Congress is building a hit list of top lawyers and bankers who showed Enron how to cook up phantom profit schemes that wiped out $68 billion for investors. "Some of the nation's finest" lawyers, accountants and bankers worked "to prop up the biggest corporate farce of the century," Sen. Charles Grassley (R-Iowa) said yesterday in unveiling the 2,700-page tome of wrongdoing.
Who Cleared That Enron Exemption?
Posted Feb. 8, 2002
By John Berlau
Enron went to the Democrat-controlled SEC under Levitt to get the exemption the Republican-controlled Congress had refused. The company admitted in its application, a copy of which Insight obtained, that it was "aware of no direct precedent for the exemptive order requested in this application." Nevertheless, without mentioning directly the government loans it had received at the hands of the Clinton administration, Enron argued that to deny the exemption would go against government export policy. "National policies to encourage exportation of goods and services, as expressed in Ex-Im Bank rules and the Overseas Private Investment Corp. guidelines, indicate [an] intention to encourage foreign infrastructure activities of the type conducted by covered entities," Enron wrote. "It is in the public interest for the covered entities to be permitted to engage in these activities without unintended restrictions imposed by the act."
This certainly made it clear that Enron's effort was blessed by the White House. It worked, and the SEC gave Enron the relief it could not get from Congress, announcing on March 13, 1997: "It is ordered that the requested exemption from all [emphasis added] provisions of the act is hereby granted."
The SEC earlier had given Enron an exemption from the Depression-era Public Utility Holding Company Act in 1993, just after Levitt came onboard as chairman. Although that exemption has its critics, who say it allowed Enron to get into different types of businesses, many experts say the exemption was appropriate given the changes in the electricity market since the 1930s. But experts on the Investment Company Act say that while an exemption from some of the law's provisions on certain projects may have been justified, the unusual blanket nature of the 1997 exemption — for present and future projects — allowed Enron to escape accountability.
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Another thing raising eyebrows about the special exemption for Enron is the connection between Barry Barbash, the regulator who, as head of the SEC's investment-management division in 1997, signed off on the agreement, and Joel Goldberg, the Enron lobbyist pushing it. Goldberg had been a boss of Barbash when both worked at the SEC in the 1980s. Now both are out of government and are partners at the Washington office of the law firm Shearman & Sterling. "It looks bad," Haas says, "but it doesn't necessarily imply that there's any wrongdoing."
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Levitt told the New York Times he had no recollection of Enron's exemption. "It may be one of those things that seemed insignificant at the time but can wind up being determinative," he said. He did not respond to Insight's request for further comment.
But Barbash, who Levitt brought out of private practice to head the investment-management division at the SEC in 1993, says he sent memos to Levitt and the commissioners about the proposed exemption, and that they were well-aware of the issue. "That exemptive order was probably one of the most well-vetted things in Washington of its day," Barbash tells Insight. "Everybody who mattered in the SEC knew of the order at the time." When asked if he ever discussed the exemption with Levitt, Barbash replies, "I don't have a clear recollection."
A securities lawyer with knowledge of the Enron exemption tells Insight that, because of Enron's status in the Clinton administration and his background as a Democratic fund-raiser, Levitt likely was involved in the decision. Levitt "was very tuned in to political developments," says the securities lawyer, who requested anonymity. As journalist Michael Lewis has noted, Levitt "landed his job at the SEC in part because he raised a lot of money on [Wall] Street for Bill Clinton."
Whatever former SEC chairman Levitt's role in Enron's exemption, some find it ironic that the Clinton-Levitt SEC repealed Reagan-era exemptions for small companies under the justification of preventing investor fraud (see "Recession Shock," Dec. 31, 2001), yet gave special breaks to this large, well-connected corporation that may have committed the biggest fraud in U.S. history. "Enron just caused more investor fraud than all the violations of penny stocks and small caps, rolled up, for probably the last two decades," says James Steinkirchner, cochairman of the National Small Public Company Leadership Council.
http://216.239.37.100/search?q=cache:7Dn-NbvTT2AC:www.insightmag.com/main.cfm/include/detail/storyid/180073.html+Shearman+%26+Sterling,+clinton&hl=en&ie=UTF-8
Virtually all of this happened during the Clinton-Gore-Clinton regime. The wheels started to come off in late 2002, when California began have electricty shortages.
It was a rhetorical question. Of course it happened on Clinton's watch.