We may make a few adjustments.

Your other new film is “My Trip to Al-Qaeda,” which — well, how would you describe it? Is it an adaptation of Lawrence Wright’s performance piece?

Yeah, in some ways it is. He did a one-man play called “My Trip to Al-Qaeda,” which is like “my summer vacation,” except in the Middle East. What intrigued me was that it was an everyman’s look at al-Qaida — why they attacked us, and why they came to be what they were. In making the film, we filmed the play, but then we enhanced it. The set of the play was Larry’s study, but it also included a TV screen. We made that TV screen significantly bigger on our set, and used it as a magic portal.

There’s a kind of time and space travel in the film, where we go to Cairo, to London. We also travel through space and time to the caves in Afghanistan, to Saudi Arabia, so that you can see and feel these places in addition to traveling on Larry’s personal journey, which is his play.

Getting back to “Casino Jack,” which is a movie about a scandal that was widely covered in the media when the story broke, five or six years ago. It seems as if you’re arguing that people may know Abramoff’s name, and maybe the general outlines of the story, but may not understand its importance.

In some ways, he assembled the tool kit that lobbyists are still using. Now, people will object to that: “Absolutely not! Jack Abramoff was one of a kind! He was completely outrageous.” Well, yes. He was outrageous, and he was way out of control. But he used the same tool kit everybody uses today: the rapacious use of not-for-profits to hide trips, to hide agendas, to hide money flows. The revolving door, where you get staffers from senators’ or congressmen’s offices and put them into your lobbying shops so you can influence votes, influence legislation. The use of entertainment and skyboxes — there are different rules now, but there are also ways to get around them. Biggest of all is the way you manage money to influence legislation, in a way that skirts the prohibitions on quid pro quo. It’s about going inside the kitchen in the world’s biggest restaurant and seeing how the sausage is made. Jack Abramoff was the master chef in the world’s biggest restaurant.

We wonder why Congress is dysfunctional, why they’re not doing the people’s bidding, why everyone seems to hate them. The reason is, the system is broken, because it’s all based on money. By looking at Jack’s story, you can see how that happened.

And Jack’s story — first of all, it’s hilarious and spectacular. It’s globe-girdling, there’s a murder in it, there are sweatshops in Saipan, dirty deals in Russia, arms whistling to the West Bank. But at its heart is the very stuff that is breaking our system of democracy.

This was the biggest congressional corruption scandal ever, at least at the time. But did the level of corruption that Abramoff represented become the new normal, in a sense? Because in the film you suggest that even more dramatic stuff has happened since his downfall.

The dispiriting thing is that Jack Abramoff, in the wake of the financial lobbying of the last few years, looks like a piker. I mean, he’s Podunk! The financial lobbyists, and the medical and pharmaceutical lobbyists, have taken what Abramoff did to a new level.

You mentioned the fact that the Abramoff story is highly entertaining, which it certainly is. And while it’s unlikely that your viewers will find him likable or sympathetic, let’s just say this: He makes one hell of a lead character.

There is another film, which is still called “Casino Jack.” I think they’re going to change the title. It’s a fictional version of this story, in which Kevin Spacey plays Jack Abramoff. I’ve seen the film, and Kevin Spacey is very good in it. But he’s no Jack Abramoff. [Laughter.]

Jack Abramoff is one of a kind. As Neal Volz, a former staffer for congressman Bob Ney who later worked for Jack, says, “Jack could talk a dog off a meat truck.” He was that persuasive. He was the ultimate salesman, but he was also a man of great imagination. He was a film buff, who saw his own life as an action film or a spy thriller. As a result, he imagined himself into situations that, you know, make for pretty good moviegoing.

Suddenly, we’re in Angola, in Africa, where Jack is holding a sort of right-wing Woodstock [in June 1985], shooting machine guns with a bloodthirsty character named Jonas Savimbi and a guy named Adolfo Calero, who used to run the Contras in Nicaragua. And they’re all holding hands after a lot of machine-gun shooting and singing a version of “Kumbaya” with this guy Lew Lehrman, who later ran for governor in New York state, and who gave George Washington’s bowl to Jonas Savimbi, this bloodthirsty dictator. You can’t make this stuff up!

Yeah, I literally couldn’t believe that entire sequence. It’s so amazing. It seems impossible, totally fictional. Was it difficult to find documentation of that event?

It sure was. We got lucky or we were good, one of the two. We tracked down a cameraman who had been there, and he still had 10 hours of footage. We also got Jack’s film, which was amazing. Jack was a film producer. He produced “Red Scorpion,” with Dolph Lundgren [released in 1989], and “Red Scorpion 2.” I think the Angola affair — it taught Jack that it wasn’t a big enough deal. That was his documentary version, and he was always going to make an action film. So he reinvents Savimbi into Red Scorpion, and has Dolph Lundgren as the action hero, shooting up everybody and performing weightlifting tricks. And that’s what Jack was as a young man, a weightlifter. So Dolph Lundgren is standing in for Jack.

I have a fun thing at the beginning of the film. There’s this thing that Jack said to somebody, which we transposed into an e-mail: “Documentary? You don’t want to make a documentary. Nobody watches documentaries. You want to make an action film.”

So to some extent, this film is an action film. That’s what I told Jack: “It’s an action film, man. People are going to be entertained.” I think it’s also a comedy, at least in parts. But unfortunately it’s a comedy in which the joke’s on us.

So you’ve had contact with Abramoff. What was that like?

Very interesting. I visited him in prison, and found him to be a very engaging character, very funny, good storyteller. He loves to quote movies.

Did he know who you were?

He did. I think — no, I know — that there was great reluctance to meeting with me. It wasn’t like I had a big record as a movement conservative, which was something we joked about. We agreed on one thing: I didn’t see him as a bad apple. I saw him as spectacular evidence of a rotten barrel.

He was at the center of things, not on the periphery. Everybody else was trying to make him the scapegoat: “Oh, we got rid of Jack Abramoff. Everything’s fine!” I told him, and I firmly believe, that he was at the center. He was doing stuff to the extreme, yes, over the top. But he was doing the same stuff everybody else was doing.

Well, you make a pretty strong case that Abramoff wasn’t in it for the money, or not entirely. He had an ideological motivation. He actually believed he was doing the right thing.

Right. I think he was a zealot. Unlike his partner, Mike Scanlon, who was in it for the money, Jack Abramoff was a zealot. He believed in the principles of the Reagan revolution. He was very anti-Soviet, but he also wanted to do what Grover Norquist has suggested: make government so small you can drown it in the bathtub. Denude it of its resources. Destroy the government, in effect.

Do you see any parallels between Abramoff and Eliot Spitzer? Here are these two brilliant, headstrong guys from opposite sides of the political spectrum, who appeared to be very idealistic, driven by ideology, but who allowed themselves to become corrupted.

I don’t know that Eliot was corrupted by his ideology, but I think he’s a character who did something that was wildly unexpected. If there is a parallel, it’s hubris. I think Jack became so entranced with his outsize reputation that he began to believe his own press releases. And I think Eliot Spitzer — he started seeing prostitutes at the moment of his greatest political influence. He was on his way to being governor, overwhelmingly popular among both Republicans and Democrats. And at that very moment, at the top of his game, he began to see prostitutes. Dudley Do-Right did wrong.

Of the two of them, maybe Spitzer was the real hypocrite. You can call Abramoff a lot of things, but not that.

I don’t think you could really accuse Jack of being a hypocrite. Jack was corrupt, and I don’t think you can say that Eliot Spitzer was corrupt. But he was hypocritical, there’s no doubt about that. Look, he had increased penalties for johns in New York, and he had prosecuted escort services. Now, I have rather politically incorrect liberal views about whether prostitution should be legal. [Laughter.] But the fact was that it was illegal, and he was the governor of New York, who had convinced people to elect him because he was Mr. Clean. So, yes, he was a hypocrite. And Jack wasn’t.

“Casino Jack and the United States of Money” opens May 7 in New York, Los Angeles and Washington; May 14 in Chicago, Phoenix, San Diego, San Francisco, San Jose, Calif., Santa Cruz, Calif., and Seattle; May 21 in Atlanta, Boston, Monterey, Calif., Nashville, Palm Springs, Calif., Philadelphia, Sacramento, Tucson, Ariz., and Austin, Texas; May 28 in Charlotte, N.C., Cleveland, Dallas, Kansas City, Miami, Minneapolis, Portland, Ore., Salt Lake City, San Antonio and Santa Fe, N.M.; and June 4 in Houston and Waterville, Maine, with more cities to follow.

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Andrew O

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Friday, Apr 30, 2010 4:31 PM UTC

Exclusive Alex Gibney clip: Jack Abramoff and healthcare

See a deleted scene from Oscar-winner Alex Gibney's new movie about the guy who dosed Congress with dirty money

By

In an exclusive premiere for Film Salon readers, here’s a deleted scene from Oscar-winning director Alex Gibney’s upcoming documentary “Casino Jack and the United States of Money.” The film recounts the horrifying, mesmerizing saga of über-lobbyist Jack Abramoff and the congressional corruption scandal of the late ’90s and early 2000s that dramatically changed the landscape of Washington (and definitely not for the better).

In this Webisode, Gibney explores the elaborate money shuffle through which Abramoff channeled money from supposedly legitimate lobbying clients (like Indian tribes) through Republican PACs and Big Pharma front groups, who in turn wrote industry-friendly legislation that was passed intact by the GOP-led Congress. I’ll have an interview with Gibney and more coverage of the film next week. “Casino Jack and the United States of Money” opens May 7 in major cities, but you’ll only find this clip here (at least until the DVD comes out).

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Andrew O

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Thursday, Mar 18, 2010 12:20 AM UTC

It’s time for Wall Street to pay

We need accountability -- as in, jail time where warranted -- for those who created the financial disaster

By James Cayne of Bear Stearns, John Thain of Merrill Lynch, and Lloyd Blankfein of Goldman Sachs

Almost everybody’s got their noses out of joint these days — and no wonder. If there’s a significant American institution that hasn’t failed in its fundamental public responsibility over the past decade, it’d be hard to identify.

Writing in Time, Christopher Hayes puts it succinctly: “Nearly every pillar institution in American society — whether it’s General Motors, Congress, Wall Street, Major League Baseball, the Catholic Church or the mainstream media — has revealed itself to be corrupt, incompetent or both. And at the root of these failures are the people who run these institutions, the bright and industrious minds who occupy the commanding heights of our meritocratic order.”

Me, I blame the combination of runaway baseball salaries, the “talented and gifted” movement in schools, and the tyranny of SAT scores. I’m only half-joking. Once free agency drove even an average third baseman’s pay into the seven-figure range formerly reserved for tycoons who owned major industries or medium-size Midwestern states, practically everybody with SAT scores over 1,400 figured they deserved to earn as much as Aramis Ramirez.

The differences being that quality third basemen are a lot rarer than Ivy League MBAs, and are publicly and relentlessly evaluated. Steroids or no steroids, one bad season and they’re replaced by a 22-year-old from the Dominican Republic. That’s one of the things keeping us fans hanging on.

Not so in the corporate world. As recently as 2008, the geniuses running Wall Street investment banks bankrupted their companies and came perilously close to collapsing the world financial system. And what happened? A few CEOs departed via “golden parachute,” but most executives stayed shamelessly in place, profited from multibillion-dollar TARP bailouts and then began awarding each other obscene bonuses almost before the smoke cleared.

Meanwhile, a substantial part of a generation’s retirement savings vanished into thin air. Had the Bush administration succeeded in “privatizing” Social Security back in 2005, the damage could not have been worse.

Over time, American institutions appear to be growing steadily less accountable. Hayes cites the Catholic Church’s sex abuse scandal, which strikes me as a red herring. Yes, the bishops averted their eyes, placing the putative well-being of the church above children. Yes, ecclesiastical lectures on sexual sin are a bit harder to take. But the church has been hierarchical, secretive and self-protective since forever. Moreover, as recent developments in Ireland and Germany show, the problem is international.

More to the point, “look at CEO pay,” Hayes urges. “In 1978, according to the Economic Policy Institute, the ratio of average CEO pay to average wage was about 35 to 1. By 2007 it was 275 to 1.” In comparison, the ratio remains approximately 20 to 1 in most European countries; roughly 11 to 1 in Japan. Yet people complain about labor unions.

Hayes cites Nell Minow, an expert in corporate governance nicknamed “The CEO Killer” by Fortune magazine, to the effect that all many executives know how to do is “manipulate the levers of governance and devise ingenious methods of guaranteeing themselves windfalls regardless of their company’s performance.” The unvarying defense of the latest Wall Street bonuses, of course, is that the talented and gifted recipients might otherwise change teams. Why, perish the thought.

Only recently, reporters have begun catching up with the bankruptcy examiner’s report on the failure of Lehman Brothers investment bank, the precipitating event in the 2008 financial crisis. According to law professor and former white-collar prosecutor Peter J. Henning, writing in the New York Times’ DealBook blog, the 2,000-page document “discusses some accounting gimmicks that are eerily reminiscent of how Enron tried to prop up its balance sheet back in 2001 before it collapsed.”

And for which, it will be recalled, a number of Enron executives went to prison. The details can be dauntingly complex. But what they amounted to were a series of short-term accounting tricks designed to make the bank’s financial health appear robust as it “teetered on the brink of ruin.”

The examiner’s report calls CEO Richard Fuld “grossly negligent” at minimum, and reserves even harsher terms for Lehman’s accounting firm, Ernst & Young. Remember when accounting was a respectable profession? No more. They’re buccaneers today.

The basic gimmick was called a “Repo 105,” moving bad real estate-based assets off the books by using them as collateral for short-term loans just long enough to file quarterly reports, then unwinding the deals as quickly as overnight.

It’s as if your brother-in-law assumed your debts and deeded you his assets overnight so you could qualify for a bank loan, then took them back. Except Lehman was doing it to the tune of $50 billion a pop. You and your brother-in-law would go to prison for that, and so should somebody at Lehman Brothers. Hopefully, somebody with a brilliant academic record and impeccable social credentials, so the rest of them start paying attention.

© 2010, Gene Lyons. Distributed by United Feature Syndicate, Inc.

 

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Arkansas Times columnist Gene Lyons is a National Magazine Award winner and co-author of "The Hunting of the President" (St. Martin's Press, 2000). You can e-mail Lyons at eugenelyons2@yahoo.com. More Gene Lyons.

Friday, Jan 29, 2010 10:29 PM UTC

Sundance: Searing portrait of a top lobbyist

Oscar-winner Alex Gibney talks about his new Jack Abramoff expos

By 18 Aug 2005, MIAMI, FL, USA --- Washington lobbyist Jack Abramoff leaves the courthouse in Miami August 18, 2005. Abramoff, a central figure in investigations involving House Majority Leader Tom Delay, plans to fight charges he defrauded two lenders of $60 million to buy a casino cruise line, his lawyer said on Thursday. Abramoff, a well-connected Republican lobbyist, and Adam Kidan, his partner in the $147.5 millions buyout of SunCruz Casino five years ago, were indicted by a federal grand jury in Fort Lauderdale, Florida, on August 11. --- Image by © CARLOS BARRIA/Reuters/Corbis(Credit: © Carlos Barria/reuters/corbis)

PARK CITY, Utah — Alex Gibney’s new documentary, “Casino Jack and the United States of Money,” which premiered at Sundance this week, is much more than a shocking and highly entertaining movie about Jack Abramoff, the über-lobbyist at the center of the biggest corruption scandal in congressional history. It’s a portrait of a political system that has been poisoned down to the root by the pernicious influence of big money, by the buying and selling of connections and influence, and by a radical free-market ideology that has been systematically employed to undermine the principles of representative democracy.

As the Oscar-winning director of “Taxi to the Dark Side” and “Enron: The Smartest Guys in the Room” told me in our conversation in a Park City restaurant, the Abramoff case was not an isolated instance of criminality, but a symptom of a much larger disease. As in his earlier films, Gibney dramatizes the work of America’s best investigative journalists, and directly attacks the “bad apple” hypothesis that’s repeatedly employed to explain away disturbing tales of corruption and malfeasance, from Enron to Abu Ghraib to Abramoff.

Magnolia Pictures will release “Casino Jack” in theaters this spring. For now, here’s Alex Gibney on the outlandish Abramoff tale and its rogue’s gallery of supporting players — from Tom DeLay to Grover Norquist to George W. Bush — why it definitely still resonates in the Obama era, and what it means for our imperiled republic. 

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