PAGE 12
ENRON
THE REAL DEAL
DA: By coverup, you mean a way to steal and launder
money all at the same time?
CAF: You might say it that way. But a coverup is also
a method to protect people and institutions — that is, to keep
the pieces of the syndicate in place. For instance, it is my under
standing that PROMIS is managed for the Department of Justice
by the military contractor DynCorp. Again the technology is
important.The sophistication of surveillance and communication
technology today is even beyond what Hollywood can imagine.
And curiously enough Herbert “Pug” Winokur, who was DynCorp
chairman and lead investor from 1989 to 1997 and still chairman
of DynCorp’s compensation committee, was the chairman of
Enron’s Finance Committee through all of Enron’s worst days
— that is, until June 6, 2002 when he resigned.
TONYAUTH
FROM PAGE 11
the testimony — it's been more than a year now — they have
given Enron a chance to work over or obliterate the evidence.
And you feel this is deliberate?
CAF: It looks that way. Enron’s bankruptcy filing created
a stay against all suits against Enron. Those directed at board
members and management could proceed. Private discovery,
however, may be limited Watching this process my question is:
Did the DOJ specifically help Enron get into bankruptcy and
define their investigations so as to protect the information from
class action investigation?
DA:The law firm Milberg Weiss has a consolidated class
action lawsuit against Enron management and directors in the
U.S.District Court in Houston right now The lead attorney William
S. Lerach will charge certain Enron executives and directors, its
accountants, law firms and banks with violations of the federal
securities laws and that they engaged in insider trading. So
Mr Lerach is seemingly serious about this private investigation.
Will the timing of the bankruptcy filing get in Lerach’s way?
CAF: My best guess is that the bankruptcy filing has
helped ensure that any moneys laundered and/or stolen through
Enron and the moneys that investors made on the pump and
dump of Enron stocks has had plenty of time to get away. The
good news is that federal court’s dismissal of Morgan-Chase’s
fraud charges against its insurers may be just what Milberg
Weiss needed to proceed against Enron's complicit banks,
attorneys and CPAs. This could be the key to the recovery of
billions for employee pension funds and other shorted investors
here and around the globe.
In the meantime, however, federal investigators are
steadily chewing up time by slowly giving up or indicting Arthur
Andersen, then others in Enron management. The real bad guys
are the private investors, working through banks or investment
firms, who have already gotten their money out and so far are
scheduled to keep it — and those members of the board, if any,
who traded under third party names These are the people and
institutions who have the power to ensure that people like Ken
Lay and Andrew Fastow are hired in the first place and who
ensure that the right regulators are in place to ignore what is
going on, perhaps even help it along
DA: So Ken Lay’s not one of the big guys?
CAF: As far as I'm concerned, Ken Lay was just the lead
patsy We re talking about a top ten Fortune 500 company with
annual revenues exceeding $100 billion — which suddenly fell
off the map. What the Enron CEOs made was nothing compared
to what inside-trading investors made — both with corporate
assets liquidated out before the implosion or in the pump and
dump of stocks. And many of these investors look to be from the
same syndicate that I saw playing the Iran-Contra/S&L game in
the 1980s.
DA: “Syndicate!" Now there’s a loaded word. Webster's
defines a syndicate as “an association of bankers, corporations,
etc, formed to carry out some financial project requiring much
capital, especially to gain control of the market in a particular
commodity." Sounds quite like Enron's position in the energy
market Can you be more specific about this syndicate you just
referred to?
CAF: Sure. Let's see what Milberg Weiss uncovers But
in testimony already, former Chief Accountant of the SCC Lynn
Turner offered that these banks and investment banks “shopped
their structured finance vehicles" around to other corporations.
Turner indicated that in one case where the SEC was able to
intercede on his watch, a bank had people sign privacy agree
ments as not to divulge details of the scheme proposed to
regulators and others
DA: Then these are the kinds of linkages we re looking
for— the little private “courtesies"that quietly make the syndi
cate a whole What about the investors working through these
banks — are they the bad guys you keep referring to? Who are
they?
CAF: I don’t believe it’s appropriate to throw out names
here — without lengthy explanations and qualification To under
stand how the investors use interlocking corporate designs and
trusts to protect themselves I recommend going to Linda Minor's
series “Follow the Yellow Brick Road From Harvard to Enron" or
Pete Brewton’s book ‘The Mafia, CIA & George Bush" or Truell
and Gruwin’s book ‘False Profits"— also Tom Flocco's work on
Harken Energy helps
DA: Then these networks of investors, which in no far
stretch of the word are syndicates, are the ones being protected
by the mishandling of the investigation?
CAF: They will try to get away with the money, yes
And all the right documents may have already been shredded
to ensure that — which takes us to the fourth step: You never
permit the shredding of documents
There are lots of different ways to work with the
attorneys, the accountants and other people to ensure that
shredding doesn't happen Not only has it happened, but also
Arthur Andersen and Enron admitted to what appears to me to
be criminal obstruction of evidence by shredding the documents.
This is even more shocking because of the government’s right to
assert control over any federal contracts and seize government
payables owed to the guilty parties.
Enron, since 1997, has enjoyed substantial federal
contracts and Arthur Andersen enjoys very significant and
sensitive federal contracts. Those contracts can be canceled
at the convenience of the government, and it can be done within
the space of 24 hours. I have direct experience with the govern
ment doing this.
DA: That is, when your company Hamilton Securities,
Inc. was being investigated?
CAF: Precisely Which moves us along to the fifth step:
You assert control of all the company cash, both onshore and
offshore.
Because of laws passed in connection with the War
on Drugs and related money laundering and RICO laws, the
Department of Justice and the U.S. Treasury have developed
an extensive infrastructure dedicated to seizures of cash and
other assets — both company and personal — in situations
where fraud is indicated Typically, proof of fraud or an indict
ment or a conviction is not required. Indeed, as I just said,
I have personal experience with the DOJ asserting rights of
seizure against company and management and board members’
personal assets when their own investigators have determined
there is no fraud and the parties are entirely innocent. Hence,
this is an area where law and practice combines to make it
possible for the DOJ to seize cash and assets aggressively
when they want to. Investigators used the mere possibility of
fraud as a pretext to demand control of all Hamilton Security
records. Notwithstanding indisputable evidence of fraud, no
reports indicate actions by the government to seize any records
or offices from Enron. We have to wonder why?
When Manuel Noriega was sent to jail, my understand
ing is the U.S. government used the PROMIS software system
to sweep offshore bank accounts and seize back $2 billion of
his money. The technology is important. Tools like PROMIS
software and “Echelon” under the control of the DOJ and NSA
and other military and intelligence agencies have the capacity
to track and identify worldwide bank deposits and flows and to
transact through bank settlement systems to effect seizures.
DA: Thus operationally we have the capacity to track
Enron’s bank transactions and take back significant moneys and
have not?
CAF: I have been told that Congressional audit teams
have preserved some settlement system records. However, I
am skeptical. The proof is in the pudding. More than a year has
passed Where is the money? The failure to assert control of the
records and money for this length of time can only be a coverup.
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DA: Thus the ex-Chairman of Enron's Finance Commit
tee has intimate connection to the DOJ’s most powerful tool for
watching bank deposits and money flows. There's nothing like
being well connected.
CAF: It’s more than that DynCorp is also the lead con
tractor for the DOJ Asset Forfeiture Fund. So if DOJ wanted to
do a seizure of any assets in connection with Enron, presumably
they would have to turn to Pug's company to seize Pug’s assets
as a fiduciary, an investor and an individual. Not surprisingly, we
have one indication that seizures are not even on their radar
screen. Very shortly after they neatly got Enron Online tucked
away inside the Swiss mountain range — some very important
news slips out of the Cayman Islands. It is a press release from
the Cayman islands. Enron SEC filings indicate that there are
approximately 700 Enron subsidiaries in the Cayman Islands.
This is a huge number of subsidiaries for a company to have
— in one of the great offshore money havens of the world. The
government of the Cayman Islands says, in this press release,
that it would be delighted to cooperate with U.S. investigators
and prosecutors on an investigation of Enron, but as of this date
they have not yet received a request for assistance.
From everything I can see, there has been no effort to
assert control of the data about the money because there was
no effort to identify and recapture stolen or fraudulently made
company money. Never believe someone who says we need to
take action to make sure this does not happen again. The only
way it will not happen again is if you get the money back this
time. Remember, it’s all about the cash. Crime that pays is
crime that continues.
DA: While in the instance of Hamilton Securities, here is
a company doing something good for people, saving taxpayers
money, whose work results in the agency effort winning Vice
President Al Gore's Hammer Award' for re-engineering govern
ment, and the rug got pulled out from under you. What do they
say, “No good deed goes unpunished." For white-collar crime,
it seems more like no bad deed goes without its reward.
CAF: The sixth step in a competent investigations is:
You assert control of all the insider trading and personal cash
where probable fraud exists, both onshore and offshore.
Enforcement officials can also assert control of all
the capital gains that were made on insider trading or probable
insider trading. You do not need to have proof of fraud or an
indictment or conviction to assert control over those stock
market profits made by the Enron board and management and
their affiliates or partners participating in insider trading fraud
with them. You can freeze or seize the personal assets of current
and former Enron employees and auditors and any other parties
implicated in potential fraud. The DOJ communicated openly
that they had the right to seize personal assets of Hamilton
Securities management, board members and agents as a result
of possible company fraud.
Based on Enron confessions, it is hard to understand
why there have been no seizures of the insider trading profits
and personal assets of a number of key Enron management and
board members as well as, potentially, its auditors and private
attorneys.The idea that Ken Lay was paid $50 million a year to
be oblivious to what was going on and that he sold over $100
million in stocks just at the right time, and should be allowed
to keep all this money because he is a good guy, is financial,
ethical arid legal insanity. It is, however, a perfectly rational
decision if the goal is to protect the syndicate's winnings, key
government officials, and operations that facilitated the fraud.
DA: The government has frozen $23 million from the
personal assets of Michael Kopper and Andrew Fastow. This
is something. Or would you contend these are just the little guys
taking the rap?
CAF: The management are all little guys. I will say it
again: the Big Guys are the guys who have the cash that was
laundered through Enron, stolen/liquidated out of Enron, or
made in pumping and dumping Enron’s stock. The Big Guys
are “The Street” (Wall Street), the syndicate players. Harvard
Endowment appears to be a candidate for investigation in
this respect. Which leads us back to ’Pug’ Winokur. He was
a member of the Harvard Corporation which runs both the
university and Harvard’s $18 billion endowment — one of the
largest investors in the U.S. Winokur resigned from the Harvard
Corporation on April 5, 2002, due to pressure from the student
group “Harvard Watch" for his connection to the Enron dealings.
Coincidentally, two days later Robert Rubin, Clinton’s Treasury
Secretary and now on the board of Citigroup, was selected to fill
the gap on Harvard Corporation's board. And recall that it was
Rubin who placed a call to the Treasury Department to make
a modest inquiry if anything could be done to save Enron. Just
another courtesy among “friends," you might say.
DA: According to “Harvard Watch," High fields Capital,
the investment firm that manages part of Harvard's endowment,
sold 3.5 million Enron stock options for an estimated $120 million
profit And that was after the Harvard Business School wrote five
studies praising Enron’s business model in the two years prior to
the collapse More courtesy within the network?
CAF: Pump then dump. That is the way it works. During
the S&L crisis, an investor would make money selling assets to
a developer at 2 to 100 times market value financed by an S&L.
Then they would buy the assets back at 10 cents on the dollar
after the crash. So they made money on the “pump" and then
money on the “dump ” Meantime, if the feds needed a fall guy,
they would have the DOJ and the SEC go after the developer
or the S&L CEO. The reality was that the bank regulators would
never have allowed such things to go on if investors and their
i
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