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Monday, April 24, 2006

Ken Lay Takes the Stand

As Mark Babineck and John Roper report in the Houston Chronicle, Ken Lay finally took the stand today in the federal trial against him and his fellow former Enron CEO, Jeffrey Skilling.

Lay's m.o. from the get-go has been to portray Enron's demise as the result of the illegal self-dealing machinations of Enron finance whiz Andy Fastow and the investor panic which ensued the revelations that Enron's financial sheet was off by billions of dollars. Under this version of events, Lay is as much a victim as all the Enron investors and employees whose pensions and livelihoods were ruined.

On the stand today, Lay tried to reinforce this narrative. He challenged the acocunt of Enron whistleblower Sharon Watkins, who first brought the questionable side deals to Lay's attention. Watkins asked Lay to avoid using Enron's then-current accounting firm (Arthur Andersen) and law firm (Vinson and Elkins), because they had signed off on the sketchy deals.

Lay agreed to look into the matter, but ignored Watkins' plea that he use an independent firm to do so. This was not the action of a man interested in actually verifying and ensuring the accuracy of the financial reporting done by his company, but rather that of a man interested in appearing to do so.

Appearances are deceiving though, in Layworld, where his selling of Enron stock at a time he knew of the company's precarious financial position is not the self-dealing flee-the-ship move that it seems, according to Lay. Rather, he just needed to pay some bills. And Jeff Skilling quitting his job as Enron CEO at the same time? Well, that was because of personal reasons, not because the company was about to tank in the largest U.S. bankruptcy to date.

Pending judicial nullification of some sort, the jurors will ultimately decide whether Ken Lay's story holds up, or is just another whopper in a long series of whoppers in the Enron saga. This is both fitting, and somewhat ironic. When Lay wanted to push energy deregulation at the federal and state level, he did so in large part by passing out massive amounts of campaign cash so that Congress and various state legislatures were favorably disposed to doing so.

In other words, in the pursuit of his own financial benefit, Lay leveraged his company's massive cashflows and his own personal fortune to bypass the will of the people on his way to the bank. Facing jail time, Lay has no other choice than to put his freedom in the hands of his fellow citizens. His hat in hand, he must trust in the people whose bank accounts he helped to empty, and whose democratic institutions he showed so little regard for.

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Congressman Mollohan (WV) Steps Down From Ethics Committee

As Chris Cillizza reports in "The Fix", his column for the Washington Post, Congressman Alan Mollohan stepped down from the House Ethics Committee on Friday. Pressure has built on the West Virginia Democrat since the Wall Street Journal reported that Mollohan had steered some $250 million to nonprofit groups he helped create.

At least some of the directors of the nonprofits used their extravagant salaries (paid for with your and my tax dollars) to make campaign contributions to Mr. Mollohan. This looks eerily similar to the scheme set up by Duke Cunningham and his bribers, in which the Duke steered federal contracts to companies which in turn contributed more than $100,000 to Cunningham's political committees, not to mention $2.4 million in outright bribes to Cunningham.

Mollohan also has a joint investment with at least one director of one of the nonprofits, which raises further questions about the propriety of Mollohan steering those groups federal funds.

Replacing Mollohan is Congressman Howard Berman, who represents a district in north Los Angeles (thanks to his brother Michael).

From a practical standpoint, Mollohan's departure doesn't amount to a hill of beans. The Ethics Committee has been paralyzed by a standoff between Republicans and Democrats for over a year. The parties have each refused to consider any ethics complaints, using the excuse that the other party is using the Ethics Committee for partisan maneuvering. And if that means that the ethics machinery grinds to a halt, well, so be it say the Dems and Reeps.

Because of the self-dealing by members of Congress and the inherent conflict in having Congress police itself, reform-minded folks have called for an independent congressional watchdog to look at ethics complaints. Unsurprisingly, the vast majority of people in Congress have resisted the idea, and have thrown the notion of an independent watchdog onto the scrap heap of other reforms which were introduced in the wake of the Cunningham and Abramoff scandals, only to be watered down by the House and/or Senate.

In short, Congress will continue to leave the rest of us undefended against its own self-dealing, increasing the likelihood that the other violations will go undiscovered, uninvestigated, and unpunished.

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