Covert action and political clout help Enron win contracts
From: [EMAIL PROTECTED] (Joydeep Mitra)
Date: 1995/08/05
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Covert action and political clout help Enron win contracts
By Pratap Chatterjee
WASHINGTON, Jul 31 (IPS) - What links Enron, the largest natural gas company
in the United States, the Central Intelligence Agency (CIA), the Pentagon
and the fast-growing energy markets of developing countries around the
world?
If you said covert intelligence operations to support
Washington's aggressive pursuit of emerging markets and a network of ''good
old boys'' who have long helped each other in and out of government, you
probably got it right.
Consider the facts. Houston-based Enron was the one of the first
companies to bag lucrative new deals to build private energy projects in
both the Philippines and India.
One of the Filipino deals was to take over a power plant from the
Pentagon, the popular name for the U.S. Defence Department. Enron also
bagged two other projects to build power plants in the country.
The Indian deal was clinched with the help of the CIA which
provided Enron and U.S. government officials with key data on the risks of
the project and strategies of possible competitors, according to published
accounts.
''A number of U.S. government agencies worked on helping Enron in the
Department of Commerce's new advocacy centre. Several of them told me that
the CIA had helped them get information, but the Commerce people themselves
would not talk about it,'' David Sanger of the New York Times told IPS.
Curiously enough, the most senior U.S. diplomat in both
countries when the deals were negotiated was the same, Frank G. Wisner. He
served as ambassador to the Philippines from 1991 well into 1992. He has
presided over the U.S. Embassy in New Delhi since last August.
Enron agrees that the ambassador helped it in the final stages of the
Indian deal but says it had no contact with him in Manila.
''Enron officials paid a courtesy call on the embassy in
Manila, but ...did not meet Wisner until his arrival in India. The U.S.
government's assistance for the trip to India was to prepare for (Commerce
Secretary) Ron Brown's trip. You must remember that we had been negotiating
in India two years before Wisner or Brown arrived,'' says Diane Bazelides,
Enron's chief spokesperson.
Enron struck a deal to manage a 28-megawatt power plant in Subic Bay,
formerly the largest U.S. military base in the region, shortly after Wisner
left Manila in July 1992. Enron took over the plant in January, 1993, two
months after the last U.S. troops left the base.
''The U.S. embassy staff produced an excellent report on how U.S.
business could win contracts in the former base. They had an edge because
they knew it so well,'' recalls a senior staffer at the Filipino embassy in
Washington.
Wisner spent a lot of time after arriving in New Delhi last
year helping Enron win a 2.8-billion-dollar deal to build a 2,015-megawatt
power plant near the southwestern coastal town of Dhabol, close to Bombay.
The deal is now under heavy fire for being over-priced. Allegations of
bribery are rife.
''If anybody asked the CIA to help promote U.S. business in
India, it was probably Frank. That's his style - take action
rather than wait for somebody else to make a decision,'' a former Wisner
staffer told IPS.
In recent weeks, newspaper reports have claimed that CIA
support for U.S. business abroad is now an official priority. On Monday,
for example, the Los Angeles Times reported that the Clinton administration
has issued a set of rules for the CIA to engage in ''economic espionage'' in
keeping with the new, geo-economic mindset of U.S. foreign policy.
''The idea is that an ambasador can call on a chief of station (the top
CIA official in a foreign country) to find out who will take the key
decisions on the bid, information on competitors, any possible corruption on
the part of foreign companies,'' a former US ambassador told IPS.
Wisner is himself long acquainted with the CIA and its
capabilities. His father was one of its architects and served as a top
official there from just after its creation in 1947 until just before his
suicide in 1965.
As such, he helped oversee the toppling of the Guatemalan
government of Jacobo Arbenz for United Fruit company, a family-owned U.S.
business, in 1954. He also was involved in the 1953 overthrow of Iranian
Prime Minister Mohammed Mossadeq who had threatened to nationalise U.S. and
British oil interests, and in secret operations against Indonesian President
Sukarno in the mid-1950s.
Wisner, Jr. has not been associated with anything quite so
dramatic, but he has gone out of his way to promote both U.S. business and
military policy. Before his posting to New Delhi, Wisner held the number
three position at the Pentagon. During his stint there, Washington actively
courted the Indian military.
Help from such powerful sources in the elite and secret worlds of this
city are commonplace for Kenneth Lay, the chief executive officer and
founder of Enron, who started the company soon after quitting the Federal
Power Commission, a now defunct government agency here.
Lay had worked in the Pentagon during the Vietnam war, when Richard Nixon
was president. An economics PhD, his work got him noticed at the senior
echelons of the administration.
''Lay understands how government works. He knows who cuts the deals and
he makes sure that he knows people in the right places,'' says a Houston
journalist who asked not to be named.
Lay, whose posh River Oaks home in Houston is a few kms from the
Tanglewood residence of George Bush, is a close friend of the former
president. Although Bush himself has never been accused of doing favours for
Lay, three of his sons have allegedly used their father's name to try and
win contracts for Enron.
Neil and Marvin Bush were named in an article in the New Yorker magazine
by investigative journalist Seymour Hersh as having tried to influence
Kuwaiti officials in favour of an Enron bid to rebuild Shuaiba North, a
power plant destroyed in the Persian Gulf war. Enron abandoned the bid a
year ago.
In 1988, George W. Bush, another of the Bush sons who is now governor of
Texas, reportedly telephoned Rodolfo Terragno, Argentina's Public Works
Minister, to ask him to award Enron a contract to build a pipeline from
Chile to Argentina.
''He assumed that the fact he was the son of the president
would exert influence. I felt pressured. It was not proper for him to make
that kind of call,'' Terragno recently told The Nation weekly magazine.
Enron ultimately won the bid under the next government, headed up by Carlos
Menem, another Bush friend.
In 1987, Neil Bush, a director of the failed Silverado Banking, Savings
and Loan Association, which made millions of dollars in high-risk loan,
created a subsidiary of his oil company to conduct business in Argentina.
The activities of the two Bush children in Argentina prompted a
par-liamentary inquiry in that country.
''None of Bush's sons have worked for Enron. I don't know why people keep
bringing up these old stories,'' says Bazelides.
Two weeks ago, the head of Enron Development Corporation denied at in a
press conference in Bombay an IPS report that Enron used political clout to
swing deals. ''Enron's reputation is being attacked, and we do not do
business under the table,'' said Rebecca Mark.
But Enron officials acknowledge that the company used James Baker, Bush's
Secretary of State, and Robert Mosbacher, his Commerce Secretary as
consultants. Also on the Enron payroll is Thomas Kelly, director of
operations for the Pentagon during the Gulf War.
Another powerful Enron contact is Wendy Gramm, who joined Enron's board
of directors in 1993 after resigning as chair of the Commodity Futures
Trading Commission (CFTC) here. Previously, she was a senior staffer in the
White House for former President Ronald Reagan.
In late 1992 Gramm began proceedings to remove energy futures, a highly
specialised financial instrument, from government regulation, based on a
petition from Enron and other energy companies. She resigned her job just
before the commission agreed to the petition. Today a tenth of Enron's
profits are derived from playing this financial market.
''Former associates say that Gramm would not be the first CFTC member to
go through Washington's revolving door to work for a company that has issues
before the agency,'' Jerry Knight, a Washington Post journalist who tracks
these markets, told IPS.
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India State Reviews The Fate of U.S. Power Project
From: [EMAIL PROTECTED] (Abhijit Dutta)
Date: 1995/07/19
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VOA, July 19
New Delhi: The fate of the biggest U-S investment in India now lies
before a state government panel that could decide to scrap the deal,
worth nearly three billion dollars. The controversy surrounding the
Enron power project in the western state, Maharashtra.
At issue is whether a consortium of U-S companies -- lead by
Houston-based Enron development corporation -- should be allowed to
continue building a two-point-eight billion dollar power plant in
western India.
But also at stake is investor confidence in energy-starved India, which
has only begun to open the power sector to foreign capital.
A Maharashtra state cabinet subcommittee has presented a report on the
Enron project to the state's leader: Chief minister Manohar Joshi.
the report remains secret, but government sources say it recommends
cancelling the Enron deal.
Mr. Joshi will not speculate about what will happen. He says the
report must be reviewed by the full cabinet. He says the cabinet could
accept or reject its recommendations. No date has been set for final
action. Meanwhile, Mr. Joshi says construction can continue at the
project site on the Arabian sea south of Bombay.
Critics of the project complain Enron got a sweetheart deal (special
favors) last year from the previous Maharashtra state administration,
which was headed by Sharad Pawar -- a senior member of the Indian
Congress party of prime minister P-V Narasimha Rao.
Critics say there was no competitive bidding and New Delhi eased the
risk by guaranteeing Enron would be paid, in case Maharashtra
defaulted. Indian officials also slashed red tape (bureaucratic
procedures) and put the deal on a fast-track (speeded up the deal) to
showcase their commitment to economic reform.
Along the way, some critics suspect kickbacks (bribes) were paid. But
Enron officials bristle (stiffen with anger) at those suggestions and
no evidence has surfaced to substantiate them.
U-S ambassador to India Frank Wisner says the U-S government is
convinced Enron violated no laws and did not engage in corrupt
practices.
If Maharashtra cancels the Enron deal, ambassador Wisner says India may
have trouble getting the money it needs to finance such huge
infrastructure projects. It has been estimated India needs to spend at
least 43 billion dollars (140 thousand crore rupees) on new power
plants.
The Indian news magazine "India Today" agrees there could be a
financial squeeze, if the Enron deal is cancelled without compelling
reasons. As the magazine puts it: "It may act as a major deterrent,
just when India is desperately looking for money to fund its economic
development."
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Re: Enron Project: Economic Terrorism, part 1
From: Dinesh Agrawal <[EMAIL PROTECTED]>
Date: 1995/07/25
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Clinton officials publicly helped Enron win the contract in
India as well as in Indonesia. And in the last two years, Enron
has received U.S. government funds to build power plants in
China, the Philippines and Turkey. Enron also won contracts in
Pakistan and Russia while accompanying senior U.S. government
officials on state trips.
>>As to the rate of return, there are many ways to skin a cat. The
>>apparent rate of return need not be the real rate of return if the
>>capital costs are inflated in the first place. The $2.9 billion for
>>the Enron project sounds wildly inflated given the capacity of the
>>project even relative to other projects in India, let alone China or
>>Thailand.
>Every reputable economic journal that I have seen that discussed this
>issue has said exactly the opposite.
Could you please care to post what this 'reputable' economic journal has to
say on the issue? Have you any comment on the following facts which give
a total lie to this so-called economic journal's comments:
ENRON ALTERNATIVE IN THAILAND
By Praful Bidwai
Times of India July 11, 1995
Geneva: As the world moves towards new and holistic strategies of
buying power from private producers while balancing the price with
criteria such as location, environmental safety and consumer
interest, India remains stuck in a primitive groove where opaque,
case-by-case, individually negotiated deals a la Enron prevail.
Thailand is the latest instance of the evolution of regulation in
the power sector towards greater sophistication. On June 30, no
fewer than 30 international and domestic groups submitted competitive
bids to generate 4,400 MW of power (6 times the capacity of Enron's
Dabhol project). This was way beyond official expectations, according
to The Financial Times.
Egat, Thailand's electricity authority, will evaluate the bids in
two phases. First, it will score each proposal not just for the
price of power, but from such diverse criteria as location,
financial feasibility, type of fuel, and environmental safety.
Price will only account for 60% of the score.
This will greatly extend the scope of the regulation strategy
for power purchase agreements (PPAs) followed worldwide. This
typically uses four criteria: assured return on investment; the
concept of 'delivered price'; 'avoided cost' or the marginal
cost of generation in existing utilities; and finally, a fixed
price at which the electricity will be purchased.
Further, in the second phase, Egat will negotiate more delicate
issues with the shortlisted corporations: how much cost escalation
is to be allowed for rising fuel prices? How certain is the fuel
supply"? How flexible the fuel mix? (Thailand, like India, has
limited supply of gas). WHo will bear the cost of changes in
environmental regulation? The successful bidders will be chosen
through this procedure....
The capital cost quoted for the Egat tenders for both gas and
coal-fired plants, are about $1.02 million per MW. This is 25%
lower than the capital cost of the Dabhol plant. According to a
Thai govt source here, the unit cost of generation works out to
under 6 US cents a kw-hour, against Enron's 7.5 cents.
The Dabhol capital cost is the highest among all projects
Enron negotiated worldwide in 1994: 51% higher than in China,
35 to 42% than in Indonesia, 26% than in the Dominican Republic,
and 19% than in Turkey.
Costs apart, our effort is to ensure that the PPA conforms
to our needs, uses domestic suppliers wherever possible, and
has the maximum macro-economic spinoffs e.g. balanced regional growth,
the Thai official says. "We badly need power, but we will drive
the best bargain to get it. We seek a political commitment
from the investor too."
Unlike India, Thailand, according to the official, has learnt
from other countries like the Philipines, Malaysia (which recently
signed two gas plant agreements at a 44% lower cost than Dabhol
and China.
The Thai model is more sophisticated than most others, including
that of the US and UK. These, in turn, are vastly superior to the
Enron type...
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Spies help sell cars, energy, planes and save the rain forest
By Pratap Chatterjee
WASHINGTON, Jul 31 (IPS) - Raytheon, a U.S. company based in
Massachusetts, won a 1.4 billion dollar contract from Brazil last
July to set up a satellite surveillance system to monitor the
destruction of the rain forest.
The deal was clinched after President Bill Clinton made a special
appeal on behalf of the manufacturer to the Brazilian government.
U.S. officials also helpfully pointed out that Thompson CSF, a
French company and Raytheon's main rival in the bid, had bribed
local officials.
''Our agents were tipped off about the bribes. We don't think
that bribery is a fair way to do business, especially because our
laws don't allow us to do that,'' William Colby, a former Central
Intelligence Agency (CIA) chief, told IPS.
Earlier in the year the French were also outsmarted in their bid
to win a six-billion-dollar deal to modernise Saudia, the Saudia
Arabian airline, by the same combination -- CIA information on
French bribes followed up by a personal letter from Clinton.
In March 1994, the Saudi government awarded the contract to the
U.S. consortium of McDonnell Douglas and Boeing. The French-led
Airbus consortium was left out in the cold.
Last week the Los Angeles Times, quoting anonymous CIA sources,
announced that CIA help for U.S. business was now official policy.
This is in keeping with the priority the administration has
placed on helping U.S. business abroad. It also benefits the CIA
which has been trying to justify its post-Cold War existence.
Clinton, according to the Times article, was particularly pleased
with the role of the CIA in putting together a daily tip sheet
for the U.S. National Economic Council about the Japanese
negotiating position in the recent U.S.-Japan spat over cars.
Other examples have been reported although never confirmed. In
September 1993, Clinton reportedly asked the CIA to spy on
Japanese plans to build a zero-emission vehicle and provide its
intelligence to the Big Three U.S. car manufacturers -- Chrysler,
Ford and General Motors.
Unlike some of these companies, who probably welcome the CIA
help, the French are unhappy. They struck back in February when
five U.S. citizens were accused of trying to bribe French
government and corporate officials to obtain French technology and
trade secrets.
Pamela Harriman, the Washington's ambassador to France, was
summoned to the office of Charles Pasqua, the French interior
minister, to be reprimanded. Four of the suspects were asked to
leave the country. (The fifth had left already.)
But this has not deterred the CIA. The same month the New York
Times described how agency officers supplied information to the
Department of Commerce to help Enron, the largest natural gas
company in the United States, win a contract to build a power
plant in Dhabol, India.
Enron was not happy with this publicity. ''We cringed when we saw
the article that described the CIA's role. They never gave us any
information. For the most part, we have always had more
information than the U.S. government,'' says Joseph Hillings,
Enron's vice president for federal government affairs.
Enron may indeed have obtained more information, but the CIA is
anxious to toot its own horn.
At recent Congressional hearings, the agency claimed that it has
helped U.S. businesses win 30 billion dollars in contracts. This
figure is quoted by U.S. foreign service officers, who are
enthusiastic about the programme.
''The thinking now is that our ambassadors should be able to
request the local station chief to get information on key
contracts -- information about possible competitors, about any
illegal activities such as bribery,'' a State Department source
told IPS.
Old CIA hands are not quite so enthusiastic. ''I'm not sure that
it's such a good idea. What if two U.S. companies are bidding for
the same project? Whom do you favour?'' argues Colby, who now
advises large multinational corporations.
McDonnell Douglas and Raytheon are very close to the U.S.
government. The two companies are the second and seventh largest
recipients of federal contracts. They won a total of 18.1 billion
dollars worth of business from the government in 1993.
Both companies have also always had close ties to the CIA and the
U.S. military because of the very nature of their business --
more than half of their sales are for war-related activities. Many
of their senior officials have worked for either the Pentagon or
the CIA at some point in their careers.
But the argument that these companies are decent, law-abiding
citizens that need help in competing against unfair foreign
business practices is questionable.
In October 1993, Raytheon agreed to pay 3.7 million dollars to
the Pentagon to settle charges that it had overcharged the
government for Patriot missiles.
In August 1992, Raytheon paid out 2.75 million dollars for
overcharging on test equipment for Sparrow, Seasparrow and
Sidewinder missiles, and in March 1990 it paid a million dollars
for illegal trading in confidential Pentagon documents.
Proponents of CIA cooperation with companies cite the use of
foreign intelligence services to help their business.
For example, the French used their intelligence services in the
1970s to obtain U.S. and Soviet plans to sell fighter aircraft to
India. Armed with this information, Mirage of France, won a huge
contract from India.
The CIA's role in helping U.S. business is not new. In 1954 the
CIA orchestrated the overthrow of the democratically elected
government led by Jacobo Arbenz to help United Fruit, a family-
owned U.S. business, protect its interests in the Central American
nation.
In 1953, it moved successfully against Iranian Prime Minister
Mohammed Mossadeq when he threatened to nationalise British and
U.S. oil investments.
It also worked unsuccessfully with telecommunications giant ITT
to try to prevent the election of Chilean President Salvador
Allende Gossens in 1970.
U.S. companies have also assisted the CIA in the past, sometimes
by permitting it to plant agents among its personnel abroad and
volunteering briefings to the CIA's National Collection Division
on information collected overseas.
The Paris-based Le Monde newspaper claim that the CIA has 30 of
the 80 CIA agents in France operate under ''non-official cover.''
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